Professional Documents
Culture Documents
Business Law OCR Course Material - Compressed
Business Law OCR Course Material - Compressed
Business Law OCR Course Material - Compressed
Copyright:
2021 Publisher
978-93-90457-95-3
Address:
4435/7, Ansari Road, Daryaganj, New Delhi-110002
Only for
NMIMS Global Access - School for Continuing Education School Address
V. L. Mehta Road, Vile Parle (W), Mumbai — 400 056, India.
CURRICULUM
The Indian Contract Act, 1872: Agreements and Contracts, Classification of Contracts, When an
Agreement becomes a Contract: Essential Conditions, Offer/Proposal and Acceptance, Standard
Form of Contract/Boilerplate Contract/Adhesion Contract, Consideration and Privity of Contract,
Free Consent, Capacity to Contract, Void, Valid and Voidable Agreements, Quasi-Contracts,
Discharge of Contracts, Remedies for Breach of Contract, Contracts of Indemnity and Guarantee,
Contract of Bailment and Contract of Pledge, Contracts Dealing with Agency, Explaining
Agreements using a Template
Sale of Goods Act, 1930: Concept of Goods, Sale of Goods Act, 1930, Difference between the Contract
of Sale of Goods and the Contract for Work and Labour, Doctrine of Caveat Emptor and Exceptions,
Performance of the Contract of Sale, Unpaid Seller, Hire Purchase and Hypothecation Agreements
Laws that Commonly Affect Businesses: Negotiable Instruments Act, 1881, Types of Negotiable
Instruments, Recent Amendments in the Negotiable Instruments Act, 1881 and their Impact,
Payment and Settlement Systems Act, 2007 and its Features, Penalties and Punishment under
Negotiable Instruments Act, 1881 and Payment and Settlement Systems Act, 2007, Intellectual
Property Law, Prevention of Sexual Harassment, Impact of Sexual Harassment Cases on Indian
and Foreign Organisations
Consumer Protection Act, 2019: Consumer Protection Act, 2019, Objective of the Act, Scope of
the Act, Important Provisions and Features of the Consumer Protection Act, 2019, Difference
between Consumer Protection Act, 1986 and Consumer Protection Act, 2019, Rights of a Consumer,
Consumer Protection Councils, Functions of Consumer Protection Councils, Central Consumer
Protection Council, State Consumer Protection Councils, District Consumer Protection Councils,
Consumer Disputes Redressal, Consumer Disputes Redressal Machinery, Procedure of Dispute
Right to Information Act, 2005: The Right to Information (RTI) Act, 2005, Public Authorities (Chapter
II of the Act), Procedure for Obtaining Information (Sections 6 and 7), Information Exempted from
Disclosure (Section 8), Information Commissions (ICs), Impact of the RTI Act, 2005
Competition Act, 2000: Competition—What and Why, Competition Act, 2002, Anti-competitive
Agreements, Competition Commission of India (CCI), Combination, Penalties Imposed Under the
Competition Act, 2002, Leading Cases under the Competition Law in India
Employee related Laws: Factories Act, 1948, Objectives and Applicability, Key Provisions and Features
of the Law, Occupation of Occupier (Employer) and Responsibilities of Occupier, Industrial Disputes
Act, 1947, Minimum Wages Act, 1948, Employees Compensation Act, 1923, Employees Provident Fund
and Miscellaneous Provisions Act, 1952, Calculation of Provident Fund and Apportionment of the Fund
against Various Schemes, Payment of Bonus Act, 1965, Payment of Gratuity Act, 1972, Maternity Benefit
Act, 1961, Code on Labour Laws
Environment related Laws: Laws Aimed at Protecting and Conserving the Environment, Environment
Protection Act (EPA), 1986, National Green Tribunal (NGT) Act, 2010, Air (Prevention and Control
of Pollution) Act, 1981, Water (Prevention and Control of Pollution) Act, 1974, Hazardous and Other
Wastes (Management and Transboundary Movement) Rules, 2016, Wildlife Protection Act, 1972, Forest
Conservation Act, 1980, Public Liability Insurance Act, 1991, Biological Diversity Act, 2002
CONTENTS
1.1 Introduction
1.2 Agreements and Contracts
Contracts — Historical Perspective
1.2.2 Promise and Contract — Two Sides of the Same Coin
Self Assessment Questions
Activity
1.3 Classification of Contracts
1.3.1 According to Initiation
1.3.2 According to Enforceability/Validity
1.3.3 According to the Method of Formation
1.3.4 According to Performance
Self Assessment Questions
Activity
1.4 When an Agreement becomes a Contract: Essential Conditions
Self Assessment Questions
Activity
1.5 Offer/Proposal and Acceptance
1.5.1 What Constitutes an Offer
1.5.2 Difference between Offer and Invitation to Offer
1.5.3 Acceptance
1.5.4 Communication of Offer and Acceptance
Self Assessment Questions
Activity
1.6 Standard Form of Contract/Boilerplate Contract/Adhesion Contract
Self Assessment Questions
Activity
1.7 Consideration and Privity of Contract
1.7.1 Essentials of a Valid Consideration
CONTENTS
CONTENTS
1.13.3 Injunctions
Self Assessment Questions
Activity
1.14 Contracts of Indemnity and Guarantee
1.14.1 Contract of Indemnity and Contract of Guarantee — Meaning
and Examples
1.14.2 Rights of the Indemnified and Indemnifier
1.14.3 Commencement of Indemnifier’s Liability
1.14.4 Contract of Guarantee
1.14.5 Kinds of Guarantee
1.14.6 Rights and Liabilities of Surety
1.14.7 Discharge of Surety
1.14.8 Difference between Contract of Indemnity and Contract of Guarantee
Self Assessment Questions
Activity
1.15 Contract of Bailment and Contract of Pledge
1.15.1 Kinds of Bailment
1.15.2 Termination of Bailment
1.15.3 Duties and Rights of a Bailor
1.15.4 Duties and Rights of a Bailee
1.15.5 Bailee’s Lien
1.15.6 Types of Lien
1.15.7 Pledge
1.15.8 Rights and Duties of a Pledgee (Pawnee) and a Pledger (Pawnor)
Self Assessment Questions
Activity
1.16 Contracts Dealing with Agency
1.16.1 Meaning of Principal and Agent
1.16.2 Types of Agents
1.16.3 Authority of an Agent
1.16.4 Liability of Principal and Agent
1.16.5 Termination of Agency
Self Assessment Questions
Activity
1.17 Explaining Agreements using a Template
Self Assessment Questions
Activity
1.18 Summary
1.19 Descriptive Questions
1.20 Answers and Hints
1.21 Suggested Readings & References
INTRODUCTORY CASELET
FORMATION OF CONTRACTS
Bidders at any auction are entitled to make an offer but that offer
may or may not be accepted by the seller. In other words, auctions
are an invitation to offer. Therefore, it was held that no agreement
was reached because the seller refused the offer made by Mr
Pushkar. The court held that no legally enforceable contract was
entered into because there was a lack of agreement. Mr Ayush
won the suit. Hence, an invitation to offer does not give rise to any
rights or obligations.
© LEARNING OBJECTIVES
tract
Explain the concept of free consent and capacity to c
Yt
:es
5,
g
3
z
g
o
BQ
<
j
&
B
»
18S INTRODUCTION
The Contract Act, 1872 is the most important law that governs vari-
ous types of contracts to be applied for transactions affecting Indian
goods and properties. Section 2(h) of the Contract Act, 1872 defines a
contract as an agreement enforceable by law. An agreement cannot
become a contract unless it is enforceable by law. To be enforceable
by law, a contract must contain all the essential elements of a valid
contract.
In this chapter, you will study about the elements of agreements and
contracts under the Contract Act, 1872 at length.
Under Section 2(b) of the Indian Contract Act, 1872, when the person
to whom the proposal is made, signifies his assent thereto, the proposal
As per Section
7 of the Contract is said to be accepted. A proposal, when accepted, becomes a promise.
Act, 1872, in order to convert ‘Offer’ and ‘proposal’ can be used interchangeably; while the English
a proposal into a promise, the law uses the term ‘offer’ and in the Indian law, ‘proposal’ is used. Thus,
acceptance must:
(1) be absolute and unqualified
Agreement = Offer (Proposal) + Acceptance of Offer (Proposal) +
(2) be expressed in some usual
and reasonable manner
Consideration
MEANING OF CONTRACT
From the above definitions, it can be revealed that a contract has two
elements, namely:
1. Agreement
2. Enforceability
The law governing contracts in India is the Indian Contract Act, 1872
came into force on 1 September 1872. Since then, the Indian Contract
Act, 1872 has been amended from time to time by the Central Govern-
ment and the state governments as per the state requirements.
The Contract Act, 1872 defines the meaning of contracts, their execu-
tion and implementation in addition to describing the provisions for
the breach of contracts. The Contract Act, 1872 that we see today has
been developed into its current state by going through a lot of trans-
formation. The different phases through which the Contract Act, 1872
has passed to reach its current shape are explained as follows:
1. Early and medieval period (Vedic and medieval period and
Islamic law): There was no general rule governing contracts in
the ancient and medieval periods in India. However, the princi-
ples mentioned within various scriptures, such as Vedas, Dharm-
shastras, Smritis and Shrutis, mention laws similar to contracts.
Various studies have revealed that contracts originated in the
Vedic period. These scriptures mention various transactions
that are similar to contracts, such as debt deposit, pledges, sale DID YOU KNOW
The Arthashastra is an ancient
without ownership, mortgage, gifts, etc. These scriptures men- Indian Sanskrit treatise on
tion various rules of contracts that are similar to the Modern statecraft, economic policy and
Law of Contract. As an example, Manusmriti mentions that the military strategy. Kautilya, also
competence of parties is the first requirement for the formation identified as Chanakya, wrote
this treatise 2400 years ago.
of a contract. In Manusmriti, dependents, minors and persons
devoid of limbs were considered incompetent to the contract.
Vedic scriptures also mention the concept of liability.
In medieval times, the law of contract was governed by moral
and economic factors and activities. Contracts were made for In the Mauryan period, the
business and commercial transactions, such as transfer of prop- following types of contracts
were considered to be void:
erty, performance of services, etc., on the basis of agreements
¢ Contracts formed during the
and promises. Another important medieval scripture to mention night
contracts is the Kautilya’s Arthashastra. ¢ Contracts made in a forest
Contracts were also made during the Mauryan period and ¢ Contracts made in any secret
involved free consent and consensus. place
ans. For cases between Hindus, Hindu Law was applied and in
cases between Mohammedans, Mohammedan Law was applied.
In cases between Hindus and Mohammedans, the law of the
defendant was applied. These laws continued to be applicable
till the Contract Act, 1872 was enacted.
5. Enactment of Contract Act, 1872: In 1872, the Contract Act was
enacted. It became enforceable from 1 September 1872. It con-
tinues to exist till date with various amendments.
‘Promise’ and ‘contract’ are said to be the two sides of the same coin.
Section 2(e) of the Contract Act, 1872 states agreement as every prom-
ise or a set of promises that forms a consideration for each other. It
means that the presence of a promise is quintessential for the forma-
tion of an agreement that, if legally enforceable, becomes a contract.
a. Dependents
b. Minors
Persons devoid of limbs
Q
All of these
2
Using the Internet, study the Contract Act, 1872 thoroughly and
analyse the rationale of the law.
=e CLASSIFICATION OF CONTRACTS
Contracts are categorised on the basis of their initiation, enforceabil-
ity, formation and performance. Let us discuss different categories of
contracts in detail.
Ob Beenie
Using various sources, study the rationale of a bilateral contract
and write down your findings.
Undue influence
--
Fraud
©
Misrepresentation
Mistake — bilateral or unilateral
When the consent of a party to the agreement is not free, the
contract is voidable. The party whose consent is not free, has the
option to either accept the contract or reject the same.
As per Section 2(a) of the Act, a person is said to make an offer when he
signifies to the other person his willingness to do or to abstain from doing
anything with a view to obtaining the assent of the other person.
When a person expresses his A valid offer consists of the following essential elements:
intention, this will not amount to
offer. Q An offeror must convey his willingness to do or not do something.
1.5.3 ACCEPTANCE
Q If the offer contains any specific mode for acceptance of the offer,
the acceptance must be made in the prescribed mode only. If
acceptance is communicated using any other mode, the offeror
may refuse to be bound by such acceptance. However, in cases
where the mode of acceptance is not prescribed, the acceptance
can be communicated in any reasonable mode which depends on
a particular case.
Q If the offer contains any specific timeline for acceptance of the
offer, the acceptance must be made within the prescribed timeline
only. If acceptance is communicated outside the timeline, it shall
not be binding on the offeror. However, in cases where timeline
for acceptance is not prescribed, the acceptance can be commu-
nicated within a reasonable time, which depends on a particular
case,
Q Acceptance succeeds offer.
Q Acceptance must be given by the person to whom the offer has
been made.
Q It must be communicated to the offeror.
Example: Continuing the above example, assume that B posts his letter
of acceptance from Mumbai on 1* August, that reaches A in Delhi on 4”
August. The communication of acceptance is complete on 1%* August as
against the offeror irrespective of whether or not the letter of acceptance
has reached the offeror. However, the communication of acceptance is
complete as against B on 4" August, enabling him to revoke his accep-
tance if he wishes to before 4% August.
Q It must express the desire of the promisor that must not be done
gratuitously.
It may move from the promisee or any other person.
UO
bound to do.
The rule of privity of contract does not apply in the following cases:
Q Beneficiary of a trust can claim benefits or rights conferred on him
in terms of the trust deed.
Q Beneficiary of a charge which has been created on specific immov-
able property for his benefit can file suit to enforce the charge.
Q When a contract is made under a family settlement or partition
of the joint property or any other family arrangement in order to
benefit a stranger.
Q Incase contracts are made by the agent, the principal has the right
to enforce those contracts.
ie FREE CONSENT
As studied earlier, consent is said to be free when an agreement is
made with the approval of both the parties and is free from any kind
of force or pressure.
Example: A wants to sell his car to B at a certain price, but does not
specify which car as A has numerous cars. On the other hand, B also
wants to purchase A’s car which A may not be intending to sell. In this
case, there is no consent as both the parties are not agreeing upon the
same thing in the same sense. Know More
Section 15 of the Contract
Free consent of contracting parties is essential for a valid contract.
Act, 1872 states coercion as
The consent of the parties is said to be free if it has not been caused by committing or threatening to
any of the vitiating factors which include coercion, undue influence, commit, any act forbidden by
fraud, or misrepresentation or mistake. the Indian Penal Code (45 of
1860) or the unlawful detaining,
There is a minute difference between consent and free consent. The or threatening to detain, any
property, to the prejudice of
consent of an individual can be obtained by illegal means, such as use
any person whatever, with the
of force or threat. However, free consent is the consent given by an intention of causing any person
individual without using any force or pressure. to enter into an agreement.
1.8.2 COERCION
Study 74 There is a presumption of law against the dominant party that he/she
Hint must have abused his/her dominant position in making the contract in
the aforementioned cases.
Section 17 of the Contract Act,
1872 states fraud as an act by
Example: A poor Hindu widow agreed to pay the lender 100 percent
a party with an intention to
deceive the other party in any
rate of interest on the money which she had borrowed to establish her
of the following conditions: right to maintenance. It was held that the agreement has been induced by
* False representation of undue influence as the lender has abused his dominant position.
facts done purposely or
reckless!
¢
’
Concealment of facts by
1.8.4 FRAUD
anyone who has knowledge
Fraud refers to an intentional misrepresentation of material existing
or belief of the facts
facts made by one person to another with knowledge of its falsity and
e Any promise made without
an intention to perform it
for the purpose of inducing the other person to enter into a contract.
e Any other act to deceive
e Any act or omission which - — : -
the law has specifically Rajagopala Iyer vs. South India R ubber Works (1942), MLJ 228
declared as fraudulent
Facts: The prospectus of a company showed certain persons as its
directors. The statement was true; however, before allotment, some
of the named directors retired. This fact was not communicated to
the applicants for shares. It was held to be a fraud consisting of con-
cealment; therefore, the applicants could seek refund of their money.
1.8.55 MISREPRESENTATION
1.8.6 MISTAKE
CASE LAW =
Galloway vs. Galloway (1914)
CASELAW |
Ayekam Angahal Singh vs. Union of India (1970) According to Section 22 of the
Contract Act, 1872, a contract
Facts: There was an auction for sales of fisheries rights on an annual does not become void because
contract basis and the lease for a period of three years. Mr. Singh of any unilateral mistake. Unless
was the highest bidder but he mistook the bid to be for all the three the unilateral mistake is related
years of lease, whereas the bid price was on an annual basis. How- to a fundamental fact, the
ever, Mr. Singh could not get any relief from the court since it was a contract validity is not affected.
case of unilateral mistake.
1 CAPACITY TO CONTRACT
According to Section 11 of the Contract Act, 1872, every person is com-
petent to enter into a contract if:
Q He/she is of the age of majority according to the law to which he/
she is subject;
Q He/she is of a sound mind; and
Q He/she is not legally disqualified from contracting by any law to
which he is subject.
any person, the day on which Q Minors (till they are being classified as minors under the law they
he was born is to be included are subject)
as a whole day and he shall
be deemed to have attained Q Persons of unsound mind
majority at the beginning of the
eighteenth anniversary of that Q Persons disqualified by law to which they are subject
day.
Let us study about the persons who are incompetent to contract:
Q Minors: According to the Indian Majority Act, 1875, a person below
the age of 18 years is considered as a minor. However, the age of
majority is extended to 21 years where the guardian of a person or
his property has been appointed by a court or the minor has been
put under the guardianship of the court of wards.
Legal Position of Agreements by a Minor
The following points explain the legal position of agreements by a
minor:
# An agreement with a minor is void ab initio (Mohiri Bibee vs.
Dharmodas Ghose) so that a minor is not under any legal obli-
gation.
¢ A minor can be a promisee or a beneficiary so that he can en-
force the agreement.
¢ There can be no ratification of the agreement made with a mi-
nor during or after he attains majority.
There can be no specific performance of a minor’s agreement.
There can be no estoppel against a minor as per Section 115
of the Evidence Act, 1872. It means that a minor cannot be es-
Research on the Internet and find out the essentials of a valid con-
tract under the Contract Act, 1872.
Immoral
oO
Sse
CASE LAW
Guthina vs. Lynn (1831)
QUASI-CONTRACTS
Usually, contracts are made between two or more parties wherein
DID YOU KNOW a promisor voluntarily undertakes to do or not to do something for
Quasi-contracts are also called the promisee. However, at times, the law imposes certain restrictions
contracts implied in law. upon one party for the benefit of the other party even in the absence
of a contract. In such cases, the law assumes the presence of a con-
tract when, in reality, no agreement (either express or implied) exists
between the parties. Such a contract is called a quasi-contract. Obliga-
tions are imposed by law upon a person to prevent unjust enrichment
at the expense of another person.
21. A contract results from the will of both the parties expressed
with a view to creating an obligation, whereas a
is an obligation resembling to that created by a contract.
22. When a supplier supplies any necessaries to a person who is
incapable of entering into a contract or to any incompetent
person who requires support, then such a person is entitled
to be reimbursed from the property of the incapable person.
(a) True (b) False
$23 Rese
Epidemic or Pandemic
Riots
Lockouts or strikes
However, there are certain other cases where the contract suffers from
supervening impossibility. Such contracts cannot be said to be dis-
charged and even with such impossibility parties are expected to per-
form the contract and avoidance of obligations would lead to breach of
contract. The rationale behind this is that the purpose of frustration is
to put an end to the contract. This doctrine is not to be lightly invoked.
Q Difficulty of performance: Difficulty of performance arises when
the performance of the contract becomes more difficult due to
increased expenses or decreased profits than what was estimated
at the time of the formation of contracts.
Q Commercial impossibility: It has become commercially non-prof-
itable or expected profits cannot be realised under the contract.
Q Impossibility due to default of a third party: If the contract could
not be discharged due to the default of a third party on whose
promise the performance of contract was based, it cannot be con-
sidered as discharged.
Q Partial impossibility: A contract cannot be simply considered as
discharged because of impossibility of one of the several objects
of a contract. Then the obligations that cannot be performed are
severed to the extent they can be severed from the contract and
the rest of the contract is expected to be performed.
ANTICIPATORY BREACH
ACTUAL BREACH
Whenever one or more parties to a contract reach out to the legal sys-
tem and claims/claim that the contract has been breached, the courts
need to decide whether or not the case concerned is indeed a case of
breach of contract. Breach of contract means the failure to perform
the promise related to the entire contract or of some clauses of the
contract. To decide if a claim of breach is indeed true, the courts need
to answer certain questions as follows:
Q Did a contract exist in the first place? Is such a contract a valid
contract?
Did a valid contract exist? What were the duties of each party?
UO
breach?
Q Does the defaulting party have any legal defence against the
enforcement of the contract?
Q What damages were caused by the breach?
24. In which of the following cases will the contract not be dis-
charged?
a . Declaration of war
b. Death
Difficulty of performance
9
Change of law
a.
You have already studied that if one party refuses to perform his/her
duties as per the contract, the other party can rescind the contract and
refuse to perform his/her obligations.
1.13.1 DAMAGES
Specific Relief (Amendment) Act 2018 has been effective since 1 Octo-
ber, 2018 which has inter-alia amended provisions of the Specific
Relief Act, 1963 more specifically provided in Sections 10 and 14 of
the Specific Relief Act, 1963. The amendments were initiated with an
aim of realigning the provisions to foster ease of doing business in
ENGAGEMENT OF EXPERTS
In Section 14A of the Specific Relief Act, 1963, the court may engage
experts for their opinion on any subject matter, within the purview
of the Specific Relief Act, 1963, in order to get assistance on any spe-
cific issues involved in the cases for contractual disputes. A suit may
require more experts to accumulate or provide evidence or include
the production of documents on the issue that shall be based upon
the relevant information and part of a record. Therefore, according to
Section 14A, the court has the power to engage experts in a suit.
SUBSTITUTED PERFORMANCE
Section 20 of the Specific Relief Act, 1963 has been changed under the
Specific Relief (Amendment) Act, 2018 to substitute the performance
of a contract. As per the new provisions, the aggrieved party has a
choice to get the contract performed by the third party at the same
cost as the party that has not performed or breached the contract.
The condition is that the victimised party needs to give in writing, a
notice to the breaching party of not less than 30 days, to perform the
contract. So, the breaching party needs to perform the contract signed
within the specified time frame mentioned in the notice; otherwise,
the aggrieved party can get the same contract performed by a third
party or his own agency, and the costs and expenses incurred from
performing the contract shall be borne by the breaching party.
As per Section 14 of the Specific Relief Act, 1963, the following con-
tracts now cannot be specifically enforced:
(a) where a party to the contract has obtained substituted perfor-
mance of the contract as per Section 20 of the Act;
(b) acontract the performance of which involves the performance of
a continuous duty that the court cannot supervise;
1.13.3 INJUNCTIONS
At times, a party may not perform the contract, which has been prom-
ised, causing the breach of contract. In such a case, a competent court
may issue an order to prohibit the party from either performing the
act or preventing him from doing any act that leads to the loss of the
aggrieved party. Such orders of the court are called injunctions. More
specifically, an injunction can be defined as a mode of securing the
specific performance of the negative terms of the contract. In other
words, injunction is a court order requiring a party in, to refrain from
doing something which may lead to a breach. Injunction may be a
temporary injunction or a perpetual injunction [Section 36 of Specific
Relief Act (1963)]. While the scope of temporary injunction is tempo-
rary, i.e., till the disposal of the suit; permanent injunction gives a per-
manent relief.
RIGHTS OF INDEMNIFIED
RIGHTS OF INDEMNIFIER
The Contract Act, 1872 does not mention the rights of the indemni-
fier expressly. In Maharana Shri Jasvaisingji Fatesingji v. Secretary of
State for India 14 BOM 299, it was decided that the rights of the indem-
nifier are similar to the rights of a surety mentioned under Section 141
of the Act. As per Section 141, the indemnifier becomes entitled to
the benefit of all securities that the creditor has against the principal
debtor whether he was aware of them or not. Where a person agrees to
An indemnified cannot hold the indemnifier liable till the time such
indemnified has suffered an actual loss. In relation to the contracts of
indemnity, it is relevant to determine when an indemnifier becomes
liable to pay. In other words, it must be determined when an indemni-
fied becomes entitled to recover his indemnity.
Under a contract of guarantee, the surety enjoys all the rights that
are usually available to any party under a usual contract. Apart from
these, there are certain specific rights that are enjoyed by the surety
under a contract of guarantee, which are as follows:
Q Rights against principal debtor: The following are the rights of
surety against principal debtor:
¢ Right of indemnity: The surety has the right to recover any
amount from the principal debtor that he has legitimately paid
to the creditor towards the debt under the contract of guaran-
tee.
than their share of = 1,000, they can claim contribution from oth-
ers in excess of = 1,000.
¢ Effect of releasing a surety: The release of one surety of
co-sureties by the creditor does not discharge other sureties,
nor is the surety, so discharged, released from his obligation
vis-a-vis other co-sureties.
You studied about the rights of surety. However, there are liabilities
of the surety and co-sureties as well. The nature and extent of the
liability of a surety depends on whether there is a single surety or two
or more co-sureties. According to the Contract Act, 1872, the liability
of a surety is co-extensive with the liability of the principal debtor
except in case the contract provides for the contrary. As a general rule,
co-sureties are jointly and severally liable for the debt. It means that
all sureties have to contribute equally for the repayment of debt.
Notice by Surety
Novation
4 Loss of Security
| Guarantee Obtained by
Misrepresentation
Failure of Co-surety to
Join Surety
There are two parties, namely There are three parties, namely surety,
indemnifier and ss creditor and principal debtor.
The indemnifier cannot sue The surety has the right to sue the princi-
any third party for any loss. pal debtor if he has discharged his guaran-
tee by invalidation of the contract.
Find some real life examples where contracts of guarantee and con-
tracts of indemnity are applied.
Example: Arun gives his novel to Bala for reading and says that Bala
can return the novel after reading. It is a case of gratuitous bailment.
Example: Arun gives his novel to Bala for reading and says that Bala
can return the novel after reading if he pays Arun % 15. It is a case of
non-gratuitous bailment.
On the basis of the benefit accruing to the parties, the contract of bail-
ment is classified into the following categories:
a Bailment for exclusive benefit of the bailor: In such a bailment,
the bailment is executed solely for the benefit of bailor and the
bailee derives no benefit.
Example: Arun gives his novel to Bala for safe-keeping because his
house is being renovated.
Bailment for the exclusive benefit of the bailee: In such a bail-
ment, the bailment is executed solely for the benefit of bailee and
the bailor derives no benefit.
Example: Arun has five cows and gives one cow to his poor friend
Bala so that he may sell its milk to manage his household for one year.
Bailment for mutual benefit of both the bailee and the bailor: In
such bailment, the bailment is executed for the mutual benefit of
both the bailor and the bailee.
Example: Arun gives a gold bar to Bala, who is a jeweller, to make
a ring from it and Bala charges money for the services undertaken
by him.
a Not to mix the bailed goods with other goods: It is the duty of
the bailee not to mix the bailed goods with any other goods held
by him. There can be three cases when the bailee mixes the goods
which are:
1. When the goods are mixed with the approval of the bailor, the
bailor and the bailee have an equal proportion of interest in the
mixed goods.
2. When the goods are mixed without the approval of the bailor
and the goods can be separated, the bailee has to bear the costs
related to division, separation and damages.
3. When goods are mixed without the approval of the bailor and
the goods cannot be separated, the bailee has to bear the costs
of loss to the bailor.
Duty to return the goods to the bailor in time: It is the duty of the
bailee to return the goods to the bailor after the expiry of the time
of contract or when the purpose of bailment has been achieved.
Duty to return accretion to the goods: The bailee must return the
goods to the bailor along with any profit or increments.
There are two types of lien, namely particular lien and general lien,
which are explained as follows:
Q Particular Lien: According to Section 170 of the Contract Act,
1872, a bailee’s particular lien is defined as where the bailee has, in
accordance with the purpose of the bailment, rendered any service
involving the exercise of labour or skill in respect of the goods bailed,
he has, in the absence of a contract to the contrary, a right to retain
such goods until he receives due remuneration for the services he has
rendered in respect of them.
It means that a bailee may retain the goods only in case he has
not received his legal and rightful remuneration for the services
provided by him.
Q General Lien: According to Section 171 of the Contract Act, 1872,
general lien is a lien that bankers, factors, wharfingers, attorneys of
a High Court and policy brokers may, in the absence of a contract to
the contrary, retain, as a security for a general balance of account,
any goods bailed to them, but no other persons have a right to retain,
as a security for such balance, goods bailed to them, unless there is
an express contract to that effect.
Example: A borrows % 1,000 from his bank XYZ without any security.
After three months, A again borrows = 1,000 from XYZ, but this time he
keeps a security of some gold ornaments. Now, if A has returned the sec-
ond loan of € 1,000, then XYZ can retain the gold ornaments till A pays
off the rest amount of loan.
1.15.7 PLEDGE
Section 172 of the Contract Act, 1872 describes three terms, namely
pledge, pawnor and pawnee.
When goods are bailed as a security for the payment of a debt or for the
performance of a promise, it is called pledge. The bailor here becomes
the pawnor/pledger, whereas the bailee becomes the pawnee/pledgee.
In both bailment and pledge, only movable goods are delivered. The
bailment and pledge contracts are both created by mutual agreement
between the parties. In the case of bailment, the bailee may use goods
as per the terms of contract, whereas the pawnee cannot use the goods
pledged.
In the case of pledge, the pawnee has a right to sell the goods pledged
if the pawnor defaults on debt repayment after giving a due notice to
him. On the contrary, in case of default by the bailor, the bailee can
only retain and have lien on the goods or sue the bailor.
Section 172 of the Act deals with Section 148 of the Act deals with
pledges. bailments.
The Law of Agency states that an agent is not personally liable except
in a few conditions which are stated as: ‘In the absence of any contract
to that effect, an agent cannot personally enforce contracts entered into
by him on behalf of his principal, nor is he personally bound by them’.
However, there are certain circumstances that make the agent person-
ally liable. Figure 1.2 shows the circumstances under which an agent
is personally liable:
| I I
In case of acts In case In case of In case of
not ratified of acts in express custom or
[Section 235] his own name agreement usage of
trade
I | |
Both the agent and the principal can terminate the agency by the fol-
lowing ways:
Q By mutual agreement: An agency between the principal and his
agent can be terminated by mutual agreement in the similar way
an agency is formulated.
Q By revocation of an authority by the principal: An agency gets ter-
minated if the principal revokes the authority of his agent. The prin-
cipal has the right to revoke the authority of its agent at any time.
Q By renunciation of agency by the agent: An agency is terminated
when an agent himself renounces the business’s agency.
the nominal value of the shares within 2... days from the allotment of the said -
shares. But should any allotment of the shares be made to the underwriters in accordance with
the terme of this agr the ission shall not be payable until the underwriters pay
the application and allotment moneys payable in respect of all the shares so allotted to the
underwriters.
6. It is hereby agreed that time is the of this agr +
This agreement shall be executed in duplicate. The original shall be ined by the
and the duplicate by the underwriters.
In Witness Whereof the parties: have signed these presente and a duplicate hereof the day and year
firet hereinabove written.
Signed and delivered byA 8 Ltd, the within named a contract
to be concluded
company by its Managing Director Shri —.. a
Signed and delivered by M/s. XYZ the within named under writers by their partners << Td
WITNESSES: ~€ 1
1.
Witness
2.
WHEREAS ~¢ Recitals of
1. The Licenser is the proprietor of a trade mark more particularly described in the achedule hereunder written and | Agreement
which ie duly registered under the Trade and Merchandise Marke Act 1852.
2. The Licensor is manufacturing and eelling the goods viz under the eaid trade mark.
$3. The Licensee who is running a emall ecale industry has requested the Licensor to grant him a license to manufacture
the said gocde with the trade mark embossed or printed thereon as is being done by the Licensor and which the
Licensor has agreed to do on the following terme and conditions agreed to between the parties hereto.
NOW IT IS AGREED BY AND BETWEEN THE FARTIES AS FOLLOWS:
1. The Licensor hereby grants to the Licensee 2 license to manufacture the eid goods az 2job work by applying the aaid
trade mark, particulars of which are described in the Schedul der written Offer
2 The csr agen sod ancaken tat of Ged seas mauacred ty te Loess Be Boo
or eleewhere shall be sold to the not to anybody elee at the price of Re
item or article. The Licensee undertakes to mani supply to the Licensor a quantity of not less then
every month. A |
$3. The goods eo manufactured with the eaid trade mark applied to them will be supplied and delivered by the Licensee to
the Licensor at the latter« business premises at at hie own coste of transport.
4 The price of the eaid goode eo supplied will be paid by the Licensor againet delivery after deducting there from the
royalty payable by the Licensee to the Licensor az hereinafter provided.
The Licensor shall have the right to reject any goods supplied if they are not as per epecificationa or quality which are
ov
made known to the Licensee and in the event of such rejection the Licensee shall take back the rejected goods from
the Licensor’s premizes at hie own costa and until such removal they will be at the rikof the Licensee. The Licensor
agrees that during the aubsiatence of thie agreement, the Licensor will not get the eaid goode manufactured
from
anybody elee.
6. The ownershsp ofthe anid trademark will aways remain with the Licenacr and the Licensee will not pase of the aaid = mee
goods as if he is the owner of the eaid tradi
7. The Licensee will be at liberty to puta label or advertise that the aid goods are manufactured by him but it will also Property
be mentioned that the trade mark belonge to the Licensor and that the goods are manufactured for the benefit of the
Licensor.
8. In consideration of the Licensor allowing the Licensee to manufacture the eaid goods with the said trade mark the
Licensee agrees topay tothe Licensor by way of royalty a sum equal to per cent of the price of the goods
at which they will be sold to the Licensor by the Licensee az af for
9 Far eas ct te coos ened second tha Licanacr and the price rencived by him
and royalty paid in reepect thereof and euch account chall be open to inspection by the Licensor from time to time
aa may be required by the Licensor. The Licensor will aleo have the right to enter upon the premises of the Licensee
where the goods are manufactured and to take inspection of th ufactured.
10. Thie agreement will remain in force for a period of _@AX_ te
period
or earlier termination thereof
aa herein provided, the Licensee shall atop manufacturing the aid goods under
the eaid trade mark and all the goods till then fz d and lying undeli d to the Li will be deli dito
the Licensor in terme of thie agreement ae aforesaid.
ll. Ifthe Licensee commits breach of any term of thie ag t, the Li will b itled to thie ag:
by fifteen days prior notice in writing to the Licensee and on the expiration of the notice paiod, this agreement shall
stand terminated unless in the mean while the breach lained of is died to the f: ofthe
12. The Licenses may get himeelf registered as a registered user under the provisione of the Trade & andendee Marke
Act 1958 subject to the terms of thie agreement.
18. the Registrar of Trade Marks while registering the Licensee as a registered wer puts any condition which ia net Negative
ble to the Li the L will withd: the lication for regi ion or the Licensor
will have the Covenants-
option to terminate this agreement. Covenants that
14. If any peraon ia found by the Licensee to infringe the ezid trade mark either by pasting off or otherwise, the Licensee | Festrict parties
will bring that fact to the notice of the Licenzor to enable him to take necessary legal action against euch pereon and =
in that event the Licensee will give all cooperation to the Licensor in prosecuting such action and all the coste thereof ee a
will be borne and paid by the parties hereto in equal shares. p= causing losses
15. If the Licensee himself infringes the aaid trade mark by passing off or otherwise, then notwithatandi i
provided in clause 16 hereof it will be open to the Licensor to take legal action againat him and in auch case the i
Licensee will not be entitled to challenge the ownership of the Licensor
in reapect of the aaid trade mark. Resolution and
16. In the event of any dispute arising out of thie agreement, the eame will be referred to arbitration of a common | Jurisdiction are
Arbitrator if agreed upon or in the absence of auch agreement, to two Arbitratore one to be appointed by each party | the clauses which
hereto and the Arbitration will be governed by the Arbitration Act for the time being in force. <{————|_ povern the law
IN WITNESS WHEREOF the parties have put their reapective hands the day and year first hereinabove written. and court which
will apply in caze
THE SCHEDULE ABOVE REFERRED TO of dieputes
Signed
and delivered for and on behalfof =
Within named Licensor Company So
the Agreement
By ite Managing Director _ is important for
In the presence of < ete
be concluded-
Signed and delivered by the Conzensus-ad-
Within named Licensee Mr. idem
< [__wines|
Inthe of ~«
Source: h ih A lid, h a. 1, 1 gal $e fs of]: betw trad
oe ee es
BES SUMMARY
Q Acontract is a legally binding agreement made between two or
more persons by which rights are acquired by one or more acts
or forbearances (abstaining from doing something) on the part of
others.
Q An ‘agreement’ means a promise or a set of promises that forms a
consideration for each other. In other words, an agreement is an
exchange of promises between two or more parties.
KEY WORDS
:9 | DESCRIPTIVE QUESTIONS
1. Explain the following phrase:
‘All contracts are agreement but all agreements are not contracts.’
2. Describe the classification of contracts on the basis of initiation,
formation, enforceability and performance.
3. Explain the essential conditions for the formation of contracts.
8. False
9. True
12. True
28. True
SUGGESTED READINGS
Q Chandiramani, N. (1997). The law of contract. Mumbai: Saptarang
Publ.
Q Tulsian, P (2019). Business Law (3rd ed.). New Delhi: McGraw Hill
Education (India) Private Limited.
Q Sheth, T. (2017). Business Law (3rd ed.). Pearson Education.
E-REFERENCES
Q (2020). Retrieved 18 September 2020, from https://cablogindia.
com/the-indian-contract-act-1872-notes/
Q Laws, B., Law, C., & guarantee, I. (2020). Indemnity and Guaran-
tee. Retrieved 31 March 2020, from https://www.lawctopus.com/
academike/indemnity-and-guarantee/
Q History of the Indian Contract Act 1872. (2020). Retrieved 31
March 2020, from https://www.lawteacher.net/free-law-essays/con-
tract-law/history-of-the-indian-contract-act-1872-contract-law-es-
say.php
CONTENTS
2.1 Introduction
2.2 Concept of Goods
Self Assessment Questions
Activity
2.3 Sale of Goods Act, 1930
2.3.1 Sale and Agreement to Sell
2.3.2 Difference between the Contract of Sale of Goods and the Contract
for Work and Labour
2.3.3 Conditions and Warranties
2.3.4 Title (Ownership)
2.3.5 Doctrine of Caveat Emptor and Exceptions
2.3.6 Performance of the Contract of Sale
2.3.7 Unpaid Seller
2.3.8 Hire Purchase and Hypothecation Agreements
Self Assessment Questions
Activity
2.4 Summary
2.5 Descriptive Questions
2.6 Answers and Hints
2.7 Suggested Readings & References
INTRODUCTORY CASELET
7-3 ‘A’ goes to a chemist’s shop to buy a hot water bottle. The chemist
de TS a (HON shows him a bottle and says that the bottle will not stand boiling
SSSR na eneaTia water, but is fit to store hot water. On this representation by the
repercussions of the breach chemist, ‘A’ buys the bottle. After a few days, while ‘A’ was using
of contract of sale. the bottle, it burst and caused injuries to ‘A’.
The seller is liable to pay damages to ‘A’ for the breach of this con-
dition.
*Source: Priest v. Last (1903) 2 KB 148.
© LEARNING OBJECTIVES
rae INTRODUCTION
In the previous chapter, you studied about the Contract Act, 1872. The Quick Revision
chapter discussed the agreements, contracts, types of contracts and
various related provisions.
Till now, you have studied about the contracts in general. However,
the contracts for sale of goods are governed by the Sale of Goods Act,
1930. Before 1930, the law relating to sale of goods was contained in the
Indian Contract Act, 1872. In the year 1930, the Sale of Goods Act was
enacted which came into force from 1* July 1930. This chapter starts
with an explanation of the meaning of goods and its types, namely the
existing goods, future goods and contingent goods.
Agreements for sale and agreement to sell are quite different. Simi-
larly, contracts for sale of goods and contract for work and labour are
different. In case of any contract, there are certain stipulations that
are divided into conditions and warranties. Condition is a stipulation
that is an essential part of a contract, whereas warranty is a stipula-
tion that is only collateral to a contract.
The contracts for sale are guided by the doctrine of Caveat Emptor
which means that examining the goods before buying is the primary
responsibility of the buyer. There are certain exceptions to this rule.
A seller who has not received the full amount of price is known as an
unpaid seller and he has certain rights and duties. There are certain
agreements, such as hire purchase agreement and the hypothecation
agreement where the buyer takes the possession of the assets first and
then makes payments in certain periodic amounts. In this chapter, you
will study about Sale of Goods Act, 1930 at length.
The goods that are excluded under the definition of goods are as fol-
lows:
Q Actionable claims such as book debts
= Existing Goods =
= Future Goods —
— Contingent Goods —
There are differences between sale (agreement for sale) and agree-
ment to sell. These differences are discussed in the upcoming section.
Examples:
1. IfAisasand artist and enters into a contract with B to perform a
sand art for creating awareness regarding air pollution, then this
contract is basically a contract where the skill of the artist is of
essence.
2. If X enters into an agreement with Y, who is a graffiti artist to paint
the walls of her backyard and provides all the required paints,
brushes, etc., it is a contract for work and labour.
If both the material and services are provided by one party, it may be a
‘sale’, though theoretically called ‘contract for work and labour’. Know More
According to Section 12(1) of
the Sale of Goods Act, 1930, a
2.3.3 CONDITIONS AND WARRANTIES stipulation in a contract of sale
with reference to goods which
When you buy some goods like electronic gadgets, you are concerned are the subject thereof, maybe a
about their warranty period. You always ask the seller about the condition or a warranty.
warranty in order to ensure that the product gets easily replaced or
repaired even if it is found to be faulty after purchase. Thus, the sale
or purchase of goods forms contractual relations between a buyer and
the seller. These contractual relations lead to certain rights and lia-
bilities. Whenever there is a breach of these rights and liabilities, the
breach of contract arises. To avoid or curb the instances of the breach
of contract, the terms ‘Condition’ and ‘Warranty’ are mentioned in the
contract of sale in order to determine remedies the parties can claim
in case of the breach by either of the parties.
Know More
According to Section 12(2) of
WHAT IS A CONDITION? the Sale of Goods Act 1930,
a condition is a stipulation
A condition is a stipulation which is essential for the very purpose of essential to the main purpose of
the contract and gives the aggrieved party an option to terminate the the contract the breach of which
contract. gives rise to a right to treat the
contract as repudiated.
Example: A asks B, a two-wheeler dealer, that he wants to purchase a
bike that can run at a speed of 200 miles/hour. B suggests a bike to A,
and A purchases the suggested bike. However, A finds that the bike pur-
chased by him is not running at the required speed which was one of the
conditions of the contract. On the breach of this condition, A is entitled
to reject the bike and seek a refund of the price paid.
CASE LAW
Baldry vs. Marshall (1925)
The Court observed that the suitability of the car for touring purpose
was a condition because it was so important that the non-fulfilment
defeated the very purpose of purchasing the car. It was held that A
was entitled to return the car and get back the price paid.
WHAT IS A WARRANTY?
TYPES OF CONDITIONS
Condition as to Condition as to
Fitness or Quality Merchantability
Example: In E&S Ruben Ltd. vs. Fair Bros. (1949), some rubber rolls
were sold corresponding to the specific length and width. However,
the actually supplied rolls did not match the sample, giving a right to
the buyer to repudiate the contract.
Q Condition as to fitness or quality: Under a contract of sale, there is
no implied condition as to the quality or fitness of goods supplied.
In fact, in most agreements, this assurance or condition of fitness
or quality is specifically disclaimed by the seller. This is expressed
by the principle of Caveat Emptor (i.e., let the buyer beware).
However, the buyer has the right to satisfy himself/herself about
the quality of goods. In the following cases, an implied condition is
deemed to exist on part of the seller that the goods supplied shall
be reasonably fit for the purpose for which the buyer wants them:
¢ The buyer discloses the purpose for which the goods are need-
ed except where the purpose is self-evident from the nature of
goods;
@ The buyer relies on the seller’s skill or judgement;
The principle of Caveat Emptor
is contained in Section 16 of the @ The business of the seller must be to sell goods of that kind.
Sale of Goods Act, 1930.
Example: A customer purchased a packet of milk from H’s dairy.
However, the milk was infected with typhoid bacteria, resulting in
the customer’s wife falling ill on consumption of milk. He will be
liable to pay damages as it is a case of breach of condition of fitness.
Q Condition as to merchantability: There is an implied condition
that the goods shall be of merchantable quality, unless specifically
disclaimed by the seller, or the goods are specifically stated to
be sold on an ‘as is’ condition (i.e., with all their defects). The
expression ‘merchantable quality’ means that goods are free from
any latent defects. The quality and condition of the goods must
be such that an individual would accept them as the goods of that
description.
Example: A customer bought some worst-quality coatings after
seeing the sample. Later, it was discovered that the clothing was unfit
for stitching into coats. The same defect was also there in the sample
but it was discoverable by ordinary examination. The goods were
held to be un-merchantable.
TYPES OF WARRANTY
EXHIBIT
When a buyer would not have purchased the goods in the absence
of a stipulation, it is called a condition. However, if a buyer would
still have purchased the goods in the absence of the stipulation, it is
called a warranty. When the stipulations are only designed to provide
an assurance with respect to quality and suitability of the goods, it is
called a warranty.
Section 13(1) states that where a contract of sale is subject to any con-
dition to be fulfilled by the seller, the buyer may waive the condition or
elect to treat the breach of the condition as a breach of warranty and not
as a ground for treating the contract as repudiated.
This means that the buyer may voluntarily waive off the condition.
Here, the buyer’s waiving off of the condition and treating the breach
of condition as a breach of warranty is completely voluntary and it
depends upon the will of the buyer.
When a buyer finds out that the seller has committed a breach of con-
dition, the buyer has the right to repudiate the contract. However, if
the buyer does not repudiate the contract, it is assumed that he has
waived off the condition. And after a condition has been voluntarily
waived off by the buyer, he cannot ask the seller to fulfil it.
Section 13(2) states that where a contract of sale is not severable and the
buyer has accepted the goods or part thereof, the breach of any condition
to be fulfilled by the seller can only be treated as a breach of warranty
and not as a ground for rejecting the goods and treating the contract as
repudiated, unless there is a term of the contract, express or implied, to
that effect.
This means that when a buyer has accepted goods and comes to know
about the breach of condition later, he cannot reject the goods, but can
claim for damages. There can be certain cases where the buyer has
accepted a part of the entire consignment and the contract is indivis-
ible. In this case, the buyer has to accept the entire consignment but
has the right to claim damages. For example upon the purchase of a
television, the buyer finds that the remote of the TV is defective and in
that case the buyer cannot repudiate the contract but claim damages
as both are not severable.
In case of a divisible contract, the buyer has to retain goods that have
been accepted and claim damages for the part of goods received. How-
ever, for the remaining unaccepted part of the goods, the buyer can
repudiate the contract.
Section 13(2) states that nothing in this Section shall affect the case of
any condition or warranty, fulfilment of which is excused by law by rea-
son of impossibility or otherwise.
In simple words, ‘title’ means ‘ownership’. A person that holds the title
to the goods is the owner of the goods. The title or ownership of goods
can be proved by using documents.
the buyer because the risk involving the property depends on the
time of transfer. In a sale of goods contract, following have to be
determined:
Q Exact point in time when the property in goods is transferred from
the buyer to the seller
Q Point of time when the risk is transferred from the seller to the
buyer
Q Point of time when ownership and possession are passed on from
the seller to the buyer
The time for the transfer of ownership from the seller to the buyer can
be decided by the parties freely. However, in cases where the intention
of the parties is not clarified from the contract, some rules have to be
followed.
For deciding the time of passing of property in goods from the seller
to the buyer, goods are divided into three types, namely specific or
ascertained goods, generic or unascertained goods and goods sent on
approval. Let us now discuss the three cases as follows:
1. Specific/Ascertained goods: For specific goods, there can be
three cases, which are as follows:
a. Where there is an unconditional contract for the sale of spe-
cific goods in a deliverable condition, the ownership passes at
the time when the contract is made.
b. Where there is a contract for the sale of specific goods not in
a deliverable condition, the ownership passes when the goods
are made into a deliverable state and the buyer has informa-
tion regarding it.
ce. Where there is a contract for the sale of specific goods in a de-
liverable state, but the seller has to weigh or measure goods
to ascertain the price, the ownership passes when the seller
has ascertained the price and the buyer has information re-
garding the same.
Apart from these, in case of standing trees, the ownership passes when
the trees are felled and ascertained.
The title is usually transferred by the owner himself. The general rule
to be followed is “nemo dat quod non-habet” that means that no one
can give a better title than himself. In any case, if a person purchases
and acquires the possession of a stolen good, then he must return that
to the actual owner. In case a seller sells the goods when he does not
have a title, the buyer acquires no title in the goods.
Example: Sita selects 10 kg rice, pays for the same and let the rice remain
in the shop with an arrangement of picking it up later. Meanwhile, there
is a flood and the rice gets destroyed. Sita will be liable to bear the loss.
The term ‘Caveat Emptor’ means ‘let the buyer beware’. It is a funda-
mental principle followed in contracts of sale of goods. It means that
it is the responsibility of the buyer to check the suitability and defects
in a good, he is purchasing. Stated another way, it is not the duty of
the seller to point out any defect. The buyer must make use of his
skill and judgement while making the purchase. In this regard,
Section 16 of the states that there is no implied warranty or condition
for the quality of the goods or for the fitness, as to the purpose of the
buyer under the contract of sale.
Delivery means the voluntary transfer of goods from the seller to the
buyer. The seller must be willing to give the possession of the goods to
the buyer for a price and the buyer must be willing to accept and pay
the price.
An unpaid seller refers to a seller who has not received the full price
for the goods sold by him.
The term ‘unpaid seller’ has been defined in Section 45 of the Sale of
Goods Act, 1930 as follows:
The conditions that must be satisfied for an unpaid seller are as fol-
lows:
Q Goods are sold by the seller, but the price is due.
Q Full price is not received.
Q Ifthe price is not paid immediately, a negotiable instrument, such
as bill of exchange, cheque, etc., are received as payment.
Q The negotiable instrument received had been dishonoured.
If Sameeksha sold a T-shirt for = 1,500 to Aditya, but Aditya paid the
whole amount through a cheque that was dishonoured, then Sameeksha
is an unpaid seller.
If Sameeksha sold a T-shirt for = 1,500 to Aditya, but allows a time of one
month to make the payment, but does not receive the payment after one
month, then Sameeksha is an unpaid seller.
There are certain cases where the seller cannot be called an unpaid
seller, which are as follows:
Q Ifthe payment has been received in full, but some other expenses
have not been paid, the seller will not be called an unpaid seller.
Q If the seller has sold the products on credit, the seller cannot be
called an unpaid seller till the expiry of the credit period.
Q Ifa buyer has paid the full price of goods, but the seller refuses to
accept the payment, he cannot be called an unpaid seller.
with the vendor. The payment may be made in instalments and the
ownership will be transferred in favour of the buyer only on the com-
pletion of payment of all agreed number of instalments. However, the
buyer can use assets. The main features of a hire purchase agreement
are as follows:
a There are two parties, namely the hirer and the hiree (the vendor
or the owner).
Q The hirer is the person who makes use of the assets while making
payment of the asset on an instalment basis.
In a hire purchase transaction, there is no transfer of ownership
till the whole amount or until the payment of final instalment.
The transaction is a bailment coupled with the hirer’s option to
purchase by paying all the agreed number of instalments.
A hire purchase agreement includes two elements, namely an
element of bailment and an element of sale.
There is no obligation on part of the buyer to purchase the asset.
Options are available with him to either buy or decline the hire
purchase agreement.
The main differences between a hire purchase agreement and sale are
as follows:
Q Sale is governed by the Sale of Goods Act, 1930, while the hire
purchase agreement is merely a combination of bailment and sale.
Q In the case of sale, the ownership is transferred immediately upon
payment while in the case of the hire purchase agreement; only
the possession with the right to use the asset is given to the hirer.
Q Payment for a sale may be in cash, credit or instalment, while, in
a hire purchase agreement, the payment is made in instalments.
Q On the failure of the buyer to make payment, the seller cannot take
back assets but sue the buyer for the unpaid portion of the price.
However, in a hire purchase agreement, the owner can take back
the asset on default by the hirer to pay even a single instalment.
Q = Sale involves price, whereas hire purchase includes some amount
of interest in the total amount of payment.
Q The buyer, in the case of sale, has the right of resale and the
subsequent buyer shall get a good title. In the hire purchase,
the hirer has no right to sell the asset without the completion of
payment.
HYPOTHECATION AGREEMENT
Right of lien
2
Study any case law related to the suit for interest filed by an unpaid
seller. Prepare a synopsis for the case law.
ra SUMMARY
@
Q Goods in general refer to merchandise or possessions or articles
that can be bought and sold.
Q Goods are of three types, namely existing goods, future goods and
contingent goods.
Q The Sale of Goods Act, 1930 is the governing law for the contracts
of sale of goods.
Q_ Sale is when the goods are immediately transferred from the seller
to the buyer, whereas agreement to sell is when the seller is to
transfer the goods to the buyer at a future date.
Q Acondition is a stipulation which is essential for the very purpose
of the contract and it gives the aggrieved party an option to
terminate the contract.
Q = The time for the transfer of ownership from the seller to the buyer
can be decided by the parties freely.
Q For deciding the time of passing of property in goods from the
seller to the buyer, the goods are divided into three types, namely
specific or ascertained goods, generic or unascertained goods and
goods sent on approval.
Q = Itisnot the duty of the seller to point out any defect. The buyer must
make use of his skill and judgement while making the purchase.
Q The first part of the performance of a contract is delivery.
Q The second part of the performance of a contract is the buyer’s
acceptance of goods.
Q = Thethird and last part of performance of contract relates to making
the payment for goods received.
Q An unpaid seller refers to a seller who has not received the full
price for the goods sold by him.
Q Various rights of an unpaid seller include:
Right of lien
OHe+hU Ooh Hh
Right of resale
Right to withhold goods
Suit for price
Suit for damages
Suit for interest
KEY WORDS
DESCRIPTIVE QUESTIONS
1. Explain the concept of goods as per the Sale of Goods Act, 1930.
2. Explain the Sale of Goods Act, 1930.
3. Describe the meaning of conditions and warranties and their
types.
NAY
ANSWERS FOR SELF ASSESSMENT QUESTIONS
8 aTrue
Sale of Goods Act, 1930 4. d. Collateral to the main purpose
of the contract
5a True |
6. Caveat Emptor
Tc. Right to withhold delivery
8. transfer of ownership
essential for the very purpose of the contract and it gives the
aggrieved party an option to terminate the contract. Refer to
Section 2.3 Sale of Goods Act, 1930
4. Section 13 of the Sale of Goods Act, 1930 states that a condition
is to be treated as a warranty under three cases as mentioned in
Sections 13(1), 13(2) and 13(3). Refer to Section 2.3 Sale of Goods
Act, 1930
5. The doctrine of Caveat Emptor is a fundamental principle which
means that it is the responsibility of the buyer to check the suit-
ability and defects in a good he is purchasing. Refer to Section
2.3 Sale of Goods Act, 1930
6. An unpaid seller refers to a seller who has not received the full
price for the goods sold by him. The term ‘unpaid seller’ has been
defined in Section 45 of the Sale of Goods Act, 1930. An unpaid
seller has rights against the goods as well as against the buyer.
Refer to Section 2.3 Sale of Goods Act, 1930
7. Hire purchase is an agreement in which the possession of an
asset is transferred from one person to another person, but the
ownership remains with the vendor. The payment may be made
in instalments. Refer to Section 2.3 Sale of Goods Act, 1930
SUGGESTED READINGS
Q Kumar, A. (2001). Mercantile Law. Atlantic Publishers & Dist.
Q Pillai, R. Legal Aspect of Business (Mercantile Law). New Delhi: S.
Chand.
E-REFERENCES
Q Implied Conditions in the Sale of Goods. (2020). Retrieved 7 April
2020, from https://www.lawyersclubindia.com/articles/IMPLIED-
CONDITIONS-IN-THE-SALE-OF-GOODS-379.asp
Q Duties of an Unpaid Seller under Sale of Goods Act - iPleaders.
(2020). Retrieved 7 April 2020, from https://blog.ipleaders.in/duties-
of-an-unpaid-seller/
CONTENTS
Introduction
Unincorporated and Incorporated Forms of Business
Sole Proprietorship—Meaning, Features, Advantages, and Disadvantages
Partnership and the Partnership Act, 1932
Limited Liability Partnership (LLP) Act, 2008
Distinction between Partnership Firm Incorporated under the Partner-
ship Act and Partnership Firm Incorporated under the LLP Act
Hindu Undivided Family (HUF) and its Characteristics
Distinction between a Partnership Firm Incorporated under Partnership
Act, 1932 and an HUF
Self Assessment Questions
Activity
3.3 Companies Act, 2013
3.3.1 Concept and Evolution of a Company
3.3.2 Characteristics of a Company
3.3.3 Kinds of Companies
3.3.4 Difference between a Private Company and a Public Company
3.3.5 Lifting the Corporate Veil
3.3.6 Formation and Incorporation of a Company—Conditions and the Process
of Incorporation
3.3.7 Constitutional Documents of a Joint Stock Company
3.3.8 Memorandum of Association (MoA)
3.3.9 Articles of Association (AoA)
3.3.10 Binding Force of MoA and AoA
3.3.11 Difference between MoA and AoA
3.3.12 Public Limited Company—Prospectus
3.3.13 Raising Capital using Shares and Debentures
3.3.14 Membership (Ownership) and Management
CONTENTS
INTRODUCTORY CASELET
FORMATION OF PARTNERSHIP
© LEARNING OBJECTIVES
Sai INTRODUCTION
Quick Revision
In the previous chapter, you had studied about the Sale of Goods Act,
1930 which is one of the most important laws of contract for conduct-
ing business in India. This chapter discusses the principal forms of
business organisations. The oldest of these forms is the sole propri-
etorship. Most small shops in villages, towns, and cities selling all
kinds of daily-use items are of this kind. In comparison, if two or more
persons decide to set up a business for sharing the profits earned, it
is called a partnership. A partnership between persons can be estab-
lished through an agreement, which can be either written or oral. An
oral agreement is, however, not recognised under the statutory laws
governing partnerships in India. Further, oral agreements may lead
to ambiguity and disputes in future. Hence, it is better to have a writ-
ten agreement between partners. Rights and duties created under the
Partnership Act, 1932, however, can be enforced in a court of law only
if the partnership is registered and a written partnership agreement
is filed with the Registrar. That said, an unregistered partnership firm
can be sued by a third party. The law relating to partnerships in India
is governed by the Partnership Act, 1932 and the Limited Liability
Partnership (LLP) Act, 2008.
In this chapter, we will study the various forms of partnership and the
types of partners. The relationship between partners and their rights
and duties are also discussed. The chapter also discusses different
Acts for various other forms of business establishments such as Hindu
Undivided Family (HUF) and joint stock companies.
39 UNINCORPORATED AND
m= INCORPORATED FORMS OF BUSINESS
A business can be established in the form of sole proprietorship, HUF,
partnership, or a joint stock company. It depends upon the choice of
owners to decide the structure of their business. They can choose
either an unincorporated or an incorporated form of business. Incor-
poration of business is a process of creating a separate legal entity for
a business as per the statutory laws. It can reduce the magnitude of
risk and provide tax benefits and legal protection as well. In an unin-
corporated form of business, the owner is responsible for all the liabil-
ity and responsibility except in the case of a limited liability partner-
ship. The business does not become a separate legal entity. There are
different ways of establishing a business. Let us study the major forms
of incorporated business, which are as follows:
Q Sole proprietorship
Q Partnership firm (unlimited or limited liability)
Q HUF
Q Joint stock company
FEATURES OF A PARTNERSHIP
TYPES OF PARTNERSHIPS
There are certain changes that may occur in the constitution of the
firm due to the following events:
Q Retirement of a partner: Every partner of the firm has the full
right to retire at any time during the course of the partnership.
However, in the case of a partnership at will, a prior notice has to
be given to all the remaining partners, of such retirement.
Q Expulsion of a partner: In case any partner is found guilty of any
misconduct, the other partners may, by mutual consent, expel the
guilty partner from the partnership. The most common reason of
the expulsion of a partner is his/her involvement in unlawful acts
against the firm or the partners.
Q Insolvency ofa partner: When a partner is unable to pay off his/her
liabilities, he/she is said to be insolvent. Upon insolvency, he/she
ceases to be a partner from the date of his/her being adjudicated
as an insolvent.
Q Death of a partner: If one of the two partners dies, then the
partnership is said to be dissolved. However, if there are more than
two partners, the death of one of them will not lead to dissolution
of the firm, but will lead to re-constitution of the partnership firm.
TYPES OF PARTNERS
As per the Partnership Act, 1932, there are certain rules that need to
be followed by all the partners. These rules are as follows:
1. Every partner has a right to take part in the conduct of the busi-
ness.
2. Every partner is bound to attend diligently to his/her duties in
the conduct of the business.
3. Any difference arising as to ordinary matters connected with the
business may be decided by a majority of partners, and every
partner shall have the right to express his/her opinion, before the
matter is decided, but no change may be made in the nature of
the business without the consent of all the partners.
4. Every partner has a right to have access to and to inspect and
copy any of the books of the firm.
by the acts of partners which are done in the ordinary course of busi-
ness. The authority and responsibility of a partner can be classified as
follows:
Q Express authority: Express authority of a partner is defined in
the partnership deed itself. Every partner’s liabilities and rights,
which are expressed, are mentioned in the partnership deed. The
firm is bound by all acts of a partner done within the scope of his/
her express authority.
Q Implied authority: This authority allows a partner to perform the
necessary or reasonable duties on behalf of another partner or the
partnership firm entity even though the same may not be expressly
mentioned in the partnership deed; such implied authority can be
inferred from the circumstances of the case.
LLP AGREEMENT
An LLP agreement states the ratio of capital invested by all the part-
ners and their respective profit-sharing ratios. All the provisions
related to capital contribution, such as maintenance of books of
accounts or admission of a new partner into the LLP are defined in
the LLP agreement.
CHARACTERISTICS OF AN HUF
Joint Hindu Family (JHF) is a concept under the Hindu law where
husband and wife form a JHE. They are further joined by their prog-
eny. A JHF can enter into a business together, comprising members
of the family. Such business is taxed under the Income Tax Act as an
HUF. Before 2005, only male members of the family could be copar-
ceners. But after 2005 Amendment to the Hindu Succession Act, 1956,
even women can be coparceners in their father’s family. Recently in
2020, the Supreme Court further clarified that any woman, whether
married or unmarried, will be a coparcener in her father’s family.
Questions have also been raised whether a woman can be a Karta.
It has been held numerous times that a woman can be a Karta in her
father’s family’s coparcenary. There have also been several instances
where a woman—the mother or eldest son’s wife or an older daugh-
ter—has played the role of Karta. Just like a male coparcener, now a
female coparcener can also seek a partition in her father’s coparce-
nary. A male coparcener’s wife enjoys a different position. She gets a
share in the HUF property only upon her husband’s death or when a
partition takes place; she can ask for a partition of the HUF property
in her husband’s family. As a coparcener, sons and daughters of a fam-
ily automatically become members of the HUF business.
Minor as a Karta
COPARCENERS
When a Karta dies leaving behind his/her property and wealth, the
next senior member of the family has the right to become the Karta DID YOU KNOW
of the HUF As per Section 6 of the Hindu Succession Act, 1955, Kar- When the Karta of an HUE
ta’s death does not result in partition. A coparcener has the right to enters into a partnership with
become the Karta of the HUF Now, even daughters can become the a stranger, the members of the
Karta of the family. Since daughters have an interest in the copar- family do not ipso facto become
oo. . . partners in that firm and they
cenary property similar to that of sons, they can also continue their have no right to take partin its
father’s HUF. But a wife does not have the right to become the Karta. management or to sue for its
Hence, the oldest member of the family becomes the Karta after the dissolution.
death of the Karta.
Before 2005, only male members of an HUF used to become the Karta
and the females were not given equal status in the HUF After 2005,
through an amendment to the Hindu Succession Act, 1956, even
females are entitled to be Karta by virtue of they having share in the
property. Earlier, only male members could be Karta, but now female
members can also act as Karta and can demand HUF partition.
5. A minor has the right to take his/her share of profit from the
business as agreed upon in the
6. A partnership arises from an agreement, whether implied or
expressed.
a. True b. False
Using the Internet, identify the legal journey that led to the amend-
ment of Hindu Succession Act, 1956 that led to allowing women a
share in the HUF property.
object of the Companies Act, 2013 is to build a smooth and easy cor-
porate environment marked by simplification and ease of doing busi-
ness, which is critical for India to become more competitive.
Under Section 29(2) of the Companies Act, 2013 talks about compa-
nies with unlimited liability in which the company does not have any
limit on the liability of its members; every member is liable for the
debts of the company to an unlimited extent.
Since a company is a legal entity separate from the persons owning its
share capital or running its management, a veil is said to be created
Table 3.4 lists the conditions under which a corporate veil can be lifted:
PROMOTION
Who is a ‘Promoter’?
According to Section 2(69) of the Companies Act, 20138, the term ‘Pro-
moter’ can be defined as the following:
Q A person who has been named as such in a prospectus or is
identified by the company in the annual return in Section 92; or
Q Aperson who has control over the affairs of the company, directly
or indirectly whether as a shareholder, director or otherwise; or
Q A person who is in agreement with whose advice, directions, or
instructions the Board of Directors of the company is accustomed
to act.
INCORPORATION
Certificate of Incorporation
COMMENCEMENT OF BUSINESS
Floating/Raising of Capital
Newly formed companies raise capital from the capital brought by the
promoters and their friends and families, the venture capital firms,
private equity funds, and other such special avenues available for
entrepreneurs.
A public offer may be an IPO made when the company raises capital
for the first time from the capital markets or by offering the general
public to subscribe to the shares of the company in the primary mar-
ket through the issue of a ‘Prospectus’.
Companies that have already raised equity capital from the public
before and intend to raise further equity capital with Follow on Pub-
lic Offer should first mandatorily offer their existing shareholders an
opportunity to subscribe to the newly issued shares. This is the right
granted by the Companies Act, 2013 to the existing shareholders in
order to ensure that their existing proportion of the share capital with
the company is not diluted. Such issue of new shares made to the
existing shareholders is called the ‘rights issue’. It is mandatory for
the companies to make ‘rights issue offer’ to the existing shareholders
before they can raise further capital from the general public.
CLAUSES OF MoA
ALTERATION OF MoA
ument are strictly regulated by the provisions of the Act. Though any
of the clauses of the memorandum can be altered, several restrictions
have been put in place. Some of the alterations require a general res-
olution (more than 50% majority); some alterations require a special
resolution (more than 75% majority); and others require Central Gov-
ernment approval in addition to a resolution.
AoA specifies the rules, regulations, and bye-laws for the internal
administration and management of the company. It governs the rela-
tionship between the company and its constituent members by pre-
scribing their rights and obligations. An act of a company in contra-
vention with the AoA is not null and void. It is merely irregular and
can be ratified by means of a special resolution.
IMPORTANCE OF AoA
MoA and AoA, once registered, binds the company and its members to
its clauses and puts them under observation. The AoA helps in over-
coming the day-to-day problems and issues in the functioning of the
company. Simply put, Articles are the rules, regulations, and bye-laws
for the internal management of the affairs of the company. AoA estab-
lishes a formal and ethical relationship between a company and its
shareholders in order to bind the members to the company and the
company to its members. It constitutes a contract between a company
and its members in respect of rights and liabilities as members. Arti-
cles usually contain provisions relating to share capital and variation
of rights, transfer of shares alteration of capital, general meetings, vot-
ing rights, proceedings of the Board, dividends and reserves, winding
up, and the like.
As per the Companies Act, 2013, a company can alter its Articles even
with a retrospective effect. AoA can be changed by passing a special
resolution. The following are the provisions with regard to the alter-
ation of Articles:
Q AoA can be altered only through a special resolution.
Q AoA cannot go beyond any provisions of the MoA or of the
Companies Act, 2013.
Q AoA cannot be illegal, contrary to any statute or public policy.
Q Alteration in the AoA must be done in good faith and for the benefit
of the company as a whole.
Q Alteration cannot increase the liability of the existing members to
contribute to the share capital, nor can the board of directors expel
a member by altering the Articles.
Q A listed company can alter its AoA only with the approval of
concerned stock exchange.
Q Alteration of AoA with the effect of converting a public company
into a private company can happen only after an approval from the
central government.
According to Section 10 of the Act, the MoA and AoA shall, when regis-
tered, bind the company and the members thereof to the same extent
as if they, respectively, had been signed by the company and each of
the members. Accordingly, both the parties are bound to observe all
the provisions of the memorandum and the Articles. The Articles bind
the company to its members, the members to the company, and the
members inter se to each other.
1. Purpose It contains the main con- These are the rules and
ditions based on which regulations to manage
the company is allowed internal affairs of the
to be incorporated. company.
2. Status It is subordinate to the Articles are subordi-
Act and specifies the nate, both, to the Act
limits within which the and also to the MoA and
company can operate. lays down rules, etce.,
for working within the
boundaries of memoran-
dum.
CONTENTS OF A PROSPECTUS
Authority for the issue and the details of the resolution passed
Capital structure of the company
Main objects of the public offer
Terms of the present issue and such other particulars
Oooo
PRIVATE PLACEMENT
TYPES OF SHARES
There are two major types of shares: equity shares and preference
shares. The description of these types is as follows:
1. Equity shares (or ordinary shares), apart from the rights men-
tioned above, give its owner the right to vote during resolutions
passed in company’s general meetings, thereby giving him/her
the right to participate in the decision-making of the manage-
ment. Other characteristics of ordinary equity shares are as fol-
lows:
# Owners of equity shares are entitled to dividends out of prof-
its as declared in an annual general meeting.
@ For the purposes of dividend and repayment of capital, they
rank after preference shares. Dividends can be declared only
after dividends are paid for preference shareholders.
# Companies Act, 2013 also allows for the issuing of equity
shares with differential rights with regard to dividend and
voting rights.
@ Upon winding-up, equity shareholders have a claim over
capital, next in line to preference shareholders.
2. Preference shares are those shares which carry a preferential
right as regards the payment of dividend and repayment of cap-
ital (if and when the company is wound up). In general, prefer-
ence shares are entitled to a fixed amount of dividend (unlike
ordinary equity shares where the dividend may be higher, lower,
or nil depending on profits made).
EXHIBIT
DEBENTURES
Features of Debentures
before the maturity date at a certain price. The call price is usually
more than the issue price.
Q Control: Debenture-holders are considered as company’s creditors.
They do not have any control over the managerial operations and
voting rights. At the time of liquidation, the company has prior
claims over shareholders.
CO—C—CSCSC‘C(é(<“
One of the scams that strengthened the need for corporate governance
is listed as follows:
Q UCO Bank Security Scam carried out by Harshad Mehta in the
(Year 1992)
All the public servants accused were asked to pay a fine of € 1 lakh
each. They were convicted of offences under 120-B IPC (conspiracy),
409 IPC (criminal breach of trust), and Section 13(2) read with Section
13(1) (D) of PCA. CBI registered the case in June 1992 against the
accused.
The Ministry of Corporate Affairs has notified Section 135 and Sched-
ule VII of the Companies Act as well as the provisions of the Compa-
nies (Corporate Social Responsibility Policy) Rules, 2014 (CRS Rules)
which has come into effect from 1st April, 2014.
Section 135 of the Companies Act provides the threshold limit for
applicability of the CSR to a Company, i.e.,
(a) net worth of the company to be ® 500 crore or more
(b) turnover of the company to be € 1000 crore or more
(c) net profit of the company to be ®5 crore or more
Further, as per the CSR Rules, the provisions of CSR are not only
applicable to Indian companies, but also applicable to branch and
project offices of a foreign company in India.
and positions its exports in global markets, also motivating the firms
to perform CSR. There is a significant opportunity for the public sec-
tor to harness business enthusiasm for CSR to help achieve its goal of
reducing poverty.
d. None of these
21. It is more difficult to alter the clauses of the Articles of
association than the clauses of the Memorandum of Associa-
tion.
a. True b. False
22. The Memorandum of Association and Articles of Association
bind a company and its members as if the company and the
members have signed a contract to observe the clauses of
these documents.
a. True b. False
Ey] SUMMARY
Q Sole proprietorship refers to the type of business that is operated |
by a single person, though he/she may take the help of his/her
family members for the purpose of running it.
Q A sole proprietorship is the best option for a business in which
investment and risks associated with it are few, the nature of
business is simple, decision-making is simple, and customers are
in direct contact with the business. Partnership is ‘the relationship
between persons who have agreed to share the profits of a business
carried on by all or any one of them acting for all’.
Q A partnership is based upon the idea of mutual agency. Every
partner of a firm has a dual role—the one of a principal and the
other of an agent. In other words, the law of partnership is an
extension of the law of agency.
Q A partnership deed is a written agreement made between the
partners, which delineates the rights and duties of the partners,
KEY WORDS
DESCRIPTIVE QUESTIONS Fo
1. Describe the legal position of a minor in a partnership firm. What
are his/her rights and liabilities?
2. Define the concept of LLP under the Limited Liability Partner-
ship Act, 2008. What is the legal nature of an LLP?
3. Define the concept of an HUF. Explain the characteristics of an
HUF in detail.
4. What are the important legal characteristics of companies as per
the Companies Act? Explain the concept of limited liability and
perpetual existence of companies.
Sole proprietorship
2 legal relation
Se a. True
oe partnership deed
6. a. True
’ 9. Karta
10. b. Two
13. a. True
15. d. Bothbande
SUGGESTED READINGS
Q Pathak, A. (2021). Legal Aspects of Business. Tata McGraw-Hill.
Q Ramaiya (Revised by Arvind P Datar, Balasubramanian S). (2014).
A Ramaiya Guide to the Companies Act, 18 Edition. Lexis Nexis.
E-REFERENCES
Q Indian Partnership Act, 1932 | Bare Acts | Law Library |
Advocate Khoj (2018). Retrieved on DD-MM-YYYY from http://
www.advocatekhoj.com/library/bareacts/partnership/index.
php? Title=Indian%20Partnership% 20Act,%%201932
Q Satapathy, S. (2018). Meaning of HUF—Hindu Undivided Family.
Retrieved on DD-MM-YYYY from http://incometaxmanagement.
com/Pages/HUF/1-Meaning
of HUFHindu_Undivided_Family.
html
Q (2020). Retrieved 26 October 2020, from http://www.caaa.in/
resource/Image/11_cos_act_2013.pdf
Q Companies Act 2013—Salient Features of the Indian Companies Act,
2013 [UPSC GS-II]. (2020). Retrieved on 26th October, 2020 from
https://byjus.com/free-ias-prep/indian-companies-act/
CONTENTS
Introduction
Negotiable Instruments Act, 1881
Scope, Features and Importance of Negotiable Instruments Act, 1881
Types of Negotiable Instruments
Recent Amendments in the Negotiable Instruments Act, 1881 and their
Impact
Payment and Settlement Systems Act, 2007 and its Features
Penalties and Punishment under Negotiable Instruments Act, 1881 and
Payment and Settlement Systems Act, 2007
Leading Case Studies
Self Assessment Questions
Activity
4.3 Intellectual Property Law
4.3.1 What are Intellectual Property Rights (IPRs)?
4.3.2 Impact of IPR
4.3.3 Leading Case Laws in IPR
Self Assessment Questions
Activity
4.4 Prevention of Sexual Harassment
4.4.1 What is Sexual Harassment?
4.4.2 Judgment — Vishakha vs. State of Rajasthan
4.4.3 The Sexual Harassment of Women at Workplace (Prevention, Prohibition
and Redressal) Act, 2013
4.4.4 Committee on Prevention of Sexual Harassment — Appointment, Mem-
bers, Procedures and Actions to be Taken
4.4.5 Impact of Sexual Harassment Cases on Indian and Foreign Organisations
Self Assessment Questions
Activity
CONTENTS
INTRODUCTORY CASELET
Toyota launched the world’s first commercial hybrid car called _ ESR (aH NC
‘Prius’ in Japan in 1997, which was subsequently introduced in
This caselet discusses
other countries like UK, USA, Australia, etc., in 2001. The trade
whether Toyota has a valid
name ‘Prius’ was initially registered in Japan in 1990 followed claim on its registered trade
by registration in 28 other countries. The car was, however, not name?
introduced in India till 2009. Considering the trade name to have
become well established, it thought itself as the natural owner of
the trade name all across the globe. To its dismay, the company
discovered that the same trade name has been registered in 2001
in India by a small auto-parts manufacturer. The auto-supplier
was making supplies to several major automobile manufacturers,
like Hyundai, GM and even Toyota. The Indian company claimed
to have got the Latin word ‘Prius’ from English Dictionary as a
substitute for the Sanskrit phrase ‘pehla prayas’ meaning ‘to
come first’. It further claimed its intention to use this trade name
for their new product ‘Add-On Chrome-Plated Accessories’ and
that it has nothing to do with Toyota’s Prius.
PASSING-OFF
INTRODUCTORY CASELET
reputation, and popularity in the market where the suit for pass-
ing off is brought. However, the passing-off action will fail if such
proof does not relate to the relevant jurisdiction in which it has
been filed.
THE VERDICT
Based on the logic of territorial rights, the Delhi High Court issued
an injunction order against the Indian auto spare parts maker
(defendant) using the registered trademarks of Toyota. Toyota (the
Plaintiff) filed an appeal before the Division Bench of the High
Court against the relief to defendant which permitted the defen-
dant to use the registered as well as unregistered trademarks of
Toyota subject to the condition that they use the trademarks only
for the purpose of identifying that the defendants’ product can
be used in Toyota’s cars. Consequently, the issue went in appeal
before the Supreme Court. The Supreme Court took a position
that the case depends mainly on whether there had been a spill-
over of the reputation and goodwill of the trademark of Toyota in
India. It was held that the Prius car was launched in India in 2009
and, at that time, the brand name had not acquired the degree of
goodwill, reputation and market popularity in the Indian market.
It meant that the degree of goodwill was not enough so as to vest
in the plaintiff the necessary attributes of the right of a prior use
so as to successfully maintain an action of passing off even against
the registered owner.
All this upheld the Delhi High Court order and granted the rights
for the usage of the trademark ‘Prius’ to the defendant as there
were not sufficient enough proofs of reputation of ‘Prius’ in the
Indian market.
© LEARNING OBJECTIVES
ZS INTRODUCTION
In the previous chapter, you studied the incorporated and unincorpo- Quick Revision
rated forms of business and the Companies Act, 2013. In this chapter,
you will study various laws that commonly affect businesses.
With respect to promissory notes, there are two parties, namely the
maker/payer/drawer and the drawee/payee. Maker is the one who
makes the promissory note and payee is the one to whom the promis-
DUO
It contains an unconditional promise to pay.
Ovo
vO
It is signed by the drawer.
It mentions that ‘drawer’ and ‘drawee’ are certain persons.
It is made for a certain amount that is paid in monetary terms only.
O
Names of parties
Signed by the drawer
Section 6, Explanation |, Clause Amount of money must be fixed
(a) as amended by Act 26 of
2015 defines “a cheque in Stamping of bill is essential under the provisions of the Indian
electronic form’ as a cheque Stamp Act, 1899.
drawn in electronic form by using
any computer resource and signed
in a secured system with a digital CHEQUE - TYPES AND LEGAL VALIDITY
signature (with or without biometric
signature) and asymmetric crypto A cheque is a special kind of bill of exchange that is drawn on a spec-
system or with an electronic ified banker and is payable only on demand. A cheque also includes
signature, as the case may be. the electronic image of a truncated cheque and a cheque in the elec-
tronic form.
=
SEN cheque
fi inin writing.
writing
Types of Cheques
There are certain types of cheques that are mentioned in the Negotia-
ble Instruments Act, 1881 as follows:
Q Cheques crossed generally: Section 123 of the Negotiable
Instruments Act, 1881 states that when a cheque bears two
parallel transverse lines or some words or company name or any
abbreviation with or without the words ‘not negotiable’ between
two parallel transverse lines, such a cheque is considered to be
crossed generally.
Q Cheque crossed specially: Section 124 of the Negotiable
Instruments Act, 1881 states that when a crossed cheque bears
the name of a banker with or without the words ‘not negotiable’,
such a cheque is called a specially crossed cheque. Such a cheque
can be presented to and cleared by a paying bank whose name
appears on the cheque.
Q Cheque bearing ‘not negotiable’ crossing: Section 130 of the
Negotiable Instruments Act, 1881 states that a person taking a
cheque crossed generally or specially, bearing in either case the
words ‘not negotiable’, shall not have, and shall not be capable of
giving, a better title to the cheque than that which the person from
whom he took it had.
It is a known fact that all countries need money for carrying out their
economic activities, such as trade and commerce, which is essential
for taking care of the demand and supply of goods and services. Trade
and commerce transactions require payments of money and settle-
ment of dues. The efficiency of an economy depends on the reliability
of the payment and settlement system of the country.
There are two regulations that have been made by the RBI in the PSS
Act, 2007. The first regulation is related to the Board for Regulation
Granting authorisation
UO
Payment instructions
Ooo vO
Furnishing returns
vo
Documentation
Furnishing accounts and balance sheets
Determination of standards of payment systems
Section 138 of the Negotiable Instruments Act, 1881 deals with penal-
ties that can be imposed if a cheque is dishonoured due to insufficient
funds. According to this Section, if a cheque is drawn by a person on
an account that is operated under his name with a particular banker
for the payment of a sum of money to another person for the discharge
of any debt or liability, and it is returned by the bank due to insuffi-
cient funds, the bank will not release the required sum of money and
such a cheque will be dishonoured. If a cheque issued by a drawer is
dishonoured, the drawer is said to have committed an offence. If this
offence is proved, the drawer may be punished with imprisonment for
a term that may extend up to 2 years or a fine twice the amount of the
cheque.
In Dayawati vs. Yogesh Kumar Gosain case, the Court held that it is
legal to refer a criminal compoundable case as one under Section 138
of the Negotiable Instruments Act, 1888 to mediation. In this case, the
fundamental issue is related to the settlement of disputes in criminal
law through alternative dispute mechanisms. The Court, in order to
arrive at its decision, studied the distinction between different kinds
of criminal offences, i.e., compoundable and non-compoundable
offences. The Court stated that there is no express statutory provision
in the legislation that enables the criminal courts to refer the com-
plainant and accused persons to Alternate Dispute Redressal (ADR)
mechanism; but the Code of Criminal Procedure does permit and
recognise settlement without stipulating or restricting the process by
which it may be reached. There is, thus, no bar in utilising the alter-
nate dispute mechanism including arbitration, mediation, conciliation
(recognised under Section 89 of Code of Civil Procedure) to settle dis-
putes that are the subject matter of offences covered under Section
320 of the Code of Criminal Procedure.
a. True b. False
Now, organisations are going global and are selling their goods and
services in various countries across the globe. It must be remembered
that Intellectual Property Rights (IPRs) are country-specific. There-
fore, specific IPRs and laws of the country where an organisation
wants to do business must be ascertained.
In India, trade secrets and know-how are not protected under any
particular IPR law. However, these are protected by the common law
of India. Trade secrets are protected using the law for breach of con-
fidentiality.
IPRs are similar to any other rights that enable their creators or own-
ers to benefit from their own work or investments. These recognition
of a persons right to ownership and protection of IPRs are mentioned
in Article 27 of the Universal Declaration of Human Rights. There
were two major treaties, namely Paris Convention for the Protection
of Industrial Property (1883) for Patents and the Berne Convention
rest 7 Geographic
ntellectua Industrial Property Indications
Property
Copyrights
ovo
Designs
Biodiversity-Geographical Indications
oOo
India has implemented its obligations and made laws relating to IPRs
as per the TRIPS Agreement. A few of the major legislations com-
ing out of TRIPS are: the Patents Act, 1970, amended by the Patents
(Amendment) Acts of 1999, 2002 and 2005. Rules implemented under
the Patents Act are: the Patents Rules, 2003; the Patents (Amendment)
Rules, 2005; and the Patents (Amendment) Rules, 2006. In India trade-
marks are regulated under the Trade Marks Act, 1999 and copyrights
are registered and regulated under the Copyrights Act, 1957. Similarly,
we have the Geographical Indications of Goods (Registration and Pro-
tection) Act, 1999 that defines and prescribes rules for geographical
indications in India.
There are three main features of the TRIPS agreement which are:
1. Standards: These are the minimum standards of protection that
must be provided by each member country in respect of each
type of IPR.
2. Enforcement: The TRIPS agreement contains provisions that
describe the domestic procedures and remedies for enforcing
IPRs.
3. Dispute prevention and settlement: Disputes among the mem-
ber countries related to IPRs are subject to the dispute settle-
ment procedures as laid down in the agreement.
In India, patents are regulated by the Patents Act, 1970 whose major
provisions came into force on 20* April, 1972. This Act was amended
from time to time and was given the name the Patents (Amendment)
Acts of 1999, 2002 and 2005 along with Patents Rules. The Patents
Rules were last amended in 2017. Patents now extend to all fields of
technology, such as food, drugs, chemicals and microorganisms.
A patent is a document that represents certain rights that give the cre-
ator or developer the sole right over their creations. Patents are issued
by an issuing authority of a country after receiving the application by
the owner of an invention. The rights given by patents ensure that the
patent holder has the rights to make, use, manufacture and market
the invention if the invention satisfies certain stipulated conditions.
motivates them to undertake more and more innovations that help the
society.
A patent gives an inventor the right to own, use or sell the invention,
method or process for a specified period. Patented products help in
increasing the level of industrial innovations which leads to the growth
of the nation.
NATURE OF PROTECTION
Under the Patents Act, 1970, the country gives a patent-holder (or pat-
entee/inventor/signee) the exclusive rights for a fixed period of time
(period of protection) for his/her invention.
PERIOD OF PROTECTION
AUTHORITY
The offices and authorities that regulate the patent, trademarks and
geographical indications in India are shown in Figure 4.2:
Organisation chart
| Ministry of Commerce & Industry |
|
'
Department of Industrial Policy & Promotion
y Y v Y Y |
v v v | v |
Source: https://shodhganga.inflibnet.ac.in/bitstream/10603/54118/10/10_chapter%203.pdf
From Figure 4.2, it is clear that there are four patent offices located
at Kolkata, New Delhi, Chennai and Mumbai. The application for the
patents can be filed in any of these patent offices.
Period of Protection
Authority
Know More
Trademarks can be divided into
Figure 4.3: Trade Marks, Service Marks and Registered Marks
the following categories:
Source: hittps://www.dreamstime.com/registered-trademark-copyright-patent-service-mark- ¢ Word mark (word or letters,
icon-set-imagel 46450985 slogans or taglines)
¢ Device mark (logo, combi-
Elements nation of words, pictures or
drawings)
Some of the important elements of the Trade Marks Act, 1999 are as © Colour mark
follows: ¢ Shapes of goods
Q It gives exclusive rights of using trade marks to a registered * Sound mark
proprietor. ¢ Three dimension mark
Q_ It provides for the registration of trade marks for goods and services.
Q Provision for penalties in case of infringement of trade marks.
Q Provision for criminal remedies in case of falsification of trade
marks.
Period of Protection
The trade mark registration is valid for 10 years from the date of appli-
cation. A trade mark can be renewed from time to time after the appli-
cant has made the application for renewal. It is renewed for 10 years
from the date of expiry of the original registration or the last renewal
of registration.
Authority
Section 83 of the Trade Marks Act, 1999 empowers the central gov-
ernment to constitute an appellate board known as Intellectual Prop-
erty Appellate Board (IPAB). The IPAB hears appeals against the
decisions made by the Registrar under this Act.
Elements
Nature of Protection
In India, trade secrets are not covered by any law. Article 39 of the
TRIPS agreement protects trade secrets as undisclosed information.
Each member country of the TRIPS agreement protects trade secrets
and provides a uniform mechanism for protecting trade secrets.
Period of Protection
Authority
Explanation: For the purposes of this clause, any name which is not
the name of a country, region or locality of that country shall also be
considered as the geographical indication if it relates to a specific geo-
graphical area and is used upon or in relation to particular goods orig-
inating from that country, region or locality, as the case may be.
Elements
Period of Protection
Gls are registered for 10 years and can be renewed from time to time.
Similarly, authorised users are registered for a period of 10 years or
till the date on which the registration of the GI in respect of which the
authorised user is registered expires.
Elements
In India, industrial designs are governed by the Designs Act, 2000; the
Designs Rules, 2001; the Designs (Amendment) Rules 2008; and the
Designs (Amendment) Rules 2014.
Some of the important elements of the Designs Act, 2000 are as fol-
lows:
Q As per the Designs Act, 2000, India has adopted the Locarno
classification for the registration of industrial designs and this
classification is based only on the subject matter of design.
Q Introduced the criteria of absolute novelty and originality.
Q Adesign must be unique and there must not be any prior publication.
Q The design must be such that it does not hurt the sentiments of
the people.
Period of Protection
The diversity that exists in various life forms on the earth is known
as biodiversity. Biodiversity is an essential feature of the earth and is
important for the functioning of the ecosystem.
Elements
Prior to the development of the IPR laws in India, the risk of infringe-
ment of IPRs was extremely high. In the absence of strong IPR laws,
individuals and organisations did not show much interest in R&D
works in India which resulted in a low rate of innovations and inven-
tions, high risk of infringement and monetary loss. To mitigate and
handle this situation, India strengthened its IPR regime by enacting
various laws related to IPRs that you have read about in the preceding
sections.
In case the IPRs of an owner are contravened, the owner has the right
to seek either reactive or proactive enforcement. Some of the infringe-
ment remedies that are available to the owner of IP are:
Q Stop unauthorised use of IP
Q Prevent any further infringements
Q Obtain recovery
Q Seek compensation for the damages
owner has the option to seek a legal remedy which may be a civil or
criminal remedy.
UO
Copyright Act, 1957
OoovO
Patent Act, 1970
Designs Act, 2000
Geographical Indications (Registration and Protection) Act, 1999
Civil and criminal remedies are mentioned under these laws for IPR’s
enforcement.
Some of the proactive
enforcement remedies available In case of IP infringement, civil remedies may be enforced by filing
in case of IP violations include infringement suit in a designated and competent court. The court may
civil remedies and criminal
grant reliefs of civil nature as follows:
remedies. Civil remedies include
infringement and passing off, ag Injunction: An injunction suit prohibits an action by a party to a
whereas criminal remedies
lawsuit.
include administrative actions.
a Anton pillar order/ex-parte orders: Such an order permits the
lawyer of the party who files the suit (plaintiff) to enter into the
premises of the infringers so that he/she may seize the evidence of
infringement.
Orders to deliver up/surrender or seize and destroy: Such an
order is passed so that the infringing goods are delivered to the
plaintiff or the infringing goods may be destroyed as the case may
be.
An award of costs and damages: Damages are awarded to the
plaintiff to compensate for the losses incurred by the plaintiff. In
other cases, the court may grant costs or actual profits of the IP to
the plaintiff.
Tracing orders: When such an order is granted, the infringer is
asked to provide details regarding the infringing goods such as
from where he got the supplies of infringing goods.
Bayer Corporation and Ors. Vs. Union of India and Ors. 162(2009)
DLT 371 (Decided on 18th August, 2009)
Q Uninvited touching
Q Asking for sexual favours
Q Showing or sending sexually explicit pictures, text messages, emails,
etc.
In the last few decades, the education levels among women has
increased and they have started to go out and earn their livelihoods.
They are now employed in almost all fields of work. The cases of
sexual harassment have assumed alarming proportions after women
started being employed in all types of jobs and started to stand shoul-
der to shoulder with their male counterparts. Recently, the #MeToo
movement was started and the world witnessed various cases where
women were sexually harassed or attempted to be harassed at work
by male counterparts. It is also a fact that most of the victims who face
sexual harassment at workplace feel helpless and do not report such
incidents. At times, they are silenced and forced not to disclose these
incidents or they will face dire consequences. Certain organisations
may also try to suppress such cases for fear of their reputation.
ter of Ramkaran Gujjar who was less than a year old. Despite all her
efforts, she could not stop the marriage. However, Ramkaran Gujjar
Vishakha guidelines formed the became an enemy of Bhanwari Devi. She was exposed to social pun-
of Women at Wotwhnee ishment and boycott. To seek vengeance, Ramkaran Gujjar and his
(Prevention, Prohibition and five friends gang raped Bhanwari Devi in front of her husband.
Redressal) Act, 2013.
After this crime, Bhanwari Devi had to face a lot of hardships during
her legal battle to get justice. Initially, the trial court acquitted the
accused. Despite this, she did not lose hope. She along with all female
social workers who were supporting her filed a writ petition in the
Supreme Court of India under the name ‘Vishakha’. Following this
case, the Supreme Court framed the guidelines for preventing sexual
harassment at workplace. These guidelines are called the Vishakha
Guidelines.
EXHIBIT
APPOINTMENT
MEMBERS
All the members of the ICC can hold office for a period not more than
three years from the date of their nomination. In case the members
are appointed from NGOs or associations, they must be paid fees or
allowances as may be prescribed by the employer.
Procedure
Vv v Y
Interviewing Complainants| | [Providing Findings and
Receiving Complaint Witnesses and Recommendations in a
Respondents Report
v v
Analysing the Information to
Preparing the File Understand the Sequence of Events
related to Complaints
After the ICC has created its report, it is forwarded to the District Offi-
cer by the employer.
ACTIONS TO BE TAKEN
Increased absenteeism
Increased sick leaves
Offering a handshake
a.
The IT Act consists of 94 sections and four schedules. The sections are
divided into 13 chapters. Apart from paper-based methods of commu-
nication and storage of information, there are electronic methods of
communication and information storage and exchange. This IT Act
provides legal recognition to all such transactions. Following this IT
Act, data storage was given recognition for being used by legal pur-
poses. After the enactment of this IT Act, some other Acts, such as
the Indian Evidence Act, 1872 and the Indian Penal Code, 1860 were
also amended to provide legal recognition to the documents that were
specified in IT Act.
The purpose of developing the IT Act was to promote the use of e-com-
merce, e-transactions and e-governance practices. This law had intent
to increase the use of e-transactions. IT Act grants legal recognition
and validation to all the online transactions and data exchange only if
they are done using authorised websites.
The objectives of IT Act are as follows:
Q Granting legal recognition to transactions that are carried out
by means of Electronic Data Interchange (EDI) or other means
of electronic communication which are usually called electronic
commerce transactions
As per Section 1(4) of the Information Technology Act, 2000, this law
is not applicable to documents and transactions that are specified in
the first schedule of this Act. Therefore, the scope of the Information
Technology Act, 2000 is restricted to documents that have been men-
tioned in the First Schedule. There are five types of documents that
are included in the First Schedule as follows:
Q A Negotiable Instrument (other than a cheque) as defined in
Section 13 of the Negotiable Instruments Act, 1881 (26 of 1881)
Q A Power of Attorney as defined in Section 1A of the Power
of Attorney Act (7 of 1882)
Q A trust as defined in Section 3 of the Indian Trusts Act, 1882
(2 of 1882)
4.5.4 E-COMMERCE
The Indian markets too have gained a lot of importance and growth
in e-commerce. Such high levels of growth in the Indian e-commerce
markets pose numerous legal and regulatory challenges. Some import-
ant challenges that are related to the Indian e-commerce include:
Q Legal validity of electronic transactions
Q Security of electronic transactions
Q Content regulation
Q Intermediary liability and jurisdiction
On 26" June, 2019, the Press Information Bureau of the Indian Gov-
ernment notified that the draft national e-commerce policy has been
prepared and placed in public domain. This policy addresses six areas
related to e-commerce, such as:
1. Data
Infrastructure development
ie |
E-commerce marketplaces
Regulatory issues
Stimulating domestic digital economy
6. Export promotion
This policy has been drafted keeping in mind the interests of all e-com-
merce stakeholders who include investors, manufacturers, MSMEs,
traders, retailers, start-ups and consumers.
Q Brings transparency
Q Increases convenience
Q Helps in reducing overall cost
Q Increases the reach of government
Q Provides a chance to the constituents to directly participate with
the help of e-governance
The Act has redefined the terms like ‘communication device’ in con-
text of current usage and validating electronic signature, etc., in order
to deal with electronic commerce and cybercrime. This Act has intro-
duced various provisions to foster an effective enforcement of cyber
law in India.
Cyber terrorism
Voyeurism is a crime
Certificate to identify the authenticity of the device to introduce
as a proof
Tampering with computer document is crime
U
4.5.7 CYBERCRIME
A cybercrime refers to any and all types of crimes that are used with
DID YOU KNOW the help of computers and computer networks. According to the Inter-
Cybercrime is also called the pol, ‘Pure cybercrime’ refers to crimes against computers and informa-
bane of the Internet. tion systems, where the aim is to gain an unauthorised access to a device
or deny access to a legitimate user.
TYPES OF CYBERCRIMES
Up to 3 years 1,00,000
any person by means of any communi-
cation device or computer resource by
personating
Intentionally capturing, publishing or Up to 3 years 2,00,000
transmitting any image of private area
_of any person without his/her consent
Any act done electronically or by using Lifetime imprison- N.A.
computer which threatens the unity, ment
integrity, security or sovereignty of
India
Publishing or transmitting in elec- Up to 3 years 5,00,000
tronic form any material which (1* event) (1* event)
appeals to prurient interest, or if its ane eee 10,00,000
effect is such as to tend to deprave and (2"4 event) (24 event)
corrupt persons who are likely to read,
see or hear matter contained in it
Publishing or transmitting any sexu- Up to 5 years 10,00,000
ally explicit material in electronic form (1* event) (1* event)
Up to 7 years 10,00,000
(2>* event) (2>4 event)
If any person intentionally or know- Up to 2 years 1,00,000
ingly fails to comply with the order of a
Certifying Authority
oy
UNDER THE ITA, 2000
4
Offence Punishment/Impris- Penalty/
onment Term Fine (2)
Securing access to any electronic Up to 2 years 1,00,000
record, book, register, correspond-
ence, information, document or other
material without the consent of the
person concerned and disclosing such
electronic record, book, register, corre-
spondence, information, document or
other material to any other person
Securing access to any material con- Up to 3 years 5,00,00
taining personal information about
another person, with the intent to
cause wrongful loss or wrongful gain
discloses, without the consent of the
person -
Publishing an electronic signature cer- Up to 2 years 1,00,000
tificate and making it available to any
other person with the knowledge that
the Certifying Authority has not issued
it, or the Subscriber has not accepted it,
or the Certificate has been revoked or
suspended
Knowingly creating, publishing, or
aw 1,00,000
making available Electronic Signa-
ture Certificate for any fraudulent
unlawful purpose
Source: https://taxguru.in/corporate-law/offences-penalties-information-technology-act-2000.
html
Source: https://taxguru.in/corporate-law/offences-penalties-information-technology-act-
2000.html
Za SUMMARY
Q A negotiable instrument is a document which promises the
payment of a certain sum of money to the assignee or some specific
person.
Q Anegotiable instrument means a promissory note, bill of exchange
or cheque payable either to order or to bearer.
Q All the payments and settlements are regulated and governed by
the Payment and Settlement Systems (PSS) Act, 2007.
Q Section 138 of the Negotiable Instruments Act, 1881 deals with
the penalties that are applicable in case of dishonour of certain
cheques due to insufficient funds.
Q Creations and inventions that are created by the human mind,
such as literary works, artistic works, symbols, names, images,
designs, etc., are called Intellectual Property (IP).
Q India is a member of the WTO and is a signatory to the TRIPS
agreement. The Trade Related Aspects of Intellectual Property
Rights is an international and legal agreement signed between all
member countries of the WTO.
Trademarks
tehU OrmhU Hh
Copyrights
Designs
Biodiversity-Geographical Indications
Registration of designs of Semiconductors and Integrated
Circuits
@ Trade Secrets
Q Sexual harassment involves unwelcome act(s) or behaviour(s),
such as sexual advances, requests for sexual favours and any other
verbal or physical conduct of a sexual nature.
Q The case judgement of Bhanwari Devi Rape case led to framing
of Vishakha Guidelines which formed the basis of the Sexual
Harassment of Women at Workplace (Prevention, Prohibition and
Redressal) Act, 2013.
Q The Information Technology Act, 2000 is the law that governs the
cybercrime and e-commerce activities.
KEY WORDS
DESCRIPTIVE QUESTIONS
1. Describe the three important types of negotiable instruments.
2. Explain the significance of TRIPS.
3. List various types of intellectual properties and the laws that
govern them.
Explain the main provisions of the Sexual Harassment of Women
at Workplace (Prevention, Prohibition and Redressal) Act, 2013.
Outline various provisions of the Information Technology Act,
2000.
1 b. Ante-dated cheque
2 2
| Ww 3 a. True
Intellectual Property Law 4, intellectual property
nd 5 e. Copyrights
Prevention of Sexual Harass- 6 district officer
ment
7. d. Offering a handshake
Information Technology Law 8. eyber-crimes
95 a. True
E-REFERENCES
Q E-commerce policy framework to be ready in 6 months. (2020).
Retrieved 18 April 2020, from https://economictimes.indiatimes.
com/small-biz/policy-trends/e-commerce-policy-framework-to-
be-ready-in-6- months/articleshow/63902314.cms
Q Home page. (2020). Retrieved 18 April 2020, from _https://
magnetoitsolutions.com/blog/advantages-and-disadvantages-of-
ecommerce
Q Imminent need for uniform laws for ecommerce in India. (2020).
Retrieved 18 April 2020, from https://economictimes.indiatimes.
com/industry/services/retail/imminent-need-for-uniform-laws-for-
ecommerce-in-india/articleshow/73692139.cms?from=mdr
Q India proposes new e-commerce regulations with focus on data
rules. (2020). Retrieved 18 April 2020, from https://www.reuters.com/
article/us-india-ecommerce/india-proposes-new-e-commerce-
regulations-with-focus-on-data-rules-idUSKCN1QC0LO
Q India’s New E-Commerce Rules Challenge E-Retailers | American
Express. (2020). Retrieved 18 April 2020, from https://www.
americanexpress.com/us/foreign-exchange/articles/e-commerce-
regulations-in-india-challenge-for-retailers/
Q National, Science, Sports, World, Variety, & Education et al.
(2020). Govt unveils draft e-commerce norms. Retrieved 18 April
CONTENTS
Introduction
Alternative Dispute Resolution (ADR)
Meaning and History of ADR
Features of ADR
Advantages of ADR
Self Assessment Questions
Activity
5.3 Types of ADR
5.3.1 Negotiation
5.3.2 Mediation
5.3.3 Conciliation
5.3.4 Lok Adalats
5.3.5 Arbitration and Conciliation Act, 1996
5.3.6 Leading Case Studies
Self Assessment Questions
Activity
5.4 Anti-Corruption Laws
5.4.1 Anti-Corruption Laws in India
5.4.2 Difference between US Anti-Corruption Laws and Indian
Anti-Corruption Laws
5.4.3 Leading Cases
Self Assessment Questions
Activity
5.5 Summary
5.6 Descriptive Questions
5.7 Answers and Hints
5.8 Suggested Readings & References
INTRODUCTORY CASELET
CONVENIENCE IN ARBITRATION
7-3 The use of the arbitration is significant in the service industry and
de eT ee (HO especially in the field of brokerage because if there is any dispute
STEER ee eenenr between a client and a stockbroker about the trades executed at
important role arbitration the Bombay Stock Exchange or the National Stock Exchange,
plays in the service industry. those disputed transactions can be referred to the arbitral tribu-
ee nal of that particular exchange. After the receipt of the complaint,
parties save various types . : . . .
of expanses, which enables an arbitrator is appointed by the choice of both parties. Thereaf-
substantial financial saving. ter, relevant evidence is submitted with the sole arbitrator who,
on the basis of the submissions, makes a decision that is binding
on the parties. However, the parties have a right to challenge the
legality and impropriety of the order given by the arbitrator, in the
appropriate civil court.
The parties who refer their disputes to an arbitral tribunal are not
required to pay the court fee. Moreover, the parties may not have
to engage a lawyer to put forward their arguments to the arbitral
tribunal, since the procedural law is not applicable to arbitral pro-
ceedings. There is no bar on the disputing parties arguing their
own case before the tribunal. The commercial parties benefit by
keeping their dispute away from the prying eyes of the press. It
helps in maintaining the confidentiality of their business matters.
In a nutshell, by opting arbitration, the parties save various types
of expenses such as court fee, suit valuation fee, stamp duties
and other procedural fees (like application fee, notice fee, which
enables substantial financial saving), therefore being convenient
to parties.
@ LEARNING OBJECTIVES
‘wi INTRODUCTION
In the previous chapter, you have studied various laws that affect busi- Quick Revision
nesses such as Negotiable Instruments Act, 1881, Intellectual Property
Law and Information Technology Law. All these laws play an active
role in offering a legal framework to businesses to operate ethically.
Section 89 of the Civil Procedure Code, 1908, was the first legislation
that empowered the court to persuade parties to choose ADR for
resolving their disputes. At that time, there was no other law that pro-
vided for any alternative to formal litigation. Subsequently, the first
Arbitration Act, 1940, provided for arbitration, but there was consid-
erable judicial interference in arbitration during that period. Much
later, the Arbitration and Conciliation Act of 1996 came into force
which reduced the judicial interference to almost a negligible extent.
The Legal Services Authority Act, 1985, provided for the establish-
ment of Lok Adalat in every judicial court, from district court to the
Supreme Court. Similarly, Sections 5, 6 and 9 of the Family Courts
Act, 1984 provide for the appointment of agencies and counsellors
besides obliging the court to make efforts for settlement before taking
evidence. Thus, the central focus of the legal system is to encourage
ADR.
ADR can be used along with existing legal systems within common
law jurisdictions. ADR traditions differ by country and culture. These
methods are used for resolving disputes outside of official formal judi-
cial mechanisms such as informal tribunals, informal mediation pro-
cesses formal tribunals and formal mediation processes. These meth-
ods have become global necessity as it offers cheaper, informal and
speedier redressal. ADR has also found favour with parties engaged
in international commercial disputes as it is neutral to the law, lan-
guage and institutional culture of the parties. This helps in maintain-
ing equality among parties and prevents some parties getting the
home-court advantage when compared to the court-based litigation
in respective countries.
1. ADR includes:
a. Informal tribunals
b. Informal mediation processes
ce. Formal tribunals
d. All of these
2. Section 89 of the Civil Procedure Code, 1908, was the first
legislation that empowered the court to persuade parties to
choose ADR for resolving their disputes.
a. True
b. False
ss TYPES OF ADR
There are various types of ADRs available other than court proceed-
ings. These types are evolving and the list is quite exhaustive. Clas-
sifications are based on the procedures followed in alternate dispute
mechanisms:
Q Agreement: There are procedures such as mediation, negotiation,
mini trial and facilitation that help disputing parties to derive out-
of-court settlement on the basis of agreement. The settlement
involves the agreement of the parties involved in it.
Q Decision: There are various procedures through which settlement
of a dispute can be done one of which is on the basis of decision or
adjudication by an outsider. The dominant procedure of decision
is arbitration. In the case of arbitration, an outsider decides how
to resolve a dispute between the conflicting parties. Hence, he/she
is the ultimate decision maker. The arbitrator arrives at a decision
based on the facts and arguments presented by the disputing
parties.
Q Advice: There are procedures that involve a neutral or non-binding
party to inform or advice the conflicting parties on the basis of case
evaluation or expert opinion. It involves non-binding arbitration,
facts finding, neutral evaluation, etc.
In the sub-section, you will study some of the major ADR mechanisms
in detail.
5.3.1 NEGOTIATION
5.3.2 MEDIATION
5.3.3. CONCILIATION
MEANING OF CONCILIATION
ROLE OF CONCILIATOR
Lok Adalat means people’s court. When disputes are referred to Lok Know More
Adalat for settlement, it is done in accordance with the provisions of As per Justice Ramaswamy,
the Legal Services Authority Act, 1987. “Resolving disputes through
Lok Adalat not only minimizes
litigation expenditure, it saves
5.3.5 ARBITRATION AND CONCILIATION ACT, 1996 valuable time of the parties
and their witnesses and also
The Arbitration and Conciliation Act is based on the United Nations facilitates inexpensive and
Commission on International Trade Law (UNCITRALs) Model Law prompt remedy appropriately
to the satisfaction of both the
on International Commercial Arbitration, 1985. This Act extends to
parties”.
the whole of India. The essence of arbitration is that some dispute is
referred to by the parties for settlement to a tribunal/person of their
own choosing instead of a court. In popular parlance, arbitration may
be defined as a private process set up by the parties as a substitute for
court litigation to obtain a decision on their disputes. e DID YOU KNOW
The process of arbitration is
The Arbitration and Conciliation Act was enacted in 1996 for achiev- governed by the Arbitration
and Conciliation Act, 1996 (the
ing the following objectives: Act). The Act has been brought
Q To consolidate and modify the law relating to domestic arbitration into force with effect from 25
January, 1996. The model law
and international commercial arbitration on arbitration adopted by the
United Nations Commission
Q To enforce foreign arbitral awards
on International Trade Law
Q_ To define the law relating to conciliation and for matters connected (UNCITRAL) is the foundation of
this Act.
therewith or incidental thereto
The first part of the law deals with domestic arbitration and interna-
tional arbitration held in India. The second part is designed to deal
with international commercial arbitration. There is an exclusion of
judicial intervention though the arbitral tribunal may take judicial
assistance for technical matters such as the recording of evidence.
DEFINITION OF ‘ARBITRATION’
ARBITRATION AGREEMENT
1p:
4s 18530
Appointment of Arbitrators
The arbitral tribunal may also provide adequate security to the party
for any of the interim measures provided in the above points.
PROCESS OF ARBITRATION
party filing the claim is called the Claimant, and the party against
whom the claim is filed is called the Respondent. The Respondent is
provided with ample time to respond in writing whether they agree
to resolve the dispute through arbitration. The acceptance from both
parties to start the proceedings through arbitration starts the actual
process of arbitration where the role of arbitrator comes into the pic-
ture. An arbitrator is selected by the parties or a panel of arbitrators is
approved by the parties to continue the proceedings. Then, there will
be prehearing conferences and formalities. Then, after several arbi-
tration hearings, testimony from both the parties and their respective
witnesses are heard, and all the evidence is submitted. In the end,
closing arguments are made by the attorneys. The final decision is
made after considering all the evidences that have been notified to the
parties, usually in 30-90 days.
Meaning of Award
There is no particular form for the validity of an award except for the
following rules contained in Section 31 of the Arbitration and Concil-
iation Act:
(i) An arbitral award shall be made in writing and signed by the
sole arbitrator or majority of the members of the arbitral tribu-
nal. In case a particular member of tribunal has omitted to sign,
reasons for the same must be given. Once the award has been
signed, the tribunal becomes functus officio. (no further official
authority).
(ii) The arbitral award shall state the reasons for the award unless
the parties have dispensed with the need to give reasons, or the
award is an arbitral award on agreed terms as per Section 30.
(iii) The arbitral award shall state its date and the place of arbitra-
tion as determined under Section 20.
(iv) A signed copy of the arbitral award shall be delivered to each
party to the arbitration agreement in accordance with the
has specified the following grounds on which the court may set aside
an arbitral award rendered in India:
1. Incapacity of Parties [Section 34(2) (a) (i)]: An arbitral award is
not binding and may be set aside if it has been made against a
party that is incapable looking after its interests such as a minor
or a person of unsound mind or it does not have a guardian or
another person to represent its interests. Therefore, it is essen-
tial to get a guardian appointed in terms of Section 9 of the Arbi-
tration and Conciliation Act in respect of minors and persons of
unsound mind for the purpose of arbitral proceedings. On fail-
ure to do so, the award given against the incompetent party shall
be liable to be set aside.
2. Invalidity of Arbitration Agreement [Section 34(2) (a) (ii)]: The
validity of an arbitral agreement may be challenged on the same
grounds on which the validity of a contract may be challenged
[State of U.P v. Allied Constructions]. The validity of the arbitral
agreement shall be examined by reference to the law to which
the parties are subjected it and is in force.
3. Failure to Give Notice to Other Party [Section 34(2) (a) (iii)]:
An arbitral award is liable to be set aside if the other party has
not been given proper notice of the following:
@ the appointment of an arbitrator
¢ of arbitral proceedings
@ the other party was for some reasons unable to present his case
If a party is prevented from appearing and presenting its case
before the tribunal, the award will be liable to be set aside as the
deprivation of a party from an opportunity of being heard negates
the principles of natural justice [Vijay Kumar vs. Bathinda Cen-
tral Co-operative Bankand Ors [2013] ].
4. Award Beyond Scope of Reference [Section 34(2) (a) (iv)]: An
arbitral award relating to matters which were beyond the scope
of reference made to Arbitrator or were not contemplated by the
reference, or did not fall within the terms of the reference shall
be liable to be set aside. An arbitrator cannot go contrary to the
terms of the contract. Where the terms of the contract are not
clear or unambiguous, the arbitrator gets the power to interpret
them. In State of Rajasthan v. Nav Bharat Construction Co.[ix],
a majority of claims allowed were against the terms of the con-
tract.
ss CASE LAW
| State Trading Corp. vs. Molasses Co., the Bengal Chamber of
Commerce [1981],
Appeals shall also lie with the court if the arbitral tribunal refuses to
provide interim measures to the parties and where the arbitral tribu-
nal is exceeding its jurisdiction or deciding the matters that are not in
its scope.
The Arbitration and Conciliation Act, 1996 was amended in 2015 and
2019. The Arbitration and Conciliation (Amendment) Act, 2015 (here-
inafter referred to as the ‘Amendment Act, 2015’) was enacted to make
the arbitration process cost-effective and speedy with minimum court
intervention.
Some of the key highlights of the Amendment Act, 2015, are as follows:
Q The Amendment Act, 2015, distinguishes between an international
commercial arbitration and domestic arbitration insofar as the
definition of court is concerned. For domestic arbitration, the
definition of Court is the same as defined in the 1996 Act. For
international commercial arbitration, Court means the High Court
of competent jurisdiction.
Q Section 2(2) of the Arbitration and Conciliation Act has been
amended insofar as Section 9 (interim measures), Section 27 (taking
of evidence), Section 37(1) (a), and 37(3) shall apply to international
commercial arbitrations even if the seat of arbitration is outside
India, unless there is an agreement to the contrary. In matters
where the seat of arbitration is India, Part-I of the Arbitration and
Conciliation Act, 1996 shall apply.
Q Section 8, which deals with referring the parties of dispute to
arbitration, was amended and it now mandates that any judicial
authority may refer the parties to arbitration if a matter is brought
before it.
Q The exercise of power under Section 9 after constitution of the
tribunal has been made more onerous and the same can be exercised
only in circumstances where remedy under Section 17 (interim
measures by arbitration tribunal) appears to be non-efficacious to
the Court concerned.
Q Section 11 relates to appointment of arbitrators. As per this Section,
the Supreme Court or the High Court or a person designated
by them can appoint arbitrators within 60 days from the date of
service of notice on the opposite party.
Q = Section 12 has also been amended and it requires that the arbitrator
make a declaration about his independence and impartiality. In
this Amendment Act 2015, a fifth schedule has been inserted and
it lists the grounds that may give rise to doubt to independence
and impartiality of the arbitrator. The seventh schedule was added
and if the relationship between the arbitrator and any party falls in
any of the categories mentioned in the seventh schedule, then the
arbitrator will be ineligible.
Q Section 14 was amended and it provides for the termination of the
mandate of the arbitrator.
Q Section 17 relates to interim measures by arbitral tribunal and as
per the amended section, an arbitral tribunal shall have the same
powers as are available to a court under Section 9. Also, interim
orders passed by an arbitral tribunal will be enforceable in same
manner as if it is an order of a court.
Q Section 23 of the amended Arbitration and Conciliation Act, 1996
empowers the respondent to submit a counter claim or plead a
set-off.
Q Section 24 of the amended Arbitration and Conciliation Act,
1996 states that the arbitral tribunal should hold hearing for the
presentation of evidence or oral arguments on day-to-day basis.
Also, the tribunal should not grant any adjournments if there is
no sufficient cause. In case of adjournments, the tribunal may also
impose exemplary cost.
Q New sections, namely Section 29A and 29B were inserted. Section
29A deals with the time limit for arbitral award and Section 29B
deals with fast track procedure. These sections provide for time
bound arbitrations. The arbitral tribunal must address the case
within 12 months extendable by a maximum 6 months by the
consent of the parties.
Q Section 25 of the amended Arbitration and Conciliation Act,
1996 empowers the tribunal to treat the respondent’s failure to
communicate his statement of defence as the forfeiture of his right
to file such statement of defence. However, the respondent’s failure
to communicate cannot be treated as admission of the allegations
made by the opposite party.
Q Section 28 of the amended Arbitration and Conciliation Act, 1996
requires that the tribunal should take into account the terms of
contract and trade usages applicable to the transaction.
Q Section 31 of the amended Arbitration and Conciliation Act, 1996
provides that if the arbitrator does not give any award, then, the
tribunal should levy future interest on the awarded amount at a
rate which is 2% higher than the current rate of interest prevalent
on the date of award.
Q Section 34 of the amended Arbitration and Conciliation Act,
1996 deals with limiting the gamut of public policy of India. The
Amendment Act, 2015, states that an award that is passed in an
This issue arose in Chloro Controls (India) Pvt Ltd. vs Severn Trent
Water Purification Inc&Ors (2013) 1 SCC 641 where disputes arose
between an Indian company and its foreign collaborator due to lat-
ter’s parent company operating through entities other than those
covered by the agreement. The Indian party sought injunction to
prevent breach by the respondents and for referring the parties to
arbitration under Sections 45 of the Arbitration and Conciliation Act,
1996. Respondents alleged that Shareholders Agreement (SHA) was
the main document incorporating the arbitration clause to which
the other two respondents were not signatories. Other agreements
between parties did not have the arbitration clause. Appellant con-
tended that the expression ‘person claiming through or under’ in
Section 45 covers within its ambit persons who are in legal relation-
ships via multiple and multi-party agreements, though they may not
all be signatories to any one agreement or arbitration clause. Hence,
even non-signatory parties can pray for and be referred to arbitra-
tion. The Section did not refer only to parties to agreement but ‘per-
sons in general’ and that the Shareholders’ Agreement is a composite
document.
The following factors must be kept in mind while referring third par-
ties to arbitration:
(a) The parties must have a direct relationship with the party signa-
tory to the arbitration agreement
(b) Subject matter of the agreement must be common
(c) Agreement between parties must form a composite transaction
(d) The transaction must be of a composite nature
(e) A transaction is considered to be composite if the performance
of the principal agreement is not possible without the execution
and performance of the supplementary or ancillary agreements
In P Anand Gajapathi Raju vs. PVG Raju (2000) 4 SCC 539, during the
pendency of the appeal before the Supreme Court, all the parties made
a jointly signed application that included an arbitration agreement to
refer their dispute to a retired SC Judge as the sole arbitrator. This
agreement was challenged. It was held that the agreement need not
already be in existence at the time when the dispute arose. The phrase
‘which is the subject of an arbitration agreement’ does not necessarily
require the agreement to be already in existence before the filing of
suit in the court. The phrase also includes an arbitration agreement
brought into existence while the action is pending provided it meets
the requirements of Section 7 of the Arbitration and Conciliation Act.
Under Section 8, it is obligatory for the court to refer the parties to
arbitration in terms of their agreement.
a. True
b. False
be ANTI-CORRUPTION LAWS
Corruption is delineated as the abuse of public office or entrusted
DID YOU KNOW power for personal gain. It involves bribery, extortions, fraud, theft,
The Indian government favouritism, conflicts of interests and taking undue advantages.
has established Lokpal, an There are various types of corruption, naming a few, administra-
independent
investigate andombudsman
prosecute to tive corruption, : political corruption or public corruption. These are
corruption cases of bribery, the social disease that cripples equal competition in the market
money laundering, benami which decreases the economic deficiency. Therefore, it is quint-
transaction, etc. essential for the governments and the World Bank to update the
anti-corruption legislations time-to-time. The anti-corruption laws
are legal tools or compliances that help to curb corruption practices
from society. The violation of anti-corruption laws can apply crimi-
nal penalties, civil penalties, disciplinary recourse and reputational
repercussions.
The PC Act, 1988 came into existence to deal with the corruption spe-
cifically in government departments. It offers the provision of prose-
cution and punishment for public servants who are involved in cor-
rupt practices such as bribery. The PC Act was first set up in 1988. The
amendment in the Act is done to review anti-bribery and anti-corrup-
tion and the provisions provided in the Act ensure more transparency
and accountability in the government or public servants working.
(i) By corrupt or illegal means, obtains for himself or for any oth-
er person any valuable thing or pecuniary advantage
(ii) By abusing his position as a public servant, obtains for him-
self or for any other person any valuable thing or pecuniary
advantage
(iii) While holding office as a public servant, obtains for any person
any valuable thing or pecuniary advantage without any public
interest
(e) Ifhe or any person on his behalf, is in possession or has, at any time
during the period of his office, been in possession for which the pub-
lic servant cannot satisfactorily account, of pecuniary resources or
property disproportionate to his known sources of income.
Chanda Kochhar, the former ICICI Bank MD was alleged for “dis-
honestly sanctioning loans to the Videocon Group” under CBI FIR
as she received illegal gratification from her husband, Deepak Koc-
char who was the Videocon MD. Since, by sanctioning a term loan of
~ 300 crore to Videocon International Electronics Ltd., she misused her
official position, various charges were leveled up on her for criminal
conspiracy and cheating. The FIR against her says On August 26, 2009,
a rupee term loan of Rs 300 crore was sanctioned to Videocon Interna-
tional Electronics Ltd (VIEL) in contravention of rules and policy by the
sanctioning committee... Kochhar was one of the members of the sanc-
tioning committee, who in criminal conspiracy... dishonestly by abusing
her official position sanctioned this loan in favour of VIEL, She violated
the bank’s code of conduct. ICICI bank also released a statement for
this case stating “Ms Chanda Kochhar was in violation of the ICICI
Bank Code of Conduct, its framework for dealing with conflict of inter-
est and fiduciary duties, and in terms of applicable Indian laws, rules
and regulations”
Od Xen
Search the Internet and find out the ‘anti-corruption laws’ of other
nations and mark the distinction among them.
so SUMMARY
Q Alternative dispute resolution, also called ‘ADR’, is a generic |
term that refers to a wide range of methods of dispute resolution, ——
which provide an alternative to the adversarial court-based public
litigation.
Q ADR is neutral to the law, language and institutional culture of
the parties that helps in maintaining equality among parties which
prevents some parties from getting the home-court advantage when
compared to the court-based litigation in respective countries.
Q There are various types of alternate dispute resolution available
other than the court proceedings such as negotiations, arbitration,
and mediations.
Q Negotiation is an informal technique of resolving a dispute, where
the parties in dispute directly try to communicate with each other
and reach a conclusion.
Q Mediation is a voluntary, non-binding, confidential and structured
process wherein a neutral third party possessing special
communication, negotiation, social and interactive skills helps the
parties arrive at a mutual settlement.
Q Lok Adalat is a promising, participative ADR method. Lok Adalat
is considered as people’s court, which provides easy access to
justice with mutual consent.
Q The Arbitration and Conciliation Act, 1996 is divided into 86
sections and 4 chapters and extends to the whole of India. It is
based on the Model Law on arbitration suggested by UNCITRAL.
Q. Thefirst stage in the arbitration is the formulation of the arbitration
agreement whereby the parties agree to submit their present or
future differences to arbitration.
Q_ The decision of the Arbitral Tribunal is termed as ‘Arbitral Award’.
It is analogous to a court judgment although it is made by a
mutually agreed private adjudicator.
Q Conciliation refers to a process of settling disputes through the
good offices of a third party which attempts to minimise the points
of conflict between the parties to enable them to reconcile.
Q Anti-corruption laws are legal tools or compliances that help to
curb the corruption practices from society. The violation of anti-
KEY WORDS
DESCRIPTIVE QUESTIONS
1. Discuss the advantages of the alternative dispute resolution
method.
Define negotiation. List its characteristics.
BR
2. a. True
9. ce. Botha.andb. :
10. Conciliator
12. a. True
13.78 a ~o
Ja SUGGESTED READINGS
Q Clarkson, K., Miller, R., Jentz, G., & Cross, F (2014). Business law:
Text and cases (11th ed.). Cengage Learning.
Q Keenan, D., & Riches, S. (2007). Business law. Harlow: Pearson
Longman.
E-REFERENCES
Q (2020). Retrieved 27 April 2020, from http://www.nishithdesai.com/
fileadmin/user_upload/pdfs/Research_Papers/Overview-of-Anti-
Corruption-Laws-in-India-Web1.pdf
Q ADR Types & Benefits - alternative dispute resolution. (2020).
Retrieved 27 April 2020, from https://www.courts.ca.gov/3074.htm
Q Types of Alternative Dispute Resolution (ADR). (2020). Retrieved
27 April 2020, from _https://www.legalmatch.com/law-library/
article/types-of-alternative-dispute-resolution-adr.html
CONTENTS
6.1 Introduction
6.2 Consumer Protection Act, 2019
Objective of the Act
Scope of the Act
Important Definitions
Important Provisions and Features of the Consumer Protection Act, 2019
2.5 Difference between Consumer Protection Act, 1986 and Consumer
Protection Act, 2019
Self Assessment Questions
Activity
6.3 Rights of a Consumer
Self Assessment Questions
Activity
6.4 Consumer Protection Councils (CPCs)
6.4.1 Functions of CPCs
6.4.2 Central Consumer Protection Council (CCPC)
6.4.3 State Consumer Protection Councils (SCPCs)
6.4.4 District Consumer Protection Councils (DCPCs)
Self Assessment Questions
Activity
6.5 Consumer Disputes Redressal
6.5.1 Consumer Disputes Redressal Machinery
6.5.2 Procedure of Dispute Resolution
6.5.3 Procedure for Filing a Complaint before the Consumer Protection Body
6.5.4 Nature and Scope of Remedies
6.5.5 Appeals and Limitations
Self Assessment Questions
Activity
CONTENTS
INTRODUCTORY CASELET
The infamous case of Maggi and various other cases were fol-
lowed by the enactment of the new Consumer Protection Act,
2019. Under this Act, the central government will establish a Cen-
tral Consumer Protection Authority (CCPA) to specifically inter-
vene in matters related to unfair trade practices and misleading
advertisements.
© LEARNING OBJECTIVES
INTRODUCTION
Quick Revision In the previous chapter, you studied various laws related to enforce-
ment and redressal mechanism in the business including dispute
resolution, alternate dispute resolution and anti-corruption laws as
applicable in India.
The Consumer Protection Act, 2019 has been enacted for protecting
the interests of consumers by establishing various provisions, con-
sumer councils, commissions and a central authority for settling dis-
putes of consumers. The Consumer Protection Act, 2019 formed the
Central Consumer Protection Authority (CCPA) which is responsible
for promoting, protecting and enforcing the rights of consumers.
In this chapter, you will study the Consumer Protection Act, 2019, its
objective, scope and provisions. The chapter explains various provi-
sions and definitions such as unfair trade practices, product liability,
e-filing facility, etc. All the rights of consumers as per this Act have
also been discussed. The role of consumer protection councils as advi-
sory bodies and the consumer disputes redressal mechanism under
the law is also described. Towards the end, the state of consumer laws
across the globe has been discussed briefly.
The Consumer Protection Act, 2019 received the assent of the Presi-
dent of India in August 2019 and was published in the official gazette The Consumer Protection
Act, provided for three-tier
on 9* August 2019. The Consumer Protection Act, 2019 came into consumer dispute redressal
force on 20% July, 2020. It was a long-awaited Act because it intends machinery at the national,
to resolve a large number of consumer complaints that are pending in state and district levels.
CASE LAW
Karnataka Power Transmission Corporation (KPTC) vs. Ashok
Iron Works Private Limited
Thus, the court allowed the complaint on the two grounds that the
applicant — Ashok Iron Works Private Limited, can sue as a person,
and that supply of electricity if found deficient can be a fit ground
for claiming compensation. The Court sent the case back to District
Forum for retrial on these grounds.
Source: https://vakilsearch.com/advice/the-top-ten-consumer-court-cases-and-trials-in-india/
Some of the other objectives of the Consumer Protection Act, 2019 are
as follows:
Q To provide a simple and effective consumer grievance redressal
process
Q = To dispose of all the consumer grievance complaints in the least
amount of time
Q To ensure effective disposing of all the cases pending in the
consumer courts
Q To conduct investigations into violations of consumer rights and
institute complaints
Q = To order the recall of unsafe goods and services
Q To order the discontinuance of unfair trade practices and
misleading advertisements
Q To impose penalties on manufacturers/endorsers/publishers of
misleading advertisements
In addition, the scope of this Consumer Protection Act, 2019 has also
been widened by providing a wider definition to terms such as the
complainant, consumer, deficiency, etc.
Some of the important definitions that have been included under the
Act are as follows:
a Advertisement: Any audio or visual publicity, representation,
endorsement or pronouncement made by means of light, sound,
smoke, gas, print, electronic media, internet or website and
includes any notice, circular, label, wrapper, invoice or such other
documents is an advertisement.
Central authority: Under Section 10 of the Consumer Protection
Act, 2019, the Central Authority refers to the Central Consumer
Protection Authority (CCPA).
Complainant: Complainant may mean any of the following:
¢ Aconsumer
¢ Any voluntary consumer association registered under any law
for the time being in force
The Central Government or any State Government
The Central Consumer Protection Authority
One or more consumers, where there are numerous consum-
ers having the same interest
¢ In the case of the death of a consumer, his legal heir or legal
representative
¢ In the case of a consumer being a minor, his parent or legal
guardian
Consumer: A consumer may be any of the following:
# Any person who buys any goods for a consideration whether
paid or promised
# Any person who buys goods for a consideration that is partly
paid and partly promised
¢ Any person who hires or avails of any service for a paid con-
sideration or for a consideration that is partly paid and partly
promised
The consumer purchases goods
and services only for self-use. # Any person who makes online purchases
When a person purchases any
goods or avails any service for a Consumer dispute: It is a dispute where the person against whom
resale or commercial purpose, a complaint has been made, denies or disputes the allegations
he/she is not considered a
contained in the complaint.
consumer.
Defect: Any fault, imperfection or shortcoming in the quality,
quantity, potency, purity or standard must be present in the good.
Deficiency: Any fault, imperfection, shortcoming or inadequacy
in the quality, nature and manner of performance of a good
required by the law. In addition, any act of negligence or omission
or commission by a person due to which a consumer experiences
loss or injury or any act of deliberately withholding relevant
information from a consumer bya seller is a deficiency.
all sellers at each level of MLM can be exposed to liability and not
just product manufacturers.
INTERMEDIARIES
E-COMMERCE
PRODUCT LIABILITY
As per Section 86, a product seller can be held liable in the following
situations:
Q When the seller had exercised substantial control over the
designing, testing, manufacturing, packaging or labelling of a
product that caused harm
Q When the seller had altered or modified the product due to which
harm was caused
Q When the seller has made an express warranty of a product
independent of any express warranty made by a manufacturer
and the harm is caused due to failure of such express warranty
made by the product seller
Q When the product has been sold by the product seller and the
identity of product manufacturer of such product is not known, or
if the identity is known, the service of notice or process or warrant
cannot be effected on him
Q When the seller fails to exercise reasonable care in assembling,
inspecting or maintaining the product such as failing to convey the
warnings or instructions of the product manufacturer with respect
to the dangers involved, proper usage of the product and the harm
was caused due to such failure.
Under the Consumer Protection Act, 2019, the government will consti-
tute multiple bodies for redressing consumer disputes.
After the CPCs, the second level of the consumer redressal is the Con-
sumer Disputes Redressal Commissions (CDRCs) that will be set up
at three levels. This is also called the three-tier Consumer Dispute
Redressal Commission. All the consumer dispute complaints are sub-
mitted in these Commissions (Courts). The complaints may be sent
to the district level, state level or national commission based on the
pecuniary jurisdiction.
The Consumer Protection Act, 1986, did not have a provision for alter-
nate dispute resolution. However, in accordance with Section 74 of the
new Consumer Protection Act, 2019, the State Government will estab-
lish mediation cells to be attached to all the district and state commis-
sions of that state. In addition, the Central Government will establish
a consumer mediation cell to be attached to the National Commission.
E-FILING OF COMPLAINTS
The Consumer Protection Act, 2019 allows for the filing of complaints
using electronic or online means, also called e-filing.
Section 35 of the Act deals with the manner in which the complaint
can be made. This section states that a complaint may be filed with a
district commission by any of the following:
Q Aconsumer
Q Aconsumer who alleges that there has been a use of unfair trade
practice with respect to such goods or service.
Q Any recognised consumer association and in such case the
aggrieved consumer may or may not be a member of such
association.
Q One or more consumers can file a complaint as a class after taking
permission of the District Commission if all of them have a similar
interest and the complaint is made for the benefit of all consumers. It must be remembered that
every complaint must be filed
Q The Central Government, the Central Authority or the State along with a prescribed fee and
Government. the fee will also be payable in an
electronic form.
These complaints can also be filed electronically.
One of the most significant features of the Act of 2019 is that it calls for
the setting up of a regulatory body known as the Central Consumer
Protection Authority (CCPA). This regulator is to be set-up because,
under the previous version of the Act, there was no provision for a
central regulator to look after the consumer rights issues.
@ The CCPA may also take suo moto cognisance of the consumer
rights violations in any form.
Q Undertaking an action against the accused, if proved guilty.
me are canta! ‘hie The CCPA will also have an Investigation Wing that would be headed by
ae eee a Director-General and would be responsible for conducting enquiry
Director-General or Director, and investigation in matters that are referred to it by the CCPA.
Joint Director or Deputy . .
Director or Assistant Director The Central Government has been empowered to appoint a Direc-
for conducting inquiries or tor-General and any number of Additional Director-General, Director,
investigations and these need to Joint Director, Deputy Director and Assistant Directors as it deems fit
pe Suomen eee and these members would exercise their powers and discharge their
After conducting the enquiry, the District Collector has to submit his
report to the CCPA or to the Commissioner of a regional office which
is the same source through which the complaint was received.
or misleading advertisement
Q Enquiring or ordering an investigation into violations of consumers’
rights or unfair trade practices, either suo motu or on a complaint
received or on the directions from the Central Government
Q Filing complaints before the District Commission, the State
Commission or the National Commission
Q Intervening in the proceedings of any of the three consumer
courts namely District Commission, State Commission or National
Commission for any case of consumer rights violation or unfair
trade practices
Q Reviewing the matters and factors inhibiting the enjoyment of
consumer rights, including safeguards for protecting consumers
and recommending appropriate remedial measures for their
effective implementation
The Consumer Protection Act, 2019, contains strict penalties for mis-
leading or false advertisements. The CCPA has the authority to regu-
late matters relating to the violation of unfair trade practices and false
or misleading advertisements. The CCPA has the authority to impose
a penalty of up to & 10 lakhs on a manufacturer or an endorser for the
first offence and imprisonment of up to two years if it is found respon-
sible for the false or misleading advertisement.
In its present form, the Consumer Protection Act, 2019 does not cover
healtheare in the list of services listed under the definition of service.
Interestingly, the bill that was passed by the Lok Sabha included
healthcare under services. In Parliament, an amendment known as
Healthcare Amendment was introduced to exclude healthcare from
the list of services. It was a direct result of opposition from the medical
fraternity and there were genuine concerns that Consumer Protection
Act, 2019 may be misused against them. Now, after this amendment,
it is not clear whether or not healthcare as a service will be included
under the Consumer Protection Act, 2019.
MEDIATION
PENALTIES
In case any party defies any order of the commission, the punishment
of imprisonment shall be for atleast 1 month, or a fine, which shall not
be less than twenty-five thousand rupees, but which may extend to
one lakh rupees, or both.
si RIGHTS OF A CONSUMER
You are already aware that any person who buys any good or avails any
service in exchange for a consideration is called a consumer. Also, the
consumer may purchase the goods or services using traditional modes
as well as online modes. However, any person who obtains a good for
resale or for any commercial purpose is not considered as a consumer.
In 1985, the United Nations added four more rights to the existing four
rights in order to protect consumers as follows:
1. Right to satisfaction of the basic needs: This right is related toa
consumer’s right to have access to the basic, essential goods and
services, such as food, clothing, shelter, healthcare, education,
public utilities, water and sanitation.
2. Right to redress: This right relates to the consumers’ right to
seek redressal in terms of a fair settlement of just claims, com-
pensation for misrepresentation, unscrupulous exploitation of
consumers’ unsatisfactory services, unfair trade practices, etc.
3. Right to consumer education: Consumers have a right to acquire
the knowledge and skills needed for making informed decisions.
The consumers must also be aware of the basic rights and duties
of consumers.
4. Right to a healthy environment: Consumers have a right to live
and work in a safe, clean, healthy and sustainable environment
In India, consumers enjoy all
that does not threaten their well-being. eight consumer rights.
b. False
The Central Government will form the CCPC or the Central Council
as an advisory body that will be chaired by the Minister-in-Charge of
the Department of Consumer Affairs. The CCPC must meet at least
once a year. The objective of the CCPC is to advise for the promotion
and protection of the consumers’ rights at the national level.
All the states will form the SCPC or the State Council as an advisory
body that will be chaired by the Minister-in-charge of the Department
of Consumer Affairs in the State Government. The SCPCs must meet
at least twice a year. The objective of the SCPC is to provide advice for
the promotion and protection of consumers’ rights within their states.
All the states will form the DCPC or the District Council as an advisory
body that will be chaired by the collector of the district. The DCPCs
must meet at least twice a year. The objective of the DCPC is to pro-
vide advice for the promotion and protection of consumers’ rights
within their respective districts.
a. True b. False
List a few activities that have been carried out by the CPCs for the
protection of consumer rights.
As per the Consumer Protection Act, 2019, consumers can get a res-
olution to their consumer complaints with the three-tier structure.
Under this structure, the Consumer Courts are set up at three levels
as follows:
Q District Consumer Disputes Redressal Commission (DCDRC), also
known as the District Commission
Q State Consumer Disputes Redressal Commission (SCDRC), also
known as the State Commission
Q National Consumer Disputes Redressal Commission (NCDRC),
also known as the National Commission
ii. None of the points of the dispute are mutually resolved by the
parties and the court passes an order stating the same. This is a
case of failed mediation. In this case, the matter is moved back to
the court.
iii. The parties to a dispute can resolve one or more points of dis-
putes but not all. This is a case of partially successful mediation.
Here, the designated Commission shall record settlement of
the issues that have been so settled and continue hearing other
issues that could not be resolved through mediation.
The first step in filing a complaint with the consumer protection body
is to file a complaint in a written or electronic form with the concerned
Consumer Commission or the consumer court. As already discussed,
the complainant may be an individual consumer, the State Govern-
ment or the Central Government or even the CCPA. The complaint
is accepted only if it is accompanied by the requisite amount of fees.
(c) Returning the total price or the charges paid by the complainant
along with the interest on such price
(d) Paying compensation to the consumer for any loss or injury
suffered by the consumer due to the negligence of the opposite
party
The various appeals and their period of limitation under the Con-
sumer Protection Act, 2019 are as follows:
Q If a person has been aggrieved by any order that has been passed
by the CCPA, then he/she may file an appeal with the National
Commission within 30 days from the date of receipt of such order.
If a person has been aggrieved by an order made that has been
passed by the District Commission, then, he/she may file an appeal
against such order with the concerned State Commission within
45 days from the date of such an order.
If a person has been aggrieved by an order made that has been
passed by the State Commission, then, he/she may file an appeal
against such order with the concerned National Commission
within 30 days from the date of such an order.
An appeal always lies with the
National or State Commission if If a person is aggrieved by an order made by the National
the State or District Commission
Commission, then he/she may appeal against such order to the
respectively has passed an ex
parte order.
Supreme Court within 30 days of such order.
Bd Xeni
Describe the various orders that can be passed by a commission
while giving any judgment with respect to a consumer complaint.
There are four main objectives that form the foundation of any coun-
try’s state policy and include:
1. Consumers are fully informed and can take decisions.
2. Consumers are not discriminated on the basis of their gender,
race, colour, region, income level, religion, culture, caste, etc.
10. The USA has strict laws for drug manufacture and sale and
for checking adulteration.
a. True
b. False
Make a list of ten developed countries of the world and study their
consumer protection laws. Compare these laws and their provi-
sions with the consumer laws of India.
al SUMMARY
Q The use of digital means has offered various benefits as well
as challenges related to consumer protection. To meet these
challenges faced by consumers, the Indian Government enacted
the Consumer Protection Act, 2019.
Q The objective of the Consumer Protection Act, 2019 is to provide
timely and effective administration and settlement of consumer
disputes.
Q Some important features and provisions of the Consumer
Protection Act, 2019 are:
¢ Broadening the term consumer
Inclusion of e-commerce
OHO OHhUh OH
“~-fthUc
e+e
The right to redress
e+e
The right to consumer education
+e
The right to a healthy environment
oe
The right to file a consumer complaint anywhere
+e
+ The right to receiving compensation for product liability
The right to present a case via video conferencing
“~rft
KEY WORDS
(3 DESCRIPTIVE QUESTIONS £9
1. Explain the objective, scope and significance of the Consumer
Protection Act, 2019.
2. What are the provisions for product liability and false or mislead-
ing advertisements in the Consumer Protection Act, 2019?
3. What are the various rights that are enjoyed by a consumer in
India?
4. Discuss the Consumer Disputes Redressal mechanism under the
Consumer Protection Act, 2019.
1 SCPC
Consumer Disputes Redressal 8. d. 21
ew True
Comparison of Consumer Law in Vari- 10. a. True
ous Countries
SUGGESTED READINGS
Q Tiwari, G. (2014). Understanding Laws Consumer Rights (1st ed.).
Lexis Nexis.
Q Kaushal, A. (2016). Practical Guide to Consumer Protection Law
(4th ed.). Universal Law Publishing Co Pvt Ltd.
E-REFERENCES
Q (2020). Retrieved 27 April 2020, from _http://egazette.nic.in/
WriteReadData/2019/210422.pdf
Q > Roysam, V. (2020). Marketers say, ‘so jaograhak so jao’. Consumers,
do you know these important rights?. Retrieved 27 April 2020, from
https://yourstory.com/2017/03/consumer-rights
CONTENTS
7.1 Introduction
7.2 The Right to Information (RTI) Act, 2005
7.2.1 Objectives of the RTI Act
Self Assessment Questions
Activity
7.3 Public Authorities (Chapter II of the Act)
7.3.1 Obligations/Duties of Public Authority (Chapter II of the Act)
7.3.2 Framework of Public Information Authority (Section 5)
7.3.3 Public Information Officers (PIO) and their Duties
Self Assessment Questions
Activity
7.4 Procedure for Obtaining Information (Sections 6 and 7)
Self Assessment Questions
Activity
7.5 Information Exempted from Disclosure (Section 8)
Self Assessment Questions
Activity
7.6 Information Commissions (ICs)
7.6.1 Central Information Commission (CIC) (Chapter III of the Act)
7.6.2 State Information Commission (SIC) (Chapter IV of the Act)
7.6.3 Powers and Functions of Information Commissioners (Chapter V of the
Act)
7.6.4 Procedure for Appealing to CIC and SIC (Section 19)
7.6.5 Penalties (Section 20)
7.6.6 Jurisdiction
7.6.7 Role of Central and State Governments
Self Assessment Questions
Activity
CONTENTS
INTRODUCTORY CASELET
The Right to Information (RTI) Act , 2005 not only brought about
greater transparency and accountability in the functioning of _ eT ee (HON
various governmental agencies but also helped bust multiple This caselet discusses how
scams in the country. It is rightly called the ‘sunshine law’ due the Right to Information (RTI)
to its potential to expose the scandalous actions of the high and Act has been contributing
the mighty. Since its inception, the law has been contributing in in revealing scams worth
; —s 5 billions, whereby the
revealing scams worth billions, whereby the taxpayers’ money or eset
public property has been looted by the corrupt politicians and cor- property has been looted by
porations. Some of the infamous scams that had been brought into the corrupt politicians and
light include Public Food Distribution Scam in Assam (2007), the corporations.
2G Scam (2008), Adarsh Society Scam (2010) in which the defence
was cornered by several well-known politicians and bureaucrats,
Commonwealth Games Scam and scams involving diversion
of Dalit funds, Wakf Board Land Scam in Karnataka (2012), the
Coal Allocation Scam (2012), Indian Red Cross Society Scam, and
many others. The significance of the legislation lies in compelling
the leaders working in various positions to improve governance
for the socio-economic betterment of the citizenry, rather than
personal aggrandisement.
© LEARNING OBJECTIVES
Act, 2005 a~
(AS INTRODUCTION
Quick Revision In the previous chapter, you have studied consumer-oriented laws
such as the Consumer Protection Act, 2019. This chapter discusses
the RTI Act, 2005 (hereinafter referred to as ‘RTI Act’). The right to
information is the pivot of a participatory democracy, which aims
to bring about accountability and good governance. The higher the
ease of access about the quality of governance, the higher shall be
the degree of responsiveness of the public authorities towards their
responsibilities.
In this chapter, you will study the objectives of the RTI Act. Next, you
will study the public authorities and their framework. The chapter will
then discuss the procedure for obtaining information. Then, you will
study the role of Information Commissions (ICs). Finally, the chapter
discusses the impact of the RTI Act.
According to Section 2(j) of the RTI Act, 2005 the term “right to
information” means the right to information accessible under this
Act which is held by or under the control of any public authority and
includes the right to—
(i) inspection of work, documents, records;
(ii) taking notes, extracts, or certified copies of documents or records;
(iii) taking certified samples of material;
(iv) obtaining information in the form of diskettes, floppies, tapes,
video cassettes or in any other electronic mode or through print-
outs where such information is stored in a computer or in any
other device;
The type of information that may be obtained under the RTI Act is
defined in Section 2(f) as ‘any material in any form, including records,
documents, memos, e-mails, opinions, advices, press releases, circu-
lars, orders, logbooks, contracts, reports, papers, samples, models,
data material held in any electronic form and information relating to
any private body which can be accessed by a public authority under
any other law for the time being in force’. The RTI Act was passed ‘to
provide for setting out the practical regime of right to information for
citizens’. The main aim of the Act is to provide secure access to infor-
mation for promoting transparency and accountability.
Briefly describe some cases known to you or which you may have
read somewhere about the way the RTI Act, 2005 was used by any
Indian citizen(s) to obtain information.
As per the RTI Act, there are two sets of organisations that are con-
sidered to be ‘public authority’. The first one involves bodies that are
formulated by the enactment of the legislation or constitution of India,
such as all the political parties, state legislatures such as Securities
and Exchange Board of India (SEBD), Reserve Bank of India (RBD),
and Telecom Regulatory Authority of India (TRAIT). The second type
of public authorities includes bodies that are substantially financed
by the government. For instance, planning commission or education
institutions created by law, etc. Therefore, they owe their existence
to the funds given directly or indirectly by the government. These
authorities can be at the state level or district level or sub-district level.
Also, the RTI Act mandates that every public authority shall proac-
tively disclose information pertaining to it and maintain its documents
and records to facilitate the right to information under the Act. These
authorities have statutory or public duties that are to be performed for
the benefit of the public.
Q Ifthe PIO fails to give a decision on the request within the period
specified, he/she is deemed to have rejected the request. Where a
request has been rejected, the PIO needs to communicate to the
requester: (a) the reasons for such rejection, (b) the period within
which an appeal against such rejection may be preferred, and (c)
the particulars of the appellate authority.
Q To provide information in the form in which it is sought unless
it would disproportionately divert the resources of the public
authority or would be detrimental to the safety or preservation of
the record in question.
Q If the PIO allows only partial access, where such part is not
exempted from disclosure and such part can be easily severed
from the part exempt, the PIO should give a notice to the applicant
informing: that only part of the record requested, after severance
of the record containing information which is exempt from
disclosure, is being provided.
The PIO should give reasons for the decision, including any
findings on any material question of fact, referring to the material
on which those findings were based; the name and designation of
the person giving the decision; the details of the fees calculated by
him/her and the amount of fee which the applicant is required to
deposit; and his/her rights with respect to review of the decision
regarding non-disclosure of part of the information, the amount of
fee charged, or the form of access provided.
Q If the information sought has been supplied by a third party or
is treated as confidential by that third party, the PIO shall give
a written notice to the third party within 5 days from the receipt
of the request and take its representation into consideration. The
third party must be given a chance to make a representation before
the PIO within 10 days from the date of receipt of such notice.
Visit the RTI Act’s website to find the details of the fee applicable to
people living below the poverty line.
Under the RTI Act, the following types of information are exempted
to be provided to the public:
Q Information, the disclosure of which would prejudicially affect the
following:
¢ Sovereignty and integrity of India
@ Security, strategic, scientific, or economic interests of the state
¢ Relations with foreign states or lead to incitement of an offense
For instance, in Nusli Wadia, Mumbai vs. Ministry of External
Affairs, Appeal No. CIC/OK/A/2008/00245, dated 1st October, 2008,
the information about the Jinnah House sought by the appellant
was declined on the ground that the disclosure of the information
would prejudicially affect the relations of India with a foreign state.
Q Information, which has been expressly forbidden to be published
by any court of law, tribunal, or the disclosure of which may
constitute contempt of court
(A INFORMATION COMMISSIONS
An Information Commission is considered as an adjudicator or sec-
ond appellate authority that manages and approves the disclosure of
A two-tier appeal mechanism information under RTI Act. It plays a crucial role in deciding whether
is provided under the Act for to allow or deny the disclosure of information to the applicant. These
persons who do not receive commissions are the interpreters of public interest as they help the
information from a PIO or who citizens in raising the request for information under the RTI Act.
ie ae eae Information Commission have two separate bodies to hear complaints
, and appeal under the RTI Act—State Information Commission (SIC)
and Central Government Commission (CIC).
The powers of both CIC and SIC are contained in Section 18 of the
Act. The following are the powers of the Information Commissioners:
Q To conduct an enquiry
In case the PIO of a public authority does not supply the information
within the specified time or supplies incorrect and incomplete infor-
mation, the RTI Act has made appeal provisions to enable the citizens
to approach the appellate authorities. Making an appeal is a two-step
process: (i) appeal is made to the appellate authority and (ii) appeal is
made to the appropriate Information Commissioners.
Any person who does not receive the decision within the time limit
specified in the RTI Act or who is aggrieved with any of the decisions
of the PIO may file an appeal within 30 days from the expiry of such
period or from the receipt of the decision to the officer who is senior in
rank to the PIO as the case may be who is the First Appellate Author-
ity. However, the aggrieved party may appeal even after 30 days, if
sufficient reason is shown for the delay.
The second appeal shall be filed within 90 days from the date by which
decision should have been made or is actually received. The appeal
shall be made before the Information Commissioners.
APPEAL BY A THIRD PARTY
In the first case, the appellate authority should make sure that the
desired information has immediately been supplied to the appellant.
7.6.6 JURISDICTION
tax refunds, etc. People are massively using the RTI Act to get their
work done and they feel empowered. With greater transparency in
governance, RTI Act has given a boost to the freedom of speech and
expression. All the levels of government, centre, state, or village-level
Panchayats should put their record in the public domain.
Research on the Internet and find out how the RTI Act has revealed
the scam in the Crawford Market redevelopment issues in Mumbai.
b. False
Using the Internet, find out about the role played by PIO with
respect to the RTI Act.
(eS SUMMARY =:
Q The Right to Information (RTI) Act was passed ‘to provide for |
setting out the practical regime of right to information for citizens’.
The main aim of the Act is to provide secure access to information
for promoting transparency and accountability.
Q The main objective of the RTI Act is setting up of a practical regime
where citizens can have secure access to information that is under
the control of public authorities in order to promote transparency
and accountability in the working of public authorities.
Q Every public authority, within 100 days of enactment of the RTI
Act, shall designate the Central Public Information Officers
(Central PIO) or the State Public Information Officers (State PIO)
in respective public or administrative offices.
Q The procedure for obtaining the information under the RTI
Act involves four main steps—Application, Time limit, Fee, and
Grounds for rejection.
Q Inaccordance with the doctrine of severability, only the part of the
record that does not contain any information which is exempt from
disclosure and can reasonably be severed from the part containing
the exempt information may be provided to the applicant.
£2 | DESCRIPTIVE QUESTIONS
1. What is the main aim of the RTI Act? List some of its features.
2. Discuss the main obligations of a public authority.
3. List the various duties assigned to a public information officer.
4 Describe the procedure of obtaining information under the RTI
Act.
Topic 1s aC Answer
The Right to Information 1. a. public
(RTI) Act, 2005
2. transparency and
accountability
Public Authorities (Chapter II Se a. True
of the Act) 7
4, d. All of the above
Procedure for Obtaining Ee b. False
Information (Sections 6 and 7) awd
Information Exempted from 6. e. Bothaandb
Disclosure (Section 8)
Information Commissions (ICs) fie a. Civil Procedure Code, 1908
8. 30 days
2 oa. The
a. Information Commission
Impact of the RTI Act, 2005 a ~~corruption
Leading Case Studies a. True
SUGGESTED READINGS
Q Aggarwal, S; Singhal, K. (2006). Indian business laws. New Delhi:
Galgotia.
Q Padhi, P (2013). Legal aspects of business. New Delhi: PHI Learning.
Q Pillai, R; Bagavathi. (2010). Business law. New Delhi: S. Chand.
Q Tulsian, PR (2014). Business law. New Delhi: McGraw Hill Education
(India) Private Limited.
E-REFERENCES
Q (2020). Retrieved 4 May 2020, from http://nromoef.gov.in/Guide%20
For%20the%20Public%20Authorities.pdf
Q (2020). Retrieved 4 May 2020, from https://cic.gov.in/sites/default/
files/Impact%20o0f%20the%20Right%20to%20Information%20Act.
pdf
Q aburman, V. (2020). What entities are public authorities under the
RTI Act?. Retrieved 4 May 2020, from https://anirudhburman.
org/2013/09/27/publicauthoritiesunderthertiact/
CONTENTS
8.1 Introduction
8.2 Competition—What and Why
Need for a Competition Policy
8.2.2 Genesis of Competition Law
8.2.3 Comparison of the US and Indian Competition Laws
Self Assessment Questions
Activity
8.3 Competition Act, 2002
8.3.1 Objectives of the Competition Act, 2002
8.3.2 Features of the Competition Act, 2002
8.3.3 Acquisition
Self Assessment Questions
Activity
8.4 Anti-competitive Agreements
8.4.1 Vertical Agreements
8.4.2 Horizontal Agreements
8.4.3 Cartels
8.4.4 Bid Rigging
Self Assessment Questions
Activity
8.5 Competition Commission of India (CCI)
8.5.1 Composition of CCI
8.5.2 Powers and Jurisdiction of the CCI
8.5.3 Inquiry into Certain Agreement and Dominant Position of Enterprises
8.5.4 Powers and Jurisdiction of the Director General
8.5.5 Procedure for Enquiry into the Complaints (Section 19)
8.5.6 Anti-competitive Acts taking place Outside India but having Adverse
Effect on Competition in India (Section 32)
CONTENTS
INTRODUCTORY CASELET
ABUSE OF DOMINANCE
© LEARNING OBJECTIVES
“3a INTRODUCTION
Quick Revision In the previous chapter, you studied about the Right to Informa-
tion (RTI) Act, 2005 and its objectives. You also studied about public
authorities, the procedure for obtaining information, information that
is exempted from disclosure, the role of Information Commissions
(ICs) and the impact of the RTI Act, 2005. This chapter discusses the
Competition Act, 2000 which governs competition policies and prac-
tices in the Indian market.
The Indian legislature had also passed the Competition Act, 2002. This
Competition Act, 2002 defines various anti-competitive practices such
as entering into anti-competitive agreements, abuse of dominant posi-
tion and combinations. The different authorities involved, penalties
and punishments for violations and the procedure using which the
authorities decide whether or not violation has indeed taken place are
all described under this Competition Act, 2002.
The MRTP Act, 1969 was the first competition law of India that defined
restrictive trade practices. However, this law was not adequate for
promoting competition and trade, and reducing anti-competitive
practices.
The MRTP Act, 1969 was meant to regulate the concentration of eco-
nomic power, competition law and consumer protection. This Act was
applicable to almost all areas of business such as production, distribu-
tion, pricing, investment, procurement, packaging, advertising, sales
promotion, mergers, amalgamations, takeovers, undertakings, etc.
In the US, there are six institutions that help in implementing the
competition law of US, which are as follows:
Q The Department of Justice Q Juries
Q TheFederalTradeCommission OQ Private Parties
Q The Courts Q State Attorney Journals
In the case of India, the antitrust law is the Competition Act, 2002. The
institutions that help in implementing the competition law of India
include the following:
Q Competition Commission of India
Q National Company Law Appellate Tribunal (NCLAT)
Q Supreme Court Competition Commission of India, the National
Company Law Appellate Tribunal (NCLAT) and the Supreme
Court.
Find out which of the countries have the strongest and weakest
competition policy.
To prevent monopolies
Ovo
Let us now study these features of the Competition Act, 2002 in detail.
Q. Prohibits anti-competitive agreements (Section 3): An agreement
is considered anti-competitive if it causes or may potentially cause
an adverse effect on competition. An important feature of the
Competition Act, 2002 is to prohibit anti-competitive agreements
such as tie-in arrangements, exclusive supply and distribution
agreements, etc.
8.3.3 ACQUISITION
ACQUISITION
of services; or
promotion of technical, scientific, and economic development
U
In May 2017, the central government dissolved the CAT and replaced
it with NCLAT. Now, NCLAT is the appellate body that works under
the Competition Act, 2002. The right to appeal to NCLAT remains
unchanged. It is also the relevant authority to seek compensation
under the Competition Act, 2002.
GROUP
PREDATORY PRICING
ANTITRUST LAW
MONOPOLY
PERFECT COMPETITION
OLIGOPOLY
MONOPOLISTIC COMPETITION
RELEVANT MARKET
The Act defines the relevant market as the market which may be deter-
mined by the commission with reference to the relevant product market
or the relevant geographic market or with reference to both the markets.
a. True b. False
Find out the instances of rigged bidding in the recent past in the
Indian market.
ee ANTI-COMPETITIVE AGREEMENTS
Section 3 of the Competition Act, 2002 relates to the prohibition of
anti-competitive agreements. The anti-competitive agreements are
the types of agreements that unduly benefit a person or group and
which might harm competition in any particular market. All such
agreements are prohibited under Competition Act, 2002.
into an agreement with the supplier that he/she would not make
the same engine for any other buyer.
Under exclusive distribution agreement, restrictions are imposed
on the supply of certain goods which may limit the availability of
the goods. At times, such restrictions with respect to allocation of
any area or market or sale of goods are also covered under this
Competition Act, 2002.
Q Resale price maintenance: Any agreement to sell goods on
condition that the prices to be charged on the resale by the
purchaser shall be the prices stipulated by the seller unless it is
clearly stated that prices lower than those prices may be charged
is called resale price maintenance. In simple words, resale price
maintenance involves any attempt by an upstream supplier to
control or maintain the minimum price at which a product can be
resold by a customer. Such restrictions ensure that the resellers
do not compete too fiercely which leads to lower profits. If an
agreement prescribes that a product is resold at a specific margin
or limits, the discount offered by a reseller restricts a reseller’s
ability to set a price; such agreements are prohibited.
Q Refusal to deal: Any agreement that restricts or may potentially
restrict the persons or classes of persons to whom goods are sold
or from whom goods are bought are prohibited under the Act.
Such agreements are considered as anti-competitive.
8.4.3 CARTELS
Most cartels and collusive agreements are illegal. When cartels are
able to convert the perfectly competitive market into a monopoly
or a duopoly, they gain control over all critical business areas such
as pricing and market control. Collusive agreements usually lead to
anti-competitive practices such as price-fixing and market-sharing.
Such practices are aimed at reducing output and raising prices.
Most cartels are illegal; however, export cartels in most countries and
at international level are legal. For example, the Organisation of the
Petroleum Exporting Countries (OPEC) is a legal international cartel.
There are three major types of bid rigging, which are as follows:
1. Cover bidding: It is also known as complementary bidding.
Under cover bidding, a group of bidders submit collusive bids so
that some other bidder can win the contract.
2. Bid suppression: It occurs when many bidders agree not to bid
or they withdraw their bids. This is done in order to make a par-
ticular bidder win the bid.
3. Bid rotation: It refers to a process wherein all bidders take turns
to submit a low bid with an intention to make each bidder win on
a rotational basis.
CCI believes that competition is a means for ensuring that the com-
mon people of India can access a range of goods and services at com-
petitive prices. It aims to regulate competition so that the producers
can have maximum incentive for facilitating innovation and bring-
ing specialisation. Healthy competition in markets leads to reduced
costs and increased choice available to consumers. Therefore, the
CCI works towards providing a level playing field to the market par-
ticipants and at the same time take care of the interests of the con-
sumers as well.
The CCI is the body through which the central government aims at
achieving the objectives of the Competition Act, 2002. The CCI con-
sists of a Chairperson and not less than two and not more than 6 mem-
bers which are appointed by the central government. The major activ-
ities of the CCI are as follows:
Q Eliminating practices having AAEC
Promoting and sustaining competition
UO
outside country
As of now, the jurisdiction of the CCI has been widely debated. There
have been cases wherein some other courts have stayed the verdict
of the CCI. There are various jurisdictional challenges related to CCI
encroaching the jurisdiction of another regulator or court. The CCI
actually faces a lot of issues because it sees an overlap between its own
jurisdiction and that of other regulators.
The Competition Act, 2002 does not specify any rules based on which
the CCI can decide the cases to be taken cognisance of. There have
been numerous instances of overlap and exercise of authority between
CCI and other regulators. This often leads to delay in justice.
EXHIBIT
The CCI has the power to inquire into any alleged violation of Sec-
tions 3 and 4, i.e., anti-competitive agreements and abuse of dominant
position by taking suo moto cognisance (on its own motion) or in the
following cases:
Q When the CCI receives any information from any person, consumer,
or their association which is accompanied with the required fee
amount
In the first situation, the CCI is satisfied that there exists some sub-
stance in the complaint; then, in such a situation, the CCI directs the
DG to investigate the matter. If the CCI receives any complaints or
information that is similar to any previously received information,
then all the new information should be clubbed with the previously
available information.
In the second situation, the CCI is not satisfied with the matter
referred to it and it does not find that a prima facie case is made out;
then, the CCI closes the matter and passes orders as it deems fit. The
CCI also has to send a copy of this order to the central government
or the state government or to the authority from which the complaint
was received.
When a case is referred to the DG, he/she carries out a thorough inves-
tigation and prepares a report of his/her findings. If the report of the
DG states that there was no contravention of any provisions of the
Competition Act, 2002, the complainant may rebut and appeal against
the findings of the DG to the CCI. Following this, the CCI hears the
b. False
[3] COMBINATION
The acquisition of one or more enterprises by one or more persons or
acquiring of control or merger or amalgamation of enterprises under
certain circumstances (exceeding monetary limits of assets or turn-
over as specified in Section 5 of the Act and given below) shall be con-
strued as a combination. The combination is defined as acquisition
of one or more enterprises by way of merger or acquisition or control
over the enterprise. Regulating the combinations is one of the primary
tasks of the Competition Act, 2002 and the Competition Commission
of India.
must file with the CCI details of such deal within 7 days of the date
of acquisition.
However, the CCI may initiate such an inquiry into the combination
only within one year after such a combination has taken effect and no
later than that.
This section also states that the central government should enhance
or reduce the value of assets or the value of turnover every two years
in consultation with the CCI and must notify the same.
This section states that if a person fails to comply with either the
directions of the CCI under Sections 36(2) and 36(4) or the directions
of the DG under Section 41(2), without any reasonable cause, then the
person can be fined an amount of up to 1 lakh for each day during
which such failure continues subject to a maximum of & 1 crore. The
amount is decided by the CCI.
Section 41(2) states that the DG shall have all powers as are conferred
upon the CCI as mentioned in Section 36(2) of the Competition Act,
2002.
Section 438A of the Act states that if any person or enterprise fails
to give notice to the CCI when they are entering into a combination
agreement [under Section 6(2) of the Act], the CCI may impose a
penalty of up to 1% of the total turnover or the assets of the combi-
nation. This provision was inserted into the Act by the Competition
(Amendment) Act, 2007.
(b) Ifthe person omits any material fact which he/she knows is mate-
rial to the case
(c) If the person changes, suppresses, or destroys any document
which is required to be furnished out of his/her own free will
Section 47 of the Competition Act, 2002 states that the amount that
the CCI receives by imposing penalties must be credited to the consol-
idated fund of India.
Section 48 of the Competition Act, 2002 states that when there is a per-
son committing any contravention of any of the provisions of this Act
or of any rule, regulation, order, or direction issued under this Act, is a
company; then, every person who is in charge of and was responsible
to the company for the conduct of the business of the company at the
time when the contravention was committed along with the business
will be considered as guilty of the contravention. The CCI will carry on
18. Section 47 of the Competition Act, 2002 states that all the
amount that the CCI receives by imposing penalties must be
credited to the
14. Amit was a party to a combination and he had made a false
statement with the CCI. What is the maximum penalty that
CCI can impose on Amit?
This case was filed by the M/s Reliance Big Entertainment Private
Limited against Tamil Nadu Film Exhibitors Association (hereinafter
referred to as the ‘Opposite Party’ or ‘TNFEA’) under Section 19(1)(a)
of the Competition Act, 2002. The informant alleged that the TNFEA
had contravened the provisions of Sections 3 and 4 of the Act.
On the basis of the above facts of the case, the informant prayed the
following:
Q TNFEA should be restrained and it should be ordered not to
compel its members for not dealing with the film (Osthi) of the
informant including all its upcoming films also.
Q TNFEA should be restrained and it should be ordered to not allow
the release and exploitation of the said film and forthcoming films
of the informant.
Q TNFEA should be restrained from imposing any unfair and
unjustified restrictions on the release and exploitation of the
informant’s said film.
Q TNFEA should be restrained from entering into any anti-
competitive agreements with its members.
Q TNFEA should be restrained from abusing its dominant position.
The CCI considered this case and after considering all the facts, it
noted the following:
Q M/s Sun TV owed money to a few members of TNFEA.
Q TNFEA resorted to arm twisting tactics and threatening and in
order to recover its money by ordering that theatres associated
with TNFEA not to exhibit the film with which M/s Sun TV was
associated.
Following this, the CCI ordered the DG to investigate the matter for
contravention of Sections 3(3) of the Act.
b. False
EX] summary
@
Q Competition is not necessarily negative, and in fact healthy
competition among organisations is actually good for businesses.
Q Competition policy involves applying rules to ensure that the
businesses and companies compete fairly with each other.
Presence of a healthy competition policy ensures wider choice for
consumers and helps in reducing prices and improving quality.
Q The Monopolies and Restrictive Trade Practices (MRTP) Act was
meant to regulate concentration of economic power, competition
law, and consumer protection and was applicable to almost all areas
of business such as production, distribution, pricing, investment,
procurement, packaging, advertising, sales promotion, mergers,
amalgamations, takeovers, undertakings, etc.
Q The Competition Act, 2002 was enacted on 13° January, 2003
to regulate and govern the competition and related practices in
India.
Q Section 3 of the Competition Act, 2002 relates to the prohibition of
anti-competitive agreements. The Competition Act, 2002 is based
on the philosophy of modern competition laws. It prohibits anti-
competitive agreements and abuse of the dominant position by
enterprises.
Q The objectives of the Act are sought to be achieved through the
aegis of the Competition Commission of India (CCI) which has
been established by the central government with effect from 14th
October, 2003.
Q The CCI is the regulatory authority that oversees competition in
Indian market.
Q The primary objective of the CCI is to create a fair and competitive
business environment.
Q Section 20 of the Competition Act relates to the inquiry of
combinations by the CCI. According to this Section, the CCI may
inquire into the cases of combinations such as acquisition, merger,
amalgamation, etc., by taking into account its own knowledge
or information in order to determine if such a combination has
caused (or may potentially cause) an Appreciably Adverse Effect
on Competition (AAEC) in India.
DESCRIPTIVE QUESTIONS
What is the meaning of competition and competition policy?
NP
the CCI?
6. Describe the factors that must be considered while determining
the adverse effect of the combination on competition in the rele-
vant market.
SUGGESTED READINGS
Q Pathak, A. (2020). Legal Aspects of Business (7th ed.). McGraw Hill
HED.
Q Dhall, V. Competition Law Today (2nd ed.). Oxford.
E-REFERENCES
Q (2020). Retrieved 6 May 2020, from _https://www.oecd.org/
investment/toolkit/policyareas/competition/Competition%20
Policy%20Guidance,%20Thomsen.pdf
Q (2020). Retrieved 6 May 2020, from https://assets.publishing.
service. gov.uk/media/57a08d5b40f0b652dd00190e/CRCwp2.pdf
Q Pierce, R. (2020). Comparing the Competition Law Regimes of the
United States and India. Retrieved 6 May 2020 from https://papers.
ssrn.com/sol3/papers.cfm?abstract_id=2951944
Q = Editor, V. (2020). Competition Commission of India - Hyundai Case
Study - India Business Law Journal. Retrieved 6 May 2020 from
https://www.vantageasia.com/hyundai-case-a-lesson-for-cci/
CONTENTS
Introduction
Factories Act, 1948
Objectives and Applicability
Key Provisions and Features of the Law
Occupation of Occupier (Employer) and Responsibilities of Occupier
Self Assessment Questions
Activity
9.3 Industrial Disputes Act, 1947
9.3.1 Objectives and Applicability
9.3.2 Examples
Self Assessment Questions
Activity
9.4 Minimum Wages Act, 1948
9.4.1 Objectives and Applicability
9.4.2 Key Provisions and Features
Self Assessment Questions
Activity
9.5 Employees Compensation Act, 1923
9.5.1 Objectives and Applicability
9.5.2 Key Provisions and Features
Self Assessment Questions
Activity
9.6 Employees Provident Fund and Miscellaneous Provisions Act, 1952
9.6.1 Objectives and Applicability
9.6.2 Key Provision and Features
9.6.3 Calculation of Provident Fund and Apportionment of the Fund against
Various Schemes
Self Assessment Questions
Activity
CONTENTS
INTRODUCTORY CASELET
INTRODUCTORY CASELET
INTRODUCTORY CASELET
© LEARNING OBJECTIVES
Hai INTRODUCTION
Quick Revision
In the previous chapter, you have studied about the Competition Act,
2000. In this chapter, you will study employment-related laws.
In India, there are about 60 laws concerning labour dealing with work-
ing conditions, industrial relations, monetary benefits and social secu-
rity issues in Indian ministries and commercial establishments. The
main objective of these laws is to promote the welfare of workers and
employees and improve their social life. There are three categories of
labour laws in the country as follows:
A. Laws framed and administered by the Central Government such
as the law relating to provident fund, mines, beedi workers,
industrial disputes etc.
B. Laws framed by the Central Government but administered by
the State Governments such as the law on factories, employ-
ment exchanges (compulsory notification of vacancies), bonded
labour, trade unions, employees’ compensation, etc.
C. Laws framed by Central Government but administered by both
the Central and the State Governments include laws such as the
payment of wages, gratuity, child labour, apprenticeship, equal
remuneration, contract labour and inter-state migrant workers.
The scope and coverage of the Factories Act, 1948 are as follows:
Q It aims to improve the working conditions in factories across India
Q It provides basic minimum requirements to ensure safety, health
and welfare of workers
Q It also governs the following:
@ Approval of factory building plans before construction/exten-
: The term ‘suo motto’ is usually
sion applied to actions taken by a
@ Issue of licenses and regulation of factories running without court without any prior; motion or
request from the parties.
license
Renewal of licenses
¢ Inspection of factories in case of complaints/accidents/suo
motto
To renew the licence of a
factory, the following documents
should be submitted: 9.2.2 KEY PROVISIONS AND FEATURES OF THE LAW
¢ An application in form num-
ber 3 (duplicate) Since the object of the Factories Act, 1948 is to protect the interest of
¢ Treasury receipt challan with workers from exploitation, the Act recommends certain standards for
prescribed fees safety, welfare and working hours of workers, apart from other pro-
¢ Original licence visions. The main provisions of the Factories Act, 1948 are as follows:
¢ Process flowchart
Q Compulsory approval, licensing and registration of factories: It
is mandatory to obtain a licence before a factory is started. The
State Government may make rules related to the licensing and
registration of factories. As an initial step towards the approval
for licensing, detailed plans or any class of description of factories
As per Section 18, it is important
to make proper arrangements
must be submitted to the Chief Inspector or the State Government.
for cool drinking water during Later, the plans and specifications of a factory and its location are
summers, if the factory employs presented in the required format in writing to the Chief Inspector
more than 250 workers. or the state government for its registration.
Q Health measures: Factories Act, 1948 is intended to ensure that
2
the conditions in factories do not affect the health of workers
C es adversely. Various provisions for cleanliness, disposal of wastes
and effluents, ventilation and temperature, lighting, artificial
Details regarding the provisions
of safety of workers in the
humidification, spittoons, overcrowding, dust, fumes, drinking
Factories Act, 1948, can be taken water, latrines and urinals to ensure good working conditions for
from the following link: the workers. It is important to repaint the inside walls, partitions,
https://labour.gov.in/sites/ ceiling or top of rooms, passages and staircases once in every 5
default/files/Factories_Act_1948. years. No person in the factory shall be allowed to spit at any place
pdf other than spittoons. In case of violation, fine of not more than 5
rupees shall be paid.
Q Safety measures: Following are the some of the important
provisions under these sections regarding the safety of workers:
Under Section 40B of the @ Dangerous machinery such as electric generators must be se-
Factories Act, 1948, itis
curely fenced.
important to appoint a safety
officer by the occupier in case: @ Work on or near machinery in motion must be carried out only
a. Where 1000 or more workers by specially trained adult male workers wearing tightly fitting
are ordinarily employed
clothes.
b. Where the state government
is of the opinion that manu- ¢ All floors, steps, stairs, passage and gangways shall be of sound
facturing process involves
construction and properly maintained. Handrails shall be pro-
any kind of risk such as body
injury, poisoning disease or vided where necessary. Safe means of access shall be provided
other hazard to health to the place where the worker will carry on any work.
The state government can direct @ No worker shall be made to carry a load so heavy as to cause
or prescribe the occupier the
him injury.
number of safety officers to be
appointed.
Occupier is the person who has the ultimate control over the affairs
of a factory and is responsible for various functions. He cannot be
anyone who is a mere servant charged with specific duties in regard
to control of the machinery, workmen or office, for example, a man-
ager [Emperor vs. Ram Pratap 20 (1905) Bom 423]. The term ‘occupier’
includes:
Q Proprietor (owner) in case of sole proprietary concern
Q Partner of a partnership firm
Q Director of a Company [J K Industries Ltd. vs. Chief Inspector of
Factories & Boilers & Ors. (1997 SC)]
Q Person nominated by government in case of government factory
CASE LAW
JK Industries Ltd. and others vs. Chief Inspector of Factories and
Boilers and others (1996)
Facts: In this case, the Supreme Court noted that where a company
owns or runs a factory, it is the company that has the ultimate control
over the affairs of the factory and would therefore be the occupier.
Use the Internet and make a table showing the nature of offences
and penalties related to those offences under the Factories Act,
1948.
The ID Act extends to the whole of India and applies to all the indus-
trial establishments that carry on business, manufacturing units, trade
and services. The main aim is to ensure industrial peace by protecting
the interest of the workmen. The main objectives of this ID Act are:
Q Tomaintaina better relationship between labourers and industries
by providing a medium of setting disputes through adjudicating
authorities
The ID Act also prohibits the pendency of the conciliation and adju-
dication settlement proceedings by providing a more organised and
legal way of settling disputes. The ID Act provides provisions to elim-
inate all forms of intimidation, coercion and violence.
CASE LAW _|
Workmen of Dimakuchi Tea Estate vs. Dimakuchi Tea Estate
(1958)
Facts: In this case, the Supreme Court laid down the following objec-
tives of the ID Act:
(i) Promotion of measures of securing and preserving amity and
good relations between the employer and workmen
(ii) Investigation and settlement of industrial disputes between
employers and employers, employers and workmen, or work-
men and workmen with a right of representation by registered
trade union or federation of trade unions or an association of
employers or a federation of associations of employers
(iii) Prevention of illegal strikes and lockouts
(iv) Relief to workmen in the matter of lay-off and retrenchment
(v) Promotion of collective bargaining
APPLICABILITY
This law extends to the whole of India and shall come in force on the
first day of April, 1947. The Industrial Disputes Act, 1947, applies to
every industrial establishment carrying on any business, trade, man-
ufacture or distribution of goods and services irrespective of the num-
ber of workmen employed therein.
RESOLUTION OF DISPUTES
9.3.2 EXAMPLES
The joint venture of Hero Group of India and Honda of Japan faced
a financial loss of ¥ 100 crore because of a labour strike in 2006. In
Hero Honda Gurgaon Plant, 4000 workers were involved in the strike
during April 2006. They demanded hike in wages, medical benefits at
par and extra casual leaves. This resulted halt in production; thereby
lead to financial loss. These contractual workers were paid very low
wages and do not even get any pay slip. Therefore, under the aegis of
Industrial Dispute Act, 1947, a mutual negotiation was done between
Haryana’s Additional Labour Commission Management and workers’
representatives for settlement. It resulted in 30% hike in the salary
and provision of two casual leaves in a month was provided to the
workers.
National tribunals
2
JOS Bese
With the help of the Internet, gather information about some major
industrial disputes in India that took place in the last 10 years. Com-
pare these disputes and find out their respective causes.
APPLICABILITY
Dr. B.R. Ambedkar, the father of our constitution, drafted the Minimum
Wages Bill on April 11, 1946. The bill was introduced and enforced on
March 15, 1948 due to delay by constitutional changes.
The Minimum Wages Act, 1948 is applicable to the whole of India. The
provisions of this Act are applicable to every employer that employs All the provisions of the Act
more than 1000 employees in a state. The provisions of the Minimum equally apply to both male and
female workers.
Wages Act, 1948 do not apply to the employees undertaken by the cen-
tral government or railways unless the same has been consented by
the central government.
JOS Beenie
Trace the history of setting of the provisions for the Minimum
Wages Act, 1948, and prepare a chronology of the events that led to
na.
As per the Employees
the final provisions of the Act.
their dependents is ensured by law. The law provides for the payment
by certain classes of employers to their workmen of compensation for
injury by accident.
The EPF Act has been enacted to provide social security to the
employees after their retirement and to their dependents in case of
the employee’s death. Under the EPF Act, the following three schemes
have been provided:
1. Employees’ Provident Fund Scheme, 1952: Under this scheme,
the employee contributes up to 12% of basic wages, DA, includ-
ing cash value of food concession, and retaining allowance. All
accumulations under the fund including contributions from the
employer are refunded with interest on superannuation/ volun-
tary retirement/permanent disability/migration from India. This
scheme allows making a partial withdrawal from the account.
2. Employees’ Pension Scheme, 1995: In this scheme, the contrib-
utory gets a monthly pension after he/she retires. The amount of
pension depends on the pensionable salary, which is the average
monthly salary in 12 months preceding the date of exit from the
membership of the Employees Provident Fund, and the length of
service. The pension is paid on superannuation on attaining 58
years of age/retirement/death during service/ death after super-
annuation/ permanent total disablement.
3. Employees’ Deposit Linked Insurance Scheme, 1976: This
scheme is for those who are members of the provident fund
scheme for the purpose of providing life insurance benefit to
the employees of any establishment or class of establishments to
which the EPF Act applies. Here, the employees need not make
any contribution but the employer has to contribute 1% of the
total pay of the employee. In this scheme, if the employee dies,
the dependents are paid a lump sum amount.
The key provisions provided in the EPF Act addresses the post retire-
ment needs of employees and their welfare. As per the EPF Act, every
employee of a commercial establishment with salary up to = 15,000
or less is entitled to join the Employee Provident Fund. However,
employees with salary more than % 15,000 can also join the scheme.
The retirement benefit plan requires contribution from both the
employer and employee. For employees, 12% of wages or more can
be contributed and for employers, 12% of wages go for contribution
out of which 3.67% goes to provident fund and 8.33% goes to pension
fund. Every employer is required to pay the contribution amount
received from the employee before or on 15 of the following month.
An employee can withdraw funds from the provident fund provided
that he/she does not have employment for a two month period.
Next, the EPF Act has Employees’ Pension Scheme which provides
the provision of superannuation pension, retiring pension and perma-
The law provides for the payment of bonus to the persons employed
in certain establishments and for matters connected therewith. How-
ever, the Act has not defined the term ‘bonus’, which involves the
sharing of the prosperity of the concern with those employed therein.
The objectives of the PBA, 1965 are:
Q To impose a legal obligation on employer to pay the bonus to
employees
Q To offer redressal mechanism in case of non-compliance
Q To designate minimum and maximum percentage of bonus
Q_ To prescribe the formulae for calculating bonus
APPLICABILITY
The law extends to the whole of India and covers all the employees
[Section 2(13)] receiving salary or wages up to = 21,000 per month
[as amended by the Payment of Bonus (Amendment) Act, 2016] and
engaged in any kind of work whether skilled, unskilled, manual,
supervisory, managerial, administrative, technical or clerical, in the
factory or establishment of the employer provided the employee has
worked for at least 30 days in that particular accounting year (Section
8). The minimum bonus payable is 8.33% of the salary or wages of
the employee during the accounting year. This is payable even if the
employers suffer a loss. The maximum bonus payable under the Act is
20% of the basic salary and wages.
The bonus is paid within 8 months of the closure of the accounting year
and is paid on an annual basis. There shall be no bonus to a worker
who has been dismissed for fraud, riotous behaviour, theft, misappro-
priation and sabotage of property.
APPLICABILITY
Gratuity is payable to employees who have rendered a continuous ser- n employee of a seasonal
vice of five years or more, interrupted only on account of sickness, establishment shall be deemed
accident, leave, absence from duty without leave (not amounting to to be in continuous service if he
break j . der th 1 t standi ders), 1 ff strik has actually worked for not less
reak in service under the relevant standing orders), lay off, strike, ania
or lockout or cessation of work not due to the fault of the concerned for which the establishment
was
employee. in operation.
CASELAW ———is”
Irel (india) limited vs p. N. Raghava panicker (2020)
Facts: In this case, the court held that a trainee is not excluded from
the definition of the term ‘employee’ under the gratuity act, but only
an ‘apprentice’ is excluded. Section 2(e) of the payment of gratuity
act, 1972 defines an “employee” which excludes only apprentice. The
act says “employee means any person (other than an apprentice)...”.
CASE LAW
Arasuri Ambajimata Mandir devasthan Trust vs. Jaitabhai Patel,
Shramjivi General Works Union (1983)
Facts: It was held that the post in Temple trust is controlled by State
Government. It is not a post under State government. So as to fall under
the exclusion under section 2(e) and hence it falls under the defini-
tion of employee and is entitled to gratuity under the act which means
though the temple is not mentioned in the section (e) of the act, court
held that it is applicable under this act.
Use the Internet to identify the cases in which the gratuity can be
forfeited and how the gratuity amount is calculated.
This Maternity Benefit Act, 1961 extends to the whole of India and
it applies to commercial establishments with 10 or more employ-
ees. A woman employee needs to complete a period of 80 days in the
establishment in order to get entitled to the maternity benefit. The
In the case of a third child, the maternity paid leaves is provided only
Know More for 12 weeks out of which 6 weeks leaves can be taken prior to the
When a modern medical expected date of delivery. The increased paid maternity leave benefit
technology known as Surrogacy is only provided for the first two children.
is used, the woman employee
gets entitled to maternity leave
for 12 weeks from the day the CASE LAW
child is handed over to her. Dr. Rachna Chaurasiya vs. State of U.P. and others passed (2017)
CRECHE FACILITY
CASE LAW |
Rakhi PV. and Others V. State of Kerala & Another [2018 (2) KHC 251
12. As per the Amendments in the Maternity Benefit Act, the work
from home option can be availed after the expiry of 26 weeks
of maternity leave (the employer and claimant to decide the
terms mutually)
a. True b. False
Under this law, the central government may introduce various social
security schemes for the worker’s benefit. These schemes can include
provisions for Employee’s Provident Fund (EPF) Scheme, Employees’
Pension Scheme (EPS) or insurance schemes, etc. The provision of
penalties is also available in the code for various offences such as fail-
ure of payment from employer contribution etc.
The central and state governments fix the working hours, working
conditions and welfare facilities for various types of establishments. It
would simplify and consolidate the existing health and safety laws. All
the factories, mines, docks, buildings, construction company labour,
construction workers, plantation labour, contract labour, cine work-
ers, etc., are included in this code. According to the Code on Occupa-
tional Safety, Health and Working Conditions, 2020, the following are
the duties of employers:
Q Providing a workplace that is free from hazards that may cause
injury or diseases
Q Providing free annual health examinations to employees in notified
establishments
Q Issuing appointment letter to employees
Q Informing relevant authorities in case an accident at the workplace
leads to death or serious bodily injury of an employees
yt SUMMARY
Q InIndia, there are various laws that ensure equitable remuneration |
for employees working in various organisations and factories.
Besides this, there are various provisions to ensure that even
after retirement or in case of an accident, sufficient amount of
money is accumulated for the survival of the employees and their
dependents.
Q In this direction, the Acts enacted by the Parliament include the
Provident Fund Act, Gratuity Act, Minimum Wages Act, Bonus
Act, Workmen Compensation Act, ete.
Q The government of India has enacted various labour laws,
including the Industrial Disputes Act, 1947, to improve industrial
relations and establish industrial peace.
Q The Maternity Benefit (Amendment) Act, 2017, is regarded as a
vital piece of labour to provide maternity benefit and certain other
benefits.
Q Under the virtue of labour reforms initiatives, the ministry of
labour has decided to amalgamate 44 labour laws under four
labour codes. These reforms are performed to provide flexibility in
retrenchment and to ensure accountability, transparency, effective
implementation of labour laws.
Q The government also keeps on amending these acts from time to
time for the betterment of labourers and employees.
DESCRIPTIVE QUESTIONS
1. Explain the objectives of the Factories Act, 1948.
2. Explain the objectives of Industrial Disputes Law.
3. Discuss the obligation of the occupier as per the Factories Act,
1948.
What is Employees Compensation Act? Discuss its scope.
Explain the scope and major provisions made in the Payment of
Bonus Act.
Discuss the various schemes provided under the Employees
Provident Fund and Miscellaneous Provisions Act.
Define the conditions of applicability for the Payment of Gratuity
Act, 1972.
Discuss the scope and major provisions made in the Minimum
Wages Act, 1948.
9. What are the objectives of the Maternity Benefit Act?
2. Occupier
a
Payment of Bonus Act, 1965 8. 8.339%
9. a. True
11. a. 5
13. 80 4
15. Wages dp WZ
SUGGESTED READINGS
Q Abbott, K., Pendlebury, N., &Wardman, K. (2013). Business law.
Andover: Cengage Learning.
Q Emerson, R. (2016). Business Law. Hauppauge: B.E.S. Publishing.
Q Sahi, G., &Singhania, R. (2008). Employment law in India. Hong
Kong: CCH Hong Kong Ltd.
E-REFERENCES
Q (2020). Retrieved 15 May 2020, from http://adapt.it/adapt-indice-
a-z/wp-content/uploads/2014/09/Labour_Employment_Laws_
India.pdf
Q (2020). Retrieved 15 May 2020, from https://knowledge.leglobal.
org/wp-content/uploads/sites/2/LEGlobal-Employment-Law-
Overview _India_2019-2020.pdf
Q Employment & Labour Law 2020 | India | ICLG. (2020). Retrieved
15 May 2020, from https://iclg.com/practice-areas/employment-
and-labour-laws-and-regulations/india
CONTENTS
10.1 Introduction
10.2 Laws Aimed at Protecting and Conserving the Environment
10.2.1 The Environment Protection Act (EPA), 1986
10.2.2 The National Green Tribunal (NGT) Act, 2010
10.2.3 The Air (Prevention and Control of Pollution) Act, 1981
10.2.4 The Water (Prevention and Control of Pollution) Act, 1974
10.2.5 The Hazardous and Other Wastes
(Management and Transboundary Movement) Rules, 2016
10.2.6 The Wildlife Protection Act, 1972
10.2.7 The Forest Conservation Act, 1980
10.2.8 The Public Liability Insurance Act, 1991
10.2.9 The Biological Diversity Act, 2002
10.2.10 Cases where Companies have faced Consequences of
Violating Environment Protection Laws in India
Self Assessment Questions
Activity
10.3 Summary
10.4 Descriptive Questions
10.5 Answers and Hints
10.6 Suggested Readings and References
INTRODUCTORY CASELET
If allegations against BSL are proved, the guilty can get a maxi-
mum punishment of five years jail or %1 lakh fine or both.
@ LEARNING OBJECTIVES
iUee INTRODUCTION
In the previous chapter, you studied various laws that are relevant for Quick Revision
labour welfare.
For the last three decades, the Indian environment law has been evolv-
ing for the good. Initially, India participated in the United Nations
Conference on the Human Environment which resulted in the emer-
gence of Indian environment in 1972. It had been realised in that con-
ference that a framework of laws was necessary to deal with environ-
mental hazards that would result from the stage of development that
India was entering in the 1970s. It is acommon aspiration of countries
to reduce the damage to the environment and work in a sustainable
manner. However, due to multiple factors, almost all countries harm
and exploit the environment. Therefore, various international organ-
isations, like the United Nations, have come forward and laid down
the standards and the basic law framework that can be adopted by
countries to ensure that they are able to set environmental standards
and can punish individuals or organisations that violate any of the
environmental laws. In India, there are multiple environmental laws.
Some of these laws are discussed in this chapter. These laws protect
the environment; regulate the discharge of pollutants; handle hazard-
ous substances; provide a speedy response in the event of accidents
threatening environment; and award deterrent punishment to those
who endanger human environment, safety and health.
In this chapter, you will study about the Environment Protection Act
(EPA), 1986; the National Green Tribunal (NGT) Act, 2010; the Air
(Prevention and Control of Pollution) Act, 1981; the Water (Prevention
and Control of Pollution) Act, 1974; the Hazardous and Other Wastes
(Management and Transboundary Movement) Rules, 2016; the Wild-
life Protection Act, 1972; the Forest Conservation Act, 1980; the Public
Liability Insurance Act, 1991 and the Biological Diversity Act, 2002.
Section 11 of the NEAA Act, 1997 says, any aggrieved person may file
an appeal within 30 days of passing of an order granting environmen-
tal clearance in the areas in which any industries, operations, or pro-
cesses shall not be carried out or shall be carried out subject to certain
safeguards under the EPA. Also, NEAA may entertain an appeal even
after the expiry of the said term if a sufficient cause for delay in filing
such an appeal exists but not after 90 days from the date of such order.
The NEAA is required to dispose of the appeal within 90 days from
the date of filing of the same. However, it may, for reasons that are to
be recorded in writing, dispose of the appeal within a further period
of 30 days.
The National Green Tribunal Act (NGT Act) was enacted in 2010
with an aim to establish the National Green Tribunal (NGT) which
would be responsible for dealing with cases related to environment
protection, conservation of forests and other natural resources, etc.,
in an effective and speedy manner. The NGT also has to look after the
enforcement of any legal rights relating to environment. It also has the
powers to give relief and compensation for damages to persons and
property.
The most important provision and objective of this NGT Act is the
establishment of the NGT to look after the laws as mentioned in
Schedule I of the NGT Act as follows:
Q Water (Prevention and Control of Pollution) Act, 1974
Q Water (Prevention and Control of Pollution) Cess Act, 1977
Q Forest Conservation Act, 1980
Q Air pollution means the presence in the atmosphere of any air pol-
lutant
Under this Air Act, the ambient air quality standards were established.
These standards were meant for resolving the problems associated
with air pollution. The PCBs that have been set up under this Air Act
are responsible for ensuring that air pollution in the country can be
controlled. The Boards also have the power to take action against enti-
ties which do not meet the required air quality standards.
This Air Act seeks to combat air pollution by deploying various provi-
sions. Some major features of this Air Act are as follows:
Q Prohibiting the use of polluting fuels and substances
Q Regulating appliances that lead to air pollution
Q Empowering the state government in consultation with the respec-
tive State PCBs to declare any area as APCA (Air Pollution Con-
trol Area) (Section 19)
Q Establishing or operating any industrial plant in the pollution con-
trol areas that require consent from the respective State PCBs
Q Testing air in Air Pollution Control Areas
Inspecting the pollution control equipment and manufacturing
processes
Q Empowering the boards to cancel the consent on non-fulfilment of
the required conditions
Taking a stock of the water situation and in order to prevent and con-
trol water pollution, the Indian Parliament passed the Water (Preven-
tion and Control of Pollution) Act, 1974. It is also known as the Water
Act.
The Water Act, 1974 consists of 64 sections divided into eight Chapters.
Chapter I defines a few preliminary aspects. Chapter II deals with the
central and state boards for preventing and controlling water pollu-
tion. Chapter III deals with Joint Boards. Chapter IV defines powers
and functions of the boards. Chapter V contains various provisions for
preventing and controlling water pollution. Chapter VII defines pen-
alties and the procedure for prosecuting under this Act.
Q Directing the discharges into streams and wells and for opening
new outlets for discharge requires the concerned entity to take
consent from the concerned PCB
Q Providing the entity affected by the actions of the PCB to appeal
Q Providing penalties for offences related to violation of the Water
Act
As per the MOEFCC, hazardous waste is any waste which can poten-
tially harm the health or environment due to its physical, chemical,
or biological composition. The waste may be harmful alone or when
in contact with other wastes. Most hazardous wastes have their own
chemical composition. Most industries discharge these hazardous
wastes without any treatment which ends up poisoning the land and
water posing serious threats to life in all forms, ecology and the envi-
ronment.
Hazardous wastes that are dumped or stored on open land areas may
seep and enter into the groundwater leading to contamination of aqui-
fers and regional water supply. If such hazardous wastes are mixed
into the groundwater, they can contaminate the agricultural produce
and may cause serious health issues if it is used for drinking purpose
by the public. Hazardous wastes are hazardous in nature because
they usually contain heavy metals and carcinogens which may affect
the health of public. When such contaminated food and water is con-
sumed for a long period of time, it might lead to serious conditions
such as gene alteration, reproductive abnormalities, physical defor-
mities, permanent disorders, deaths, etc. Apart from the hazardous
waste that is produced by industries, India also imports hazardous
waste as raw material for recovering metals.
Minimisation
e+
Reuse
+
Recycling
Recovery, utilisation including co-processing
“fet
Safe disposal
Q The government agency that has been authorised by the state
government for the matters related to the management of hazard-
ous wastes has to allocate industrial space or shed for recycling,
pre-processing and other utilisation of hazardous or other wastes
in the existing and upcoming industrial park, estate and industrial
clusters.
The HWM Rules, 2016 have been further amended by the Hazard-
ous and Other Wastes (Management and Transboundary Movement)
Amendment Rules, 2019 (hereinafter referred to as ‘Amendment
Rules, 2019’). Some important features of the Amendment Rules, 2019
are as follows:
Q Banning the import of solid plastic waste into India even in the
Special Economic Zones (SEZs) and in Export Oriented Units
(EOUs)
Q Exempting the silk waste exporters from the requirement of
obtaining permission from the Ministry of Environment, Forest
and Climate Change (MOEFCC).
Q Exempting the electrical and electronic assemblies and compo-
nents that were manufactured in and exported from India for
importing back if these are found defective within a year of export
from the requirement of obtaining permission from the MOEFCC.
The biggest problem facing India at the moment is the high density of
plastic scrap imported by the country, especially since China banned
these imports. However, the country has been making strides in devel-
oping methods for recycling plastic waste.
The rules have been further amended by the Hazardous and Other
Wastes (Management and Transboundary Movement) Amendment
Rules, 2019 (hereinafter referred to as ‘Amendment Rules, 2019’).
Q_ To provide for the protection of wild animals, birds and plants and
related matters
Q. Toensure the ecological and environmental security of the country
To prohibit hunting of wild animals and birds
Q_ To penalise and prosecute the people who violate any provision of
the Wildlife Protection Act, 1972
To prevent extinction of animals
The reasons that justify the major push for the conservation of forests
are as follows:
Q Trees produce oxygen.
The main objectives of this Forest Conservation Act, 1980 are as fol-
lows:
Q To provide for the protection and conservation of forests and
related matters
Q To ensure the judicious use of forest produce
Q To check the diversion of forest land for non-forest purposes
Provides for the judicious use of tribal and non-tribal forest land
vO
It has already been stated that there has been a remarkable growth
Know More in the number and types of industries that have been set up in India.
As per the EPA, 1986 and the When the number of industries increases, the probability of industrial
Public Liability Insurance Act, accidents also increases. There is a risk to the workmen employed in
een Hr te such industries, to the general public staying in nearabout areas and
Eon nitennanieel to the owners of the industries.
In order to deal effectively with the cases of public liability, the Govern-
ment of India enacted the Public Liability Insurance Act, 1991 which
was amended in 1992 and the Public Liability Insurance Rules, 1991.
The main objectives of the Biological Diversity Act, 2002 are as fol-
lows:
Q To conserve the biological diversity in India
Q_ To regulate access to Indian biological resources
Q To ensure fair and equitable benefit sharing arising from the utili-
sation of those biological resources and knowledge
Q To ensure the sustainable use of the components of the biological
diversity
Q To establish governing bodies such as the National Biodiver-
sity Authority (NBA) at the national level, the State Biodiversity
Boards (SBBs) at the State level and Biodiversity Management
Committees (BMCs) at the local level.
EXHIBIT
Powers of NGT
The NGT deals with civil cases related to environment under the
following Acts:
i. The Water (Prevention and Control of Pollution) Act, 1974
ii. The Water (Prevention and Control of Pollution) Cess Act,
1977
the company to pay the fine along with compound interest @12
per cent per annum from November 1997 till the amount is paid or
recovered. The company was also asked to pay costs of litigation.
Q In 2019, the NGT ordered the UP’s PCB to prepare a report for
matter related to disposal of bio-medical waste by M/s Medical
Pollution Control Committee, Growth Center which is a Common
Bio-Medical Waste Treatment Facility (CBMWTF) located near
Jhansi, Uttar Pradesh. The UPPCB filed its report and found var-
ious discrepancies at CBMWTF as follows:
# Plant machinery of CBMWTF was not working properly
because it was undergoing modernization.
¢ Incineration of bio-medical waste was done at wrong tempera-
ture.
b. False
c. Pharmaceutical
d. Paint
Perform a research on the Internet and find out the real-life exam-
ples of the organisations who violated the environment protection
laws in India.
ss SUMMARY
Q Inthe Constitution of India, the fundamental duties are laid out in
Article 51A. This Article states that it is the duty of every citizen
of India to protect and improve the natural environment such as
forests, lakes, rivers, wildlife, etc.
Q The regulation and administration of environmental protection
laws in India is done by a combination of the Ministry of Environ-
ment, Forest and Climate Change (MoEFCC), the Central Pollu-
tion Control Board (CPCB) and the State Pollution Control Boards
(SPCBs).
Q The EPA, 1986 provides for the protection and improvement of
environment and the prevention of hazards to human beings,
other living creatures, plants and property.
Q The National Green Tribunal Act (NGT Act) was enacted in 2010
by the Indian Government with an aim to establish the National
Green Tribunal (NGT) which would be responsible for dealing
with cases related to environment protection, conservation of for-
ests and other natural resources.
Q The Air (Prevention and Control of Pollution) Act, 1981 provides
for the prevention, control and abatement of air pollution.
Q = The major objective of the Water (Prevention and Control of Pollu-
tion) Act, 1974 is to provide for the prevention and control of water
pollution.
KEY WORDS
DESCRIPTIVE QUESTIONS Fo
1. Write a brief note on the important environment-related legisla-
tions enacted in India.
2. What are the key objectives of the Environment Protection Act,
1986?
2. d. NGT
3h Water, 1974
4, a. True
6. e SLA
3. The Pollution Control Boards that have been set up at the cen-
tral and state levels namely the CPCB and the SPCBs which are
responsible for ensuring that the air and water pollution in the
country can be controlled. Refer to Section 10.2 Laws Aimed at
Protecting and Conserving the Environment
SUGGESTED READINGS
Q Gupta, K. (2006). Environmental legislation in India. New Delhi:
Atlantic.
Q Sahasranaman, P (2012). Handbook of environmental law. New
Delhi, India: Oxford University Press.
E-REFERENCES
Q Top 6 Environmental Acts Enacted in India. (2020). Retrieved 20
May, 2020, from https://www.biologydiscussion.com/environment/
top-6-environmental-acts-enacted-in-india/16775
Q (2020). Retrieved 20 May, 2020, from http://awsassets.wwfindia.org/
downloads/mle_024 block _2.pdf
Q Reporter, B. (2020). Bhushan Steel in soup for violat-
ing Environment Protection Act. Retrieved 20 May 2020,
from https://www.business-standard.com/article/compa-
nies/bhusan-steel-in-soup-for-violating-environment-protec-
tion-act-112070900073_1.html
CONTENTS
Case Study 1 National Insurance Company Ltd., vs. Seema Malhotra (2001
Supreme Court)
Case Study 2 Ravinder Raj vs. Maruti Udyog Limited and M/S Competent Motors
Co. Pvt. Ltd. (2011 Supreme Court)
Case Study 3 Kanodia Knits Pvt. Ltd., vs. Registrar of Companies Delhi & Haryana
(Company Appeal No. 216 of 2018)
Case Study 4 Sampelly Satyanarayan Rao vs. Indian Renewable Energy
Development Agency Ltd. (2016 Supreme Court)
Case Study 5 Tulsi Narayan Garg vs. The M.P Road Development Authority,
Bhopal and Ors (2019 Supreme Court)
Case Study 6 TDM Infrastructure Pvt. Ltd., vs. UE Development India (2008
Supreme Court)
Case Study 7 National Insurance Company Ltd. vs. Hindustan Safety Glass Works
Ltd. (2007 Supreme Court)
Case Study 8 Institute of Chartered Accountants of India vs. Shaunak H. Satya
(2011 Suprme Court)
Case Study 9 Rajni Maindiratta vs. Directorate of Education (2017, High Court of
Delhi)
Case Study 10 Competition Commission of India vs. Bharti Airtel Ltd. & ANR (2018
Supreme Court)
Case Study 11 Labour Unrest at Maruti Suzuki India Ltd.
Case Study 12 State of Rajasthan vs. Salman Khan and Others (2012 High Court
of Rajasthan)
CASE STUDY 1
FACTS
ra Case Objective
On 21* December 1993, the insured, Yash Paul Malhotra signed
This case study discusses
the facts and judgement of an insurance contract with National Insurance Company. He had
the case, National Insurance insured a Maruti car for a sum of 1,50,000 and gave a premium
Company Ltd., vs. Seema cheque to the insurance company. In return, the insurance com-
Malhotra on issue of
pany issued a cover note in accordance with Section 149 of the
Consideration in a contract
Motor Vehicles Act, 1988. Unfortunately, the insured met with an
accident in which he died and the vehicle was damaged. Subse-
quently, the bank on which the cheque was drawn by the insured
intimated the insurance company about the dishonour of the pre-
mium cheque due to insufficiency of funds in the account of the
deceased. At this, the insurance company informed the insured
party and also intimated them of the cancellation of the insurance
policy with immediate effect.
The widow of the insured filed a claim for the loss of the vehicle,
which the insurance company repudiated. At this, the respon-
dents moved the State Consumer Protection Commission. The
State Commission rejected the claim for the absence of consider-
ation (premium). The decision of the Commission was challenged
in the Jammu & Kashmir High Court. The Division Bench of
J&K High Court ruled that the insurance company is liable on
the ground where it chose the policy cancellation from the date of
bouncing of the cheque though it has been liable from the date of
the accident.
ISSUE
JUDGEMENT
The Supreme Court held that the insurer can cancel the policy
notwithstanding the issue of the cover note if the premium cheque
given to it gets dishonoured due to the cardinal rule of ‘no consid-
eration, no contract’. According to Section 64VB of the Insurance
Act, 1938, in case of the absence of any consideration, there can be
no contract. Therefore, the insurer repudiating the contract was
justified after the bouncing of the premium cheque.
CASE STUDY 1
The crucial question is about the legal position under the law of
contracts when the premium is paid by means of a cheque, which
gets bounced. In this context, there are three relevant provisions
under the Indian Contract Act, 1872, namely: Sections 51, 52 and
54. These provisions have been included under the ‘Performance
of Reciprocal Promises’ title. Section 51 is concerned with a con-
tract that deals with reciprocal promises to be simultaneously
performed. In this type of contract, the promisee is released from
performing his promise only if the promisor is ready to perform
his part of the promise willingly. Section 52 provides the provi-
sion for the reciprocal promises that are not expressly provided in
the contract but have to be performed. These promises must be
performed in an order that the nature of the transaction warrants
it.
CASE STUDY 1
has been performed, and the promisor of the promise last mentioned
fails to perform it, such promisor cannot claim the performance of
the reciprocal promise, and must make compensation to the other
party to the contract for any loss which such other party may sustain
by the non-performance of the contract.
QUESTIONS
CASE STUDY 2
FACTS
a) TSR (H NC
eo
Mr. Ravinder Raj, the complainant filed a case against M/S Com-
This case study discusses
petent Motors who was the first respondent and Maruti Udyog the facts and judgement of
Limited, the second respondent. He booked a car from the dealer the case, Ravinder Raj vs.
M/S. Competent Motors by paying = 78,351 as an initial booking Maruti Udyog Limited and M/S
amount. Then, on 5" April 1989, the balance amount was called Competent Motors Co. Pvt
Ltd. on a purchasers liability
upon and he paid the remaining amount. The official billing of
to pay tax in transaction once
the car was done on 5* April 1989. Then, the car was delivered goods are sold.
to him on 13* April 1989. However, the price of the vehicle was
escalated by = 6000 during the intervening period. Therefore, he
had to pay an amount of = 7000 extra for receiving the delivery of
the car. The complainant filed a case with the complaint number
1133/1990 to get a refund of the excess amount paid against the
pro forma invoice.
ISSUE
JUDGEMENT
CASE STUDY 2
QUESTIONS
CASE STUDY 3
FACT Pa
eT R Uy (H
te
This appeal has been filed against the order of the National Com-
This case study discusses the
pany Law Tribunal (NCLT). The appellant company, Kanodia facts and judgement of the
Knits Private Limited had two directors, who were also its share- case, Kanodia Knits Pvt. Ltd.,
holders, namely Mr. Ajay Kanodia and his wife Mr. Anjana Kano- vs. Registrar of Companies
dia with 100% shareholding. The appellant, Mr. Ajay Kanodia, and Delhi & Haryana where
the appellant
PP :
company’s
pany
name were struck off by y the Registrar
8
of Registrar of Companies have
a right to strike off the names
the Companies (ROC) because the company had not been carry- of non-operational company
ing any business activity, operations or financial transactions for under Companies Act, 2013.
the past few years. Also, the company did not get the status of a
dormant company under Section 455 of the Companies Act, 2013.
Before NCLT, the appellant claimed that they had not received
any notice under Section 248 (1) of the Act.
ISSUE
JUDGEMENT
The ROC replied against the appellant’s complaint that the appel-
lant company had not submitted financial statements from the
financial year starting from 31% March 2004 till 31% March 2011.
On part of the appellant, no convincing documents were provided
to prove that the company was operational during the last few
years, which is why the ROC struck off its name in June 2017.
Also, as per ROC, it had issued the notice under Section 248 (5)
of the Companies Act, 2013 to the company on 21* March 2017, a
copy of the same was filed with the court. The appellant did not
respond to the notice. Therefore, further steps to strike off the
name of the company were taken. The appeal was dismissed by
the court because the company documents could not prove that
the organisation was working.
CASE STUDY 3
g& QUESTIONS
CASE STUDY 4
FACTS
alm Case Objective
$e}
The appellant is the Director of the Company whose cheques have
been dishonoured. The case involves the loan of f 11.5 crores, in This case study discusses the
facts and judgement of the
the agreement it was stated that for loan installment repayment,
case, Sampelly Satyanarayan
post-dated cheques will be issued by the company, signed by its Rao vs. Indian Renewable
Director, by way of security. Cheques to the tune of = 10.3 crores eee Deve eT
were dishonoured and the appellant was named as a co-accused Ltd. on issuance of post dated
in criminal complaints against the company by the respondents. cheques and its dishonour.
The appellant contends that on the date the cheques were issued,
no debt or liability was created or it was due, hence the dishonour
of post-dated cheques did not fall within the dishonour of cheques
rules.
ISSUE
JUDGEMENT
QUESTIONS
CASE STUDY 4
CASE STUDY 5
FACTS
amim Case Objective
Here, the appellant is the proprietorship firm. The appellant and bic
first respondent entered into an agreement, where the appellant This case study discusses the
has to construct and maintain two roads. As per the agreement, facts and judgement of the
case, on the issue of whether
the completion data was twelve months, culminating on 21st a person having interest in the
October 2009. However, the first respondent being a state party Se ieiniaaiianiea
invoked clause 52 of the agreement and terminated the agree- Tulsi Narayan Garg vs. The
ment. The reason for this termination given was the slow progress M.P. Road Development
Authority, Bhopal and Ors.
of work by the appellant. Clauses 44.1 and 53.1 of the agreement
were used by the first respondent to invoke and send a notice to
the appellant for ascertaining the liquidated damages that were
challenged by the appellant before the high court of Madhya
Pradesh. The same was disposed of, with the option to the appel-
lant of challenging the order by virtue of arbitral tribunal, which
the appellant undertook before the MP Arbitral tribunal under
Section 7, Adhiniyam, 1983. When the same was pending, the
respondent served notice to the appellant for certain packages to
recover the above-said damages. The appellant then challenged
this action stating that the questions of damages were sub-judice
before the arbitral tribunal.
ISSUE
RULE
JUDGEMENT
CASE STUDY 5
c 4 QUESTIONS
|
1. Describe the facts of this case.
(Hint: The agreement between parties where the
appellant has to construct and maintain two roads, a state
party invoked clause 52 of the agreement and terminated
the agreement. Clauses 44.1 and 53.1 of the agreement
were used by the first respondent to invoke and send a
notice to the appellant.)
2. What was the Judgement given by the court?
(Hint: The judgements of the High Court were quashed
and set aside, disposal of the instant appeals and the
Arbitral Tribunal may not be influenced/inhibited by the
observations made and decide the pending reference
petition independently in accordance with the law.)
CASE STUDY 6
FACTS
alm Case Witt
tea
The case involves the resolution of a dispute between two com- : "
This case study discusses the
panies both of which were incorporated under the Indian Com- facts and judgement of the
panies Act, 1956. The respondent company namely UE Develop- case, TDM Infrastructure Pvt.
ment India Private Limited (UED) had been awarded a contract Ltd. vs. UE Development India
for up-gradation by the National Highways Authority of India. eee
domiciled entities can opt
A portion of this contract was subcontracted to the TDM Infra- for international commercial
structure Private Limited (TDM). All the TDM’s directors and arbitration.
shareholders were residents of Malaysia. The contract between
the parties provided for the resolution of disputes between them
by means of reference to arbitration under the provisions of the
Arbitration and Conciliation Act, 1996. The seat of the arbitration
was to be New Delhi.
ISSUE
CASE STUDY 6
JUDGEMENT
Section 2(1) (f) of the Arbitration and Conciliation Act, 1996 relates
to international commercial arbitration in which a legal relation-
ship between the parties is commercial or otherwise under the law
in force in India. This legal relationship is established between
an individual who is a national or habitually resident in some
other country. The ‘nationality’ or ‘habitually residence’ of a body
corporate in any country other than India should also receive a
similar construction. The determination of nationality of parties
particularly in the case of international commercial arbitration is
crucial from the standpoint of the appointment of an arbitrator.
Section 28 (1) (a) of the Act will be attracted to the case in view of
Section 2(6) of the Act which excludes the domestic arbitration
from derogating from the provisions of Indian law. This is part
of the public policy of the country. Therefore, if both the compa-
nies involved in a dispute are domiciled in India by virtue of their
incorporation under Indian law, they will have Indian national-
ity. Any dispute between them shall be a domestic dispute. They
cannot derogate from the provisions of the Indian law in view of
its being the public policy of the country. Since there is no case
of international commercial arbitration, it is wrong to approach
CASE STUDY 6
|g QUESTIONS
CASE STUDY 7
FACTS
a Case Objective
This case study discusses The case involves the purchase of two insurance policies by the
the facts and judgement of respondent Hindustan Safety Glass Works Ltd. from the appel-
the case, National Insurance lant, National Insurance Company. The insurance was subse-
Company Ltd., vs. Hindustan quently renewed for another year. The policies included the
Safety Glass Works Ltd. on the
issue of relief to consumers
damage: or loss due to flood and . inundation besides buildings,
STAGLEnneTninaEEer linn machinery, stock, fixture and furniture, etc. On account of heavy
Act, 1986 rains in 1992, there was a heavy accumulation of rainwater inside
and around the factory of the insured, which caused considerable
damage to raw materials, stocks and goods, furniture, etc., in the
factory of the respondent. The respondent filed a total claim of
= 72 lakhs. The insurance company appointed a surveyor to assess
the loss. The surveyor estimated the loss to be worth of = 24 lakhs.
Since the company did not agree with the report of the surveyor,
it appointed another surveyor who also gave the same estimated
amount of loss as given by the first surveyor. Despite notice to
the insurance company, no reply was given by the insurance com-
pany. As a result, a complaint was filed by the insured with the
National Commission under the provisions of the Consumer Pro-
tection Act, 1986. The insured claimed an amount of f 52.32 lakhs
along with a number of expenses incurred for loss minimisation
as well as interest.
ISSUES
JUDGEMENT
The Supreme Court accepted that financial loss has been caused
to the insured company on account of heavy and unusual rains
for which the claim was filed the very next day of the incident.
However, the surveyor appointed by the insurance company
submitted its report after more than one year of his appointment.
Another year was taken by the second surveyor. Two years were
CASE STUDY 7
QUESTIONS
CASE STUDY 8
oo) FACTS
Case Objective
5 o 703
This case study discusses The appellant in the case is the Institute of Chartered Accoun-
the facts and judegment tants of India (ICAI), which is a body corporate engaged in the
of the case, Institute of function of conducting examinations for the enrolment of those
Chartered Accountants of
passing out as Chartered Accountants. The first respondent was
India vs. Shaunak H. Satya
on the scope of exemption
declared not successful in the Chartered Accountants’ final exam-
of disclosures under Right to ination in November, 2007.
Information Act, 2005.
Thereupon, he applied for verification of marks. It was done and
no discrepancy was found in the evaluation of the answer script.
On receiving this information, the respondent sought the follow-
ing information under 13 heads in terms of the RTI Act, 2005:
1. Educational qualification of the examiners and moderators
with subject-wise classifications
2. Procedure established for evaluation of exam papers
3. Instructions issued to the examiners, and moderators oral as
well as written, if any
4. Procedure established for selection of examiners &
moderators
5. Modelanswers, ifany, given tothe examiners and moderators,
if any
6. Remuneration paid to the examiners & moderators
7. Number of students appearing for exams at all levels in the
last 2 years (i.e., PE1/PE2/PCC/CPE/Final with break up)
8. Number of students that passed at the 1* attempt from the
above
9. From the number of students that failed in the last 2 years
(i.e., PE1/PE2/PCC/CPE/Final with break up) from the
above, how many students opted for verification of marks as
per Regulation 38
10. Procedure adopted at the time of verification of marks as
above
11. Number of students whose marks were positively changed
out of those students that opted for verification of marks
12. Educational qualifications of the persons performing the
verification of marks under Regulation 38 and remuneration
paid to them
CASE STUDY 8
13. Number of times that the council has revised the marks of
any candidate, or any class of candidates in accordance with
regulation
ISSUES
JUDGEMENT
Question (i)
Hence, Section 8(1) (d) of the RTI Act does not bar or prohibit the dis-
closure of question papers, model answers (solutions to questions)
and instructions, if any, given to the examiners and moderators
after the examination and after the evaluation of answers scripts
is completed since at that stage, such disclosure will not harm the
competitive position of any third party. The apex court rejected the
contention of the ICAI that if information is exempt once, it contin-
ues to be exempt for all time to come.
CASE STUDY 8
Question (ii)
Question (iii)
Question (iv)
g QUESTIONS
CASE STUDY 9
FACTS aa
TSM (tH
te
The appellant, Aditi, filed an RTI application to obtain information
This case study discusses the
on affiliation, extension and upgradation provided to Vidya Bharti facts and judgement of the
School, Rohini. She approached the Commission on 05.06.2014 case, Rajni Maindiratta vs.
to provide an opportunity to her for inspection. The CIC put her Directorate of Education on
application on hold after it was discovered that she filed the RTI the issue of abuse of Right to
application only after she was removed from the school. She had Information Act, 2005.
ISSUE
JUDGEMENT
CASE STUDY 9
CASE STUDY 10
FACTS
alin
e Case Objective
A complaint was filed under Section 19 of the Competition Act,
2002 by Reliance Jio Infocomm Ltd. (RJIL) against three telecom sees any nee the
operators namely Bharti Airtel, Vodafone and Idea Cellular, for secs Spas commesi Po
adopting anti-competitive agreement and cartelisation. Upon of India vs. Bharti Airtel Ltd.
receipt of the complaint, the Commission directed the Direc- &ANR.
tor-General to conduct an investigation into the complaint filed
by Reliance Jio. Against the order of the investigation, four writ
petitions were filed in the High Court of Delhi by Bharti Airtel,
Vodafone, Idea Cellular, and the Cellular Operators Association
of India, with a prayer for quashing the investigation order. The
High Court ordered the quashing of investigation on the ground
that CCI has no jurisdiction to look into various agreements and
contracts, which are to be settled by the authority under the Tele-
com Regulatory Authority of India (TRAI) Act, 1997. Aggrieved by
the decision of the High Court, both the CCI and Reliance Jio filed
a petition in the Supreme Court.
ISSUE
(i) What are the powers of TRAI and CCI in regard to
investigation in this matter?
(ii) Whether there exists an anti-competitive agreement or
cartelisation by the parties against whom Reliance Jio has
filed the complaint before the Competition Commission of
India (CCI).
JUDGEMENT
CASE STUDY 10
QUESTIONS
1. Why was the appeal made by the CCI and Reliance Jio
dismissed by the apex court?
(Hint: The disputes need to be decided by TRAT in the first
instance as TRAI has been set up as an expert regulatory
body to specifically govern the Telecom sector.)
2. Discuss the functions and the areas of jurisdiction of both
CCI and TRAI.
(Hint: CCI deals with matters related to unfair trade
practices or anti-competitive agreements, abuse of
dominance and combination, whereas TRAI has been set
up as an expert regulatory body to specifically govern the
Telecom sector.)
CASE STUDY 11
FACTS
rat Case Objective
Maruti Suzuki India Limited, a subsidiary of Suzuki Motor Cor-
poration of Japan, has been the leader of the Indian car market This case study highlights
the labour unrest at Maruti
for many years. Maruti faced various problems in handling indus-
Suzuki India Limited issue
trial relations with its labour force. In 2012, Maruti’s Manesar of maintaining industrial
plant observed labour (contract workers) strikes, a lockout and relations.
the brutal murder of the General Manager of the company. These
happenings led to a loss of = 25 billion to the company.
OUTCOME
CASE STUDY 11
QUESTIONS
CASE STUDY 12
ISSUE
The issue before the Hon’ble High Court of Rajasthan was that
since the charge levied against the accused was that he has com-
mitted an act of mischief, as defined in Section 425 of the Indian
Penal Code, whether the mischief or damage to animals herein
would only mean domesticated animals or wild animals as well?
JUDGEMENT
As per the court judgment, A damage caused to the wild life even
if the same cannot be evaluated or calculated in terms of money is
definitely a loss to the ecology and as a result thereof, it can be con-
sidered to be a loss to the public and society at large... It is the firm
opinion of this Court that by the act of using fire arms for killing
wild life, the accused committed the offence of mischief as defined
in Sections 425 and 429 IPC. Since the Clause Thirdly of Section 141
Indian Penal Code, 1860 (IPC) covers in its ambit, mischief, crimi-
nal trespass or other offence..., the provision of Section 141 IPC can
very well be applied to an offence of mischief when committed in
relation to a wild animal also. Accordingly, the term ‘other offence’
as mentioned in Section 141 covers in its ambit, an offence under
Wild Life Protection Act. Therefore, every member of the unlawful
assembly which participates in the act of hunting is definitely liable
CASE STUDY 12
for being prosecuted for the offence under Section 51 of the Wild
Life Protection Act with the aid of Section 149 IPC. According to
Section 51 of the Wildlife (Protection) Act, it is not allowed to hunt
or capture any animal species that are included in the Schedules
I-IV.
HM Saraswat, the lawyer of Salman Khan said that the act has
been targeted in a “false and malicious campaign”. However, On
5™ April, 2018, he was sentenced to five years imprisonment along
with a fine of = 10,000 after he was found guilty for killing two
blackbucks in Jodhpur. The court took exactly twenty years to
convict Salman Khan. All other co-accused, Saif Ali Khan, Tabu,
Neelam and Sonali Bendre were acquitted by the court under the
virtue of ‘benefit of doubt’ for the incident. The verdict states that
The accused is a popular actor whose deeds are followed by people.
Despite this, the accused hunted two black bucks. It is not justified
to give Salman Khan the benefit of probation in view of the manner
in which he hunted by shooting two innocent, moot black bucks that
come under the purview of the Wildlife Conservation Act. After the
court provided its sentence, the accused filed an application for
bail in the session court. The appeal against the High Court’s ver-
dict is still pending.
g QUESTIONS