Session – 1

EPGP
2022-23
Business has mainly two functions
- marketing and innovation.
Law and Business

“rules of the game” for business

operating in a society, appreciate the
legal risks involved in business
decision-making,

Law gives predictability by laying

down structure to everyday life of its
citizens, and it evolves over a period
of time to accommodate and reflect
nation’s needs, norms, and
capabilities.
Contd..
 Applicable to business owners, managers, and other
professionals while taking business decisions.

 Plethora of laws apply to people, similarly, there is a huge

body of law that applies to business.

 - to define unacceptable behavior,

 - to provide certainty and stability,
 - to protect the public, and
 - to provide a mechanism for businesses to resolve disputes.
Business Decision Making & Law
 Applying law while taking major business decisions by
managers are very essential

 Relevance of Law in all the Five stages of business

development –
(i) evaluating the opportunity and defending the value proposition
(ii) assembling the team
(ii) raising capital
(iv) developing, producing and marketing their product and service
(v) harvesting the opportunity through sale of the venture, and initial
public offering of stock, etc.,
Implications in Business Entities

Internal organization
- the choice of business entity and the internal relationships
with employees, officers, directors, and investors.
-It affects the firm’s resources, whether physical, human, or
organizational that have the potential of providing sustained
competitive advantage.

External relationships
with customers, suppliers, competitors, and commentators, that
is, players who cause customers to value another firm’s products
and services more.
While in corporate hierarchy
 Spotting legal issues before becoming legal problems.

 Legal nomenclatures and principles most relevant to their

business as much as lawyers must sufficiently understand
the business model and its execution.

 Lawyers and Engineers have lots of commonalities because

Lawyers design social structures and devices in a way that
parallels engineers’ designs of physical structures and
devices.
Contracts, companies, trusts, constitutions, and statutes are the
buildings, bridges, machinery, roads, and railways of social life, etc.,
Significance of Law to Managers

 Law as a social phenomenon, is socially omnipresent, it affects all of

us one way or the other

 Ignorantia juris non excusat - legal maxim which simply means

ignorance of law is not an excuse.

 State which is sovereign has a duty to maintain and enforce law an

order in a society

 reason - people surrender their rights to the state based on “social

contract” theory

 The best example is the Preamble of the Constitution of India, 1950

Law and Indian Constitution

 The Architect and Father of Indian Constitution - Dr. B R

Ambedkar - opined that:
- “Law and order are the medicine of the body politic
and when the body politic gets sick, medicine must be
administered.”

 “Constitution is not a mere lawyers document, it is a

vehicle of Life, and its spirit is always the spirit of Age.”
What is “Law" in India?

 Definition of Law as per Article 13 of the Constitution of

India, 1950:
- Law includes any ordinance, order, bye-law, rule,
regulation, notification, custom or usage having in the
territory of India the force of law”

 Article 141: The law declared by the Supreme Court shall

be binding on all courts within the territory of India
Objective of Law

Object of law is order

- In the Indian Context it is to establish Socio -
Economic Justice and remove existing imbalance in the
socio-economic structure.

Sources of Law:
(i) Constitution and Statutes or Legislations,
(ii) Judicial Decisions (Judges make law in India – Article 141 of
the Constitution),
(iii) Regulations (Administrative orders) reflects society’s
definition of acceptable behaviour that is necessary for
economic prosperity
Locus Standi
 Who can come before the Court?
 Persons including natural, legal and juridical person.
-A company is a legal person.
 Public Interest Litigation/Socio-Action Litigation

 Cases are decided based on Principles of natural justice

(i) audi alteram partem (hear the other side)
(ii) nemo debbet esse judex in propria causa (no one shall be a judge
of his own cause)
(iii) Rule against Bias (All decisions must be reasoned which means
speaking orders)
What we Learn in Business Laws
Business Contracts Business Organizations

Between Individuals and entities Partnerships

- Indian Contract Act, 1872 - Indian Partnership Act, 1932

- Limited Liability Partnership Act, 2008
- Companies Act, 2013
Combining Business and Legal strategy

 Swedish company “Saab” and “Adani group” entered into an

important contract on September 1,2017

 Business Strategy: Indian Air Force (IAF) gearing up to

issue a multibillion dollar tender for over a 100 single
engine fighter jets

 Legal Strategy: The Adani group signing a partnership with

Swedish defence major SAAB to manufacture Gripen
fighter jets in India.

 Key beneficiary in India – Adani Group (Make in India)

Session – II
EPGP -14
2022-23
Formation of a Contract
Basics of Formation of a Contract:
Enforceable by Contract
Agreement
Law

Promise Consideration Agreement

Promise
Proposal Acceptance
Offer/Proposal

Intention to create legal obligation

Certainty
To do something/abstain from doing something
(Act/Abstinence)
Communication
Positive in nature

For Example, a Job Offer Letter

 Offer & Acceptance
 One has to communicate his/her intention to form an agreement by
offering the other.

 Acceptance by second party is necessary to consider the same as

promise.

 Communication of offer and/or acceptance can be express or implied.

 Communication of offer is distinguished from a communication

which is only an invitation to offer.

 An offer must be firm, clear and unambiguous made with the intention
to form a binding relationship.

 For ex: Ravi says: “ I want Apple iPhone 6”. Salesman replies: It ranges
from 10K to 26K”. Ravi says: I want one.
Invitation to Offer
Any communication in which merely the price is
indicated is only an invitation to offer.

This includes shop window, price list, catalogues and

pamphlets. This is because if these were offers, the
suppliers would get bound to supply unlimited
quantities, which they never intended.

However, if the communication, by supplying

additional information, specifies the quantity, the
communication could become an offer.
Offer or Invitation to Offer
Example
A customer called up the number of a pizza store and
asked for home delivery of a pizza from their menu.
The store first confirmed the address. The customer
read out the pizza he wanted from the menu card of
the store: ‘Large, farm fresh, deep pan pizza, price Rs.
500’ The store replied: ‘Your order is confirmed. The
pizza will be delivered to you in 30 minutes.’

What are the inferences from the above

statement?
Offers in Standard Form Contracts

 Online Transactions/LIC/Railway Administration and

so on where standard printed forms of contracts are
signed by the parties.

 Such standardized contracts contains terms and

conditions in fine print which restrict and often
exclude liability under the contract.

 Parties bound by the terms and conditions even when

they not read it – because they have signed it.
Salient Features of a Business
contract
 Minimum 2 parties – consensus ad idem
(meeting of minds)
 Offer and Acceptance
 Intention
 Certainty and possibility of performance
 Legal formalities

Elements of Contracts
 Lawful Consideration
 Competent parties/Capacity to contract
 Free Consent
 Lawful Object
Kinds of contracts
 (i) Standard Form Contract: Businesses have
standard pre-printed forms on which they would do
business with the customers. The customer fills up
signs and submits the document which becomes the
offer. The corporation can accept or reject the offer. All
business-to-business contracts have also come to be
done through the standards forms called the General
Conditions of Contract (GCC) and Special Conditions
of Contract (SCC).

Ex: Online Transactions, LIC etc.,

(ii) Negotiated Contract

 Negotiated Contract: A contract can get formed by

the parties communicating with each other where at
the end of it, one party makes and offer and the other
accepts. The communication can be in writing through
mail or email, oral, or implied.

 Ex: Job Offer Letter

(iii) Auction
 Auction: In an ordinary auction, each bid is an offer
which the auctioneer can accept or reject and the
announcement of auction is an invitation to offer. A
variation is ‘without reserve’ where the auctioneer
undertakes to award to the highest bidder. This does
not fit in the formula of offer and acceptance but the
auctioneer is bound to it.

 Ex: Bidding
(iv) Tender
 Tender: In an ordinary tender, announcement of tender is an
invitation to offer and each tender is an offer, which the party
inviting the tender can accept or reject. The party inviting the
tender has pre-printed documents which the tenders have to
complete, sign and submit. This becomes the offer document. A
tender can be a single bid tender (commercial bid) where
everything is specified by the party inviting the tender other
than the price. In a two bid tender, the tender documents are in
two parts, technical and commercial. The tender provides the
technical details of his offer under the technical bid and
price/cost in the commercial part. The two documents become
the offer document.

 Ex: Government Contracts

Essentials of a Contract
 An agreement is formed when two minds meet (Meeting of minds on
same subject-matter).

 Such agreements must be supported by consideration (Money or

money’s worth). Consideration is the benefit a party receives the other
or any detriment a party suffers at the request of another.

 Law overrides contracts. Contracts against law are not enforced.

 The Contracts must be entered into voluntarily (Not through fraud,

coercion; misrepresentation or mistake)

 For a breach of a duty in the valid contract, the innocent party gets
damages from the defaulter.
Session – III
EPGP -14
2021-22
Termination of Contract
 Breach of a core part of the contract gives the right to
elect to terminate the contract while the breach of a
secondary term does not give the right to terminate.

 The core part of a contract is called a “condition”

while the secondary part is called a “warranty”.

 Time of performance of contract in commercial

contracts is taken to be a condition of contract.
Contd..
 Every contract has a termination clause which provides on
termination for breach.

 The expression, ‘time as an essence of contract’ is used to

indicate that time of performance is a condition of
contract.

 On breach of a condition (called repudiatory breach), the

innocent party gets the option to terminate the contract.
The innocent party must elect to terminate the contract
and communicate the decision to the other party.
Anticipatory Breach
 Decision to terminate the contract should be
communicated at the earliest.

 Informing the other party in advance of possible breach - a

condition of the contract (repudiatory breach), is called an
anticipatory breach.

 The other party can elect to accept it. In that case the
contract will be terminated and the innocent party can
claim damages

 A party can reject an anticipatory breach. Contract subsist

and both the parties remain bound.
Contd..
 Termination for breach clause - the contract can be
terminated only for the breach covered by the clause.

 Termination for convenience clause - gives right to a

party to terminate a contract for its convenience.

 The contract gets terminated, but neither party can

claim damages arising from such a termination.
Impossibility or Force Majeure
 Courts very stringent in giving this remedy due to
misuse

 Some stipulated time is provided in the contract to

perform contract after the impossibility

 Force majeure clause lists the events of impossibility

– war/hostilities, riot or civil disturbance, earthquake,
flood, tempest, lightening of natural disaster,
restrictions imposed by govt. which delays the
performance of contract.
Damages
 In the case of a breach of any term, whether condition
or warranty the innocent party gets the right to receive
compensation.

 Specific performance of contracts is done only in the

contracts of rights in immovable property.

 In other contracts, a money equivalent covering the

losses is given. Every contract has a stipulation in the
parties not being responsible for indirect or
consequential losses.
Contd..
 In business contracts, the courts take the loss of profit or
production loss as immediate and in contemplation of the
parties and award it.

 The principle behind award of damages is to put the party in a

situation he would be if the contract were performed.

 The amount of money specified in a contract to be paid in the

case of a breach is called liquidated damages.

 The courts award this if this appears to be a genuine pre-estimate

of the losses. If not, the courts ask the parties to establish actual
losses and award only this.
Contd..
 In some contracts, it is not possible to work out the
loss of profit. In these contracts, the wasted resources
or production losses are awarded as damages.

 A breach of a contract creates an endless chain of

implications.
Liquidated Damages
 A contract can provide the damages to be paid by a party in case
it breaches the contract.

 The amount provided for is called ‘Liquidated Damages’.

 Liquidated damages are awarded if these, in the context of

contract, are genuine pre-estimates of the losses.

 Ordinarily, compensation for mental agony due to breach of

contract, is not awarded by the courts.

 However, the courts have come to award it in contracts where

they very object of the contract is leisure, enjoyment or peace of
mind.
Mitigation of losses
 On a breach, the innocent party receives damages.
However, the party must mitigate his losses and not
soar up the liabilities of the party in breach.

 The party is not awarded damages for the part of loss it

should have avoided.

 It is a basic tenet of justice that no person should

unjustly enrich himself at the expense of others.
Session – IV
EPGP -14
2022-23
Special Contracts – Overview
Agency
Indemnity
Guarantee
Bailment
Pledge
Hypothecation

 Will try and understand first two –

common business practice
Special Contract of Agency
 Three parties: Principal, Agent and Third Party

Third
Principal Agent
Party

 Agent is the intermediary and the person whom he

represented is called principal
Contd..
 Two contracts evolve in agency:
 (i) Principal enters into a contract with a person,
giving him authority to act on his behalf while
dealing with a third person. (Agency)
 (ii) Post signing agency, Agent deals with third party
and ends up creating rights and obligations
between the principal and third party.

 Hence, Agent has authority to create rights and

obligations for the principal, in relation to third party.
Objective
 To tie the principal and third party in contractual
relationship. Agent acts as intermediary and then make
principal and third party accountable for their determined
obligations.

 Agent becomes liable to pay damages to the third party

if he had no authority to conduct such transaction on
behalf of principal

 Estoppel: Apparent authority – Principal bound for

actions of Agent and cannot deny vesting authority on the
agent.
Example
 Robert a creditor appointed David as his agent to
recover payments from his debtors. David was sent by
Robert to recover rupees Thirty thousand from Perera,
a debtor. David took rupees Thirty thousand from
Perera and ran away with it. Hence Robert cannot ask
Perera to pay the money again. However if David is a
major, then Robert can take legal action against him.
Example
 Agency by Agreement – Actual authority - Power of
Attorney – example

 Insurance Contracts

 LIC Agents and employers agreeing to deduct premium

amount from salary of employee.

 Interesting case, employer deducts premium from salary

and deposits with LIC for first three months. Later though
it is deducted not deposited. Employee dies in the
meanwhile, wife informs LIC for the claim. Remedy ??
What kind of agency??
Special Contract of Indemnity
 A contract by which one party promises to save the
other from loss caused to him by the conduct of the
promisor himself , or by the conduct of any other
person, is called a contract of indemnity.

 A contract of indemnity is a contingent contract.

 The liability of the indemnifier arises only when the

loss is suffered.
Contract of Indemnity
Indemnified/Ind
Indemnifier
emnity Holder

 Indemnity is for reimbursement and liability arises

only when the contingent event occurs. Primary
liability vests with the indemnifier.

 The indemnifier after performing his part of the

promise, has no rights against third party. He can
sue the party only if the assignment is in his favour.
Sample Indemnity Clause

 “The Contractor shall indemnify and hold harmless the

Owner ... from and against claims, damages, losses and
expenses ... arising out of or resulting from the
performance of the Work, provided that such claim,
damage, loss or expense is attributable to bodily injury,
sickness, disease or death, or to injury to or destruction
of tangible property (other than the Work itself), but
only to the extent caused by the negligent acts or
omissions of the Contractor, a subcontractor, or anyone
directly or indirectly employed by or anyone for whose
acts they may be liable.”
Indemnity Bond
 Indemnity Bond is the document undertaking to pay
an amount top pay the sum of money.

 Insurance contract is the best example where

Insurance company agrees to suffer and cover for the
loss subject to payment of premium.
Session – V
EPGP -14
2022-23
HISTORY OF CORPORATE LAW
LEGISLATIONS
⚫ 1932 – Indian Partnership Act
⚫ 1956 – Companies Act
⚫ 1969 – Monopolies and Restrictive Trade Practices Act
⚫ 1991 – New Industrial Policy of India
⚫ 1995 – India became a member state of World trade
Organisation
⚫ 2002 – Competition Act
⚫ 2008 – Limited Liability Partnership
⚫ 2013 – Companies Act (Amended)
⚫ 2016 – Insolvency and Bankruptcy Code
Various Business Organisations
 (i) Partnership Firm
 (ii) Limited Liability Partnership
 (iii) Company
 (iv) Sole Proprietorship

 PARTNERSHIP FIRM:
 an association of persons with a defined
mechanism of sharing of profits among the
partners

 Hybrid form of principal-agent relationship

Choice of Entity
Choice of the entity is generally determined by
these factors:
(i) Taxation
(ii) Liability
(iii) Raising Investment
(iv) Separate Legal Entity
(v) Perpetual Succession

Maximum number of partners:

Banking Business – maximum 10
Any other business – maximum 20
What is Sole Propreitorship

An individual owned and managed business

Profit and loss has to be borne by a single person

Less legal compliance

Not suitable for running business requiring huge investment and

resources
Relevance of Other forms of
business
Business organizations which allows financial resources to be pooled

Businessorganizations which have a separate identity from the owners

and develop goodwill of its own

A system by which the law facilitate and incentivize risk taking

Registration of Partnership
Partnership agreement between the parties

Partnership agreement mentions the following:

฀Financial contribution of parties

฀Share of profit

฀Nature of business

฀Period for which partnership is formed

Registration
฀ With the Registrar of Firms in the concerned state
Benefits of Partnership
form of business
A contractual relationship exist between the partners

฀Disputes can be settled based on the partnership agreement

Can conduct business in the name of the firm

฀Collectively the partnership is referred in the name of the firm.

Good for a short- term venture

Skill based business- Skill more important than financial capital

Consultancy services, professional services (legal, architecture etc.)

Sharing P&L
 Instance:
 Partnership deed contained different shares for
partners – profits were divided according to partner’s
respective shares – Dispute arose on sharing of losses

 How to assess and divide losses when it is not

mentioned in the partnership deed?

 Equally or In proportion to partner’s shares??

Solution
 In ordinary mercantile partnerships, where
there is a community of profits in a definite
proportion, the losses also must be in such
proportion
Relationship of Partners
 Right to take part in the conduct of the business
 Differences to be settled through majority
 Not entitled to receive remuneration from
conducting business
 Share profits and loss equally

Mutual Agency:
Person carrying on business acts not only for himself but
for others also. Partners share principal – agent
relationship.
Property of Partnership
 Partners may bring in capital and other immovable
property – “Property of the firm”
 New properties also could be acquired for conducting
business
 Partnership is not a distinct person, hence cannot own
property
 Property of the firm should be used only for business
Explanation
 Upon dissolution, transferring partner is entitled to
receive share of assets

 Outgoing partner/ Deceased Partner:

- surviving/continuing partners when carry out business
without final settlement of the assets of firm

- Said partners/their legal representative is entitled to

 Either share of profits in accordance with his share of
property
 Or
 @ 6% per annum on amount of his share in the property of
firm
Relationship with Third Party &
Doctrine of Implied Authority
Mutual Agency – every partner is an agent of the
other

Partners are jointly and severally liable for

every act of the firm

Scope of Implied Authority

 an act of partner which is done to carry on business
of the firm in usual way will bind the firm – Doctrine
of Implied Authority
Limits to Implied Authority
 (1) submit a dispute to arbitration
 (2) open bank account on behalf of firm in his name
 (3) compromise/relinquish any claim
 (4) withdraw a suit/legal proceedings filed on behalf of
firm
 (5) admit any liability in suit against firm
 (6) acquire immovable property on behalf of firm
 (7) transfer immovable property of firm in his name
 (8) enter into partnership on behalf of his firm.
Registration of firm – Procedure

Filing an application with Registrar in

prescribed form with prescribed fee
(i) Name of firm
(ii) Address/Principal place of business
(iii) Names and Addresses of partners
(iv) Date when each partner joined the firm
(v) Duration of the firm
(vi) Date of creation
Contd..
 Authorizes State Govt. to appoint
Registrar of Firms for the purpose
of registration of partnership firms

 Such forms should be duly signed

by each and every partner of the
firm, if not his name must be
dropped as partner
Non-registered firm

1.A partner cannot file a suit against the firm or any

partner, for enforcing a contractual right

2.No suit can be filed against any third party for the
purpose of enforcing a contractual right.
Limited Liability Partnership (LLP)
Limited Liability Partnership Act, 2008

Combination of advantages of both the Company

and Partnership
An alternative to the traditional partnership firm
with unlimited liability.
LLP – Nature
Salient Features of LLP Act:
1)It is a body corporate – legal entity separate from its
partners
2)Minimum 2 persons – for any lawful business by
signing the incorporation document and getting
registered with the Registrar
3)Rights and obligations of Partners - Agreement or else
First Schedule of the Act
4)Partnership firm will be liable to the full extent of its
assets.
5)Partner liable to the extent of his contributions.
Contd..
6) Partners are not agents of co-partners and hence will not
be liable for unauthorized acts or misconducts of
other partners.

7) Atleast two individuals shall be partners – 1 must be

resident of India

6) A firm, private company or unlisted public company are

to be allowed to convert into LLP

6) An LLP may be wound up voluntarily or by the Tribunal

to be established under the companies.
 Incorporation of LLP
Incorporation Document
(i) 2/more persons associated for carrying on a lawful
business with a view to profit have to subscribe
their names to an incorporation document
(ii) This document to be filed with Registrar of State in
which the registered office of the LLP is to be stated
(iii) statement stating compliance with requirements of
and rules to be submitted
Liability of LLP & its Partners
 Partner is agent of LLP and not of co-partners
 Liable only to the extent of partners wrongful
act/omission done in the course of LLP business
 No personal liability except for wrongful act or
omission on partner’s part.
 Unlimited liability in case of fraud: when an act
is carried out by LLP or any of its partners with
intent to defraud LLP creditors or any person or for
any fraudulent purposes.
 Waiver of Penalty by court/Tribunal – has
provided useful information during investigation
Accounts
 LLP shall maintain annual accounts.

 Audit of the accounts is required only if the

contribution exceeds Rs. 25 lakh or annual turnover
exceeds Rs. 40 lakh.

 A statement of accounts and solvency shall be filed by

every LLP with the Registrar of Companies (ROC)
every year.
Drawback of LLP
No access to capital market in case of LLP

Cannot list in a stock exchange

Access to capital market is a key factor that provides Company form of

businessan advantage
Relevance of LLP
Business organizations which allows financial resources to be pooled-
฀LLPallows for financial resources to be pooled
฀FDI is also allowed

Provides a separate identity from the owners and develop goodwill of

its own
฀Yes

A system by which the law facilitate and incentivize risk taking

฀Yes, Limited liability to the extent of contribution by a partner
SESSION - VI
EPGP-14
2022-23
Queries
 Can one person form a company?

 When does a company come into existence? What would

be the name of the company?

 Can a company contract in its own name?

 Can a company buy a building in its own name?

 Who are the members of a company?

An introduction to company
law
Companies Act, 1956 was amended in 2013 and 2015.

 S. 2 (20) of the Act defines it as a company

incorporated under this Act or under any previous
company law [Section 2(20)].

 A company is a “legal person” or “legal entity” separate

from, and capable of surviving beyond the lives of its
members.
Companies
Paid Minimum & Other Observations
Up Maximum Number of
capital Persons
Public None Minimum 7 to Any subsidiary of public
Company unlimited company shall be treated as
public company even if such
subsidiary company has obtained
the status of a private company
in its articles

Private None 2 - 200 Right to transfer its shares is

Company restricted

One None One Member Can be considered as Private

Person Company
Company
Subsidiary company - Section
2(87)
 In relation to holding company, means a company in which
the holding company—
(i) controls the composition of the Board of Directors;
OR
(ii) exercises or controls more than one-half of the
total share capital either at its own or together with
one or more of its subsidiary companies:

 Provided that such class or classes of holding companies as

may be prescribed shall not have layers of subsidiaries
beyond such numbers as may be prescribed.
Example
 Subsidiary companies of the Tata Group and joint
ventures using 'TATA' in their names include:
 Tata AIG — an insurance based joint-venture company
with American International Group.
 Tata AutoComp Systems - India's leading automotive
components conglomerate
 Tata Capital — a wholly owned subsidiary of Tata
Sons Limited, the apex holding company of the Tata Group.
 Tata Consultancy Services — Asia's largest IT company and
world's largest software and services company
Associate company – Section 2 (6)
 Associate Company:

 If holding company has:

(1) atleast 20% of the total share capital of the later ;
OR
(2) having influence over the later's decision making
process under and agreement
OR
(3) Both are Joint venture companies

Example: DAFPPL
Example – Company Profile of DAFFPL

 Delhi Aviation Fuel Facility Pvt. Ltd. (DAFFPL) is an SPV

promoted by Indian Oil Corporation Ltd.

 IOCL, 37%, Bharat Petroleum Corporation Ltd., 37%, and

Delhi International Airport Pvt. Ltd., 26% stakes
respectively

 To develop and maintain the aviation fuel facilities at

Terminal 3 (T3), cargo terminal and the earlier Terminal 2
(T2) at the Indira Gandhi International Airport at Delhi.
The concession has been granted by DIAL to the SPV for a
period of 25 years starting from July 28, 2010, when T3
became operational.
Public and Private Co.
Private company and Public Company:

(i) Restriction of transferring Shares

(ii)Limits number of its members to 200

(i) Cannot invite the public to subscribe for its capital or

shares of debentures. It has to make its own private
arrangement.
Characteristic Features of
Company
(i) Independent Corporate Existence

 Instance:
 A profitable leather & shoe manufacturing business
was converted into a company. Salomon, his wife &
five children subscribe to one share each. Authorized
capital £ 40000 and business valued at £39,000 & sold
his leather business to company which pays £9,000 in
cash & allots shares worth £ 20,000.,
Contd..
 Salomon loaned the remaining £ 10,000 through
secured debentures. Company took an unsecured
loan of £ 10,000 from another person and
thereafter company falls on hard times. It had to
be liquidated to meet demands of the creditors
and total assets were not sufficient.

House of Lords decided that being an independent

corporate entity Salomon had to be paid first
 Contd..
(ii) Limited Liability
(iii) Perpetual Succession: “An incorporated company
never dies”
(iv) Transferable Shares
(v) Separate property
(vi) Common seal : It is the official signature of the
company. The purpose of the seal is to furnish
evidence regarding authenticity of a document.
Changed as per Companies Act, 2013
(vii)Can sue or be sued in its corporate name
(viii)Attracts professional management
Shareholder Theory
 Shareholder theory – Milton Friedman

 Sole responsibility of business is to increase profits.

 Management are hired as the agent of the shareholders to run the company for
their benefit, and therefore they are legally and morally obligated to serve their
interests.

 “conformity to the basic rules of the society, both those embodied in law and those
embodied in ethical custom.”

 This is the historic way of doing business with companies realising that there
are disadvantages to concentrating solely on the interests of shareholders.

 A focus on short term strategy and greater risk taking are just two of the
inherent dangers involved.

 Fall of Enron and Worldcom where continuous pressure on managers to

increase returns to shareholders led them to manipulate the company
accounts.
Stakeholder Theory
Stakeholders can be:
 owners and shareholders
 employees of the company
 Bondholders who own company-issued debt
 customers who may rely on the company to provide a
particular good or service
 suppliers and vendors who may rely on the company to
provide a consistent revenue stream
Contd..
 A company owes a responsibility to a wider group of
stakeholders, other than just shareholders.

 A stakeholder is defined as any person/group which can

affect/be affected by the actions of a business. It includes
employees, customers, suppliers, creditors and even the
wider community and competitors.
 Edward Freeman, the original proposer of the stakeholder
theory, recognised it as an important element of Corporate
Social Responsibility (CSR), a concept which recognises the
responsibilities of corporations in the world today, whether
they be economic, legal, ethical or even philanthropic.
CSR – Companies Act, 2013
Companies which have:
 Net worth of Rs. 500 crore or more; OR
 Turnover of Rs. 1000 crore or more; OR
 Net profit of Rs. 5 crore or more

Amount to be Spent on CSR Activities:-

 As per Section 135 of the Companies Act, 2013 -
company spends atleast 2% of average net
profits of the company made during the 3
immediately preceding Financial Years.
Companies (Amendment) Act,
2019
 Transfer of unspent funds – additional
requirement under the Amendment: If there are
any unspent CSR funds during a financial year -
transfer such unspent CSR funds into a special
account within a period of 30 (thirty) days from the
end of the financial year.
Contd..
 Penal liability for non-compliance: If a company
fails to comply with above mentioned obligations, the
Amendment provides for imposition of penalty of not
be less than INR 50,000 but which may extend to INR
2.5 million

 Additionally, the Amendment also provides for

imprisonment of every officer of the company who
is in default for up to 3 (three) years and a fine of not
be less than INR 50,000 but which may extend up to
INR 500,000 or with both
Contd..
 CSR in case new companies: It has now been
clarified in the Amendment that if the company has
not completed 3 (three) years from incorporation, the
amount to be spent on a CSR fund will be equivalent to
2 percent of the net profits made by the company in
the previous financial year (as against average net
profits made by the company in 3 (three) immediately
preceding financial years).
Meetings of the Company
 Annual General Meeting (AGM/GM) and Extraordinary General
Meeting (EGM)

 General Meeting: Meeting of members

 Every company other than OPC to hold GM annually

 Agenda for motion: ordinary and special business

 Ordinary Business: annual accounts, director’s reports, auditors’

reports, declaration of dividend, appointment of directors, and
appointment of statutory auditors.

 Procedure
 Minimum 21 days notice to members

 Notice must be accompanied by copy of director’s report,

audited accounts and auditor’s report

 It must contain the place, date and hour of meeting and must
also state the agenda of the meeting.

 Proxy could be appointed by members (corporate shareholders

too can appoint proxy)

 Chairman precedes the AGM

 Voting through postal means also possible provided not

involving decisions where hearing the other party is involved.
 Extraordinary General Meeting (EGM)
 For special or urgent business
 To be convened between two AGMs
 BoD or members can call the meeting
 1/10th voting power members must be called for meeting
when called by members other than BoD
 Quorum: no. of members present during the meeting for a
valid one

 Pvt. Co. - Minimum 2 members

 Public Co. – Depends upon total membership
- 5 members for 1000 members in total
- 30 members for 5000 members in total
Resolutions at the Meetings
 A motion means a proposal to be discussed at a meeting by
the members.

 A resolution may be passed accepting the motion, with or

without modifications, or a motion may be entirely
rejected.

 A motion, on being passed as a resolution becomes a

decision.

 Resolutions may be Ordinary (simple majority) or Special

(seventy five percent majority).
Corporate Personality
 A company is a legal person but not a citizen either
under the Constitution of India, 1950 or the
Citizenship Act, 1955.

 A Company acquires a nationality & a residence

based on its country of incorporation.
Session – VII
EPGP -14
2022-24
Meetings of the Company
 Annual General Meeting (AGM/GM) and Extraordinary General
Meeting (EGM)

 General Meeting: Meeting of members

 Every company other than OPC to hold GM annually

 Agenda for motion: ordinary and special business

 Ordinary Business: annual accounts, director’s reports, auditors’

reports, declaration of dividend, appointment of directors, and
appointment of statutory auditors.

 Procedure
 Minimum 21 days notice to members

 Notice must be accompanied by copy of director’s report,

audited accounts and auditor’s report

 It must contain the place, date and hour of meeting and must
also state the agenda of the meeting.

 Proxy could be appointed by members (corporate shareholders

too can appoint proxy)

 Chairman precedes the AGM

 Voting through postal means also possible provided not

involving decisions where hearing the other party is involved.
 Extraordinary General Meeting (EGM)
 For special or urgent business
 To be convened between two AGMs
 BoD or members can call the meeting
 1/10th voting power members must be called for meeting
when called by members other than BoD
 Quorum: no. of members present during the meeting for a
valid one

 Pvt. Co. - Minimum 2 members

 Public Co. – Depends upon total membership
- 5 members for 1000 members in total
- 30 members for 5000 members in total
Resolutions at the Meetings
 A motion means a proposal to be discussed at a meeting by
the members.

 A resolution may be passed accepting the motion, with or

without modifications, or a motion may be entirely
rejected.

 A motion, on being passed as a resolution becomes a

decision.

 Resolutions may be Ordinary (simple majority) or Special

(seventy five percent majority).
Corporate Personality
 A company is a legal person but not a citizen either
under the Constitution of India, 1950 or the
Citizenship Act, 1955.

 A Company acquires a nationality & a residence

based on its country of incorporation.
Incorporation of Companies
 Memorandum of Association &

 Articles of Association plus other documents

 Submit to Registrar of Companies

 Certificate of Incorporation leads to birth of a

Company
Memorandum of Association
(MoA)

 It is the constitution or charter of the company

and contains the powers of the company and
consists of five clauses.
 Fundamental conditions upon which alone
the company is allowed to be incorporated.
 Regulates external affairs of the Company with
outsiders.
Contents of MoA
(i) NAME CLAUSE
(ii) REGISTERED OFFICE CLAUSE
(iii) OBJECTS CLAUSE:
The 2013 Amendment does not require classification as main
objects and so on.
{a) Main objects, (b) and objects ancillary to main objects b)
Other objects}
(iv) LIABILITY CLAUSE : limited by shares or by
guarantee
(v) CAPITAL CLAUSE : amount of share capital the
company is permitted to raise.
Doctrines of Ultra Vires
The object clause has two-fold operation –
(i) field of industry to which the corporate
activities will be confined, and
(ii) negatively determines that nothing shall be
done beyond that field.

An act outside the objects is ultra vires the company,

that is, beyond the powers of the company.

Doctrine of ultra vires has been developed to protect

the investors and creditors of the company.
Example
Ashbury Railway Carriage & Iron Company v. Riche
(1875)
 Instance:
 The objects of this company, as stated in the MoA,
were to supply and sell the materials required to
construct railways. The contract here was to finance
construction of a railway.

 Result ? Ultra Vires or not?

Articles of Association
 Second important document to be registered alongwith the MoA.
 AoA contains details of functioning of company such as internal
regulations, bye-laws which contain regulations pertaining to
management of the company.

The articles of association usually contain provisions relating to:

(1) Specifying the business of the company
(2) Different classes of shares and the rights of shareholders, Allotment of
shares, Transfer and transmission of shares
(3) Borrowing powers
(4) Holding of Meetings
(5) Number and power of directors
(6) Dividends
(7) Audit and Accounts
Doctrine of Constructive Notice
 MoA and AoA being registered with the Registrar
of Companies (ROC) becomes public documents.
 Open to public inspection
 Every outsider dealing with the company is
deemed to have notice of the contents of the
MoA and AoA.
 This is known as constructive notice of the MoA &
AoA.
 Protects company against outsiders
Doctrine of Indoor Management

 Reverse of doctrine of constructive notice

 Outsiders may not be aware of internal

matters dealt by executives

 Internal irregularities cannot lead to set

aside a contract dealing with the company

 Protects outsiders against the company

 Royal British Bank v Turquand

 Doctrine of Indoor Management
 The directors of a coal mining and railway
company borrowed money from the Royal British
Bank, on a bond of £ 2,000.

 The bond was given under the seal of the

company and was signed by two directors and a
secretary.

 Company claimed that under its clauses of

incorporation, the directors had power to
borrow only such sums as had been
authorized by a general resolution of the
company.
Contd..
 In this case, no sufficiently specific resolution had
been passed.

 Remedy for an outsider such as Royal British

Bank?

 Doctrine of Indoor Management, hence they are

entitled to the loan amount borrowed by the
Company.
 Exceptions - Doctrine Of Indoor
Management

If outsider had:
(i) Knowledge of irregularity
(ii) Suspicion of Irregularity:
A person contracting with company is not protected by
“Turquand Rule” if the circumstances are suspicious.
Person holding Directorship of two companies pays
debts from company to another. It demands inquiry per
se.
(iii) Forgery
(iv) Connivance
Alteration of MoA and AoA
MoA:
 Special resolution (Except raising authorised share capital)
 Name Clause: Such special resolution is forwarded to
Central Govt., to seek its approval.
 Object Clause: passed Special resolution is submitted to
RoC within 30 days

AoA:
 Do not need sanction from Govt.
 Members can alter but should be consistent with MoA
 Special resolution must be forwarded within 30 days
 Resolution to alter the AoA has to be submitted to RoC.
Directors
Kinds of Directors: whole time directors, managing directors,
independent directors, nominee directors, alternate directors
and women directors

Number of Directors:
 Private Company: 2
 Public Company: 3
 OPC: 1
 Maximum: 15
 Among them atleast one woman director

Functions:
 Conduct board meetings
 Constitution of committees such as audit, finance and
personnel
 Conduct AGM
 Take decisions in matters of administration and
management of company
 Instances
(i) BMW Managing Director Mr. Stefan Schlipf was
arrested in July 2014 for cheating
 The case pertains to Delta Cars Private Limited, which was a
BMW dealer in Hyderabad from June 2007 to December 2009.
The dealership agreement expired on 31 December 2009, in the
absence of a further term renewal.

(ii) William C. Pinckney, CEO of Amway India was

arrested in connection with a criminal case registered
against the direct selling company.
 The CEO has been booked under the Prize Chits and Money
Circulation Schemes (Banning) Act besides charges of cheating
as well as extortion under relevant sections of the Indian Penal
Code (IPC)
Directors & their Liability
 “Officer who is in default” – Section 2 (60) of the
Companies Act, 2013

 In the aftermath of Harshad Mehta and Satyam fiasco,

Companies Act 2013 defined the term “Fraud” – to
incorporate corporate fraud (S.443 of the Act).
- any act or abuse of position committed with intent to
deceive, to gain undue advantage from, or to injure the
interests of a person, company, shareholders, or creditors,
whether or not there is wrongful gain or loss.

- Check Against Related-party Transaction

Director’s Liability
 is punishable with a fine which shall not be less than Rs 1 Lakh but which may
extend to Rs 5 lakhs.

 On an average, the minimum amount of fine that is imposed is Rs.25,000

 which in certain cases extends to Rs 25 crores or even more.

Where the penalties are Rs 1 crore or more:

 (a) Violation of provisions relating to not-for-profit companies (Section 8);
 (b) Violation of provisions relating to subscription of securities on private
placement (Section 42);
 (c) Issue of duplicate share certificates with an intent to defraud (Section 46
(5));
 (d) Failure to repay deposits within specified time (Section 74 (3));
 (e) Contravention of provisions relating to insider trading (Section 195 (2)).
 Insolvency Law
 Applicable Law: The Insolvency and Bankruptcy Code, 2016

 Objectives of the Act:

(i) to consolidate and amend the laws relating to reorganisation and
insolvency resolution of corporate persons, partnership firms and individuals in
a time bound manner
(ii) for maximisation of value of assets of such persons,
(iii) to promote entrepreneurship, availability of credit and balance the interests
of all the stakeholders including alteration in the order of priority of payment of
Government dues and
(iv) to establish an Insolvency and Bankruptcy Board of India

Minimum threshold limit to initiate the process is Rs. 1 crore credit

Processes for Insolvency
declaration
 Resolution Process and Liquidation Process

 Default – Appointment of Insolvency Professional (IP)

– Moratorium Period (180/270 days) – Credit
Committee Formation – 66% of the Creditors has to
approve
 If yes, implement the plan
 If no, then corporate person goes into liquidation
Resolution Process
Corporate insolvency resolution process
(i) Application on default – Any financial or operational
creditor(s) can apply for insolvency on default of debt or
interest payment

(ii) Appointment of IP – IP to be appointed by the regulator

and approved by the creditor committee. IP will take over the
running of the Company.
 From date of appointment of IP, power of Board of
directors to be suspended and vested in the IP.
Contd..
 (iii) Moratorium period – Adjudication authority will
declare moratorium period during which no action can be
taken against the company or the assets of the company.
Key focus will be on running the Company on going
concern basis. A Resolution plan would have to be
prepared and approved by the Committee of creditors

 (iv) Credit committee - A credit committee of creditors

will be constituted. Related party to be excluded from
committee. Each creditor shall vote in accordance to voting
share assigned if 75% of creditor approve the resolution
plan same needs to be implemented.
Liquidation process
(i) Initiation – Failure to approve resolution plan within specified days
will cause initiation of Liquidation. Debtor can also opt for voluntary
liquidation by a special resolution in a General Meeting.

(ii) Liquidator – The IP may act as the liquidator, and exercise all powers
of the BoD. The liquidator shall form an estate of the assets, and
consolidate, verify, admit and determine value of creditors’ claims.

Order of priority for distribution of assets

 Insolvency related costs
 Secured creditors and workmen dues upto 24 months
 Other employee’s salaries/dues up to 12 months
 Financial debts (unsecured creditors)
 Government dues (up to 2 years)
 Any remaining debts and due
 “Ease of doing biz: Enforcing contracts, IBC cases
remain hurdles for India”
– Business Standard, Nov. 4, 2018

 “Why India's product standards need an update and a

legal framework”
– Business Standard, Oct. 28, 2018

 “IL&FS crisis: Learnings in corporate governance”

– Business Standard, Oct. 8, 2018

P C Musthafa, iD story :
https://www.youtube.com/watch?v=01_eOCGNYN8
Session – VIII
EPGP -14
2022-24
Introduction
 Intellectual Property (IP) protection transforms ideas
into revenue-generating assets and sources of
comparative advantage.

 Property works on the principle of exclusion where

owner enjoys absolute ownership over the property
without interference.

 Intangible property when applied to the actual world,

can create useful and valuable goods.
Contd..
 Companies can use patents, copyrights, trade secrets,
and trademarks to:
(i) differentiate their products,
(ii) command premium prices,
(iii) erect barriers to entry,
(iv) sustain first-mover advantage,
(v) create a culture of innovation,
(vi) reduce costs and generate revenues.
IP and its related rights
 IP laws give the owner of any IP the exclusive
right to use it.
 Others are stopped from using it without the
consent of the owner.
 Kinds of IP:

Patents Trademarks Copyright

Geographical Trade
Design Secrets
Indications
Edison’s Bulb (1877)
 40 years of litigation – spent more than US $ 2 million in the late
1800s.

 Legal battle between Sawyer and Man & the Edison systems of
electric lighting.

 Sawyer and Man – lamp consisted of an incandescing conductor

of carbon made from a vegetable, fibrous material, in
contradistinction to a similar conductor made from mineral or
gas carbon. – conductor made from such vegetable carbon.

 Edison’s lamp consisted of a burner made of carbonized bamboo

of 6 inches long, 5/1000 inch thick, had electrical resistance of
more than 100 ohms.
Patents
 Patents are the most important branch of IP rights.

 Governed by Patents Act, 1970 amended in 2005

 it creates limited monopoly to encourage inventors to

create new processes, machines, products or improve on
existing things for benefit of the public.

 The benefits of a patent are primarily exclusive rights,

which may be commercially exploited.
Term of Patent
 Patent is granted for 20 years.

Checking Intention to abandon?

 An inventor must follow up his patent application of his
invention and related proceedings till a patent is
granted.
 In the event of the patent application being not
followed up properly, it is presumed that it was
abandoned.
Exceptions
 Innovations that are not classified as “inventions”:

(i) a method of agriculture or horticulture;

(ii) a process for the medicinal or other treatment of human
beings and animals;
(iii) a mere discovery of any new property, or new use for a
known substance, or a mere use of a known process,
machine, or apparatus (unless such known process
results in a new product or employs at least one new
reactant); and
(iv) an invention which is frivolous or which claims anything
obviously contrary to well established natural laws.
(v) plants and animals in whole or any part thereof other
than micro-organisms but including seeds, varieties and
species and essentially biological processes for
production or propagation of plants and animals;
Contd..
(vi) a mathematical or business method or a computer
program per se or algorithms;
(vii)a literary, dramatic, musical or artistic work or any
other aesthetic creation whatsoever including
cinematographic works and television productions;
(viii) a mere scheme or rule or method of performing
mental act or method of playing game;
(ix) a presentation of information;
(x) a topography of integrated circuits;
(xi) an invention which, in effect, is traditional knowledge
or which is an aggregation or duplication of
known properties of traditionally known component
or components.”
Pharmaceutical patents
 Product patents for pharmaceutical substances are
allowed in India. Section 3 of the Act gives certain
exceptions.
 Under Section 3 : (j) plants and animals in whole or
any part thereof (other than micro-organisms)
including seeds, varieties and species and essentially
biological processes for the production of plants or
animals – cannot be patented.
 This is in line with Article 27.3 of TRIPS. Thus micro-
organisms, which satisfy the patentability criteria, may
be patented in India.
Pharmaceuticals & Patents
 Many developing and least developed countries find it
very expensive to buy patented life-saving medicines
from Western companies.
 Pharmaceutical companies and their governments
vehemently want to implement strict protection.

Compulsory license can also be granted by

government if:
(a) Does not satisfy the reasonable
requirements of the public;
(b) Is not available to the public at a reasonably
affordable price; and
(c) Is not worked in the territory of India.
Pharmaceuticals & Patents
 Countries can issue ‘compulsory licenses' to companies
relating to the manufacture of pharmaceutical products for
export to countries with public health issues.

 India follows this so that patented pharmaceutical

products may be manufactured and exported to countries
having insufficient or no manufacturing capacity in that
sector.

 Patentee is paid adequate remuneration.

Bayer v. Natco (2012)
 Hyderabad-based Natco Pharma for the production of generic
version of Bayer’s Nexavar, an anti-cancer agent used in the
treatment of liver and kidney cancer (March 2012)

 Only 2% of the cancer patient population had an easy access to

the drug which was being sold by Bayer at an exorbitant price of
INR 2.8 lakh for a month’s treatment

 Further, on the ground that Nexavar was being imported within

the territory of India, the Indian Patent Office issued CL to
Natco Pharma, which assured that the tablets would be sold at
INR 8,880 per month, with 6% of the net sales being paid as
royalty to Bayer by Natco.
TRIPS & INDIA’s obligation
 World Trade Organization (WTO) – India became a
member in 1995 - Trade Related Aspects of
Intellectual Property Rights (TRIPS Agreement)

 India had to amend its Patents Act, 1970 to allow product

patents in Pharmaceuticals. India allowed only process
patent and not product patent till 2002.

 Because of which, Indian pharmaceutical companies could

use the process to create a new product.

 However, in 2002, India amended its Patent Law to allow

for product patent.
 Copyright Law
 Indian Law: Copyright Act, 1957

 Copyright law covers a broad range of literary and artistic

work which includes books, films, paintings, photographs,
music, poetry, dance, drama, computer software, articles,
journals, etc.

 Registrar of Copyrights issues certificate of

registration
 To be registered with the copyright office and in case of
infringement, registration acts as the best evidence.
Basics of Copyright Law
 Copyright protection is provided for the expression of
an idea, but the idea itself is not protected.

 A similar idea may be expressed in a number ways and

each expression will receive copyright protection.

 Only the owner of the copyright can copy his work,

perform, display, make derivative works, and to control
sale and distribution of the work.
 Copyrights

 Copyright law protects against copying of

the work, but not if another person
produces a very similar work independently.

Courts nowadays infer from two criteria—

(i) whether the second person had access to the

work of the first, and
(ii) whether the work is truly similar or not.
Contd..
In case the two works are substantially similar and there was
possible access to the original work, the court may conclude
that there has been violation of copyright.

Piracy In India: Harry Potter case (DHC-2010)

 1996, J K Rowling entered into a publishing agreement with
Bloomsbury Children’s books – In June 2000, Bloomsbury
appointed Penguin Books India as its exclusive distributor in
India – Rowling granted to Warner Bros. the right to create
motion pictures based on Harry Potter books as well as
trademark rights and marketing rights on characters, titles etc.

 In July 2007, police in Bengaluru informed Bloomsbury that they

have seized 1500 copies of Harry Potter. Remedy?
Term of Copyright
 60 years after the death of the author

 Joint authors, 60 years after the death of author who

died last

 If institution holds the copyright, then lasts only till

60 years from date of creation of work.
 Copyright can be transferred like any other
property. (It can be transferred in a will as can any
other property)
 Exceptions
 The following are not necessarily copyright infringement:
1. Reproduction of judicial proceedings, court
judgments, orders, etc.
2. Reproduction of Acts of Legislature.
3. Using copyright material for educational
purposes—in class or examination.
4. For research, criticism or review in newspapers,
magazines, and other media.
5. Reading or recitation in public.
6. Playing music in certain clubs or performance to a
non-paying audience or for religious institutions.
7. Copies of computer programmes can be made or
adapted for creating temporary or back-up copies
Trademarks
 Trademark protection is a statutory protection which
extends to a mark capable of being represented
graphically and capable of distinguishing the goods or
services of one entity from those of others.
 This may include shape, packaging and colour
combinations.
 This mark may be a logo, symbol, brand, signature,
word, heading, label, ticket, name, letter etc.
 Services are also included within the purview of
trademarks, which include banking, communication,
education, financing, insurance, real estate, transport,
storage, energy supply, boarding, lodging, entertainment,
etc.
Trademarks
 The law regarding trademarks in India is the Trade Marks
Act, 1999.

 The law also defines a well-known trademark as a mark

which may be used for particular goods or services.

 Problems arise when a trademark, which is known to the

public to such a degree that use of such a mark in relation
to other goods or services would likely cause confusion in
the minds of the general public.

 Term is for 10 years.

Definitions
Mark:
 Section 2 (m): includes a device, brand, heading, label,
ticket, name, signature, word, letter, numeral, shape
of goods, packaging or combination of colours or any
combination thereof;

Trademark:
 Section 2 (zb): a mark capable of being represented
graphically and which is capable of distinguishing the
goods or services of one person from those of others
and may include shape of goods, their packaging and
combination of colours;
Salient features
Infringement:
(i) using an identical mark, or
(ii) using a deceptively or confusingly similar mark.

 A soundmark is an unconventional trademark, and though it

has been granted for several decades in the US, it was granted for
the first time in India recently to Yahoo’s yodel. For example, the
soundtrack of MGM’s lion roar, the distinctive introduction
music of 20th Century Fox, and the NBC chimes.

 Colour trademarks can also be registered for single, multiple,

or combinations of colours (Coke’s red and white, for example).
 Shapes can also be protected as a trademark. Coke’s contour
bottle is one of the few packages to receive a trademark
Trademarks – Passing Off
 An action for passing off, is to restrain the
competitor/imitator from passing off its goods or
services to the public as that of a pre-existing
manufacturer or service provider.

 To preserve the reputation of the latter and safeguard the

public.

 The second important element in a passing off action is

misrepresentation—which may be intentional or
innocent.
Trademarks – Passing Off
 The real test is establishing the likelihood of confusion in
the minds of actual or potential customers.

 Thus the test is ‘imperfect recollection of a person of

ordinary memory’.

 The third essential element is loss or the likelihood of it.

GAAR
 General Anti-avoidance
 The General Anti-Avoidance Rule (‘GAAR’) has been
introduced in the Act and is effective from FY 2017-18.

 to curb impermissible avoidance arrangements entered

into by a person to avoid taxes.

 GAAR will apply only to direct tax cases.

 Additional
New Corporation Tax
Type of Company Benefit/Requirement
Rate
s
22% (earlier 30%) +
Corporations not applicable cess and No MAT (minimum
seeking any surcharge. Effective alternative tax) payable
incentives/exemptions corporate tax rate of by these companies
25.17%
MAT rate reduced to
Corporations seeking
Unchanged at 30% 15% from earlier level of
incentives/exemptions
18.5%
New manufacturing co.
must be incorporated
New Manufacturing on or before October
15% (earlier 25%)
Companies 2019. Must start
production before
March 2023
Compliance with Law
1. Develop safe products that meets customer’s needs
- Protect the health and safety of others and enhance
human development in the marketplace.

2. Use honesty and management by fact to attract and

retain best talent
- Enhance human development in workplace.

3. Eliminate all forms of discrimination to enable

employees to achieve success.
- Respect the dignity of all people. Respect diversity.
Contd..
4. Participate in law-making process. Operate on the
regulatory frontier to identify emerging social issues.
-Respect law, cooperate with public authorities, avoid
improper involvement in politics and government, and
contribute to the community.

5. Protect your property rights, consider working

cooperatively with other companies by sharing
intellectual property.
Contd..
6. Focus on contracts that build relationships and create
value through commercial affinity instead of legalities.
-Honour commitments. Be faithful to your word and
follow through on promises, agreements, and other
voluntary undertakings, whether or not embodied in
legally enforceable contracts.

7. Consider using ADR such as arbitration and

mediation to resolve business disputes.
Thank you and All the Best 