EBCL Marathon Notes

Prof Abhijeet C.
Jaiswal
EBCL
1
Prof Abhijeet C. Jaiswal
EBCL
COMPETITION ACT, 2002 (Part B – 25 marks)

What is competition in the market
“a situation in a market
in which firms or sellers independently strive
for the buyers’ patronage
in order to achieve a particular business objective, for example, profits, sales or market share.”.
-The World Bank
Need of competition
Competition is now universally acknowledged as the best means of ensuring that
✓ Consumers get wide range of products and services at the competitive prices
✓ Producers take steps for innovation which helps them in reducing costs and meeting consumer
demands.
✓ Helps in improving quality of goods and services
✓ Competition prevents Monopolies in market.
✓ It leads to Economic Growth of the country.
Recommendations of Sachar Committee for prohibition of unfair trade practices:

(a) misleading advertisements and false representations
(b) bargain sale, bait and switch selling;
(c) offering gifts or prizes with the intention of not providing them and conducting promotional
contests;
(d) supplying goods not conforming to safety standards; and
(e) hoarding and destruction of goods.
The Competition Act, 2002 – an Improvement on the MRTP Act, 1969

Principal objectives of the MRTP Act, 1969 were:
✓ Prevention of concentration of economic power to the common detriment
✓ Control of monopolies.
✓ Prohibition of monopolistic trade practice.
✓ Prohibition of restrictive trade practices.
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The MRTP Act was passed to ensure that operation of economic system does not result in the
concentration of economic power to common detriment.
However, all over the world, it was found that private monopolies can be detrimental to national
economy and control is required. It was felt that fair and free competition is requires for growth of
healthy economy.
Thus, the Competition Act, 2002 was enacted keeping in view of economic development of the
country, for establishment of commission to prevent practices having adverse effect on competition,
to promote and sustain competition in market, to protect the interest of consumer and ensure
freedom of trade carried on by other participants in markets, in India, and matters connected
therewith or incidental thereto
Objectives of the Competition Act, 2002

✓ Help in Economic development of the country
✓ To ensure free and fair competition in market
✓ To prevent practices having adverse effect on competition
✓ To prevent abuse of dominant position
✓ To declare combination void if it has appreciable adverse effect on competition.
✓ To promote and sustain competition in markets
✓ To protect the interests of consumers
✓ To ensure freedom of trade to participants in markets
✓ To provide for the establishment of a Competition Commission
✓ To deal with matters connected therewith or incidental thereto.
Acquisition [Section 2(a)]

Directly or Indirectly
acquiring or agreeing to acquire -
(i) Shares, voting rights or assets of any enterprise or
(ii) Control management or assets of any enterprise.
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Agreement [Section 2(b)]

✓ includes any arrangement or understanding or action in concert
✓ whether or not, such arrangement, understanding or concert is in formal or in writing or
✓ intended to be enforceable by legal proceedings
Cartel [Section 2(c)]

Cartel includes an association of producers, sellers or distributors, traders to control the production,
distribution, sale or price of or ,trade in goods or provision of services.
The Act prohibits formation of certain cartels
Some of the conditions that are conducive to cartelization are

✓ high concentration - few competitors
✓ high entry and exit barriers
✓ homogeneity of the products (similar products)
✓ similar production costs
✓ excess capacity
✓ high dependence of the consumers on the product
✓ history of collusion
Consumer [Section 2(f)]
Means any person who
buys any goods for a consideration which has hires or avails of any services for
been paid or promised or partly promised, or consideration which has been paid or
under any system of deferred payment and promised or partly paid and partly
includes any user of such goods other than the promised or partly paid and partly
person who buys such goods for consideration promised, or under any system of
paid deferred payment when such services are
or promised or under any system of deferred availed of with the approval of the first
payment when such use is made with the mentioned person whether such hiring or
approval of such person, whether such purchase availing of services is for any commercial
goods is for resale or for any commercial purpose purpose or for personal use.
or for personal use.
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Relevant Market [Section 2(r)]

means the market, which may be determined by the Commission (CCI) with reference to 'relevant
product market' or 'relevant geographic market' or with reference to both the markets.
Relevant Geographic Market [Section 2(s)]

Relevant Geographic Market means a market comprising the area in which the conditions of
competition for supply of goods or provision of services or demand of goods or services are distinctly
homogenous and can be distinguished from conditions prevailing in neighbouring areas
The relevant geographic market is determined by the CCI having regard to
all or any of the following factors:
- Regulatory trade barriers
- Local specification requirements
- National procurement policies
- Adequate distribution facilities
- Transport costs
- Language
- Consumer preferences
- Need for secure or regular supplies or rapid after-sales services
Relevant Product Market [Section 2(t)]

Relevant Product Market means a market comprising of all those products or services are regarded
as interchangeable or substitutable by the consumer, by reasons of characteristics of products or
services, their prices and intended use
The relevant product market is determined according to three criteria:
- Demand-side substitution
- Supply-side substitution
- Potential competition.
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Anti-competitive Agreement (Section 3)

Section 3(1) of the Competition Act, 2002 provides that
no enterprise or association of persons shall enter into any agreement in respect of
production,
supply,
distribution,
storage,
acquisition or
control of goods or provision of services,
which causes or is likely to cause an appreciable adverse effect on competition
Section 3(2) further provides that any anti-competitive agreement within the meaning of Sec.3 (1)
shall be void.
Types of Anti-competitive Agreement
Sec 3(3) Horizontal Agreement

Such agreements shall be presumed to have an appropriate adverse effect on the competition and
onus to prove otherwise lies on the defendant
agreements entered into between
enterprises or association of enterprises or
persons or associations or persons or
person or enterprise or
practice carried on ,or decision taken by any association of enterprises or association of persons,
including ‘cartels’, engaged in identical or similar goods or services which-
a) directly or indirectly determines purchase or sale price ;
b) limits or controls production , supply, markets , technical development, investment or provision
of services;
c) shares the market or source of production or provision of services, or allocation of geographical
area of market ,or type of goods or services ,or number of customers in the market or any other
similar way; and
d) directly or indirectly results in bid rigging or collusive bidding;
JV is an exception
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Bid Rigging
✓ Bidding→ intention→ enable the procurement of goods or services on the most favourable
terms and conditions.
✓ Invitation of bids is resorted to both by Government and private bodies
✓ objective of securing the most favourable prices and conditions may be negated if the
prospective bidders collude or act in concert. Such collusive bidding or bid rigging
contravenes the very purpose of inviting tenders and is inherently anti- competitive
Some of the most commonly adopted ways in which collusive bidding or bid rigging may occur are
1. agreements to submit identical bids
2. agreements as to who shall submit the lowest bid, agreements for the submission of cover bids
(voluntarily inflated bids)
3. Agreements not to bid against each other,
4. Agreements on common norms to calculate prices or terms of bids
5. Agreements to squeeze out outside bidders
6. Agreements designating bid winners in advance on a rotational basis, or on a geographical or
customer allocation basis
Sec 3(4) Vertical Agreement

The agreements shall be judged by rule of reason and the onus lies on the prosecutor to prove its
appreciable adverse effect on competition
any agreement amongst enterprises or persons

at different stages or levels of the production chain in different markets,
in respect of production, supply, distribution, storage, sale or price of, or trade in goods or provision
of services, including-
a) tie-in agreements;
b) exclusive supply agreement;
c) exclusive distribution agreement;
d) refusal to deal;
e) resale price maintenance
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Types of vertical agreements

a) tie-in agreements
any agreement requiring a purchaser of goods, as a condition of such purchase, to purchase some
other goods. A good example of tie-in agreement is where a gas distributor requires a consumer to
buy a gas stove as a pre- condition to obtain connection of domestic cooking gas. [Chanakaya and
Siddharth Gas company]
b) “Exclusive supply agreement” includes any agreement restricting in any manner from acquiring
or otherwise dealing in any goods other than those of the seller or any other person.
Thus, where a manufacturer asks a dealer not to deal in similar products of its competitor directly or
indirectly and discontinues the supply on the ground that dealer also deals in product of suppliers’
competitor’s goods is an illustration of exclusive dealing agreement. [Bhartia Curtec Hammer Ltd. In-
re (1997)
c) “Exclusive distribution agreement” includes any agreement to limit, restrict or withhold the
output or supply of any goods or allocate any area or market for the disposal or sale of the goods.
Requiring a distributor not to sell the goods of the manufacturer beyond the prescribed territory is a
good example of exclusive distribution agreement
d) “Refusal to deal” includes any agreement, which restricts, or is likely to restrict, by any method
the persons or classes of persons to whom goods are sold or from whom goods are bought.
For eg. an agreement which provides that the franchisees will not deal in products or goods of
similar nature for a period of three years from the date of determination of agreement within a
radius of five kms from showroom amounts to exclusive dealing agreement. DGIR v. Titan industries
(2001)
e) “Resale price maintenance” includes any agreement to sell goods on condition that the prices to
be charged on 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
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Prohibition of abuse of dominant position (Section 4)
Dominant position means a position of strength, enjoyed by an enterprise, in the relevant market,
in India, which enables it to -
• operate independently of competitive forces prevailing in the relevant market
or
• affect its competitors or consumers or the relevant market in its favour
Section 4(2) states that there shall be abuse of dominant position, if an enterprise or group
a) directly or indirectly imposes unfair or discriminatory :
➢ condition in purchase or sale of goods or services; or
➢ price in purchase or sale (including predatory price) of goods or service.
b) limits or restricts :
➢ production of goods or provision of services or market therefore; or
➢ technical or scientific development relating to goods or services to the prejudice of consumers.
c) Indulges in practice or practices resulting in denial of market access in any other manner.
d) Makes conclusion of contracts subject to acceptance by other parties of supplementary
obligations which, by their nature or according to commercial usage, have no connection with the
subject of such contracts.
e) Uses its dominant position in one relevant market to enter into, or protect, other relevant market
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Regulation of Combination (Section 5)

merger, amalgamation, acquisition, takeover above the prescribed limits will be considered
Combination
Parties Asset & Turnover In Asset & Turnover In
India India or Outside India
Acquisitions by Single Joint assets over Rs. Joint assets US $1

acquirer 2,000 Crore or turnover Billion,
6,000 Crore including at least 1000
Crore in India, or
turnover more than US
$3 Billion, including
atleast 3,000 Crore in
India
Acquisition by Group Group assets Rs. 8,000 Group assets US $4

Crore or turnover Rs. Billion including at
24,000 Crore least 1000 Crore in
India or turnover more
than US $12 Billion,
including atleast 3,000
Crore in India
Section 6(1)→ any person or enterprise from entering into a combination which causes or is likely
to cause as appreciable adverse effect on competition within the relevant market in India and if such
a combination is formed, it shall be void
Section 6(2) → any person or enterprise→ proposes to enter Into any combination→ notice +
details of the proposed combination → CCI,
in the from prescribed form + fees.
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Such intimation should be submitted within 30 days of:

a) approval of the proposal relating to merger or amalgamation for acquisition by the Board of
directors of the enterprise concerned with such merger or amalgamation, or
b) execution of any agreement or other document for acquisition or acquiring of control
The Commission shall have due regard to all or any of the factors for the purposes of determining
whether the combination would have the effect of or is likely to have an appreciable adverse effect
on competition in the relevant market, namely
a) extent of barriers to entry into the market;
b) level of combination in the market
c) likelihood that the combination would result in the parties to the combination being able to
significantly increase prices or profit margin.
d) extent to which substitutes are available or are likely to be available in the market
e) market share, in the relevant market, of the persons or enterprise in a combination, individually
and as a combination;
f) likelihood that the combination would result in the removal of a effective competitor or
competitors in the market;
g) nature and extent of vertical integration in the market
Competition Commission of India

✓ 'Competition Commission of India' was established by CG
✓ It is a body corporate having perpetual succession and common seal.
✓ It has its head office at New Delhi (established w.e.f 14-10-2003).
✓ The Commission can establish its offices at other places in India.
✓ consist of a Chairman and other members, min 2 and max 6
✓ they are appointed by the Central Govt on recommendation by selection
✓ they shall have knowledge and professional experience of not less than 15 years in international
trade, economics, business, commerce, law, finance, accountancy, management, etc.
✓ Tenure – 65 years or 5 years w.e.e
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Removal of Chairman and other members

following cases :
✓ Where he is adjudged as an insolvent
✓ Where he has been engaged in any paid employment
✓ Where he has been convicted of an offence which involved moral turpitude.
✓ Where he has acquired such financial or other interest as is likely to affect prejudicially
✓ Where he has abused his position ; and
✓ Where he has become physically or mentally incapable
Restriction on employment of Chairperson and other members

The Chairperson and other members shall not for a period of 2 years, accept any employment
connected with the management or administration of any enterprise which has been a party to any
proceeding before the Commission under this Act.
Exception → employment in a corporation established by or under any Central, State of Provincial

Act.
Validity of acts of CCI

An act of CCI cannot be challenged on the ground only of any defect in constitution of CCI or the
existence of any vacancy in the CCI. However, acts of CCI can be questioned on other acts such as
acting mala fide, acting on the basis of untenable evidence
Powers of CCI
1. to inquire into anti-competitive agreements and abuse of dominant position ;
2. to determine whether an agreement has an appreciable adverse effect on competition ;
3. enquire whether a combination has caused or is likely to cause an appreciable adverse effect on
competition ;
4. to issue 'cease and desist' orders ;
5. to grant such interim relief as would be necessary in a particular case ;
6. to award compensation ;
7. to impose fines ;
8. to order division of dominant undertakings ;
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9. to order demerger ;
10. to order cost for frivolous complaints
Duties Powers and Functions of CCI

a) to eliminate practices having adverse effect on competition;
b) to promote and sustain competition;
c) to protect interests of consumers and
d) to ensure freedom of trade carried on by other participants, in markets in India
Appearance before Commission

As per Section 35 of the Act, following persons are entitled to appear before the Commission
✓ a complainant; or
✓ a defendant; or
✓ the Director General
They may either appear in person or authorise any of the following:

i. a chartered accountant who has obtained a certificate of practice; or
ii. a company secretary who has obtained a certificate of practice;
iii. a cost accountant and who has obtained a certificate of practice;
iv. a legal practitioner that is an advocate, vakil or an attorney of any High Court including a pleader
in practice
Competition Advocacy
Section 49 of the Competition Act, 2002 provides that while formulating a policy on competition
including review of laws related to competition, the central Government may make a referee to the
ACCI for its opinion on the possible effects of such a policy on competition.
The Commission shall within 60 days of receipt of such a reference, given its opinion on it to the
Central Government. Thereafter the central Government may formulate such policy as it deems fit It
may be noted that the rule of the Commission is advisory and the opinion given by it shall not be
binding on the Central Government.
The CCI had also been assigned the role to take prescribed suitable measures for the following;
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✓ Promotion of competition advocacy;

✓ Creating awareness about the competition; and
✓ Imparting training about competition issues. Creating awareness about benefits of
competition and imparting training in competition issues is expected to generate conducive
environment to promote and foster competition, which is sine-qua non for accelerating
economic growth
Director General
✓ Appointed by CG
✓ CG can also appoint such number of additional, joint, deputy or assistant Director Generals
or other advisers, consultants or offices .
✓ DG shall be appointed from amongst the persons of integrity and outstanding ability and
who have experience in investigation and knowledge of accountancy, management,
business, public administration, international tirade, economics, law etc.
✓ He is an important functionary under the Competition Act 2002.
✓ He assists the Commission by furnishing Investigation Report in respect of such matters as
are referred to him by the CCI .
✓ He also assists the commission in conducting proceedings of enquiries which are initiated by
the CCI suo moto.
Acts taking place outside India but having an effect on competition in India
Section 32 extends the jurisdiction of Competition Commission of India to inquire and pass orders
in accordance with the provisions of the Act into an agreement or dominant position or
combination, which is likely to have, an appreciable adverse effect on competition in relevant
market in India, notwithstanding that, an agreement referred to in Section 3 has been entered into
outside India; or any party to such agreement is outside India; or
✓ any enterprise abusing the dominant position is outside India; or
✓ a combination has taken place outside India; or
✓ any party to combination is outside India; or
✓ any other matter or practice or action arising out of such agreement or dominant position
or
✓ Combination is outside India.
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Execution of orders of the Commission imposing monetary penalty

Section 39 provides that if a person fails to pay any monetary penalty imposed on him under the
Act, the CCI shall proceed to recover such penalty, in such manner as may be specified by the
regulations. In a case where the Commission is of the opinion that it would be expedient to recover
the penalty imposed under the Act in accordance with the provisions of the Income-tax Act, 1961,
it may make a reference to this effect to the concerned income-tax authority under that Act for
recovery of the penalty as tax due under the said Act.
Rectification of orders
The Commission may amend any order passed by it under the provisions of this Act with a view to
rectifying any mistake apparent from the record. Section 38(2) provides that subject to other
provisions of this Act, the Commission may make –
(a) an amendment of an order of its own motion;
(b) an amendment for rectifying any mistake apparent from record, which has been brought to its
notice by any party to the order.
An explanation below the Section clarifies that while rectifying any mistake apparent from the
record, the Commission shall not amend substantive part of the order passed by it under the
provisions of this Act
Competition Appellate Tribunal

Established by CG U/s 53A
a) to hear and dispose of appeals against any direction issued or decision made or order passed by
the Commission under the Act.
b) to adjudicate on claim of compensation.
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Penalty for failure to directions of Commission & Director General [Section 43]
If any person fails to comply with a direction given by the Commission or the Director General then
such person shall be punishable with fine which may extend to Rs 1 lakh for each day comply with
during which such failure continues subject to a maximum of 1 Crore
Contravention of orders of Commission

Rs 1 Lakh for each day during which such non compliance occurs subject to a maximum of 10 Crore.
If any person fails to pay the fine imposed → imprisonment upto 3 years or with fine up to 25 Crore
or with both
Penalty for not giving information on combinations

1% of total turnover or combined of assets w.e.h
Contravention by Companies
A company means a body corporate and includes a firm or other association of individuals; director,
in relation to a firm, means a partner in the firm for the purposes of penalties in connection with
contravention of the provisions of the Act by companies.
Where any rule, regulation, order made by the Commission or any direction issued thereunder is
contravened by a company, every person who, at the time the contravention was committed, was in
charge, and was responsible to the company for conducting business of the company, as well as the
company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded
against and punished. However it will be a good defence by a person liable to any punishment if he
proves that the contravention was committed without his knowledge or that he has exercised all
due diligence to prevent the commission of an offence.
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Accounts and Audit

Proper accounts and other relevant records shall be maintained by the Commission and an annual
statement of accounts shall be prepared by it in prescribed form in consultation with the
Comptroller and Auditor General of India (CAG). The CAG shall specify the intervals within which the
accounts of the Commission shall be audited by him.
Explanation to Section 52(2) clarifies that the orders passed by the Commission, being matters
appealable to the Supreme Court, shall not be subject to audit by the CAG. The expenses, if any,
incurred in connection with such audit shall be payable by the Commission to the CAG
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Reserve Bank of India Act, 1934

OBJECTIVE & ESTABLISHMENT OF THE RBI
1. Primary objects: Preamble to the RBI Act, 1934 spells out the objectives of the RBI as:
(a) To regulate the issue of bank notes.
(b) To keep reserves with a view to securing monetary stability in India.
(c) To operate currency and credit system of the country to its advantage
2. Remain free from political influence
3. Fundamental objects to act as -
(a) Note-issuing authority
(b) Bankers' bank
(c) Banker to government
4. Promote the growth of the economy
ESTABLISHMENT & INCORPORATION OF RBI

✓ Establishment & incorporation: A bank to be called the RBI shall be constituted for the
purposes of taking over the management of the currency from the Central Government an of
carrying on the business of banking in accordance with the provisions of the Act.
✓ RBI shall be a body corporate: perpetual succession and a common seal and shall by the said
name sue and be sue
✓ Capital: The capital of the RBI shall be 5 Crore.
✓ may establish Offices, branches & agencies in any other place in India with the previous
sanction of the Central Government
THE CENTRAL BOARD OF DIRECTORS

(a) A Governor and not more than 4 Deputy Governors to be appointed by the Central Government.
(b) 4 Directors to be nominated by the Central Government, 1 from each of the 4 Local Boards
(c) 10 Directors to be nominated by the Central Government.
(d) 2 Government officials to be nominated by the Central Government.
Thus, Central Board consists of total 21 persons
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BUSINESS WHICH THE RBI MAY NOT TRANSACT

✓ RBI cannot purchase the shares of any banking company or of any other company, or grant loans
upon the security of any such shares.
✓ RBI cannot advance money on mortgage of immovable property or documents of title relating
thereto. The RBI cannot become the owner of immovable property, except so far as is necessary
for its own business premises and residences for its officers and servants.
✓ RBI cannot make loans or advances.
✓ RBI cannot draw or accept bills payable otherwise than on demand.
✓ RBI cannot allow interest on deposits or current accounts
FUNCTIONS OF RBI
a) Banking Functions
b) Issue bank notes
c) Monetary Policy Functions
d) Public Debt Functions
e) Foreign Exchange Management
f) Banking Regulation & Supervision
g) Regulation and Supervision of NBFCs
h) Regulation & Supervision of Co-operative banks
i) Regulation of Derivatives and Money Market Instruments
j) Payment and Settlement Functions
k) Consumer Protection Functions
l) Financial Inclusion and Development Functions
Instruments of Monetary Policy

✓ Liquidity Adjustment Facility (LAF): The LAF consists of overnight as well as term repo
auctions. Progressively, the RBI has increased the proportion of liquidity injected under fine-
tuning variable rate repo auctions of range of tenors. The aim of term repo is to help
develop the inter-bank term money market, which in turn can set market-based benchmarks
for pricing of loans and deposits, and hence improve transmission of monetary policy. The
RBI also conducts variable interest rate reverse repo auctions, as necessitated under the
market conditions.
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✓ Repo Rate: The (fixed) interest rate at which the RBI provides overnight liquidity to banks
against the collateral of government and other approved securities under the Liquidity
Adjustment Facility (LAF).
✓ Reverse Repo Rate: The (fixed) interest rate at which the RBI absorbs liquidity, on an
overnight basis, from banks against the collateral of eligible government securities under the
LAF.
✓ Marginal Standing Facility (MSF): A facility under which scheduled commercial banks can
borrow additional amount of overnight money from the RBI by dipping into their Statutory
Liquidity Ratio (SLR) portfolio up to a limit at a penal rate of interest. This provides a safety
valve against unanticipated liquidity shocks to the banking system.
✓ Bank Rate: It is the rate at which the RBI is ready to buy or rediscount bills of exchange or
other commercial papers..
✓ Cash Reserve Ratio (CRR): The average daily balance that a bank is required to maintain with
the RBI as a share of such per cent of its Net demand and time liabilities (NDTL) that the RBI
may notify from time to time in the Gazette of India.
✓ Statutory Liquidity Ratio (SLR): The share of NDTL that a bank is required to maintain in safe
and liquid assets, such as, unencumbered government securities, cash and gold. Changes in
SLR often influence the availability of resources in the banking system for lending to the
private sector.
Constitution of Monetary Policy Committee (Sec 45ZB)

1. The CG may, by notification in the Official Gazette, constitute a Committee to be called the
Monetary Policy Committee of the Bank.
2. The Monetary Policy Committee shall consist of the following Members, namely:—
a) the Governor of the Bank—Chairperson, ex officio;
b) Deputy Governor of the Bank, in charge of Monetary Policy—Member, ex officio;
c) one officer of the Bank to be nominated by the Central Board—Member, ex officio; and
d) Three persons to be appointed by the Central Government—Members.
3. The Monetary Policy Committee shall determine the Policy Rate required to achieve the inflation
target.
4. The decision of the Monetary Policy Committee shall be binding on the Bank.
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RBI as Banker to Banks

✓ The RBI to fulfill this function, opens current accounts of banks with itself, enabling these
banks to maintain cash reserves as well as to carry out inter-bank transactions through these
accounts.
✓ Inter-bank accounts can also be settled by transfer of money through electronic fund
transfer system, such as, the Real Time Gross Settlement System (RTGS).
✓ In addition, the RBI has also introduced the Centralized Funds Management System (CFMS)
to facilitate centralized funds enquiry and transfer of funds across Deposit Accounts
Department (DADs). This helps banks in their fund management as they can access
information on their balances maintained across different DADs from a single location.
✓ As Banker to Banks, the RBI provides short-term loans and advances to select banks, when
necessary, to facilitate lending to specific sectors and for specific purposes.
✓ These loans are provided against promissory notes and other collateral given by the banks.
✓ The RBI also acts as the ‘lender of last resort’.
✓ It can come to the rescue of a bank that is solvent but faces temporary liquidity problems by
supplying it with much needed liquidity when no one else is willing to extend credit to that
bank.
✓ The RBI extends this facility to protect the interest of the depositors of the bank and to
prevent possible failure of a bank, which in turn may also affect other banks and institutions
and can have an adverse impact on financial stability and thus on the economy.
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Prudential Norms for Banks

Capital Adequacy:
✓ The RBI has instructed banks to maintain adequate capital on a continuous basis.
✓ The adequacy of capital is measured in terms of Capital to Risk-Weighted Assets Ratio
(CRAR).
✓ Under the recently revised framework, banks are required to maintain adequate capital for
credit risk, market risk, operational risk and other risks.
Loans and Advances:

✓ In order to maintain the quality of their loans and advances, the RBI requires banks to
classify their loan assets as performing and non-performing assets (NPA), primarily based on
the record of recovery from the borrowers.
✓ Banks are also required to make appropriate provisions against each category of NPAs and
also required to have exposure limits in place to prevent credit concentration risk and limit
exposures to sensitive sectors, such as, capital markets and real estate.
Investments: The RBI requires banks to classify their investment portfolios into three categories for
the purpose of valuation:
Held to Maturity (HTM),
Available for Sale (AFS) and
Held for Trading (HFT).
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Foreign Exchange Management Act, 1999 + FETC

✓ Foreign Exchange Management Act, 1999 replaced Foreign Exchange Regulation Act 1973
✓ it came into effect from 1.6.2000.
✓ RBI is overall controlling authority in respect of FEMA. In addition to RBI, Directorate of
Enforcement has also been formed for the implementation of FEMA.
✓ Section 46 of FEMA authorizes Central Govt. to make Rules
✓ Section 47 authorizes RBI to make Regulations
OBJECTIVE OF FEMA
1. To facilitate external trade and payments
2. To promote orderly development & maintenance of foreign markets in India.
SCOPE AND APPLICABILITY

1. Foreign Exchange Management Act, 1999 extends to the whole of India.
2. The Act also applies to all branches, offices and agencies outside India owned or controlled by a
person resident in India and also to any contravention thereunder committed outside India by any
person to whom this Act applies
Authorised Person [Sec 2(c)] means an

✓ authorized dealer,
✓ moneychanger,
✓ off-shore banking unit or
✓ any other person for the time being authorized by the RBI
to deal in foreign exchange or foreign securities
Person [Sec 2(u)] Person includes

1. an individual,
2. a Hindu Undivided Family,
3. a company,
4. a firm,
5. an association of persons or body of individuals, whether incorporated or not ;
6. any agency, office or branch owned or controlled by such persons.
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7. Every artificial juridical person
Person Resident in India [Sec 2(v)]

1) Any person residence in India for more than 182 days in previous financial year.
Includes →Person who has come to India or who stays in India for;
i. For taking up employment in India;
ii. For carrying on a business or vocation in India;
iii. For any other purpose for an uncertain period
Excludes → Person who has gone out of India or who stays outside India
i. For taking up employment outside India;
ii. For carrying on a business or vocation outside India;
iii. For any other purpose for an uncertain period
2) Any person or body corporate registered or incorporated in India;

3) An office, branch or agency established in India which is owned or controlled by a person
resident outside India;
4) An office, branch or agency established outside India, which is owned or controlled by a
person resident in India.
Dealings in Foreign Exchange

Except as otherwise provided in the Act, Rules or Regulations or with the general or special
permission of the RBI,
no person shall:
1. Deal in or transfer any foreign exchange or foreign security to any person not being an authorized
person;
2. Make any payment to or for the credit of any person resident outside India in any manner;
3. Receive otherwise through an authorized person any payment by order or on behalf of any
person resident outside India in any manner;
4. Enter into financial transaction in India as consideration for acquisition or transfer of any asset
outside India by any person.
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Holding of Foreign exchange, foreign security & immovable property (Section 4)

Except as otherwise provided in the Act, rules or regulations, no person resident in India shall
acquire, hold, own, possess or transfer any foreign exchange, foreign security or any immovable
property situated outside India.
Possession and retention of foreign exchange or foreign coins

1. Authorized person → no limit ;
2. Any person can possess foreign coins without limit;
3. PRI can retain foreign exchange upto Us $2000 or its equivalent in aggregate in the following
cases:
a) acquired by him while on a visit to any place out of India by way of payment for services or by
way of honorarium or gift;
b) acquired by him from any person resident outside India and who is on a visit to India for services
or by way of honorarium or gift or in settlement of any lawful obligation;
c) represents unspent amount from an authorized person for travel abroad.
4. A person resident in India but not permanently resident in India may possess foreign exchange
without any limit if such foreign exchange was acquired, held or owned by him when he was
resident outside India and has been brought into India in accordance with the prescribed
regulations
Realization, Repatriation and Surrender of Foreign Exchange

✓ A person who is entitled to obtain foreign exchange should surrender it to the authorized
dealer. He can retain with himself 2000 USD
✓ PRI → any amount of foreign exchange is due → take all reasonable steps to realize and to
repatriate to India such foreign exchange
✓ On realisation of foreign exchange due, a person shall repatriate the same to India, namely bring
into, or receive in, India and –
a) sell it to an authorised person in India in exchange for rupees; or
b) retain or hold it in account with an authorised dealer in India to the extent specified by the
Reserve Bank; or
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c) use it for discharge of a liability denominated in foreign exchange to the extent and in the
manner specified by the Reserve Bank.
A person not being an individual resident in India shall sell the realised foreign exchange to an
authorised person within the period specified below: -
✓ Foreign exchange due or accrued as remuneration for services rendered, or in settlement of
any lawful obligation, or an income on assets held outside India, or as inheritance, gift,
within 7 days from the date of its receipt;
✓ in all other cases within a period of 90 days from the date of its receipt
Period for surrender of received/realised/unspent/unused foreign exchange by Resident

individuals→ to an authorised person → 180 days
Current Account Transaction [Section 2(j)]

The term current account transaction means a transaction other than a capital account transaction
and includes
1. Payments due in connection with
a. foreign trade,
b. services ,
c. short term banking and credit facilities
d. as interest on loan and
e. as net income from investments;
2. Remittances for living expenses in abroad, of
a. parents,
b. spouse and
c. children residing
3. Expenses for of parents, spouse and children in connection with
a. foreign travel,
b. education and
c. medical care
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Prohibited Current Account Transactions

1. Drawl of foreign exchange for travel in Nepal/Bhutan is not permitted
2. Transactions with a person resident in Nepal/Bhutan
3. Commission on exports to Joint Venture/Wholly Owned Subsidiary abroad
4. Lottery/ Races
a. Remittance out of lottery winnings ;
b. Remittance of income from racing/riding etc.;
c. Remittance for purchase of lottery tickets, banned magazine
5. remittance for purchase of Lottery tickets/Money circulation schemes / banned magazines
6. Commission on export under rupee state credit route except commission upto 10% of invoice
value of export of tea and tobacco.
7. Remittance of dividend where dividend balancing is applicable.
8. Payment related to call back services of telephones.
9. Interest income on fund held in non-resident special rupee account
Scheme
CURRENT ACCOUNT TRANSACTION REQUIRING RBI APPROVAL IS REQUIRED

exceeding US $ 2,50,000 or its equivalent in a calendar year for
✓ one or more private visits abroad (other than Nepal and Bhutan);
✓ business travel, attending conference and specialized training
✓ going abroad for employment
✓ Gift remittance to family members and relatives
✓ Donations
✓ medical treatment
Commission per transaction to agents abroad for sale of residential flats/ commercial plots in India
exceeding the limit of US $ 25000 or 5% of the inward remittance per transaction whichever is
higher
exceeding US $ 1 million per project for any consultancy services procured from abroad
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US $ 1 lakh by an entity in India by way of reimbursement of pre-incorporation expenses
Donations by Corporate, exceeding one per cent of their foreign exchange earnings during the
previous three financial years or US$ 5,000,000, whichever is less, for:-
➢ creation of Chairs in reputed educational institutes,
➢ to funds (not being an investment fund) promoted by educational institutes; and
➢ to a technical institution or body or association in the field of activity of the donor Company
Capital Account Transaction

any transaction which alters the assets or liabilities
➔ outside India of persons resident in India or in India of persons resident outside India
Permissible Capital Account Transactions of persons resident in India

1. Investment in Foreign Securities
2. Foreign Currency loans raised in India and abroad
3. Transfer of immovable property outside India
4. Guarantee issued in favour of a PROI
5. Export, import and holding of currency
6. Loans and overdraft from PROI
7. Maintenance of foreign currency accounts in India and outside India
8. Taking out of an insurance policy from an insurance company outside India
9. Loans and overdraft to a PROI
10. Remittance of capital assets from outside India into India
11. Sale and purchase of foreign exchange derivatives in India and abroad and commodity
derivatives abroad
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Permissible Capital Account Transactions of persons resident outside India

1. Investment in securities of Indian body corporates
2. Investment in capital of a firm proprietorship concern or an association of persons in India.
3. Acquisition and transfer of immovable property in India.
4. Guarantee issued in favour of a PRI
5. Import and export of currency accounts in India.
6. Maintenance of foreign currency accounts in India.
7. Remittance of capital assets from India outside India.
.
Foreign Exchange Management (Permissible Account Transactions) Regulations, 2000
no PROI → investment in Indian entity which is engaged in
1. Nidhi Company
2. Agricultural and Plantation activity
3. Real estate business or construction of farm house
4. Trading in transferable Development Rights
5. Atomic energy
Regulations regarding Capital Account Transactions
I. Acquisition or transfer of immovable property situated outside India

A person resident in India would require the prior approval of RBI for acquisition or transfer of any
immovable property situated outside India.
However, the approval of RBI is not required in the following cases:
1. Property held by a foreign citizen;
2. Property acquired by a person on or before July 8, 1947 and held with the permission of RBI;
3. Property acquired by way of gift or inheritance from person referred to in clause 2 above;
4. Property acquired by way of gift or inheritance from any person who acquired, who held or
owned such property when he was resident outside India.
5. Property purchased out of the funds held in Resident Foreign Currency Account.
6. A resident can acquire immovable property outside India jointly with a relative who is a person
resident outside India, provided there is no outflow of funds from India.
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Acquisition under the Liberalised Remittance Scheme (LRS) A resident individual can send
remittances under the Liberalised Remittance Scheme for purchasing immovable property outside
India
Companies having overseas offices

may acquire immovable property outside India for its business and for residential purposes of its
staff, provided total remittances do not exceed the following limits prescribed for initial and
recurring expenses, respectively:
➢ 15 per cent of the average annual sales/ income or turnover of the Indian entity during the last
2 financial years or up to 25 per cent of the net worth, whichever is higher;
➢ 10 per cent of the average annual sales/ income or turnover during the last two financial years
II. Acquisition or transfer of immovable property situated in India
1) Acquisition and transfer of IP in India by NRI:

✓ NRI may acquire any immovable property in India other than agricultural property, plantation
property or farm house.
✓ He can transfer any immovable property in India to a person resident in India.
✓ He can transfer any immovable property other than agricultural property, plantation property
or farm house to a person resident outside India who is either an Indian citizen or a person of
Indian origin.
2) Acquisition and transfer of property in India by a person of Indian origin

✓ may acquire immovable property in India other than agricultural property, plantation property
or farm house by way of purchase.
✓ He can also acquire the property by way of gift or inheritance.
✓ He can transfer any immovable property other than agricultural property, plantation property
or farm house, by way of gift or sale, to a person resident in India who is a citizen of India.
✓ If asset is sold, amount equivalent to foreign exchange brought in can be repatriated
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Note: Citizens of Bangladesh, Pakistan, Sri Lanka, Afghanistan, China, Nepal, Iran or Bhutan cannot
acquire immovable property in India without the prior permission of RBI. However, they can acquire
immovable property in India by way of lease for a period upto 5 years without the RBI's approval.
3) Establishment of a branch office or liaison office or project office or any other place of
business in India
✓ Prior approval of RBI is required → person resident outside India → open in India a branch
office or a liaison office or a project office or any other place of business by whatever name
called
Exceptions / no RBI approval required

a) A banking company resident outside India → follow →Banking Regulation Act, 1949
b) An insurance company resident outside India →follow → Insurance Regulatory and Development
Authority established under section 3 of the Insurance Regulatory and Development Authority Act,
1999.
c) A company resident outside India → Special Economic Zones (SEZs) to undertake manufacturing
and service activities, subject to the conditions that:
i. Such branch offices are functioning in those sectors where 100% FDI is permitted;
ii. such branch offices comply with Chapter XXII of the Companies Act, 2013;
iii. and such branch offices function on a stand-alone basis
4) Acquisition of immovable property for carrying on business
A person resident outside India who has established in India a branch office or place of business (but
not a mere liaison office) in accordance with the RBI Regulations can acquire any immovable
property in India which is necessary for an incidental to carry on such activity.
The person acquiring such property in India shall file declaration in the prescribed form with the RBI
within 90 days of the acquisition of property.
If the asset is sold, sale proceeds can be repatriated only with the prior permission of RBI
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ADJUDICATION AND APPEALS
✓ Adjudicating Authorities (AA)→ appointed by CG

✓ AA an hold enquiry only on receiving a complaint in one year, If it is not possible, he shall record
the reasons
✓ 3 levels of Adjudicating Authorities
o Deputy Director,
o Additional Director and
o Director of Directorate of Enforcement
Special Director (Appeals)

✓ CG may appoint 1 or more Special Director (Appeals)
✓ hear the appeals only against the orders of Assistant Director and Deputy Director within 45
days
✓ appeal against order of Special Director (Appeals) → Appellate Tribunal for Foreign Exchange
Appellate Tribunal for foreign exchange

Section 18 empowers the Central Govt. establish an Appellate Tribunal for Foreign Exchange to hear
appeals against the orders of
Adjudicating Authorities (i.e. Additional Director and Director of Directorate of Enforcement) and
Special Director (Appeals).
✓ appeal against the orders of Appellate Tribunal → High Court, within 60 days from the date
of communication of the order, Extension - 60 days
✓ consists of a Chairperson and other members.
✓ A person qualified to be a Judge of a High Court shall be appointed as the Chairperson and
✓ A person qualified to be a judge of a District Court shall be appointed as the member of the
Appellate Tribunal
✓ Appointment shall be for a period of 5 years
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Directorate of Enforcement
✓ Section 36 empowers CG to establish a Directorate of Enforcement
✓ CG appoints →Director and other officers or class of Officers, for the purposes of the
enforcement of the Act
✓ CG authorise →Director, Additional Director, Special Director or Deputy Director →to
appoint officers below the rank of Assistant Director
✓ CG may, by order authorise any officers of customs or Central Excise or any police officer or
officers of Central or State Government to exercise such powers and discharge such duties
of the Director of Enforcement or any other officer of the Enforcement as stated in the
order.
Investigation
Section 37 → Director of Enforcement and other officers below the rank of an Assistant Director to
take up for investigation
✓ CG may also authorise any officer not below the rank of Under Secretary to Government of
India
COMPOUNDING OF OFFENCES
✓ the process of voluntarily admitting the contravention, pleading guilty and seeking redressal.
✓ Reserve Bank is empowered to compound any contraventions
✓ Willful, malafide and fraudulent transactions are, however, viewed seriously, which will not be
compounded by the Reserve Bank
✓ Applications seeking compounding of contraventions under section 3(a) of FEMA, 1999 may be
submitted to the Directorate of Enforcement
Application for compounding

1) applications for compounding + fee of Rs.5000/- by way of a demand draft drawn in favour of
“Reserve Bank of India”
2) Along with the application, the applicant may also furnish
✓ the details relating to FDI, ECB, Overseas Direct Investment and Branch Office / Liaison
Office, as applicable,
✓ a copy of the MOA and
✓ latest audited balance sheet
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✓ undertaking that they are not under investigation of any agency such as DOE, CBI, etc. in
order to complete the compounding process within the time frame.
3) Application returned / rejected, the application fees of Rs.5000/- will be refunded
4) Order within 180days from application
5) Factor to be considered
a) Amount of unfair gain
b) Loss to any authority/exchanges
c) Economic benefits accrued
d) History of non-compliance
e) Disclosure of facts
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Liberalized Remittance Scheme (LRS)

✓ introduced on February 4, 2004
✓ to facilitate resident individuals to remit funds abroad for permitted current or capital
account transactions or combination of both issues LRS.
✓ permits the Authorised Dealers to freely allow remittances by resident individuals up to USD
2,50,000 per Financial Year (April-March) for any permitted current or capital account
transaction or a combination of both.
✓ Scheme is available to all resident individuals including minors.
Permissible Capital Account Transactions by an individual under LRS

1. Opening of foreign currency account abroad with a bank.
2. Purchase of property abroad.
3. Making investments abroad – acquisition and holding shares of both listed and unlisted overseas
company or debt instruments
4. Acquisition of qualification shares of an overseas company for holding the post of Director;
acquisition of shares of foreign company towards professional services rendered online or in lieu of
director’s remuneration.
5. Investment in units of Mutual funds, Venture Capital funds, unrated debt securities, promissory
notes
6. Setting up WOS and JV outside India for bonafide business subject to the stipulated terms &
conditions
7. Extending loans including loans in Indian Rupees to Non-Resident Indians (NRIs) who are relatives
as defined in Companies Act, 2013.
Permissible Current Account Transactions by an individual under LRS

The limit of USD 2,50,000 per Financial Year (FY) under from Authorised dealer
release of foreign > USD 2, 50,000, → prior permission from RBI
a. Private visits.
✓ For private visits abroad,
✓ other than visit to Nepal and Bhutan,
✓ irrespective of the number of visits undertaken during the year.
✓ Further, all tour related expenses come under the LRS limit.
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b. Gift/donation
c. Going abroad on employment.
d. Emigration
Remittance of any amount of foreign exchange outside India in excess of this limit may be allowed
only towards meeting incidental expenses in the country of immigration
e. Maintenance of close relatives abroad.
f. Business trip
g. Medical treatment abroad
h. Facilities available to students for pursuing their studies abroad
Documentation by Remitter
The resident individual shall
✓ compulsorily designate →> branch of an AD through which all the remittances under the
Scheme will be made.
✓ furnish Form A2 for purchase of foreign exchange under LRS.
✓ have PAN card to make remittances However, PAN card need not be insisted upon for
remittances made towards permissible current account transactions up to USD 25,000.
✓ Investor, who has remitted funds under LRS can retain, reinvest the income earned on the
investments.
Remittance facilities to persons other than individuals

Gift/donation
up-to 1 % of foreign exchange earnings during the previous 3 FY or USD 5,000,000, w.e.l, for creation
of Chairs in reputed educational institutes,
a) contribution to funds promoted by educational institutes; and
b) contribution to a technical institution or body or association in the field of activity of the donor
Company.
c) Any additional remittance in excess of the same shall require prior approval of the RBI.
Procedure for remittance:

Applications for remittances for purposes other than those specified above may be forwarded to the
RBI together with
a) details of their foreign exchange earnings during the last 3 years,
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b) brief background of the company’s activities,

c) purpose of the donation.
Commission to agents abroad for sale of residential flats or commercial plots in India
subject to prior approval RBI if
commission per transaction to agents abroad
for sale of residential flats or commercial plots in India
exceeds USD 25,000 or five percent of the inward remittance whichever is more.
Remittances towards consultancy services

prior approval of RBI, if remittance > USD 10,000,000 per project
Remittances towards re-imbursement of pre-incorporation expenses

prior approval of RBI, if remittance > 5% or USD 10,000,000 whichever is higher
Payment of fees in foreign currency - Embassy affiliated educational institutions

Remittance towards payments of collected subscription to overseas TV media company
Prohibited Transactions
1. Remittance out of lottery winnings
2. Remittance of income from racing/riding etc. or any other hobby.
3. Remittance for purchase of lottery tickets, banned/prescribed magazines, football pools,
sweepstakes etc.
4. Payment of commission on exports made towards equity investment in joint ventures/ wholly
owned subsidiaries abroad of Indian companies
5. Remittance of dividend by any company to which the requirement of dividend balancing is
applicable
6. Payment of commission on exports under Rupee State Credit Route, except commission up-to
10% of invoice value of exports of tea and tobacco
7. Payment related to ‘call back services’ of telephones
8. Remittance of interest income on funds held in Non-resident Special Rupee (Account) Scheme
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FOREIGN CONTRIBUTION (REGULATION ACT), 2010

Foreign Contribution
“Foreign contribution” means the donation, delivery or transfer made by any foreign source
article,
currency,
security
Foreign Source includes:

i. Foreign Govt.
ii. any international agency, except United Nations or any of its specialised agencies, the World Bank,
IMF or such other Govt. notified agencies;
iii. a foreign company;
iv. other incorporated foreign corporations;
v. MNCs
vi. A company within the meaning of the Companies Act, 1956 or 2013 and more than 50% of the
nominal value of its share capital is held, either singly or in the aggregate, by one or more of the
following, namely:—
✓ Foreign Govt.;
✓ Foreign Citizen;
✓ Foreign corporations;
✓ Foreign trusts, societies or other associations of individuals
✓ foreign company;
vii. Foreign Trade Union
viii. Foreign citizen
Section 3(1) imposes restriction on acceptance of foreign contribution by –

✓ candidate for election
✓ correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered
newspaper;
✓ Judge, Government servant or employee of any corporation or any other body controlled or
owned by the Government;
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✓ Member of any Legislature;

✓ political party or office-bearer thereof;
✓ Organisation of a political nature as may be specified by the CG;
✓ Association or company engaged in the production or any other mode of mass communication;
✓ Correspondent or columnist, cartoonist, editor, owner of the association or company.
Restrictions does not apply to the acceptance, by any person of any foreign contribution:
a) By way of salary, wages or other remuneration from any foreign source
b) By way of payment, in the course of international trade or commerce,
c) As an agent of a foreign source in relation to any transaction made by such foreign source with the
CG or SG; or
d) By way of a gift or presentation made to him as a member of any Indian delegation
e) from his relative; or
f) by way of any scholarship, stipend or any payment of like nature
Foreign Hospitality
✓ Any offer not being a purely casual one
✓ Made in cash or kind
✓ It includes the cost of travel, boarding, lodging, medical treatment.
Restriction on acceptance of foreign hospitality

✓ No member of a Legislature or
office-bearer of a political party or
Judge or Government servant or
employee of any corporation or any other body owned or controlled by the Government shall,
while visiting any country or territory outside India, accept, except with the prior permission of
CG, any foreign hospitality.
✓ NO permission→emergent medical aid needed on account of sudden illness
✓ foreign hospitality has been received→ intimation to the CG one month from the date of
receipt of such hospitality
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Prohibition to transfer foreign contribution to other person

✓ Person who is registered / has certificate /has obtained prior permission under the Act; and
receives any foreign contribution, shall transfer such foreign contribution to such other person
is also registered / has certificate /has obtained prior permission under the Act
✓ In other case prior approval of CG is required
Utilization of foreign contribution

✓ Person who is registered / has certificate /has obtained prior permission under the Act →
utilize→ purposes for which the contribution has been received.
✓ And should not use more than 50% of foreign contribution received in one financial year as
administrative expenses
Registration of certain persons with Central Government

✓ Obtain certificate of registration from Central Government
✓ Validity upto 5 years
a) Application to Central Government in prescribe format
b) CG will Reject the application if Incomplete
c) If all conditions are compiled than Central Government can grant
certificate of registration within 90days of receipt of application
d) Failed to grant within 90days then communicate the reasons
Conditions for granting certificate of registration

a) The person
i. is not fictitious or benami;
ii. has not been prosecuted or convicted for indulging in activities aimed at conversion from one
religious faith to another;
iii. has not been prosecuted or convicted for creating communal tension or disharmony in any
specified district or any other part of the country;
iv. has not been found guilty or diversion or mis-utilisation of its funds;
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v. is not engaged or likely to engage in propagation of sedition or advocate violent methods to

achieve its ends;
vi. is not likely to use the foreign contribution for personal gains or divert it for undesirable
purposes;
vii. has not contravened any of the provisions of this Act;
viii. has not been prohibited from accepting foreign contribution;
b) has undertaken reasonable activity in its chosen filed for the benefit of the society for which the
foreign contribution is proposed to be utilised;
c) has prepared a reasonable project for the benefit of the society for which the foreign contribution
is proposed to be utilised
d) in case the person being an individual, such individual has neither been convicted under any law
for the time being in force nor any prosecution for any offence pending against him;
e) in case the person being other than an individual, any of its directors or office bearers has neither
been convicted under any law for the time being in force nor any prosecution for any offence is
pending against him;
f) the acceptance of foreign contribution by the person, is not likely to affect prejudicially —
✓ sovereignty and integrity of India; or
✓ security, strategic, scientific or economic interest of the State; or
✓ public interest; or
✓ freedom or fairness of election to any Legislature; or
✓ friendly relation with any foreign State; or
✓ harmony between religious, racial, social, linguistic, regional groups, castes or communities
Suspension of certificate
✓ Central Government may suspend for maximum 180 days
✓ May suspend if investigation is pending for cancellation of such certificate
✓ Whose certificate has been suspended shall not receive any foreign contribution during such
period
✓ Shall not utilise fund without prior approval of Central Government
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Cancellation of certificate
a) obtained on the basis of incorrect or false statement; or
b) violated any of the T/C* of the certificate or renewal thereof; or
c) In the opinion of the CG, it is necessary in the public interest; or
d) violated any of the provisions of this Act or rules or order made thereunder; or
e) has not been engaged in any reasonable activity in its chosen field for the benefit of the society
for 2 consecutive years or has become defunct
Renewal of certificate
within six months before the expiry of the period of the certificate
Foreign contribution through scheduled bank

receive foreign contribution in a single account only through such one of the branches of a bank as
he may specify in his application for grant of certificate
Intimation to Central Government:

Person who has been granted a certificate is required to inform the amount, sources and purpose to
Central Government
Intimation by Candidate for Election

Candidate for election shall intimate the amount, sources and purpose to Central Government
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Non-Banking Financial Companies (NBFCs)

NBFC is a company registered under the Companies Act, engaged in the business of
loans and advances,
acquisition of shares/stocks/bonds/debentures/securities
leasing,
hire-purchase,
insurance business,
chit business
but does not include
any institution whose principal business is that of agriculture activity, industrial activity, purchase
or sale of any goods (other than securities) or providing any services and
sale/purchase/construction of immovable property
Registration with RBI

✓ it should be a company registered under the Companies Act, and
✓ It should have a minimum net owned fund. [Rs. 200 lakhs]
Powers of the Reserve Bank

✓ to register,
✓ lay down policy,
✓ issue directions,
✓ inspect,
✓ regulate,
✓ supervise and
✓ exercise surveillance over NBFCs that meet the 50-50 criteria of principal business
RBI can penalize NBFCs for violating the provisions of the RBI Act or the directions or orders issued
by RBI under RBI Act.
The penal action can also result in RBI cancelling the Certificate of Registration issued to the NBFC,
or prohibiting them from accepting deposits and alienating their assets or filing a winding up petition
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Salient features of NBFC regulations

✓ allowed to accept/renew public deposits min 12 months & max 60 months.
✓ cannot accept deposits repayable on demand.
✓ cannot offer interest rates higher than the ceiling rate prescribed by RBI from time to time.
✓ cannot offer gifts/incentives or any additional benefit to the depositors.
✓ should have minimum investment grade credit rating.
✓ The deposits with NBFCs are not insured.
✓ The repayment of deposits by NBFCs is not guaranteed by RBI.
Cancelation of a Certificate of Registration

RBI may cancel the certificate if NBFC,
(i) ceases to carry on the business of a NBFC; or
(ii) has failed to comply with any condition or
(iii) at any time fails to fulfil any of the conditions such as adequate capital structure and earning
prospects; etc. or
(iv) fails to comply with any direction issued by the RBI or
(v)fails to maintain accounts
Corporate Governance
Constitution of Committees of the Board
1. Audit Committee
i. min 3 members.
ii. ensure that an Information System Audit of the internal systems and processes is conducted at
least once in two years to assess operational risks faced by the applicable NBFCs.
2. Nomination Committee
to ensure 'fit and proper' status of proposed/ existing directors.
3. Risk Management Committee

To manage the integrated risk, all applicable NBFCs shall form a Risk Management Committee,
besides the Asset Liability Management Committee
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“Systemically important non-deposit taking non-banking financial company”, NBFC not accepting /
holding public deposits and
having total assets of Rs. 500 crore and above as shown in the last audited balance sheet
“Infrastructure Finance Company”

(a) a minimum of 75 per cent of its total assets deployed in “infrastructure loans”; (b) Net owned
funds of Rs. 300 crore or above;
(c) minimum credit rating ‘A’
(d) CRAR of 15 percent
Asset Finance Company

principal business →financing of physical assets supporting productive/economic activity, such as
automobiles,
tractors,
lathe machines,
generator sets,
earth moving and material handling equipment, moving on own power and general purpose
industrial machines.
Principal business for this purpose is defined as aggregate of financing real/physical assets
supporting economic activity and income arising therefrom is not less than 60% of its total assets
and total income respectively.
Investment Company
means any company which is a financial institution carrying on as its principal business the
acquisition of securities
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Infrastructure Finance Co
is a non-banking finance company
a) which deploys at least 75 per cent of its total assets in infrastructure loans,
b) has a minimum Net Owned Funds of `300 crore,
c) has a minimum credit rating of ‘A ‘or equivalent,
d) a CRAR of 15%
NBFC-Factor is a
✓ non-deposit taking NBFC
✓ engaged in the principal business of factoring.
✓ The financial assets in the factoring business should constitute at least 50 percent of its total
assets and its income derived from factoring business should not be less than 50 percent of
its gross income
DIFFERENCE BETWEEN BANKS & NBFCS

(i) NBFC cannot accept demand deposits;
(ii) NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn
on itself;
(iii) deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available
to depositors of NBFCs, unlike in case of banks
Rotation of partners of the Statutory Auditors Audit Firm

✓ NBFCs shall rotate the partner/s of the Chartered Accountant firm conducting the audit,
every three years so that same partner shall not conduct audit of the company
continuously for more than a period of three years
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Special Economic Zones Act, 2005
Salient features of the Act

✓ setting up of SEZ and units there-in
✓ off shore banking units and in SEZ
✓ Single window clearance mechanism at zone level
✓ Fiscal regime for developers of Special Economic Zone and units
✓ Establishment of authority for each SEZ granting them administrative autonomy
✓ Setting up special courts to ensure faster settlement of cases and speedy investigation
Guidelines / objectives for notifying SEZ

✓ Generation of additional economic activity;
✓ Promotion of exports of goods and services;
✓ Creation of employment Opportunity;
✓ Promotion of investment from domestic and foreign sources;
✓ Development of infrastructure facilities;
Processing and Non Processing Areas

a) The processing area → manufacture of goods /rendering of services.
b) The area exclusively for trading or warehousing purposes; or
c) The non- processing areas for activities other than those specified under (a) or (b) above
Board of Approval→Constituted by CG by notification

Duties, power and functions of Board of Approval
a) Granting of approval or rejecting proposal or modifying such proposals for
✓ establishment of the SEZ.
✓ authorised operations to be carried out in SEZ.
✓ providing infrastructure facilities
d) Granting, a licence to an Industrial undertaking
e) Disposing of appeals
f) other functions as may be assigned to it by the central Govt
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Suspension of letter of approval and transfer of SEZ in certain cases

Board can suspend LOA granted to developer for Whole or Part of area
but not more than 1 year
Before such suspension 3 months’ notice should be given by the board
developer is/has
a) unable to discharge the functions or perform the duties;
b) persistently defaulted in complying with the directions of the board;
c) violated the term and conditions of the letter;
d) The financial position of the developer is such that he is unable to discharge the duties and
obligation imposed on him by the letter of approval.
Development commissioner and his Functions

✓ C.G. may appoint the development commissioner for one or more SEZ
✓ Development Commissioner to be overall in charge of the SEZ and can exercise administrative
control and supervision over the officers and employees
✓ development commissioner should
• guide the entrepreneur for setting up of Units in the SEZ
• ensure and take suitable steps for effective promotion of exports from the SEZ
• make proper co-ordination with the central Govt. or State Govt
• monitor the performance of the Developer and the Units in SEZ
• Discharge such other functions assigned to him by the C.G. / BOA
Approval Committee (Constituted by CG for every SEZ by notification)

Power and Functions –
✓ Approve Import or Export.
✓ Approve Rendering of Services.
✓ Approve, modify or reject prospal for SEZ units.
✓ Monitor and supervise compliance of conditions.
✓ Perform such other functions given by CG or SG.
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SEZ Authority (Constituted by CG for every SEZ)

Functions –
✓ the development of infrastructure in the Special Economic Zone;
✓ promoting exports from the Special Economic Zone;
✓ reviewing the functioning and performance of the Special Economic Zone;
✓ levy user or service charges or fees or rent for the use of properties belonging to the Authority
✓ performing such other functions as may be prescribed
Establishment of SEZ
Central Govt.
State Govt. or
any other person,
jointly or severally, may establish a Special Economic Zone
1) Proposal by a Person→ identify area→ make proposal to SG or directly to

Board.
2) The person may make a proposal directly to the Board for the purpose of setting up a SEZ and the
board may grant approval but after receipt of such approval the concerned person has to obtain
the concurrence of the State Govt.
3) Within prescribed time The state Govt. may on receipt of the proposal for setting up a SEZ
forward the proposal together with its recommendations to the board of Approval within the
specified time afterwards the board may either approve the proposal or, approve it subject to
such terms and conditions as it may deem fit to impose.
4) The Board may also modify or reject the proposal.
5) The Central Govt. has the authority to specify the minimum area of Land for setting up a SEZ
another terms
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Cancellation of letter of approval granted to entrepreneur

✓ The approval committee may cancel the letter of Approval of an entrepreneur after giving
reasonable opportunity of being heard.
✓ Reason →entrepreneur has contravened any of the term and conditions or its obligation subject to
which the letter of Approval was granted to the entrepreneur.
✓ Provided further that from the date of cancellation the Unit shall not be entitled to any
exemption, concession, benefit or deduction available to it as such.
✓ Any person aggrieved from an order of Approval Committee can make an appeal to the Board of
Approval within the prescribed time.
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CONSUMER PROTECTION ACT 2019
Advertisement (Sec 2(1))

✓ 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
Appropriate Laboratory (Sec 2(2))

A laboratory or an organisation—
1. Recognised by the CG; or
2. recognised by a SG, subject to such guidelines as may be issued by the CG in this behalf; or
3. Established by or under any law for the time being in force, which is maintained, financed or aided
by the CG or a SG for carrying out analysis or test of any goods with a view to determining whether
such goods suffer from any defect
Complainant (Sec 2(5)).

i. A consumer; or
ii. Any voluntary consumer association registered under any law for the time being in force; or
iii. The CG or any SG; or
iv. The Central Authority; or
v. One or more consumers, where there are numerous consumers having the same interest; or
vi. In case of death of a consumer, his legal heir or legal representative; or
vii. In case of a consumer being a minor, his parent or legal guardian
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Complaint (Sec 2(6))

Complaint means any allegation in writing, made by a complainant for obtaining any relief provided
by or under this Act
i. An unfair contract or unfair trade practice or a restrictive trade practice has been adopted by any
trader or service provider;
ii. The goods bought by him or agreed to be bought by him suffer from one or more defects
iii. The services hired or availed of or agreed to be hired or availed of by him suffer from any
deficiency;
iv. A trader or a service provider, as the case may be, has charged for the goods or for the services
mentioned in the complaint, a price in excess of the price—
a. fixed by or under any law for the time being in force; or
b. displayed on the goods or any package containing such goods; or
v. The services which are hazardous or likely to be hazardous to life and safety of the public when
used, are being offered by a person who provides any service and who knows it to be injurious to life
and safety;
Consumer (Sec 2(7))
buys any goods for a consideration which has hires or avails of any service for a consideration
been paid or promised or partly paid and partly which has been paid or promised or partly paid
promised, or under any system of deferred and partly promised, or under any system of
payment and includes any user of such goods deferred payment and includes any beneficiary
other than the person who buys such goods for of such service other than the person who hires
consideration paid or promised or partly paid or or avails of the services for consideration paid
partly promised, or under any system of deferred or promised, or partly paid and partly promised,
payment, when such use is made with the or under any system of deferred payment,
approval of such person, but does not include a when such services are availed of with the
person who obtains such goods for resale or for approval of the first mentioned person, but
any commercial purpose; does not include a person who avails of such
service for any commercial purpose.
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▪ Commercial purpose means earning large scale of profits

▪ Commercial purpose excludes a person who buys goods for earning of his livelihood or by means of
self-employment
Consumer dispute
a dispute where the person against whom a complaint has been made, denies or disputes the
allegations contained in the complaint
Consumer rights [Sec 2(9)]

Consumer rights include
i. protected against the marketing of goods, products or services which are hazardous to life and
property;
ii. informed about the quality, quantity, potency, purity, standard
iii. The right to be assured, wherever possible, access to a variety of goods, products or services at
competitive prices;
iv. The right to be heard;
v. The right to seek redressal and
vi. The right to consumer awareness.
Defect [Sec 2(10)]

✓ Means fault, imperfection, shortcoming -
✓ In quality, quantity, purity, standard which is required to be maintained under any law
Deficiency (Sec 2(11))

Deficiency means any
fault,
imperfection,
shortcoming or
inadequacy
in the quality, nature and manner of performance
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which is required to be maintained by or under any law for the time being in force or has been
undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any
service and includes—
i. any act of negligence or omission or commission by such person which causes loss or injury to the
consumer; and
ii. deliberate withholding of relevant information by such person to the consumer.
Endorsement (Sec 2(18))

Endorsement in relation to an advertisement, means—
i. any message, verbal statement, demonstration; or
ii. depiction of the name, signature, likeness or other identifiable personal characteristics of an
individual; or
iii. depiction of the name or seal of any institution or organisation,
which makes the consumer to believe that it reflects the opinion, finding or experience of the person
making such endorsement
Harm (Sec 2(22))

• Relation to product liability includes -
a) Damages to any property other than product itself
b) Personal injury, illness, mental or emotional distress or
c) such other loss of consortium.
• It excludes
a) Any damages to product itself
b) Damages to property on account of breach of warranty condition or
other commercial of economic loss
Manufacturer (Sec 2(24))

Person who
• makes any goods or parts
• Assemble any goods or parts
• Put or cause to be put his own mark on any goods
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Misleading Advertisement (Sec 2(28))

i. falsely describes such product or service; or
ii. gives a false guarantee to, or is likely to mislead the consumers as to the nature, substance,
quantity or quality of such product or service; or
iii. conveys an express or implied representation which, if made by the manufacturer or seller or
service provider thereof, would constitute an unfair trade practice; or
iv. deliberately conceals important information
Person (Sec 2(31))

i. an individual;
ii. a firm whether registered or not;
iii. a Hindu undivided family;
iv. a co-operative society;
v. an association of persons;
vi. any corporation, company or a BOI whether incorporated or not;
vii. any artificial juridical person.
Product (Sec 2(33))

• Article, goods, substance or raw material or any extended cycle of such
product
• Which may be in gaseous, liquid or solid form
• And capable of delivery either as wholly assembled or as a part
• Excludes human tissues, blood, blood products and organs
(Sec 2(36)) Product manufacturer means a person who—

i. makes any product or parts thereof; or
ii. assembles parts thereof made by others; or
iii. puts or causes to be put his own mark on any products made by any other person; or
iv. makes a product and sells, distributes, leases, installs, prepares, packages, labels, markets,
repairs, maintains such product or is otherwise involved in placing such product for commercial
purpose; or
v. designs, produces, fabricates, constructs or re-manufactures any product before its sale; or
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vi. being a product seller of a product, is also a manufacturer of such product;
Restrictive Trade Practice (Sec 2(41))

Price or its condition of delivery or to affect flow of supplies in Trade
practices which leads to bring about manipulation of the market
relating to goods or services and includes
a) Delay beyond the period agreed by a trader in supply which has led or
is likely to lead to rise in the price.
b) Any trade practices which require a consumer to buy, hire any goods
and services as condition precedent for buying, hiring or availing of
other goods.
Unfair Contract -
• Contract between manufacturer or trader or service provider and consumer
which cause significant change in rights of consumer.
• Which includes –
a) Charging Excessive security deposit.
b) Imposing Misappropriate penalty.
c) Refuse to accept early repayment of debt
d) Any other unfair terms, penalty
Unfair Trade Practice (Sec 2(47))

For the purpose of sale, use supply of goods and services adopts any
unfair method or deceptive practices namely –
i. Making any false statement relating to quality, quantity, trade, etc.
ii. False promise to replace, repair, and maintain the product.
iii. Materially mislead the public about the price.
iv. Gives false or misleading facts on the product.
v. Permitting the publication of any advertisement at a bargain price but
that are not intended to be offered for sale.
vi. Offering gifts with the intention of not providing them.
vii. Hoarding or refusal to sell.
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viii. Manufacturing of spurious goods.

ix. Not issuing bill or cash memo or receipt
Consumer Protection Council
District Consumer Protection Council
Establishment: By State Government.
Function: It shall be an advisory council.
Composition: The Collector of the district, who shall be the Chairperson; and prescribed number of
other official and non-official members representing prescribed interests.
Meeting: as and when necessary but at least 2 meetings shall be held every year.
Time & Place: As the Chairperson may think fit.
Objects: To render advice on promotion and protection of consumer rights within the District
State Consumer Protection Councils

Establishment: By State Government.
Function: It shall be an advisory council and
Composition: Minister-in-charge of Consumer Affairs in the State Government → Chairperson; and
such number of other official or non-official members, not exceeding 10, as may be nominated by
the CG.
Meeting: at least 2 meetings shall be held every year.
Time & Place: As the Chairperson may think fit.
Objects: To render advice on promotion and protection of consumer rights within the State.
Central Consumer Protection Council

Establishment by: Central Government.
Function as: It shall be an advisory council and
Composition: Minister-in-charge of the Department of Consumer Affairs, who shall be the
Chairperson; and prescribed number of other official or non-official members representing
prescribed interests.
Meeting: as and when necessary, but at least one meeting shall be held every year.
Time & Place of meeting: As the Chairperson may think fit.
Objects: To render advice on promotion and protection of the consumers' rights under the Act
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CENTRAL CONSUMER PROTECTION AUTHORITY (CCPA) (Sec 10)

Establishment of CCPA: To be established by CG.
Objective: To regulate matters relating to -
a. Violation of rights of consumer
b. Unfair trade practices
c. Misleading advertisement which are prejudicial and
d. Protect, promote and enforce the rights of consumer.
Composition: chief commissioner and prescribed number of other Commissioners, to be appointed
by the CG to exercise the powers and discharge the functions under the Act.
Headquarter: Delhi
Regional & other offices: as CG may decide.
Qualifications, method of recruitment, etc., of Chief Commissioner and Commissioners : Rules may
be made by CG.
Vacancy, etc., not to invalidate proceedings of Central Authority

No act or proceeding of the Central Authority shall be invalid merely by reason of
a) any vacancy in, or any defect in the constitution of, the Central Authority; or
b) any defect in the appointment of Chief Commissioner or Commissioner; or
c) any irregularity in the procedure of the Central Authority not affecting the merits of the case
Powers and functions of Central Authority (Sec 18)

1. Central Authority have following power and Functions -
a) protect, promote and enforce the rights of consumers
b) prevent unfair trade practices
c) ensure that no false or misleading advertisement is made
d) ensure that no person takes part in the publication of any advertisement which is false or
misleading.
2. The Central Authority may, for any of the purposes aforesaid,—

a) inquire or cause an inquiry or investigation either suo-motu or on a complaint received or on the
directions from the CG;
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b) file complaints before the District Commission, the State Commission or the National
Commission, as the case may be, under this Act;
c) intervene in any proceedings before the District Commission or State Commission or National
Commission,
d) review the matters relating to consumer rights,
e) recommend adoption of international covenants
f) undertake and promote research in the field of consumer rights;
g) spread and promote awareness on consumer rights;
h) encourage non-Governmental organisations and other institutions working in the field of
consumer rights to co-operate and work with consumer protection agencies;
Power of Central Authority to refer matters for Investigation: -

• Central Authority may after receiving any information or complaint or
direction from Central Government or its own motion.
• Central Authority → May Direct DG or District Collector for investigation.
• CA or DG or DC may call upon a person and also direct him to produce any
document or records.
• CA is satisfied that violation has made be may pass necessary order
including -
a. Recalling of goods or withdrawal of services.
b. Reimbursement of price to consumer.
c. Discontinuation of unfair or restrictive trade practices.
d. Give opportunity of being heard
Power to issue Direction and Penalties against False or Misleading Advertisement

If the Central Authority is of the opinion that it is necessary to impose a penalty in respect of such
false or misleading advertisement, by a manufacturer or an endorser,
Fine
First time →penalty up-to Rs. 10 Lakh.
for every subsequent contravention→ up-to Rs. 50 Lakh.
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Imprisonment
upto 1 year for First Contravention.
upto 3 years for Subsequent Contravention
Where the Central Authority deems it necessary, it may, by order, prohibit the endorser of a false or
misleading advertisement from making endorsement of any product or service for up-to 1 year.
Factor Determining Penalty

• Population of affected areas.
• Frequency or duration of such offence.
•. Loss suffered to consumer
• Gross revenue affected by such sale
Search and seizure (Sec 22)

Director General or any other officer authorised by him in this behalf, or the District Collector may, if
he has any reason to believe that any person has violated any consumer rights or committed unfair
trade practice or causes any false or misleading advertisement to be made, shall,
i. Enter at any reasonable time into any such premises.
ii. Search for any document, record or article.
iii. Seize such document, record or article.
iv. Make a note of inventory of such record.
v. Require any person to produce any record register
• Seized document shall be return within 20 days after taking copies thereof.
• Sample can be sent to appropriate laboratory.
• Appropriate laboratory shall file report within 45 days from reference
Vexatious Search (sec 22)

The Director General or any other officer, who knows that there are no reasonable grounds for so
doing, and yet—
(a) searches, or causes to be searched any premises; or
(b) seizes any record, register or other document or article, shall, for every such offence, be
punished with imprisonment up-to 1 year, or with fine up-to Rs. 10,000 or with both.
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District Consumer Disputes Redressal Commission (Sec 28)

establish by SG
SG may establish more than one District Commission in a district.
Each District Commission shall consist of—
a. a President; and
b. at least 2 and max members may be prescribed, in consultation with the Central Government.
Qualifications method of recruitment, procedure for appointment, term of office, resignation and
removal of the President and members of the District Commission of President and members of
District Commission as may be prescribed by CG
Jurisdiction of District Commission (Sec 34)
value of the goods or services paid as consideration Does not exceed fifty lakh rupees
A complaint shall be instituted in a District Commission within the local limits of whose jurisdiction
a) Opposite party reside or
b) Each of opposite party reside or
c) Business or branch office is situated or
d) Cause of action arise
e) the complainant resides or personally works for gain
Proceeding before District Commission

• Proceeding conducted by President and at least One Member sitting
together.
• Admissibility of complaints shall ordinarily decide within 21days.
• Pass necessary order
• A complaint shall not be rejected unless an opportunity of being heard has been given to the
complainant.
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Reference to mediation (Sec 37)

At the first hearing of the complaint after its admission, or at any later stage, if it appears to the
District Commission that there exists elements of a settlement which may be acceptable to the
parties, except in such cases as may be prescribed, it may direct the parties to give in writing, within
5 days,.
Where the parties agree for settlement by mediation and give their consent in writing, the District
Commission shall, within 5 days of receipt of such consent, refer the matter for mediation, and in
such case, the provisions of Chapter V, relating to mediation, shall apply
Procedure on Admission of Complaint

1. DC may proceed → complaint / mediation fail
2. Complaint related to goods
a. DC Gives Copy to opposite party within 21days.
b. Reply by opposite party within 30days or such Extension of 15days.
c. If opposite party denies / takes no action → DC will proceed
d. If defect of goods cannot be determined →sample→send→ appropriate laboratory.
e. Appropriate laboratory → report within 45days from reference.
f. Fees for testing→deposited by complainant
g. Lab result + DC remark → send to→ opposite party
h. Any party disputes the labs findings/methods→ submit objection in writing to DC
i. Complaint shall be heard on the basis of affidavit and documentary evidence
j. Give OOBH
k. Dispose complaint within 3 months from receipt of notice by opposite party if no test is
required or within 5 months if laboratory test is required.
Appeal against order of District Commission (Sec 41)
✓ prefer an appeal against such order to the State Commission on the grounds of facts or
law within 45 days (extension if it thinks so)
✓ Deposit 50% of claim before appeal
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State Consumer Disputes Redressal Commission (Sec 42)

• Established by SG
• Consists of -
a. President
b. Mini - 4 member and max members as may be specified by SG
• Complaints where value of goods and services paid Exceeds fifty lakhs but does not
exceed two crore rupees. or Appeal against the order of district commission.
• Question of law.
• Appeal to National Commission within 30 days (extension if it thinks so)
• Deposit 50% of the fees.
• Dispose of appeal by State Commission or National Commission within 90
Days
National Consumer Disputes Redressal Commission (Sec 53)

✓ Established by CG
✓ consist of—
a. President; and
b. not less than 4 and not more than prescribed
Jurisdiction of National Commission
✓ Complaints where the value of the goods or services paid as consideration Exceed
two crore rupees
✓ Appeals against the orders of any State Commission;
✓ Appeals against the orders of the Central Authority
Appeal against order of National Commission → Supreme Court within 30 days on deposit
50% of amount
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MEDIATION
Establishment of Consumer Mediation Cell (Sec 74)
✓ SG → establish a consumer mediation cell to be attached to each of the District Commissions and
the State Commissions of that State.
✓ CG → establish a consumer mediation cell to be attached to the National Commission and each
of the regional Benches.
A consumer mediation cell shall consist of such persons as may be prescribed.
Every consumer mediation cell shall maintain—

a. a list of empanelled mediators;
b. a list of cases handled by the cell;
c. record of proceeding; and
d. any other information as may be specified by regulations.
Every consumer mediation cell shall submit a quarterly report to the District Commission, State
Commission or the National Commission to which it is attached, in the manner specified by
regulations.
Settlement through Mediation (Sec 80)

1) Pursuant to mediation, if an agreement is reached between the parties with respect to all of the
issues involved in the consumer dispute or with respect to only some of the issues, the terms of such
agreement shall be reduced to writing accordingly, and signed by the parties to such dispute or
their authorised representatives.
2) The mediator shall prepare a settlement report of the settlement and forward the signed
agreement along with such report to the concerned Commission.
Where no agreement is reached between the parties within the specified time or the mediator is of
the opinion that settlement is not possible, he shall prepare his report accordingly and submit the
same to the concerned Commission.
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Recording Settlement and Passing of Order (Sec 81)

1) The District Commission or the State Commission or the National Commission, as the case may be,
shall, within 7 days of the receipt of the settlement report, pass suitable order recording such
settlement of consumer dispute and dispose of the matter accordingly.
2) Where the consumer dispute is settled only in part, the District Commission or the State
Commission or the National Commission, as the case may be, shall record settlement of the issues
which have been so settled and continue to hear other issues involved in such consumer dispute.
Where the consumer dispute could not be settled by mediation, the District Commission or the State
Commission or the National Commission, as the case may be, shall continue to hear all the issues
involved in such consumer dispute.
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PREVENTION OF MONEY LAUNDERING ACT 2002
✓ The purpose and object of the Act is prevention of money laundering, which simply means
conversion of tainted (black) money into untainted(white) money.
✓ Money laundering is the processing of criminal proceeds to disguise its illegal origin.
✓ Terrorism, illegal arms sales, financial crimes, smuggling and the activities of organized crime,
including drug trafficking and prostitution rings, generate huge sums.
Process of Money Laundering

Money is Laundered in following three stages :
1 Placement:
Here, the launderer introduces his illegal profits into the financial system by breaking up large sums
of money into smaller sums.
2 Layering:
Here, the launderer engages in a series of conversions or movements of funds to distance them from
their source.
3 Integration:
Here, the Launderer integrates the smaller amounts into larger sums and enters the legitimate
economy by investing into real estate, business ventures, film industry etc
Source of black money

✓ Drug trafficking
✓ Smuggling
✓ Scams
✓ Terrorism
✓ Sex rackets
✓ Insider trading
Impact of Money Laundering

✓ Widespread use of bribery in government offices leading to corruption.
✓ Control over vast sector of economy by handful of people through investment by unfair means
✓ Infiltration of banking and financial institutions through organized crimes.
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✓ Dampen social fabric and ethical standards prevalent in the society

✓ Weakens the democratic institution
Global initiatives in the prevention of money laundering
1. Fiancial Action Task Force (FATF)

✓ FATF was established in 1989.
✓ It is an international body which promotes measures taken up to counteract the world wide
impact of money laundering
Main tasks/functions of FATF are:
Review the techniques adopted for money laundering
Checks the initiatives made by the countries to counteract money laundering
Spread awareness among non-member countries also
Thus, FATF study, examine and evaluate the current situation, defines the policy and initiatives
measures that can act as solution to the problem of money laundering
2. The Vienna Convention

✓ The first major initiative in the prevention of money laundering
✓ United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic
Substances in December 1988 (popularly known as Vienna Convention).
✓ This convention laid the groundwork for efforts to combat money laundering by obliging the
member states to criminalize the laundering of money from drug trafficking.
✓ It promotes international cooperation in investigations and makes extradition between
member states applicable to money laundering.
✓ The convention also establishes the principle that domestic bank secrecy provisions should
not interfere with international criminal investigations
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Proceeds of Crime
means any property
derived or obtained
directly or indirectly
by any person
as a result of criminal activity relating to a scheduled offence or the value of such
property
Attachment [Sec 2(1)(d)]

prohibition of transfer, conversion, disposition or movement of
property
Person in default
Person who
o Knowingly entered into transaction related to proceeds of crime
o Acquire or own or possess or transfer the proceeds of crime
o Conceal proceeds of crime
Section 4
any person who commits the offence of money laundering shall be punishable
imprisonment min 3 years and upto 7 years + fine + Confiscate the proceeds of crime.
Narcotic Drugs and Psychotropic Substances Act,

imprisonment min 3 years and upto 10 years + fine + Confiscate the proceeds of crime
Attachment of property involved in money laundering

✓ Director / any officer, has reason to believe on the basis of material in his possession
that any person is in possession of any proceeds of money laundering,
such person has been charged of having committed a scheduled offence
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and such proceeds of crime are likely to be concealed, transferred or dealt with in any
manner which may result in frustrating any proceedings relating to confiscation of such
proceeds of crime,
such officer may by order in writing, provisionally attach such property for a period not
exceeding 180 days from the date of the order
The Director or any other officer who provisionally attaches any property shall, within a period of 30
days from such attachment file a complaint, stating the facts of such attachment before the
Adjudicating Authority
Obligation of banking companies or FI and Intermediary

✓ maintain a record of all transactions, along with its the nature and value of such transactions
may it comprise of a single transaction or a series of transactions legally connected to each
other, and when such series of transactions take place within a month.
✓ These informations are required to be furnished to the Director within such time as may be
prescribed.
✓ verify and maintain the records of the identity of all its clients,
✓ The records are required to be maintained for a period of 10 years.
✓ Director may call for records of all transactions
✓ Director may make such inquiry or cause such inquiry to be made, as he thinks fit.
✓ Fine min Rs.10, 000 but may extend to Rs.1,00, 000 for each failure.
KYC Policy
✓ These ‘Know Your Customer’ guidelines have been revisited in the context of the
Recommendations made by the Financial Action Task Force (FATF) on Anti Money
Laundering (AML) standards and on Combating Financing of Terrorism (CFT).
✓ Banks have been advised to ensure that a proper policy framework on ‘Know Your
Customer’ and Anti Money Laundering measures is formulated with the approval of their
Board and put in place
✓ Banks should keep in mind that the information collected from the customer for the
purpose of opening of account is to be treated as confidential and details thereof are not to
be revealed for cross selling or any other like purposes.
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✓ Banks should, ensure that information sought from the customer is in conformity with the
guidelines issued in this regard.
✓ Banks should ensure that any remittance of funds by way of demand draft, mail/telegraphic
transfer or any other mode and issue of travellers’ cheques for value of Rupees fifty
thousand and above is effected by debit to the customer’s account or against cheques and
not against cash payment
✓ With effect from April 1, 2012, banks should not make payment of cheques/drafts/pay
orders/banker’s cheques bearing that date or any subsequent date, if they are presented
beyond the period of three months from the date of such instrument.
✓ Banks should ensure that the provisions of Foreign Contribution (Regulation) Act, 2010,
wherever applicable, are strictly adhered to.
Banks should frame their KYC policies incorporating the following four key elements:
a) Customer Acceptance Policy;
b) Customer Identification Procedures;
c) Monitoring of Transactions; and
d) Risk Management
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Legal Metrology Act, 2009

Dealer 2(b)
Dealer in relation to any weight or measure, means a person who, carries on, directly or otherwise,
the business of buying, selling, supplying or distributing any such weight or measure, whether for
cash or for deferred payment or for commission, remuneration or other valuable consideration
Manufacture 2(i)
"manufacturer" in relation to any weight or measure, means a person who –
i. manufactures weight or measure,
ii. manufactures ,aquires or Assembles parts and claims the end product to be a weight or measure
manufactured by himself
iii. puts, or causes to be put, his own mark on any complete weight or measure made or
manufactured by others.
Pre-packed commodity 2 (l)

a commodity which without the purchaser being present is placed in a package of whatever nature,
whether sealed or not, so that the product contained therein has a pre-determined quantity
International Organisation of Legal Metrology (OIML)

✓ intergovernmental treaty organization whose membership includes Member States,
countries.
✓ It was established in 1955
✓ to promote the global harmonization of legal metrology procedures
✓ develops model regulations, International Recommendations,
Standard Weights and Measures

Section 4 → every unit of weight or measure shall be in accordance with the metric system based on
the international system of units.
Section 5 →
a) length → metre;
b) mass → kilogram; time → second;
c) electric → ampere;
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d) thermodynamic temperature → kelvin;

e) luminous intensity → candela;
f) and amount of substance → mole
Section 6 states that the base unit of numeration shall be the unit of the international form of Indian
numeral. Every numeration shall be made in accordance with the decimal system.
Section 11
a) Provides that no person shall, in relation to any goods, things or service, quote, or make
announcement of, whether by word of mouth or otherwise, any price or charge, or issue or exhibit
any price list, invoice, cash memo or other document,
b) Or prepare or publish any advertisement, poster or other document, or indicate the net quantity
of a pre-packaged commodity, or express in relation to any transaction or protection, any quantity
or dimension, otherwise than in accordance with the standard unit of weight, measure or
numeration
Appointment and Power of Director, Controller and legal metrology officers

Section 13 CG→ to appoint (by Notification)
a Director of legal metrology,
Additional Director,
Joint Director,
Deputy Director,
Assistant Director
Section 14 →SG may, by notification, appoint

a Controller of legal metrology,
Additional Controller,
Joint Controller,
Deputy Controller,
Assistant Controller,
Inspector
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Section 15→ Director, Controller / any legal metrology officer may → power to inspect, if he has any
reason to believe,
that any weight or
measure or
other goods
in relation to which any trade and commerce has taken place or is intended to take place and in
respect of which an offence punishable under this Act appears to have been, or is likely to be,
committed are either kept or concealed in any premises or are in the course of transportation.
Forfeiture
Every non-standard or unverified weight or measure, and every package used in the course of, or in
relation to, any trade and commerce and seized under section 15, shall be liable to be forfeited to
the State Government. Unless the same is verified and stamped within such time as may be
prescribed
Manufacturers etc. to maintain records and registers

Section 17
every manufacturer, repairer or dealer
of weight or measure
shall maintain such records and registers as may be prescribed.
The records and registers maintained shall be produced at the time of inspection to the persons
authorised for the purpose of Inspection
Declarations on pre-packaged commodities

Section 18 → no person shall manufacture, pack, sell, import, distribute, deliver, offer, expose or
possess for sale any pre-packaged commodity unless such package is in such standard quantities or
number and bears thereon such declarations and particulars in such manner as may be prescribed.
✓ Any advertisement mentioning the retail sale price of a pre-packaged commodity shall contain a
declaration as to the net quantity or number of the commodity contained in the package in such
form and manner as may be prescribed
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Registration for importer of weight or measure

Sec 19→ no person shall import any weight or measure unless he is registered with the Director in
such manner and on payment of such fees, as may be prescribed.
Section 20 No weight or measure, whether singly or as a part or component of any machine shall be
imported unless it conforms to the standards of weight or measure established by or under this Act
Prohibition of manufacture, repair or sale og weight or measure without licence

Section 23 no person shall manufacture, repair or sell, or offer, expose or possess for repair or sale,
any weight or measure unless he holds a licence issued by the Controller.
Section 24 Every person possessing using or intending to use any weight or measure, shall, before
putting such weight or measure into such use, have such weight or measure verified.
Offences and Penalties

Section 25 penalty for use of non-standard Weight or measure may be twenty-five thousand rupees
and for the second or subsequent offence, with imprisonment for a term which may extend to six
months and also with fine.
Penalty for counterfeiting of seals

Section 44 provides that whoever counterfeits any seal, sells, or disposes counterfeit seal, or
possesses any counterfeit seal, or counterfeits or removes or tampers with any stamp, or affixes the
stamp so removed on, or inserts the same into, any other weight or measure, shall be punished
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Transfer of Property Act, 1882
Section 3 only states the Immovable property doesn’t include

standing timber,
growing crops and
grass.
According to the General Clauses Act,1897, Immovable Property includes

land,
benefit to arise out of land,
things attached to the earth, or
permanently fastened to anything attached to the earth.
Thus, by combining the aforesaid two definitions, we can say that the Immovable property includes
land,
benefits arising out of the land,
things attached to the earth, etc.,
but doesn’t include
standing timber,
growing crops and
grass.
Transfer Of Property[Section 5]
act by which a living person conveys property
in present, or in future,
to one or more other living persons, or to himself, and one or more other living persons and "to
transfer property" is to perform such an act.
"Living person" includes a company or association or body of individuals whether incorporated or

not.
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A transfer of property not in existence operates as a contract to be performed in future which may
be specially enforced as soon as the property comes into existence (Jugalkishore v. Ram Cotton
Company, (1955) I SCR 1369).
Who Can Transfer The Property?
Every person who is competent to contract and entitled to transferable property, or authorised to
dispose of property is competent to transfer such property.
According to Indian Contract Act, a person is competent to contract when he is a major and of sound
mind and is not disqualified from contracting by any law to which he is subject.
But a minor can be a transferee as there is nothing in the Transfer of Property Act to disqualify a
person, who is a minor to be a transferee.
Transferable Property [Section 6]

in general, every kind of property can be transferred from one person to another.
However, following are the exceptions to this general rule
1. Chance of an Heir Apparent/Spes Successions
✓ It means succeeding to a property.
✓ This means an interest which has not arisen but which may arise in future.
✓ It is in anticipation or hope of succeeding to a estate of a deceased person.
✓ Such a chance is not property and as such cannot be transferred.
✓ If it is transferred, the transfer is wholly void.
For Example A, a Hindu who has separate property, dies leaving a widow W and a brother L, L’s
succession to the property is dependent upon two factors, viz.,
✓ his surviving the widow, W, and
✓ W leaving the property intact.
L has only a bare chance of succession to the property left by A.
This is spes successionis, and therefore, cannot be transferred (Amrit Narayana v. Gyan Singh,).
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2. Right of Re-Entry
✓ This is a right which a lesser has against the leasee for breach of an express condition of
lease which provides that on its breach the leaser may re-enter the land.
✓ The transferor reserves this right to himself after having parted with the possession of the
property.
✓ This right is for his personal benefit and cannot, therefore, be transferred.
3. Transfer of Easement
✓ Easement means an interest in land owned by another that entitles his holders to a specific
limited use or enjoyment.
✓ As an easement confers no proprietary right on its owner, it cannot be transferred apart
from the land itself.
✓ For example, the right of certain villagers to bath in another’s tank cannot be transferred.
4. Interest Restricted in its Enjoyment

The cases which fall under this head includes the following:
a) The right of “Pujari” in a temple to receive offerings.
b) The right of a “Widow” under Hindu law to residence and maintenance. The rights given in these
cases are purely of a personal nature and cannot, therefore, be transferred. These rights are
restricted to the person to whom they belong.
5. Right to Future Maintenance

right to future maintenance in whatsoever manner arising, can’t be transferred.
It is solely for the personal benefits of the person to whom it is granted.
However, the arrears of the past maintenance can be transferred.
6. Public Offices and Salaries ,Stipends, Pension, Etc .

Transfer of public offices and salaries, stipends, pension etc., cannot be transferred on the grounds
of public policy.
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Absolute Interest
▪ Complete interest.
▪ Consist of bundle of rights which include right to use, sell, lease, mortgage, gift etc.
▪ Owner has absolute interest over the property
Reversion Interest: -
▪ Reversion means property comes to the original owner.
▪ Transfer of interest for specific period then interest cover back with the original owner.
Remainder Interest: -
▪ Means where property goes to the third party after specific time.
Vested Interest
✓ does not depend upon the condition or if it depend upon the condition such condition
bound to be happen.
✓ Cannot be defeated by death of transfer
✓ Certain condition.
✓ Transferable.
✓ Heritable
✓ Vested interest includes vested in interest as vested in possession
Contingent Interest
✓ Transfer of interest which is based on happening or non-happening of uncertain event.
✓ Defeated by death of transferee
✓ Uncertain condition.
✓ Nontransferable.
✓ Non-heritable.
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Conditional Transfer
interest created on the transfer of property → depend on the fulfillment of a condition by the
transferee
Such a transfer may be subject to a condition precedent or a condition subsequent.
In condition precedent, the condition comes before the interest; whereas in condition subsequent,
the interest is created before the condition
Validity of conditions as per Section 25

✓ The condition must not be impossible to fulfil.
✓ The condition must not be forbidden by law.
✓ It should not be of such a nature that if permitted it would defeat the provisions of any law.
✓ It should not be fraudulent.
✓ The condition should not be such as to cause injury to the person or property of another.
✓ The condition should not be immoral or opposed to public policy.
Conditions Restraining Alienation

✓ any condition absolutely restraining the transferee from parting with or disposing of his
interest in the property, the condition is void.
✓ absolute restraint → void
✓ partial restraint qualified as to place or person may be valid and binding
Restraint on Enjoyment
✓ When a property is transferred absolutely, and transferor imposes any restraint on the
enjoyment of the property by the transferee, the restraint is treated as void.
Transfer For The Benefit Of Unborn Person

Transfer for the benefit of unborn person [Sec.13]
a) cannot be made directly to an unborn person;
b) The interest in favour of unborn person must be preceded by a prior interest;
c) The prior interest must also be created by the same transfer ; and
d) The unborn person must be given the whole of the remaining interest of the transferor in the
property.
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Rule Against Perpetuity

✓ prohibits the vesting of interest beyond a certain reasonable period / uncertain time.
✓ It prescribes the maximum period within which a future interest must vest, and if the vesting
is postponed beyond such period, the vesting is void for remoteness.
✓ Also known as rule against remoteness or control by dead hand
✓ it prevents the property owner from transferring and controlling his assets for an
exceptionally long period after his death
The rules contained in Setion 14 as regards transfer to unborn persons

a) If before property is ultimately transferred to an unborn person, it is transferred to different
persons for their successive lives, they should all be living at the date of the transfer.
b) The unborn person must come into existence on or before the expiration of the existence life or
lives named by the transferor.
c) He must be given the entire estate of the transferor and the transfer must be absolute.
Following are the exceptions to the rule against perpetuity

1. Gift to charity.
3. Contracts for perpetual renewal of leases.
4. Charges created on a property.
Important Doctrines
Doctrine of Election [Section 35]
✓ Election means ‘choice’.
✓ where a property is transferred to a person, then the transferee can make a choice between
whether to accept the transfer or to reject it.
✓ If he is accepting the transfer, then the transferee shall, along with the benefits of transfer , also
accept the burden of transfer.
✓ In nutshell, it means that a man taking a benefit under an instrument must also bear the
burden.
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Doctrine of Holding Out ‘OR’ Transfer by Ostensible Owner [Section 41]
✓ It is an exception to the rule that a person cannot confer a better title than he himself has.
✓ An ostensible owner is one who has all the indicia of ownership without being the real owner.
✓ Where the true owner → permits another person to hold himself as the true owner of the
property and a third party, in good faith, deals with the person permitted, then such third party
will acquire a good title as against the true owner.
✓ Following conditions are required to be complied with, so as to provide the protection to the
third party against the true owner:
o The transferor is the ostensible owner;
o He is ostensible owner by the express or implied consent of the true owner;
o The transfer is for consideration;
o The transferee has acted in good faith.
Doctrine of Feeding the Grant Estoppel

where a person fraudently or erroneously represents
that he is authorized to transfer certain immovable property
and agrees to transfer such property for consideration,
transferee acted in good faith then rights of transferee cannot be impaired.
In order to invoke this section, the transferee must prove that:

✓ There was a fraudulent or erroneous representation;
✓ The transferor is found to have subsequently acquired the interest;
✓ The transfer of property was for consideration;
✓ The transferee has not rescinded the contract;
✓ The transferee acted in good faith.
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Doctrine of Lis Pendens ‘OR’ Lite Pendente
lis pendens → pending litigation.

where a suit is pending in any Court between two persons with respect to any immovable property,
the property cannot be transferred except under the authority of the Court.
If any party transfers or otherwise deals with that
DOCTRINE OF FRAUDULENT TRANSFER

Where a person transfers his property so that his creditors shall not have anything out of the
property, the transfer is called a “fraudulent transfer”.
✓ Transfer with the intention to defraud creditors.
✓ Fraudulent transfer → voidable at the option of the creditors.
✓ Transfer is valid unless challenge by creditors.
✓ fraudulent intention has to be proved.
✓ If property is transfer to one of the creditors it will not amount to fraud
Doctrine of Part Performance

✓ prevents a transferor from taking advantage on account of non-registration of documents,
✓ provided that the transferee has performed his part of the contract and in pursuance to
that performance,
✓ the transferee has taken possession of some part of the property.
Essential conditions for the operation of the doctrine of part-performance:

1. a contract to transfer immoveable property.
2 consideration.
3. contract should be in writing and signed by the transferor himself or on his behalf.
4. The terms must be ascertainable with reasonable certainty from the contract itself.
5. The transferee → possession of the property in part performance of the contract.
already in possession→ continued in possession
6. The transferee must have fulfilled or ready to fulfill his part of the obligation under the contract
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Lease
is a transaction whereby one person (i.e., lessor)
transfers the right to enjoy in an immovable property
to another person (i.e., lessee)
either for a certain time or in perpetuity,
in return of a consideration
Licence
Where one person grants
to another, or to a definite number of other persons,
a right to do, or continue to do,
in or upon the immovable property of the grantor
something which would, in the absence of such right, be unlawful.
Determination of leases
✓ By efflux of time or lapse of time
✓ By the happening of a special event
✓ Merger: → when the lessee buys the property of the lessor / lessee takes the lessor’s interest
by succession
✓ By surrender → when the lessee gives up his interest under a lease by mutual consent
✓ By forfeiture → occurs when there is breach of a condition in a lease contract by the lessee
Mortgage
transfer of an interest in specific immovable property for the purpose of securing any of the
following :
a) The payment of money advanced or to be advanced by way of loan; or
b) An existing or future debt; or
c) The performance of an engagement which may give rise to pecuniary liabilities
Transferor → Mortgagor.
Transferee → Mortgagee
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Kinds of Mortgage
1. Simple Mortgage
✓ mortgagor → personal liability for repayment.
✓ mortgaged property → not required to be delivered to the mortgagee,
✓ On default in making payment, mortgagee is entitled to cause mortgaged property to be
sold, after obtaining a decree from the court .
✓ loan → repaid, then Transfer will not take place
2. Mortgage by Conditional Sale

✓ The mortgagor ostensibly sells the mortgaged property.
✓ Here the condition being that the sale shall be absolute in default of payment by a
particular date or that the sale shall be void on payment by a particular date and the
property retransferred.
✓ The possession of the mortgage property is required to be delivered.
3. English Mortgage
(combination of Simple Mortgage and Mortgage by Conditional Sale)
✓ The mortgaged property is transferred absolutely by the mortgagor to the mortgagee.
✓ There is a personal covenant to repay on a certain date
4. Usufructuary Mortgage
✓ profit of the property is appropriated by the mortgagee towards discharge of the advance.
✓ delivery of possession of the mortgaged property to the mortgagee.
✓ The property is returned when the amount due is personally paid or is discharged by rents
and profits rececived.
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5. Mortgage by deposit of Title Deeds/ Equitable Mortgage

✓ It is created by delivery of the material Title Deeds in respect of the mortgaged property to
the mortgagee.
✓ All the provisions relating to Simple Mortgage shall apply to this kind of mortgage
6. Anomalous Mortgage
✓ This mortgage is the combination of two or more other kinds of mortgages.
✓ The remedy to the mortgagee may be by way of sale or by way of foreclosure, depending
the terms of the Deed
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The Benami Transactions (Prohibition) Act, 1988

The Benami Transactions (Prohibition) Act, 1988 provides that
a) benami property→ subject to acquisition by such authority
b) no amount shall be payable for the acquisition;
c) → not benami transaction;
• purchase of property in the name of his wife / unmarried daughter for their
• benefit securities held by a depository as registered owner
Salient Features of the act

✓ It defines a benami transaction and benami property
✓ It lays down the procedure for determination and related penal consequences
✓ CG → designate one or more Courts of Session as Special Court or Special Courts
✓ penalty → entering into benami transactions /for furnishing any false documents
Benami Property [Section 2(8)].

▪ Property which is subject matter of a benami transaction and includes the proceeds from such
property
Benami Transaction Section 2 (9)

A. where a property is transferred to a person, and the consideration for such property has been
paid by another person;
B. a transaction carried out or made in a fictitious name; or
C. a transaction where the owner of the property is not aware of, or, denies knowledge of, such
ownership;
D. a transaction where the person providing the consideration is not traceable or is fictitious;
Exception
i. a Karta, or a member of a Hindu undivided family,
ii. a person standing in a fiduciary capacity
iii. any person being an individual in the name of his spouse or in the name of any child of such
individual and the consideration for such property has been provided or paid out of the known
sources of the individual;
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iv. any person in the name of his brother or sister or lineal ascendant or descendant, and the
consideration for such property has been provided or paid out of the known sources of the
individual;
Benamidar [Section 2(10)]

a person or a fictitious person, as the case may be, in whose name the benami property is
transferred or held and includes a person who lends his name
Prohibition of benami transactions

Before commencement of the act
benami transaction → imprisonment upto 3 years or with fine or with both.
After commencement of the act

benami transaction → imprisonment min 1year & upto 7 years and fine upto 25% of market value
Consequence of benami transaction

✓ Real owner cannot file suit or enforce claim or recover the benami property from legal
owner.
✓ Central government will confiscate the benami property.
✓ Benamidar shall not re- transfer the benami property to any person and it transfer such
transfer as be void.
Adjudication of benami property

Adjudicating Authority → (within 30days of reference)notice to furnish details → benamidar +
beneficial owner + interested party + person claiming the property
property held jointly by more than one person, → notice to all persons holding such property
Adjudicating Authority → opportunity of being heard → pass an order → property is benami / not
benami as the case may be
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Adjudicating Authority → satisfied that some part of the properties is benami property, but is not
able to specifically identify such part, he shall record a finding to the best of his judgment as to
which part or properties is held benami.
Adjudicating Authority has reason to believe that a property, other than a property referred to him
by the Initiating Officer is benami property, it shall provisionally attach the property
Adjudicating Authority may, either on the application of any party, or suo moto, strike out the name
of any party improperly joined or add the name of any person
Adjudicating Authority pass order within 1 year
Manner of service notice

Notice will be served on person who manage or control the affairs
like
✓ Firm → partner.
✓ Huf →Karta / members.
✓ Company → Director / principal officer.
✓ Other person = person who manage or control the affairs
Confiscation of property
• opportunity of being heard → Confiscation order
• If appeal is filled then confiscation after the order of adjudicating
authority.
• order of confiscation → all right and tittle rest within central government free from encumbrance
and no compensation shall be payable .
• Possession shall be given to administrator appoint by central
government.
• Administrator → notice→ within 7days from notice surrender the
benami property.
• notice/ Order is not complied – forcibly Confiscate.
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Overseas Direct Investment

Overseas Investments Governed Under
➢ Foreign Exchange Management (Overseas Investment) Rules, 2022
➢ Foreign Exchange Management (Overseas Investment) Regulations, 2022
➢ Foreign Exchange Management (Overseas Investment) Directions, 2022
Reasons for Overseas investments by persons resident in India:

✓ easier access to technology,
✓ research and development,
✓ a wider global market and
✓ reduced cost of capital
✓ increase the competitiveness
✓ boost to brand value
Overseas Direct Investment (ODI) means

(i) Acquisition of any unlisted equity capital or subscription as a part of the Memorandum
of Association of a foreign entity, or
(ii) Investment in 10% or more of the paid-up equity capital of a listed foreign entity, or
(iii) Investment with control where investment is less than 10% of the paid-up equity capital
of a listed foreign entity.
“Overseas Investment” means financial commitment and Overseas Portfolio Investment by a person
resident in India.
Financial commitment means the aggregate amount of investment by way of ODI, debt other
than Overseas Portfolio Investment (OPI) and non-fund-based facility or facilities extended by
person resident in India to all foreign entities.
Approval from the Reserve Bank

Financial commitment by an Indian entity, exceeding USD 1 (one) billion (or its equivalent) in a
financial year shall require prior approval of the Reserve Bank.
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Indian Entity
✓ A Company defined under the Companies Act, 2013
✓ A Body corporate incorporated by any law for the time being in force
✓ A Limited Liability Partnership formed under the Limited Liability Partnership Act, 2008
✓ A Partnership firm registered under the Indian Partnership Act, 1932
Conditions for Indian entity to lend or invest in any debt instruments issued by a foreign entity:
(i) the Indian entity is eligible to make ODI;
(ii) the Indian entity has made ODI in the foreign entity
(iii) the Indian entity has acquired control in the foreign entity on or before the date of making
such financial commitment
“Overseas Portfolio Investment”(OPI)

means investment, other than ODI, in foreign securities, but not in any unlisted debt
instruments or any security issued by a person resident in India who is not in an IFSC
Provided that OPI by a person resident in India in the equity capital of a listed entity, even after
its delisting shall continue to be treated as OPI until any further investment is made in the entity
Permission for Overseas Investment

A person resident in India
may make or transfer
any investment or financial commitment outside India
under general permission/automatic route
subject to the provisions of Foreign Exchange Management (Overseas Investment) Rules, 2022
and Foreign Exchange Management (Overseas Investment) Regulations, 2022.
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Procedure for Making Overseas Investment

1) applicant shall submit Form FC + requisite documents submit Authorised Dealer (AD)
2) In case of approval route, the applicant → AD bank (after scrutiny and give
recommendations) forward the proposal to the Reserve Bank.
3) The designated AD bank before forwarding the proposal shall submit the relevant
sections of the Form FC in the online ODI application and the transaction number
generated by the application shall be mentioned in their reference.
4) The following documents shall be submitted along with the proposal:
➢ Background and brief details of the transaction.
➢ Reason(s) for seeking approval mentioning the extant FEMA provisions.
➢ Observations of the designated AD bank with respect to the following:

• Prima facie viability of the foreign entity;
• Benefits which may accrue to India through such investment;
• Financial position and business track record of the Indian entity and the foreign
entity;
• Any other material observation.
No Objection Certificate (NOC) from the lender bank/regulatory body/investigative agency

Any person resident in India → (NPA) or wilful defaulter or is under investigation
shall obtain an NOC from the lender bank/regulatory body/investigative agency concerned
before making financial commitment or undertaking disinvestment.
Mode of Payment
(i) by remittance made through banking channels;
(ii) from funds held in an account maintained in accordance with the provisions of the Foreign
Exchange Management Act;
(iii) by swap of securities;
(iv) by using the proceeds of American Depository Receipts or Global Depositary Receipts or
stock swap of such receipts or external commercial borrowings raised in accordance with the
provisions of the Act and the rules and regulations made thereunder for making ODI or financial
commitment by way of debt by an Indian entity
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Transfer or Liquidation
A person resident in India may transfer equity capital by way of sale to a person resident in
India, who is eligible to make such investment under these rules, or to a person resident outside
India
Overseas Investment by trust or society

Conditions for eligibility:
(i) the foreign entity is engaged in the same sector that the Indian Trust or Society is engaged in;
(ii) the Trust or the Society, should have been in existence for at least three financial years
before the year in which such investment is being made;
(iii) the trust deed in case of a Trust, and the memorandum of association or rules or bye-laws in
case of a Society shall permit the proposed ODI;
(iv) such investment have the approval of the trustees in case of a Trust and the governing body
or council or managing or executive committee in case of a Society;
(v) in case the Trust or the Society require special licence or permission either from the Ministry
of Home Affairs, Central Government or from the relevant local authority, as the case may be
Restructuring of foreign entity

Indian entity may permit restructuring of the balance sheet by foreign entity, which has been
incurring losses for the previous two years,
subject to
✓ ensuring compliance with reporting, documentation requirements and
✓ to the diminution in the total value of the outstanding dues towards such person
resident in India after such restructuring not exceeding the proportionate amount of the
accumulated losses.
the diminution in value shall be duly certified by a registered valuer as per the Companies Act,
2013 if:
✓ investment is more than USD 10 million OR
✓ diminution exceeds twenty per cent of the total value of the outstanding dues
The certificate dated not more than six months before the date of the transaction shall be
submitted to the designated AD bank.
The certificate shall mention

✓ the amount of accumulated losses as per the audited balance sheet of the foreign entity,
✓ the proportionate amount of accumulated losses based upon the share of the Indian
entity/investor,
✓ the amount of diminution in the value of the outstanding dues towards the Indian
entity/investor post restructuring and
✓ that such diminution does not exceed the proportionate amount of accumulated losses.
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INDIAN CONTRACT ACT 1872

PROPOSAL OR OFFER
The term ‘proposal’ has been defined in the Indian Contract Act as
▪ When one person signifies

▪ to another
▪ his willingness to do or
▪ to abstain from doing anything,
▪ with a view to obtaining the assent of that other to such act or abstinence,
▪ he is said to make a proposal.[Sec.2(a)]
BASIC CHARACTERISTICS OF A PROPOSAL
1) At least two parties

2) A proposal may be positive or negative
3) A proposal must be made to obtain assent
4) Proposal must be made with an intention to create relations
5) It must be signified or communicated
6) Offer must be certain, definite and not vague
TYPES OF OFFERS
1) Specific Offer Made to a specific person

2) General Offer Can be accepted by performance of conditions
3) Express Offer words either oral / written
4) Implied Offer inferred from conduct of parties
ON THE BASIS OF NATURE OF OFFER
1) Cross offer. Identical offer

2) Counter offer Rejection of original offer
3) Standing offer A continuous offer.
WHAT IS NOT PROPOSAL?
1) Intention to put a proposal

2) Invitation to proposal
a. Catalogue or price list
b. Menu card
c. Quotation of price
d. Time table of a carrier
e. Prospectus of a company
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ACCEPTANCE
• Acceptance must be absolute / unqualified / unconditional
• Acceptance may be given by performance of conditions (General offer)
• It must be given within specified or reasonable time
• It must not precede an offer.
• It must be given by the person to whom offer is made
• Acceptance must be communicated
COMMUNICATION
• COMMUNICATION OF PROPOSAL/OFFER
An offer is complete when it is properly communicated to the offeree. The communication
of offer is complete when it comes to the knowledge of the person to whom it is
made
• COMMUNICATION OF ACCEPTANCE
(a) As against the proposer/offeror: The communication of an acceptance is complete
as against the offeror when it is put into a course of transmission to him so as to
be out of the power of the acceptor.
(b) As against the acceptor: The communication of acceptance as against the acceptor
is complete when it comes to the knowledge of the offeror.
CONTRACT
CONTRACT = AGREEMENT + ENFORCEABILITY BY LAW

SECTION 10: “All agreements are contracts if they are made by the free consent of parties
competent to contract, for lawful consideration & with a lawful object, & are not hereby
expressly declared to be void”
1. Proposal & acceptance (i.e. agreement).

2. Intention to create legal relations
3. Contractual Capacity.
a. He is a major.
b. He is of sound mind; &
c. He is not disqualified by any law
4. Free consent. Consent is said to be free when it is not caused by coercion, undue
influence, fraud, or mis-representation, or mistake
5. Consideration.
(a) Consideration means something
(b) It may be in cash or kind
(c) Must be lawful & real & not illusory
(d) It may adequate / inadequate
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6. Lawful objects or consideration

(i) If it is forbidden by law; or
(ii) If it is of such a nature that if permitted, would defeat the provisions of any law; or
(iii) If it is fraudulent; or
(iv) If it involves or implies injury to the person or property of another;
(v) If the Court regards it as immoral;
(vi) If court regards it against public policy
7. Agreements not declared void
CONSIDERATION
✓ May be in CASH or KIND
✓ Something in return (quid pro quo)
✓ May be adequate or inadequate
✓ Should at desire of promisor
✓ Must be lawful
✓ Past, present, future
✓ Act which promisor is anyway bound to do is not consideration
✓ Can be given to or by 3rd Person (Stranger to consideration)
Rule: Contract without consideration is void

Exceptions: Contract without consideration is VALID
1. Writing + registered + account of natural love & affection between parties
standing in near relation to each other
2. Promise to compensate a person who has already voluntarily done something
for the promisor, or something which the promisor was legally compellable to do;
3. Promise + writing + signed + to pay wholly or in part time barred debt
4. Gifts actually made i.e. Completed gift
5. Agency / Partnership contract
PARTIAL ILLEGALITY :-( Section 24 ) If any part of a single consideration for one or more
objects, or any one or any part of any one of several considerations for a single object, is
unlawful, the agreement is void.
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PRIVITY OF CONTRACT : Stranger to contract cannot sue parties to contract

Exception to the rule
THERE CAN BE STRANGER TO
a. Beneficiary can sue CONSIDERATION
b. Assignee of contract
c. Devolution by operation of law BUT
d. Insurance company can sue THERE CANNOT BE STRANGER
e. Principal can enforce contract entered into by Agent TO CONTRACT
CLASSIFICATION OF CONTRACTS
TYPE DEFINITION EFFECTS
• Creates legal rights &
Valid Having all essential element of
agreement obligations
section 10
• Enforceable by law
An agreement not
Void agreement enforceable by law is said to • No restitution
be void.
A contract which ceases to be
• Restitution,
enforceable by law becomes
Void Contract • Payment or compensation for
void when it ceases to be
performance
enforceable
An agreement which is • Valid till rescinded
Voidable enforceable by law at the • Restitution.
contract option of aggrieved party is • Voidable at the option of
a voidable contract aggrieved party
An agreement, which is • Void agreement
Illegal expressly or impliedly • Legal part enforceable
Agreement prohibited by law, is an • Collateral agreement
illegal agreement becomes void
Technical defects in a
Unenforceable contract may be due to non-
contract compliance of some of the legal
formalities.
CLASSIFICATION ACCORDING TO EXTENT OF EXECUTION
1) Executed contract performed by ALL the parties

2) Executory contract both or one of the parties have still to perform
3) Bilateral contract both the parties are yet to perform their obligations
4) Unilateral contract one party has to perform his obligation
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VOID AGREEMENTS
AGREEMENTS OPPOSED TO PUBLIC POLICY
1. Trading with the enemy.

2. Stifling (suppressing) prosecution:
3. Champerty & maintenance - When a person helps another in litigation
➢ Does not share in the proceeds of the action, it is called MAINTENANCE.
➢ Exchange of a promise to h& over a portion of the fruits of the litigation, if any,
it is called CHAMPERTY.
➢ VOID if litigation is of a gambling character
4. Marriage brokerage, Sale of public offices, titles & appointments.
5. To create monopolies.
6. Restraining personal liberty, parental rights
7. Restraint of marriage / trade / legal proceedings
RULE : AGREEMENTS IN RESTRAINT OF TRADE = VOID
EXCEPTION: AGREEMENTS IN RESTRAINT OF TRADE = VALID
× Sale of goodwill
× Partner's competing business
× Rights of outgoing partner
× Partner's similar business on dissolution
× An agreement between any partner and the buyer of the firm's goodwill
× Trade Combinations
× Negative stipulations in service agreements
× Sole Selling Agent’s Agreement
RULE : AGREEMENTS IN RESTRAINT OF LEGAL PROCEEDINGS = VOID
EXCEPTIONS:
× any dispute between them in respect of any subject shall be referred to arbitration (present
disputes)
× To refer to arbitration any question between them which has already arisen or which may
arise in future, is valid; but such a contract must be in writing. (agreement to refer past &
future disputes to arbitration)
× Referring disputes to court in particular jurisdiction
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WAGERING Agreements = VOID
(One party is to win and the other to lose)
✓ Share market transactions in which there is clear intention to give and take delivery share
is not wagering
✓ Contract of insurance is not wagering
✓ An agreement by way of wager is void.
✓ In the State of Maharashtra and of Gujarat wagering agreement are not only void but also
illegal. Hence, Collateral agreement will also become VOID
Consequences of No Free Consent
Undue Misreprese
Coercion Fraud Mistake
Influence ntation
Voidable Voidable
Voidable Voidable (Exception (Exception
s apply) s apply)
Mistake of
Mistake of Law
Fact
Law of
Unialteral Bilateral Foreign
Land
Law
Valid Void Valid Treated as

Mistake of
Fact
CAPACITY TO CONTRACT
I. MINORS:
According to Section 3 of Indian Majority Act, 1875 A minor is a person who has not
completed 18 years of age. Every person domiciled in India attains majority on the
completion of 18 years of age.
In the following cases, a person attains majority on completion of 21 years of age:-
• Where the guardian of a minor is being appointed under Guardians and Wards Act,
1890.
• Where the superintendence of minor’s property is assumed by Court of Wards.
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Minor CAN’T Minor CAN

a. Enter into an agreement. If he enters a. Enter into contracts of Apprenticeship,
into an agreement, it is void ab intio, Service, Education or Instruction that are
i.e. from the very beginning. beneficial to him.
b. Ratify any act, on attaining majority. b. Be a Beneficiary.
c. No restitution / Be forced to refunds c. Be admitted to the benefits of a
any benefits received. Partnership.
d. Be adjudged insolvent. d. Be an Agent and bind his
e. Be held liable even in case of principal/parents or guardian acting in
fraudulent representation of age. capacity of principal.
f. Become a partner. e. Plead minority.
g. Ask for specific performance of a f. Minor’s Estate /Property is liable for
contract. supply of necessaries including
h. Parents or Guardian are not liable for services. (Quasi Contract)
breach of contract by the minor.
II. PERSONS OF UNSOUND MIND

“A person is said to be of sound mind for the purpose of making a contract if, at the time
when he makes it, he is capable of understanding it & of forming a rational judgment as to its
effect upon his interests.” THEY CAN ENTER INTO CONTRACT WHEN THEY ARE OF
SOUND MIND
Ex: Idiot, Lunatic, Delirious persons, Drunken or intoxicated person,

Hypnotized persons, Mental decay
III. PERSONS DISQUALIFIED BY LAW

1. Alien enemy, Foreign Sovereigns, Corporation & companies (disqualified for ultra
vire transaction, Insolvents, Convicts
.
CONTINGENT CONTRACT
CHARACTERISTICS:
1. Depends upon happening or non-happening of event

2. Such event is uncertain
3. It depends on collateral/ incidental event
4. Event must not be mere will of the promisor
5. Must contain all essentials of valid contract
Contingent contracts upon uncertain event = valid

DISCHARGE OF CONTRACTS
If it depends upon impossible event = void
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Discharge of Contract
By
By By Mutual By Lapse of By operation of By Breach of
impossibility of
Performance Consent Time Law Contract
performance
Novation Impossibility at Law of By merger

Actual or Actual or
Alteration the time making Limitation unauthorized
Attempted Anticipat
Rescission the contract, Ex: Time alteration of terms,
Performance ory
Remission with or without barred debt insolvency, death,
Waiver knowledge of the rights & liabilities
Merger parties or arising becoming vested
subsequent to in the same person
the formation of
the contract
Discharge by agreement or consent
1. NOVATION Substitution Of New Contract

2. ALTERATION Changes In One / More Terms
3. RESCISSION All Or Some Terms Cancelled
4. REMISSION Lesser Fulfillment
5. WAIVER Giving Up Some Right
6. MERGER Superior Right Accruing
SUPERVENING IMPOSSIBILITY: ‘A contract to do an act which after the contract is made

becomes impossible, or by reason or some event which the promisor could not prevent,
becomes void when the act becomes impossible or unlawful.’
A contract is discharged by supervening impossibility in the following cases:
× Destruction of subject matter of contract

× Nonexistence or non-occurrence of particular state of things.
× Death or incapacity of a person, where the contract depends on the personal
skill or qualification.
× Government or legislative intervention
× Outbreak of war
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IMPOSSIBILITY OF PERFORMANCE-NOT AN EXCUSE
× Difficulty of performance: A contract is not discharged by the mere fact that

it has become more difficult to perform due to some non contemplated events or
delay.
× Commercial hardship
× Impossibility due to failure of a third person on whose work the promisor
relied
× Strikes, lock-outs and civil disturbances
× Failure of one of the objects
QUASI CONTRACTS - Doctrine of unjust enrichment

The law implies from the circumstances of the case & from the conduct & relationship of the
parties that there is a promise imposing an obligation on one party & conferring a right in
favour of the other even though there is no offer & acceptance, consensus ad idem, &
agreement. These cases, strictly speaking, are not contracts but the law recognizes them as
‘relations resembling those created by contracts.’
Types of Quasi Contracts:
Sec. 68 Sec. 69 Sec. 70 Sec. 71 Sec. 72

Supply of Reimbursement Obligation to Responsibility of Person
Necessaries of money due pay for benefit finder of goods receiving
out of non goods or
gratuitous act money by
mistake
a. Claim for necessaries supplied to a person incapable of contracting: the

person who has furnished such supplies is entitled to be reimbursed from the
property of such incapable person.
b. A person who is interested in the payment of money, which another is bound by
law to pay, & who therefore, pays it, is entitled to be reimbursed by the other.
c. Obligation of person enjoying benefit of a non-gratuitous act: the latter is
bound to make compensation to the former in respect of, or to restore, the thing so
done or delivered.
d. Responsibility of finder of goods A person, who finds goods belonging to another
& takes them into his custody, is subject to the same responsibility as a bailee.
e. Liability of person to whom money is paid or thing delivered by mistake or
under coercion.
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EBCL - Case Studies (2018-2022)

1) In pandemic of Covid 19 a drug company made an offer by advertisement, a reward of `10,000
to anyone suffering from Covid after using their drug in prescribed manner. Mrs. Romila having
taken the drug as per prescription could not be cured. She claimed for the money. Will she
succeed ?
Ans) Yes, she will succeed.
The problem is based on leading case of Carlill v. Carbolic Smoke Ball Co. wherein the company
offered by advertisement a reward of 100£ to anyone who contacted influenza after using their
smoke ball in the specified manner. Mrs. Carlill used smoke ball in the specified manner, but was
infected by influenza. She claimed the reward and it was held that she could recover the reward
as general offer can be accepted by anybody. Since his offer is of a continuing nature, more than
one person can accept it and can even claim the reward.
2) Tommy has two properties, Property-M and Property-N. He sells his Property-N to John and
puts a condition that John should not construct more than one storey on Property-N so that
Property-M, which he retains, shall have good light and free air. Whether the condition
imposed by Tommy is ‘valid’ under the Transfer of Property Act, 1882 ? Give reasons
Ans) As per Section 11 of the Transfer of Property Act, 1882, where an immovable property is
transferred by one to another, the transferor should not impose conditions as to how and in what
manner the transferee should enjoy the property.
But the above provision is subject to an exception i.e. if the condition which is imposed by
transferor is for the benefit of another piece of immovable property which he retains then such a
condition is valid.
For Example : A has properties X and Y. He sells property Y to B and puts a condition that B should
not construct on property Y more than one storey so that A’s property X which he retains should
have good light and free air. Such a condition is valid.
Thus, it is clear that the condition imposed by Tommy is for the benefit of another property which
he retains. Such a condition is valid under the Transfer of Property Act, 1882.
3) Ramesh buys a second-hand car from Suresh for `4 Lakh. The car is a stolen property of Dinesh.
After two months of use Dinesh claims the car and deprives Ramesh of the car. Can Ramesh
claim compensation from Suresh ?
Ans) Yes, Ramesh can claim compensation from Suresh.
Section 14(a) of the Sales of Goods Act, 1930 provides that unless the circumstances of the
contract are such as to show a different intention, there is an implied condition as to title that the
seller, in an actual sale, has the right to sell the goods, and in agreement to sell, he will have a
right to sell the goods at the time when property is to pass.
As a result, if the title of the seller turns out to be defective, the buyer is entitled to reject the
goods and can recover the full price paid by him.
In Rowland v. Divall, A had bought a second-hand motor car from B and paid for it. After he had
used it for six months, he was deprived of it because the seller had no title to it. It was held that B
had broken the condition as to title and 'A' was therefore, entitled to recover the purchase
money from B
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4) Ramu purchased a tractor from Mahendra Ltd. for tilling the land but he used it in idle time for
transportation of agricultural produce on hire. Some defects were developed in the engine of
the tractor. He complained to Mahendra Ltd., but all in vain. Then he filed a suit in Consumer
Disputes Redressal Forum for damages caused by the defects. Mahendra Ltd. pleaded that
Ramu is not a ‘consumer’ within the definition of section 2(7) of the Consumer Protection Act,
2019, as he is using the tractor for commercial purposes. Whether Ramu will succeed in his case
? Refer to relevant provisions of law in support of your answer with reference to case law, if
any
Ans) According to Section 2(7) of the Consumer Protection Act, 2019, consumer means any person
who–
(i) buys any goods for a consideration which has been paid or promised or partly paid and partly
promised, or under any system of deferred payment and includes any user of such goods other
than the person who buys such goods for consideration paid or promised or partly paid or partly
promised, or under any system of deferred payment, when such use is made with the approval of
such person, but does not include a person who obtains such goods for resale or for any
commercial purpose; or
(ii) hires or avails of any service for a consideration which has been paid or promised or partly
paid and partly promised, or under any system of deferred payment and includes any beneficiary
of such service other than the person who hires or avails of the services for consideration paid or
promised, or partly paid and partly promised, or under any system of deferred payment, when
such services are availed of with the approval of the first mentioned person, but does not include
a person who avails of such service for any commercial purpose.
“Commercial Purpose” does not include use by a person of goods bought and used by him
exclusively for the purpose of earning his livelihood, by means of self-employment; the
expressions “buys any goods” and “hires or avails any services” includes offline or online
transactions through electronic means or by teleshopping or direct selling or multi-level
marketing.
In the case of Bhupendra Jang Bahadur Guna v. Regional Manager & Others, it was held that a
tractor purchased primarily to till the land of the purchaser and let out on hire during the idle
time to till the lands of others would not amount to commercial use.
In view of the provisions of Consumer Protection Act and decided case law stated above, Ramu is
a consumer under the Consumer Protection Act, 1986 and he can file the claim if there is any
defect in the tractor.
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5) Raman borrows `5,000 from Boman and promises to pay `10,000, if he fails to pay on a
stipulated date. Is on Raman’s failure to repay on stipulated date, Boman is entitled to recover
10,000 from Raman ? Examine the validity of claim of stipulated damages.
Ans) Yes, claim can sustain if Court finds it reasonable.
Section 74 of the Indian Contract Act, 1872, provides for reasonable compensation for breach of
contract where penalty is stipulated for.
When a contract has been broken, if a sum is named in the contract as the amount to be paid in
case of such breach, or if the contract contains any other stipulation by way of penalty, the party
complaining of the breach is entitled, whether or not actual damage or loss is proved to have
been caused thereby, to receive from the party who has broken the contract reasonable
compensation not exceeding the amount so named or, as the case may be, the penalty stipulated
for.
Illustration (a) A contracts with B to pay B Rs. 1,000, if he fails to pay B Rs. 500 on a given day. A
fails to pay B Rs. 500 on that day. B is entitled to recover from A such compensation, not
exceeding Rs. 1,000, as the Court considers reasonable
6) F, for natural love and affection, promises to give her daughter D `1,00,000. But after some
time F refuses to fullfil his promise. Advice D what she should do ?
Ans) Present problem relates to section 25 of the Contract Act, 1872, which lays a general rule that an
agreement made without consideration is void. Section 25 also lays down exception to this rule
which read as if an agreement is expressed in writing and registered and is made out of natural
love and affection between parties standing in a near relation of each other, the agreement is
valid and enforceable and requires no consideration.
Though in the present problem F promises to give her daughter `1,00,000 out of natural love and
affection and the parties are standing in near relation to each other but his promise is not in
writing and registered, so daughter D is not entitled to get the promise by her father enforced i.e.
Oral promise without consideration is not legally enforceable under the given exception, so it is
advised to D that she is not entitled to get the promise of her father enforced in the court of law.
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7) A is the tenant of B. A asks B to clean, repair and maintain the building. B refuses. There is no
provision in the lease agreement in respect of cleaning, repairing and maintaining the building.
However ‘A’ files a claim against ‘B’ under Consumer Protection Act, 2019. Decide referring the
relevant provisions of law
Ans) The present problem relates to Consumer Protection Act, 2019. Issue involved in the question is
whether A is the consumer or not. A files for relief under the Consumer Protection Act, 2019 in
view of the definition of “Consumer” given in the Act.
According to Section 2(7)(ii) of the Consumer Protection Act, 2019, Consumer means any person
who hires or avails of any service for a consideration which has been paid or promised or partly
paid and partly promised, or under any system of deferred payment and includes any beneficiary
of such service other than the person who hires or avails of the services for consideration paid or
such services are availed of with the approval of the first mentioned person, but does not include
a person who avails of such service for any commercial purpose.
Further, in Laxmiben Laxmichand Shah v. Sakerben Kanji Chandan and others, the Supreme Court
held that the tenant entering into lease agreement with the landlord cannot be considered as
consumer under the Consumer Protection Act. Where there was no provision in the lease
agreement in respect of cleaning, repairing and maintaining the building, the rent paid by tenant
is not the consideration for availing these services and therefore, no question of deficiency in
service.
Therefore, going by the above judgement and definition of consumer in the Consumer Protection
Act, 2019, A cannot be a consumer for services of cleaning, repairing and maintaining the building
which is not part of lease agreement and for which rent he is paying cannot be considered to be
consideration. If he is not consumer, there is no question of deficiency of service under the
Consumer Protection Act, 2019.
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8) A gifts ` one lakh to B, reserving right to take back ` ten thousand out of that at his desire with
B’s assent. Decide the validity of this gift in the light of relevant provisions of law
Ans) This present problem relates to Transfer of Property Act, 1882. This involves an issue of validity
of gift. In this case, A gifts to B ` one lakh but with B’s assent, he reserves the right to get back `
ten thousand out of the entire amount of ` one lakh.
Section 122 of the Transfer of Property Act defines “gift” as follows:

“Gift” is the transfer of certain existing moveable or immoveable property made voluntarily and
without consideration by one person called the donor, to another called the donee and accepted
by or on behalf of the donee.
One of the essential characteristic of a gift is that it cannot be revoked at the will and pleasure of
the grantor. A revocable gift is one which may be revoked by the donor at any time. Its
revocation would depend upon the mere will or pleasure of the donor. Such a gift is void. But on
the other hand, if the condition is one which does not depend on the will or pleasure of the
donor, the gift can be revoked on the happening of such condition
Illustrations (b) A gives a lakh of rupees to B, reserving to himself with B’s assent the right to take
back at leisure Rs. 10,000 out of one lakh. The gift holds goods as to Rs. 90,000 but is void as to
Rs. 10,000 which continues to belong to A.
In view of the definition of gift contained under Section 122, the gift, in the case given in the
question, holds good as to Rs. 90,000 but is void as to Rs. 10,000 which continue to belong to A.
This is because, once a gift is made, it can’t be revoked at the will desire or pleasure of the Donor.
Since the gift of Rs. 10,000 solely depend at the desire of A, hence void and gift for rest Rs. 90,
000 shall be enforceable under the law
9) X and Y, buy 50 bales of cotton agreeing to divide these between them. Decide whether X and Y
are partners ? Support your answer in light of Indian Partnership Act, 1932.
Ans) This question relate to the Indian Partnership Act, 1932. The issue involved in this problem is
whether X & Y are partners or not?
According to section 4 of the Act, “Partnership is the relation between person who have agreed
to share the profits of a business carried on by all or any of them acting for all.”
Therefore, to constitute a partnership, the parties must have agreed to carry on a business and to
share profits in common. “Profits” mean the excess of returns over advances, the excess of what
is obtained over the cost of obtaining it. It follows that the sharing of profits is an essential
ingredient of partnership.
In present problem X and Y buy 50 bales of cotton agreeing to divide bales between them.
So here the prima facie evidence of the existence of partnership i.e. sharing of profits is missing
hence in view of Section 4 of the Indian Partnership Act, 1932, X and Y are not partners.
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10) Rishi (the insured) purchased two life insurance policies with premium payable quarterly from
ABC Insurance Company (the insurer). When the fifth premium became due, the agent of
insurer met the insured and took a bearer cheque towards the premium payable by the insured
in respect of the policies. The agent encashed the cheque immediately, but the amount of
premimum was not deposited by the agent for another four months. In the meanwhile, the
insured met with a fatal accident and died. The claim of widow of the insured was repudiated
by the insurer on the ground that the policies had lapsed on account of nonpayment of the
premium. Whether the claim of the widow may be recovered from the insurer ? Decide
Ans) The present case is similar to the case of Harshad J. Shah v. Life Insurance Corporation of India
[1997(3) SCALE 423 (SC)]. In this case Supreme Court held that the agent had no express
authority to receive the premium on behalf of the Corporation. In his letter of appointment there
was a condition expressly prohibiting him from collecting the premium. Nor could it be said that
he had an implied authority to collect the premium, as regulation 8(4) expressly prohibited the
agents from collecting premiums. Therefore, no case had been set up by the complainant before
the State Commission that the Corporation by its conduct had induced the policyholders,
including the insured, to believe that the agents were authorised to receive premiums on behalf
of the Corporation. Nor was there any material on record that lent support to this contention. In
the facts of this case there was no room to invoke the doctrine of apparent authority underlying
Section 237 of the Indian Contract Act when the LIC has been careful in making an express
provision in the Regulations/Rules, which are judicial in nature.
However, taking a humanitarian view of the tragedy faced by the claimants, Supreme Court
directed the LIC to refund the entire amount of premium paid to the LIC on the four insurance
policies along with interest.
When an agent has, without authority, done acts or incurred obligations to third persons on
behalf of his principal, the principal is bound by such acts or obligations, if he has by his words or
conduct induced such third persons to believe that such acts and obligations were within the
scope of the agent’s authority.”
Therefore, in the case with facts stated in question, Rishi’s (the insured) widow cannot claim any
amount from insurer on the ground of apparent authority except when it may be given on
humanitarian ground by the Court as was in Harshad J. Shah Case.
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11) A contract for the sale of land has been entered into between Vishal and Akash. Akash, the
transferee, has paid the price entering into possession and is willing to carry out his contractual
obligations. As registration has not been effected Vishal, the transferor, seeks to evict Akash
from the land. Whether Vishal can do so ? Give reasons in support of your answer
Ans) Followings are the essential conditions for the operation of the doctrine of part performance
according to Section 53A of the Transfer of Property Act.
1. There must be a contract to transfer immoveable property.
2. It must be for consideration.
3. The contract should be in writing and signed by the transferor himself or on his behalf.
4. The terms necessary to constitute the transfer must be ascertainable with reasonable certainty
from the contract itself.
5. The transferee should have taken the possession of the property in part performance of the
contract. In case he is already in possession, he must have continued in possession in part
performance of the contract and must have done something in furtherance of the contract.
6. The transferee must have fulfilled or be ready to fulfil his part of the obligation under the
contract.
If all the above mentioned conditions are satisfied, then, the transferor and the persons claiming
under him are debarred form exercising any right in relation to the property other than the rights
expressly provided by the terms of the contract notwithstanding the fact that the instrument of
transfer has not been registered or complete in the manner prescribed therefor by the law for
time being in force. It should be noted that Section 53A does not confer any positive right on the
transferee. It only prohibits exercise of the right of ownership in relation to the property in order
to evict the transferee from the property because legal requirements have not been satisfied.
In view of the above, Vishal (transferor) cannot evict Akash (transferee) from the land. Akash will
not be allowed to suffer simply because the formality of registration has not been through. The
legislature grants some relief to such a transferee under Section 53A, which embodies the
doctrine of part-performance.
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12) Ms. Rubina was operated in General Hospital Nagpur, which was under control of the
Government of Maharashtra, free of charge for family planning i.e. tubectomy. Subsequently,
she gave birth to a female child. She filed a complaint against the State of Maharashtra and the
doctor, who performed the operation, claiming ` 2 lakh for negligence in performing the
operation. Rubina sought the relief of ` 2 lakh under the Consumer Protection Act, 1986, stating
that the negligence of the doctor and the State of Maharashtra, being the controller of the
hospital may be treated as deficiency in the service. Decide, whether Rubina will succeed?
Ans) As per Section 2(1)(d) of the Consumer Protection Act, Consumer means any person who hires or
avails of any services for a consideration which has been paid or promised or partly paid and
partly promised, or under any system of deferred payment and includes any beneficiary of such
services other than the person who hires or avails of the services for consideration paid or
such services are availed of with the approval of the first mentioned person but does not include
a person who avails of such services for any commercial purpose.
The term ‘service’ is defined under Section 2(1)(o) of the Act as to mean service of any
description which is made available to potential users and includes, but not limited to the
provision of facilities in connection with banking, financing, insurance, transport, processing,
supply of electrical or other energy, board or lodging or both, housing construction,
entertainment, amusement or the purveying of news or other information, but not include the
rendering of any service free of charge or under a contract of personal service.
But in the instant case, the tubectomy is rendered free of charge which will not fall within the
ambit of the definition of “service” under the Consumer Protection Act, 1986. For the same
reason, Rubina is not a consumer as per the provisions of the Act. Therefore, Rubina will not
succeed under the Consumer Protection Act, 1986
13) A puts M as apprentice to B, and gives a guarantee to B for his fidelity. B promises on his part
that he will, at least once a month, see M make up the cash. B omits to see this done as
promised and M embezzles. State whether A is liable to B under the Indian Contract Act, 1872?
Ans) According to Section 139 of the Indian Contract Act, 1872, if the creditor does any act which is
against the rights of the surety, or omits to do an act which his duty to the surety requires him to
do, and the eventual remedy of the surety himself against the principal debtor is thereby
impaired, the surety is discharged.
A puts M as apprentice to B, and gives a guarantee to B for M’s fidelity. B promises on his part
that he will, at least once a month, see M make up the cash. B omits to see this done as
promised, and M embezzles.
In the instant case B (creditor), himself fails to fulfil his duty to check M once in a month making
up cash. So, he being at fault can’t held A (surety) liable for embezzlement by M (principal
debtor). A (being surety) is not liable to B (being creditor) under the Indian Contract Act, 1872.
14) A hot water bottle was bought by Shreya, who could not be expected to have special skill
knowledge with regard to hot water bottles, from a chemist, who sold such articles stating that
the bottle will not stand boiling water but was intended to hold hot water. While being used by
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Shreya, the bottle bursted and injured her. Whether seller is responsible for damages ? Give
reasons in support of your answer
Ans) Ordinarily, in a contract of sale, there is no implied warranty or condition as to the quality or
fitness for any particular purpose of goods supplied.
But there is an implied condition that the goods are reasonably fit for the purpose for which they
are required if:
(i) the buyer expressly or by implication makes known to the seller the particular purpose for
which the goods are required, so as to show that he relies on the seller’s skill and judgement, and
(ii) the goods are of a description which it is in the course of the seller’s business to supply
(whether he is the manufacturer or producer or not). There is no such condition if the goods are
bought under a patent or trade name.
In the case of Priest v. Last (1903) 2 K.B. 148, a hot water bottle was bought by the plaintiff, a
draper, who could not be expected to have special skill knowledge with regard to hot water
bottles, from a chemist, who sold such articles stating that the bottle will not stand boiling water
but was intended to hold hot water. While being used by the plaintiff’s wife, the bottle bursted
and injured her. Held, the seller was responsible for damages as the bottle was not fit for use as a
hot water bottle.
In view of the above, the seller was responsible for damages as the bottle was not fit for use as a
hot water bottle.
15) X gives to Y property worth only `5,000 and adds a condition that Y should sell property for
`75,000 and not below that amount, this condition will at once become invalid for no one will
buy the property which is only worth `5,000 for `75,000 Similarly X gives property to Y worth
`75,000 and stipulates that if Y wants to sell the property he should sell it to Z for `2,000. Decide
with help of case law whether it is an absolute restraint under law relating to Transfer of
Property Act, 1882
Ans) Section 10 of the Transfer of Property Act, 1882 says that when property is transferred, the
transferee should not be restrained absolutely from alienating the property. One may give
property to another subject to a condition, but the condition should not be one which absolutely
prevents the transferee from alienating the property. Such a condition, if provided is invalid.
In Trichinpoly Varthaga Sangum v. Shunmoga Sunderam, (1939) Madras 954, there was a
partition between a Hindu father and his five sons. The deed of partition provided that if any one
of the sons wanted to sell his share, he should not sell it to a stranger but to one of his brothers
who should have the option to buy for a sum not exceeding `1,000. It was held by the Court that
the condition absolutely prevented the son from selling the property to any one for good value.
In this case the market value of the property of the son was far greater than `1,000. Hence, the
condition was declared invalid and absolute restraint.
Coming to the factual matrix provided in the present case, the conditions stipulated therein are in
the nature of absolute restraint under the provisions of the Transfer of Property Act, 1882
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16) A shopkeeper sold a packet of pre-packed chillies which does not bear the declarations
required to be made by the manufacturers on pre-packaged commodities. Whether the
shopkeeper has committed any act punishable under the Legal Metrology Act, 2009 ? Discuss
Ans) Section 18 of the Legal Metrology Act, 2009 states that no person shall manufacture, pack, sell,
import, distribute, deliver, offer, expose or possess for sale any pre-packaged commodity unless
such package is in such standard quantities or number and bears thereon such declarations and
particulars in such manner as may be prescribed. Any advertisement mentioning the retail sale
price of a pre-packaged commodity shall contain a declaration as to the net quantity or number
of the commodity contained in the package in such form and manner as may be prescribed.
Under section 36 of the Legal Metrology Act, 2009 whoever manufactures, packs, imports, sells,
distributes, delivers or otherwise transfers, offers, exposes or possesses for sale, or causes to be
sold, distributed, delivered or otherwise transferred, offered, exposed for sale any pre-packaged
commodity which does not conform to the declarations on the package as provided in the Act,
shall be punished with fine which may extend to twenty-five thousand rupees, for the second
offence, with fine which may extend to fifty thousand rupees and for the subsequent offence,
with fine which shall not be less than fifty thousand rupees but which may extend to one lakh
rupees or with imprisonment for a term which may extend to one year or with both.
Accordingly, the shopkeeper has sold pre packed chillies which do not bear the declarations
required to be made on pre-packaged commodities, the said shopkeeper has committed an act
punishable under Section 36 read with Section 18 of the Legal Metrology Act, 2009
17) Amit’s son absconded. He sent Suresh, his servant in search of the boy. When Suresh had left,
Amit, by hand bills, offered to pay `5,001 to anyone finding his son. Suresh found the son and
after coming to know about the offer, claimed the amount. Examine the validity of claim raised
by Suresh
Ans) One of the cardinal principle of the Law of Contract is that an acceptance must be given within a
reasonable time and before the offer lapses or is revoked. An offer becomes irrevocable by
acceptance.
An acceptance never precedes an offer. There can be no acceptance of an offer which is not
communicated. Similarly, performance of conditions of an offer without the knowledge of the
specific offer, is no acceptance. Thus in Lalman Shukla v. Gauri Dutt (1913), where a servant
brought the boy without knowing of the reward, he was held not entitled to reward because he
did not know about the offer.
In this case Suresh had no knowledge of the offer, so he will fail to claim the same.
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18) ‘A’, an individual, by a transaction, purchased a house in the name of his wife. Consideration of
transaction was paid by ‘A’ out of his known sources. Government seized the house claiming it
to be a benami property. Decide, whether the action of the Government is justified ?
Ans) According to Section 2 (8) of the Benami Transactions (Prohibition) Act, 1988 Benami Property
means any property which is the subject matter of a benami transaction and also includes the
proceeds from such property.
As per Section 2 (9)(A) of the Benami Transactions (Prohibition) Act, 1988 “benami transaction”
means-a transaction or an arrangement—
(a) where a property is transferred to, or is held by, a person, and the consideration for such
property has been provided, or paid by, another person; and
(b) the property is held for the immediate or future benefit, direct or indirect, of the person who
has provided the consideration, except when the property is held by—
(iii) any person being an individual in the name of his spouse or in the name of any child of
such individual and the consideration for such property has been provided or paid out of the
known sources of the individual;
In the present case transaction falls in the category of Section 2 (9)(A)(b)(iii) of the Benami
Transactions (Prohibition) Act, 1988 and is an exception to what constitutes Benami Transaction.
Therefore, the house purchased by A in the name of his wife known sources does not fall in the
Benami Transaction. So the action of seizure of the house by the Government is not justified.
19) A advertises in the newspaper that he will pay ` 1,000 to any one who brings to him his lost
son. B without knowing of this reward finds A’s lost son and restore him to A. Can B claim for
the reward under the provisions of the Indian Contract Act, 1872
Ans) According to Indian Contract Act, 1872, for a valid contract an acceptance never precedes an
offer. There can be no acceptance of an offer which is not communicated. Similarly, performance
of conditions of an offer without the knowledge of the specific offer, is no acceptance and
therefore does not result in a contract.
Thus, as held in the case of Lalman Shukla v.Gauri Dutt (1913), where a servant brought the boy
without knowing of the reward, he was held not entitled to reward because he did not know
about the offer and therefore could not have accepted it.
In this given case since B did not know of the reward, he cannot claim it from A even though he
finds A‘s lost son and brings him to A.
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20) X draws a cheque in favour of Y, a minor, Y endorses the same in favour of Z. The cheque is
dishonoured by bank on grounds of inadequate funds. What legal remedy is available to Z
under the provisions of the Negotiable Instruments Act, 1881 ?
Ans) Capacity to incur liability as a party to a negotiable instrument is co-extensive with capacity to
contract. According to Section 26 of the Negotiable Instruments Act, 1881, every person capable
of contracting according to law to which he is subject, may bind himself and be bound by making,
drawing, acceptance, endorsement, delivery and negotiation of a promissory note, bill of
exchange or cheque.
Negatively, minors, lunatics, idiots, drunken person and persons otherwise disqualified by their
personal law, do not incur any liability as parties to negotiable instruments. But incapacity of one
or more of the parties to a negotiable instrument in no way, diminishes the liabilities of the
competent parties to the said instrument. Therefore, where a minor is the endorser or payee of
an instrument which has been endorsed all the parties excepting the minor are liable in the event
of its dishonour.
In the given case Z can recover the amount of cheque from X who delivers the cheque in favour
of Y, a minor by resorting to the provisions of the Negotiable Instruments Act, 1881
21) A and B are litigating in a count of law over property X and during the pendency of the suit, A
transfers the property X to C. The suit ends in B’s favour. Decide, who shall be entitled for
property X under the provisions of the Transfer of Property Act, 1882 ?
Ans) Section 52 of the Transfer of Property Act, 1882 incorporates the doctrine of Lis pendens. It
states that during the pendency of a suit in a Court of Law, property which is subject to the suit/
litigation cannot be transferred. When it is said that the property cannot be transferred what is
meant in this context is that property may be transferred but this transfer is subject to the rights
that are created by a Courts decree.
In the given case, A and B are litigating in a Court of law over property X and during the pendency
of the suit A transfers the property X to C. The suit ends in B’s favour. Here C who obtained the
property during the time of litigation cannot claim the property. He is bound by the decree of the
Court wherein B has been given the property.
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22) doctor purchased woollen undergarments from S, a retailer shopkeeper whose business was to
sell goods of the description. But after wearing the undergarments, the doctor got developed
some skin disease. Can the doctor claim damages from S under the Sale of Goods Act, 1930 ?
Decide
Ans) According to the Sale of Goods Act, 1930 in a contract of sale, there is no implied warranty or
condition as to the quality or fitness for any particular purpose of goods supplied.
But there is an implied condition that the goods are reasonably fit for the purpose for which they
are required if:
(i) the buyer expressly or by implication makes known to the seller the particular purpose for
which the goods are required, so as to show that he relies on the seller's skill and judgement, and
(ii) the goods are of a description which it is in the course of the seller's business to supply
(whether he is the manufacturer or producer or not). There is no such condition if the goods are
bought under a patent or trade name.
In the case of Grant v. Australian Knitting Mills (1936) 70 MLJ 513, G a doctor purchased woollen
underpants from M, a retailer whose business was to sell goods of that description. After wearing
the underpants G developed some skin diseases. The Court held that the goods were not fit for
their only use and G was entitled to avoid the contract and claim damages.
In view of the above Doctor can claim damages from S under Sale of Goods Act, 1930.
23) Avanti, took out motor car insurance from Healthy Trip Insurance Company. A cheque was
issued under a contract of insurance of motorcar by the insured for the payment of premium of
the policy. However, the cheque was dishonoured for want of funds in the account. Meanwhile
the car met with an accident and badly damaged, killing the insured owner. The claim for
insured amount was repudiated by the company.
Decide :
(i) Whether the contract of insurance has been performed ? Analyse the provisions of the
Indian Contract Act, 1872 in this respect ?
(ii) Whether the claim of the insured amount may be recovered from Healthy Trip Insurance
Company ?
Ans) The fact in given case are similar to the case of National Insurance Co. Ltd. vs. Seema Malhotra
[2001(2) SCALE 140]. In this case the Supreme Court held that applying the principles envisaged
under Section 51, 52 and 54 of Indian Contract Act, 1872 relating to reciprocal promises, insurer
need not to perform his part of promise when the other party fails to perform his part and thus
not liable to pay the insured amount.
When the insured fails to pay the premium promised, or when the cheque issued by him towards
the premium is returned dishonoured by the bank concerned the insurer need not perform his
part of the promise. The corollary is that the insured cannot claim performance from the insurer
in such a situation. The contract of insurance therefore cannot be said to have been performed.
Therefore, the claim of the insured amount from the Healthy Trip Insurance Company can not be
recovered.
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24) Ram employed in Mumbai promised to pay `8,000 per month to his wife Sunita. She was living
in Delhi. On receiving information that she has become unfaithful to him, Ram stopped the
payment of `8,000 to Sunita. Sunita approaches to file a case against Ram. Advise her with
reference to the Indian Contract Act, 1872
Ans) According to section 2(h) of the Indian Contract Act, 1872, Contract is an agreement enforceable
by law i.e. for an agreement to become a contract, there must be intention to create legal
relationship.
In the present case, intention to create legal relationship is absent as this is a domestic
arrangement between husband and wife. According to the Indian Contract Act, 1872, it does not
make any difference whether the agreement is oral or in writing. So being domestic arrangement
between husband and wife, it is presumed that intention to create legal relationship is absent in
the present case and therefore, this agreement is not enforceable. Therefore, Sunita would not
succeed in the present case. (Ref. Balfour v. Balfour)
25) Rajni got herself operated in the Devashri Hospital for removal of her uterus, as a cyst was
found to have developed near one of her ovaries. The surgeon, who performed the operation,
left abdominal pack in the abdominal. This caused lot of pain, suffering and uneasiness to her.
The abdominal pack was subsequently removed by another surgical operation. It was alleged
that due to negligence of the surgeon, the patient suffered all the consequences, therefore it
should be treated as negligence in the treatment. But the Hospital authorities contended that
the patient’s problem was removed by the second operation, hence it is not deficiency. Rajni
sought the relief under Consumer Protection Act, 1986 stating that this negligence may be
treated as deficiency and compensation may be paid to her. Decide whether Ranji will succeed
or not ? Why ?
Ans) According to section 2(1)(g) of the Consumer Protection Act, 1986, “Deficiency” means any fault,
imperfection, shortcoming or inadequacy in the quality, nature and manner of performance
which is required to be maintained by or under any law for the time being in force or has been
undertaken to be performed by a person in pursuance of a contract or otherwise in relation to
any service.
The principles, laid down by Supreme Court in the case of Kusum Sharma & Others versus Batra
Hospital & Medical Research Centre & Others Supreme Court (CP), shall be kept in view while
deciding the cases of medical negligence. As long as the doctors have performed their duties and
exercised an ordinary degree of professional skill and competence, they cannot be held guilty of
medical negligence.
In the present case the doctor is liable for medical negligence as by leaving abdominal pack in the
abdomen, his conduct fell below that of the standards of a reasonably competent practitioner in
his field. The doctor has breached all the above stated principles. Therefore, he is liable for
medical negligence.
Rajni will succeed in this case and will be entitled for compensation.
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26) A draws and B accepts the bill payable to C or order. C endorses the bill to D and D to E, who is
‘holder in due course’. Decide from whom E can recover the amount under the Negotiable
Instrument Act, 1881
Ans) According to the Negotiable Instrument Act, 1881, every prior party to a negotiable instrument is
liable thereon to a holder in due course until the instrument is duly satisfied. Prior parties may
include the maker or drawer, the acceptor and all the intervening endorsers to a negotiable
instrument. The liability of the prior parties to a holder in due course is joint and several.
The holder in due course may hold any or all prior parties liable for the amount of the
dishonoured instrument. Therefore, in present case, “E” can recover the amount payable on bill
from: (i) “A” being drawer of bill having secondary and conditional liability arising in case of
dishonor of bill. (ii) “B” being drawee and acceptor of bill having primary and absolute liability to
pay bill. (iii) “C” and “D” being endorsers and prior parties to the bill
27) Sachin made an unconditional gift of property to Amit but continued in possession of gifted
property. Sachin revoked the gift deed transferred it to Naresh. Amit wants to recover
possession from Naresh. Discuss it in the light of provisions of Transfer of Property Act, 1882
whether Naresh can withhold the gifted property?
Ans) According to Section 122 of the Transfer of Property Act, once a gift is accepted by the donee/his
legal representatives during life time of donor, the donor cannot revoke it.
One of the essential feature of gift is that it cannot be revoked at the will and pleasure of the
grantor. A gift which comes into existence on the fulfilment of a condition, that is to say, a gift
which is subject to a condition precedent is also valid.
But in this case, as gift is unconditional, therefore, after its acceptance, Sachin cannot revoke gift
deed.
Applying section 41 of the Transfer of Property Act dealing with transfer by ostensible owner, in
present case, Sachin (donor) is not ostensible owner as he is not holding the property with the
consent of Amit (real owner). Therefore, Naresh (transferee), cannot, invoke the protection of
Section 41. Amit would succeed in the case and Naresh cannot withhold the gifted property
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28) A minor fraudulently overstated his age and purchased a motor car after executing a
promissory note in favour of the owner of the motor car for its price. The car owner compelled
the minor to pay the amount of the promissory note. Whether the car owner will succeed ?
Examine it with reference to Indian Contract Act, 1872 and Specific Relief Act, 1963.
Ans) According to the Indian Contract Act, 1872, a minor has no capacity to contract and minor's
contract is absolutely void. Law of estoppel is not applicable to a minor and he can always plead
his minority and is not estopped from doing so even where he had produced a loan or entered
into some other contract by falsely representing that he was of full age, when in reality he was a
minor.
But where the loan was obtained by fraudulent representation by the minor or some property
was sold by him and the transactions are set aside as being void, the Court on equitable grounds
may direct the minor to restore the property to the other party.
According to Section 33 of the Specific Relief Act, 1963 the Court may, if the minor has received
any benefit under the agreement from the other party require him to restore, so far as may be
such benefit to the other party, to the extent to which he or his estate has been benefited
thereby.
In present case, car owner will not succeed in getting the amount of promissory note but he can
get back his motor car
29) A contract for the sale of land has been entered into between A and B. The transferee has paid
the price entering into possession and is willing to carry out his contractual obligations. As
registration has not been effected, A the transferor, seeks to evict B from the land. Can he do
so ? Explain.
Ans) No, B will not suffer simply because the formality of registration has not been through. The
legislature grants some relief to such a transferee under Section 53A of the Transfer of Property
Act, 1882, which embodies the doctrine of part-performance.
Followings are the essential conditions for the operation of the doctrine of part performance
according to Section 53A.
1. There must be a contract to transfer immoveable property.
2. It must be for consideration.
3. The contract should be in writing and signed by the transferor himself or on his behalf.
4. The terms necessary to constitute the transfer must be ascertainable with reasonable certainty
from the contract itself.
5. The transferee should have taken the possession of the property in part performance of the
contract. In case he is already in possession, he must have continued in possession in part
performance of the contract and must have done something in furtherance of the contract.
6. The transferee must have fulfilled or be ready to fulfill his part of the obligation under the
contract.
If all the above mentioned conditions are satisfied, then the transferor and the persons claiming
under him are debarred form exercising any right in relation to the property other than the rights
expressly provided by the terms of the contract notwithstanding the fact that the instrument of
transfer has not been registered or complete in the manner prescribed therefor by the law for
time being in force
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30) The complainant booked a ticket from Delhi to New York by a KLM plane. The airport
authorities in New Delhi did not find any fault in his visa and other documents. However, at
Amsterdam, the airport authorities instituted proceedings of verification because of which the
appellant missed his flight to New York. After reaching New York, the airlines tendered apology
to the appellant for the inconvenience and paid as a goodwill gesture a sum of `2,500. The
appellant made a complaint to the National Commission under the Consumer Protection Act,
1986. Whether the complainant will succeed ? Give reasons with the help of decided case law
Ans) The complainant will not succeed.
The present case is similar to the case of Ravneet Singh Bagga v. KLM Royal Dutch Fintimes
[1999(7) SCALE 43]. In this case the Supreme Court held that the respondent could not be held to
be guilty of deficiency in service. The staff of the airline acted fairly and in a bona fide manner,
keeping in mind security and safety of passengers and the Aircraft. The photograph on visa
documents was a photo copy and not the original which was unusual. In the circumstances, the
staff took some time to ascertain the truth and helped the appellant to reach New York the same
day.
31) A contracts to sell B a piece of land consisting of 100 bighas. It turns out that 98 bighas of the
land belongs to A and the two remaining bighas to a stranger, who refuses to part with them. B
files the suit for specific performance against A. Decide with the help of the legal provisions,
whether the specific performance suit is maintainable
Ans) Section 12(2) of the Specific Relief Act,1963 provides that where a party to a contract is unable to
perform the whole of his part, but the part which must be left unperformed by only a small
proportion to the whole in value and admit compensation in money, the Court may, at the suit of
the either party, direct the specific performance of so much of the contract as can be performed
and award compensation in money for the deficiency.
A contracts to sell B a piece of land consisting of100 bighas. It turns out that 98 bighas of the land
belongs to A and the two remaining bighas to a stranger, who refuses to join with them. The two
bighas are not necessary for the use of enjoyment of the 98 bighas, nor so important for such use
or enjoyment that the loss of them may not be make good in money. A may be directed at the
suit of B to convey to B, the 98 bighas and to make compensation to him for not conveying the
two remaining bighas; B may be directed at the suit of A, to pay to A, on receiving the
conveyance and possession of the land, the stipulated purchase money less the sum awarded as
compensation for the deficiency.
32) The ABZ company offered by an advertisement, a reward of `1,000 to anyone who contacted
influenza after using smoke ball in the specified manner. Amita used the smoke ball in the
specified manner, but was attacked by influenza. She filed the suit against ABZ company and
claimed the reward. Decide whether the suit is maintainable
Ans) The communication of the offer may be general or specific. Where an offer is made to a specific
person it is called specific offer and it can be accepted only by that person. But when an offer is
addressed to an uncertain body of individuals i.e. the world at large, it is a general offer and can
be accepted by any member of the general public by fulfilling the condition laid down in the
offer.
In the present case the suit is maintainable and Amita can claim the reward. Amita could recover
the reward as general offer can be accepted by anybody.
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33) Mohit finds a ring of Shardha and sells it to a third person Prachi who purchases it for value and
in good faith. Whether Shardha can file a suit to recover the ring? Advise with cogent reasons
Ans) Section 27 of the Sales of Goods Act, 1930 states about sale by person not the owner. According
to this section, subject to the provisions of this Act and of any other law for the time being in
force, where goods are sold by a person who is not the owner thereof and who does not sell
them under the authority or with the consent of the owner, the buyer acquires no better title to
the goods than the seller had, unless the owner of the goods is by his conduct precluded from
denying the sellers authority to sell.
The general rule is that only the owner of goods can sell the goods. Conversely, the sale of an
article by a person who is not or who has not the authority of the owner, gives no title to the
buyer. The rule is expressed by the maxim; “Nemo Dat Quod Non Habet” i.e. no one can pass a
better title than he himself has. As applied to the sale of goods, the rule means that a seller of
goods cannot give a better title to the buyer than he himself possess.
In the present case the true owner, i.e. Shradha can file a suit to recover ring from Prachi. Mohit
having no title to the ring could pass none the better title
119

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Prof Abhijeet C.

COMPETITION ACT, 2002 (Part B – 25 marks)

Recommendations of Sachar Committee for prohibition of unfair trade practices:

The Competition Act, 2002 – an Improvement on the MRTP Act, 1969

Objectives of the Competition Act, 2002

Acquisition [Section 2(a)]

Agreement [Section 2(b)]

Cartel [Section 2(c)]

The Act prohibits formation of certain cartels

Some of the conditions that are conducive to cartelization are

Relevant Market [Section 2(r)]

Relevant Geographic Market [Section 2(s)]

Relevant Product Market [Section 2(t)]

Anti-competitive Agreement (Section 3)

Types of Anti-competitive Agreement

Sec 3(3) Horizontal Agreement

Sec 3(4) Vertical Agreement

any agreement amongst enterprises or persons

Types of vertical agreements

Prohibition of abuse of dominant position (Section 4)

Regulation of Combination (Section 5)

Acquisitions by Single Joint assets over Rs. Joint assets US $1

Acquisition by Group Group assets Rs. 8,000 Group assets US $4

in the from prescribed form + fees.

Such intimation should be submitted within 30 days of:

Competition Commission of India

Removal of Chairman and other members

Restriction on employment of Chairperson and other members

Exception → employment in a corporation established by or under any Central, State of Provincial

Validity of acts of CCI

Duties Powers and Functions of CCI

Appearance before Commission

They may either appear in person or authorise any of the following:

✓ Promotion of competition advocacy;

Execution of orders of the Commission imposing monetary penalty

Competition Appellate Tribunal

Contravention of orders of Commission

Penalty for not giving information on combinations

Accounts and Audit

Reserve Bank of India Act, 1934

ESTABLISHMENT & INCORPORATION OF RBI

THE CENTRAL BOARD OF DIRECTORS

BUSINESS WHICH THE RBI MAY NOT TRANSACT

Instruments of Monetary Policy

Constitution of Monetary Policy Committee (Sec 45ZB)

RBI as Banker to Banks

Prudential Norms for Banks

Loans and Advances:

Foreign Exchange Management Act, 1999 + FETC

SCOPE AND APPLICABILITY

Authorised Person [Sec 2(c)] means an

Person [Sec 2(u)] Person includes

7. Every artificial juridical person

Person Resident in India [Sec 2(v)]

2) Any person or body corporate registered or incorporated in India;

Dealings in Foreign Exchange

Holding of Foreign exchange, foreign security & immovable property (Section 4)

Possession and retention of foreign exchange or foreign coins

Realization, Repatriation and Surrender of Foreign Exchange

Period for surrender of received/realised/unspent/unused foreign exchange by Resident

Current Account Transaction [Section 2(j)]

Prohibited Current Account Transactions

CURRENT ACCOUNT TRANSACTION REQUIRING RBI APPROVAL IS REQUIRED