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General Principles of Law and the Indian Legal System

Objectives
• To understand the essential features of a legal system, including our Constitution
• To study the different forms and principles of Civil, Criminal and Tortious liabilities
• To appreciate Globalization as relevant to Law and Legal Institutions

What is the Role of Law?

• To establish and enforce norms or societal morals
o Achieves justice?
• To limit power of the Government and other authorities
o Enforces accountability?
• To examine “reason” in all activities

Rules, Order, Justice, Avoid and resolve disputes, Constitution, Framework, Rights-Entitlements, Wrongs-
Punishments, Guiding pointers and Code of Conduct, Equality and fairness before law

Typology of Law and Legal Remedies

• Legal systems and approaches:
o Common Law: India, UK, US, and other ‘commonwealth’ nations = emphasis is on
‘equitable remedies’ and ‘Public Interest’
o Continental: European nations, most of Africa and Latin America, and some in Asia like
Singapore, Japan = strictly follow the codified law

Precedent - rule in common law countries to refer to similar cases in the past in coming to a judgement
so that you don’t differ.
Judges are given blanket right in doing anything to come to justice
Shortcomings of the common law
The law making is extremely biased
If a judge wants to perceive in a particular way
Final call has to be taken by Judges in a system of Common Law
Jury in US only gives opinion about the facts of the case. They don’t interpret law. They only give
recommendations; Judge gives the verdict.

Common Law – written law is never adequate. Even written contract is not adequate, Common law
countries believe making an exception to law sharpens it.
Continental – Once law is put down in words, legislated judges say – we will go with what is written

• Legal remedies = Constitutional, Civil, Contractual, Criminal, and Tortious

Also known as equitable rights in Common law

PIL is one kind of Legal Remedies
Locus Standi- "I have been personally affected in the matter"
Class action - "I can go to court and say, I am affected, but I am not the only person affected"

Civil compensation
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• Any violation of law or contract, and a loss is caused, shall entitle a legal claim for compensatory
remedy
• Interpretation is based on:
o Remedy being ‘monetary’
o Factual probabilities and preponderance
e.g. getting caught for drunk driving even without causing any harm is a crime. Causing harm is not a
must to be punished, also since u paid fine doesnt mean u should not be punished
any time parties can get to a settlement when it comes to civil but not criminal, they cannot be settled.
Civil Remedy – any violation of contract gives rise of compensatory remedy. There should be some loss.
Compensatory and crime punishments are 2 independent remedies – can be compensation as well as
punishment.

Criminal punishments
• Relates to only specific and identified offences and results in deterrent punishments
o Not retrospective; “right to silence”
In Indian law punishment in retrospect cannot take place. e.g. Harshad mehta wasnt penalized for share
mkt fraud, since those laws did not exist at the time. It was committed, he cannot be tried for that later.
He was arrested for forgery and other existing laws.
Right to silence/against self-incrimination – onus on law enforcement to prove the crime.
Polygraph/narco analysis challenged in SC as it was against right to Silence

• Strict interpretation and “fair trial” principles – procedural and evidentiary guarantees
o “Beyond reasonable doubt”
Common law follows tht even if there is one fact/evidence/reasonable suspicion which raises a doubt,
the person cannot be punished.
Presumption of innocence
Fair trial – across the globe, even if one evidence arises that raises a doubt no punishment can be given.

• Prosecution by the State – on the rationale of public welfare and deterrence

o Victim perspective?
Compoundable crime – Compoundable offences are those that can be compromised, i.e. the complainant
can agree to take back the charges levied against the accused. Dishonored cheque was changed from
crime to compoundable.
Caveat petition – requesting court not to make a decision to the other party unless you have heard us.
Writ petition – Writ Petition is an order by a higher court to a lower court or courts, directing them to do
something or stop them from doing something.
Public interest – petition can be filed. E.g. pollution, environment, black money etc.

Structure of the Indian Legal System

• Judiciary in India:
o Supreme Court
o High Courts
o Civil suits begin at the Civil Judge or District Court
o Criminal trials begin at Magistrate or Sessions Court
▪ Aided by Police and Prosecution

• Special Courts/Tribunals + Regulatory bodies

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o Labour Courts; Green Tribunals; Consumer Forum

o SEBI; TRAI
• Alternative Dispute Resolution (ADR) mechanisms and enforcement
o Arbitration, Mediation / Conciliation

25 high courts - 1200 + judges - 500 vacancies

District & below - magistrate
23000 courts (9000 positions vacancies)
>95% of all cases have to go to dist courts
99% efforts at Dist level go in finding the facts, primary interpretation of law happens at HC, SC affirms it
SC does not argue on facts, only on Law that too if there is a substantial question of law, else it is
dismissed
If new case fact comes up, it goes back to DC
Good lawyers reluctant to be judge - big sacrifice monetarily from successful lawyer to a judge.
Indian judiciary pending list isnt entirely due to judicial inefficiency
Delay is due to a systemic gap rather than inefficiency

Special courts – you don’t need lawyers. E.g. SEBI/TRAI, they represent own cases

The Constitution of India: Basic structure

• Preamble:
o Sovereign, Socialist, Secular, Democratic Republic
o Justice, Liberty, Equality & Fraternity
• Inherent qualities of the Indian Legal System
• Longest in the World – 395 not out!

Article 21 Right to life- Also articulated as right to livelihood- No person shall be deprived of life and
liberty except for following procedure highlighted in the law.
No Rights are absolute.
lot of debates going on Right to freedom of speech, freedom of media etc
India still retains capital punishment
We do have a right to livelihood, but within the 4 corners of law
e.g. Bihar state assemply passed a law to prohibit consumption, distribution etc of alcohol. 5/6 lac people
in the entire supply chain must be legally in this business and would have lost their employment.
By right to livelihood concept we may argue that these guys can not be denied...But the caveat in the law
is that "Right to livelihood under the four corners of law"

Fundamental Rights
• Right to Equality – bedrock of all Rights
• “Equality before the Law; and Equal Protection of the Laws”
o Classification based on intelligible differentia
o Must have a nexus with the Objective
o Eschews Arbitrariness
• Fundamental Freedoms – only to citizens – e.g.:
o Right to freedom of Speech & Expression
o Right to practise any profession, occupation or trade
• Reasonable restrictions – “public order” and “interests of general public”
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Right to Property
• Earlier – a Fundamental Right, now – a Constitutional Right
• Deprivation – only by authority of law
o “Public purpose” and ‘fair compensation’
o Land acquisition

Directive Principles of State Policy

• Non – enforceable by Courts
• “Welfare of the People”
o Right to Work
o Distribution of Economic Resources
o Living wage for workers
o Participation of Workers in management of Industries

Federalism – Law making Powers

• Union, State and Concurrent Lists – to facilitate smooth “trade and commerce”
• Union = Defence, Ports, Aircrafts, Railways, Intellectual Property, Trade and Commerce; Total 96
subjects, with the residuary power too
• State = Land Rights, Production, supply and distribution of goods; Total 66 subjects
• Concurrent = Contracts, Banking, Economic and Social Planning; Total 47 subjects

LAW OF TORTIOUS LIABILITY

To understand the extent of legal duty to take care and the corresponding enforceable remedies.

What is a Tort?
• Tort (means wrong) – an act committed in a personal sphere, but in violation of a larger duty to
take care owed to the society
• Different from a crime or violation of a contract
• Typology of Torts = Negligence; Nuisance; Accidents

Basic Principles
• Duty to take care – reasonable standard
• Breach of that duty; and
• Injury/damage caused by such breach
• Therefore, compensation payable

Kinds of tortious liabilities

• ‘No-fault’ liability:
• Vicarious Liability
o ‘Principal’ is liable for actions of the ‘agent’
• Strict and Absolute Liability
o No excuses permitted
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International Law
To appreciate the relevance of International legal principles in the Indian Legal System

Effect of International Law

• International Institutions:
o UNO; WTO; ICJ; Inter-Governmental Agencies; Professional associations like the
International Chambers of Commerce
• International Principles within a Nation
o Enforcement of International Treaties
o Adoption by Legislation

IL and Private Parties

• Harmonization efforts are mainly Political
o National Courts may still provide differing interpretations
o Lack of one single International Court or Judicial System
• Arbitration is emerging as a prevalent mode of commercial dispute settlement in international
contracts

ICJ – international court of justice, Hague. They have more power than international laws.
Any court has one big power – to issue summons. But ICJ cannot issue summons.
ICJ doesn’t do judgements, only recommendations mostly to the UN

ICC – international Criminal court. No international enforcement of judicial decisions.

Judgement passed in one country cannot be enforced in another country
Even if a country signs up with ICC or other international one it cannot be forced to follow
International law is built on diplomatic relations, diplomatic policies, it is not a law.
Extradition – taking person from one country to another. Not enforceable.
There are many countries which do not agree with ICC – US, India

Alternative Dispute Resolution Mechanisms

For early and effective resolution of disputes

ADRs
• Arbitration
• Conciliation
• Mediation
o Negotiation
• Arbitration & Conciliation Act, 1996
Conciliation/Mediation – if A & B have a dispute you can appoint mediator to arrive at a settlement. This
is a good way to settle lot of labour/compensation disputes.
Once settlement is agreed upon there can be no further appeal.

Arbitration -
A & B will appoint a technical person/expert each. These in turn have a 3rd person who comes with an
arbitration award. This can be appealed in court further.
This is possible if all parties cooperate.
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Arbitration council of india being formed – job to laydown guidelines on who could be arbitrator,
eligibility etc.

Why ADRs?
• Arbitration is now emerging as a prevalent mode of commercial dispute settlement:
o Time-bound
Arbitration has nothing to do with settlement there has to be an award within the time limit of 18
months
o Expertise to address complexity
Qualifications for arbitration - arbitration council of India in the making
o Confidential
Letting it out in media may be detrimental
o International effect
Acceptance rate of Arbitration is very high. Arbitration is not mandatory, but it is expected to explore
Settlement. Arbitration is not settlement
Only applicable for civil & commercial cases. Not for criminal.
you need to have odd number of people for arbitration
Any civil dispute of Rs 3L and above
Genuine effort of settlement should be made.
Many centers of arbitration coming up, including international ones.
If parties belong to different nations, the understanding is that parties can choose which country’s law be
applied. Typically, parties choose Singapore law since it is usually more instructive/detailed/upto date
with the latest events or changes. Also, they have a lot of arbitrators.
These are usually business models. All needs are taken care of by arbitration firms. In 6-8 months, the
final arbitration/judgement is handed over to the parties.
This is needed to be acted upon. If any party refuses, it can be enforced.
Incase there is a provision in the judgement which is in conflict with the law of the base country (e.g.
indian) then Singapore law cannot be enforced. The choice of law is possible.

Ombudsman - people legitimately given power of reconciliation

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LEGAL PRINCIPLES GOVERNING CONTRACTS

Contract – Basic features
• Agreement – when legally enforceable – becomes contract – even oral agreement
• Freedom of the Parties
o “Free will” of the Parties – consensus ad idem – “agree upon the same thing in the same
sense”
o Flexibility of format and structure
o Emergence of Standard formats
• Based on bona fides and good faith

Every Contract is an Agreement not necessarily every Agreement is a Contract.

Note: As per definition an Agreement need not be written, registered, signed, On stamp Papers, Seal.
contract = Obligation which is mutually agreed including the document + subsequent email + whatsapp
Supreme Court has given a judgement making whatsapp blue tick to be acceptable as a legal frog of a
person reading a message.
Is MOU a Contract? there is no legal format for it. Many a times MOU is just a document before
agreement (typically it is vaguely worded.
To Identify Contract Obligation –
- Definite (proposal/offer)
- Matching (acceptance)
- Commensurate/Determinable/Benchmarked – consideration: must be represented in a
commercial monetary way
If there is a conflict between law and contract, law will always prevail
Contracts are extremely flexible – provided its in agreement and legally enforceable.

Formation
Stage I – PROPOSAL
• An Offer of willingness being communicated
• Differs from an Invitation to Offer
• Presence of an Intention to create legal relations – Promise + expectation/request

Stage II – ACCEPTANCE
• Unconditional and final, else it becomes a counter proposal
• Intention is vital – express or implied
• Communication is essential – silence is not (presumed) acceptance!!
o Subsequent conduct?
o Compulsory/mandatory acceptance?
Acceptance – meaning you can only accept what is written

Stage III – Determine Consideration

• Any reciprocal act, forbearance or promise (only present and future – not past)
• Essential for a Promise to become legally enforceable
• Either Detriment or Benefit concept – must be valuable in Law – excludes affection, respect,
moral duty
• “Nominal” and “Inadequate” – No consideration
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Consideration/ value – commensurate. There should be measurable value. The value must be
proportional for both parties, mutually valuable for all parties.
Expression of Interest - One may not need to even bother about
Contract is the outcome of the bargaining position
Drive Home Content - There has to be an intent and the contract has to be as clear as possible. Saying
specifics is more important than giving vague Statements
A proposal can be conditional, but Acceptance has to be Unconditional
Letter of Intent - to communicate that your bid is the best, softer way to give an assurance that we will
be going with you, a pre- contract stage, wherein a lot of work may be required before finalizing.
Deemed acceptance is never acceptable for Price, Quality & Time. moreover deemed acceptance has to
be explicitly stated in the Contract.

VITIATING FACTORS
• COERCION – Criminal Intimidation – Done by either party
• UNDUE INFLUENCE – Abuse of Dominant position – not better bargaining power
• FRAUD – knowingly assert falsely; active concealment; insincere promise; deception
• MISREPRESENTATION – False submission not knowing the truth; non-disclosure

DISCHARGE OF CONTRACT
• By Performance
• By Agreement
• By Impossibility
• By Breach
By performance – someone may not agree with the quality
Breach Of contract – breach is possible but there are consequences. We need to be careful for all
transactions to check breach of contract
By agreement - if terminated with mutual agreement, need not go to court.
If there is a change after contract is signed, like new part added, a diff contract needs to be created with
a mention that the first one is terminated.
If SOW and MOU say different dates then there is a conflict, MOU still remains but in certain cases a new
one is considered.

Discharge by Performance
• Substantial performance standard
o Warranties – literal and equitable standards
• Reasonable opportunity to examine due performance
• Readiness and Willingness to comply is inferred

Warranty valid provided that there is the necessary Compliance.

When Time is of Essence

• Stipulation of time of performance
o Mere mention is insufficient
• Reasonable time-standard if no particular stipulation is found
• Effect of violation:
o Voidable; Compensatory; Waiver
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Suppose A is supposed to supply B on 5th every month, & B to C on 10th of the month, so A can’t delay the
supply. Two clauses included in contract – Time (indicative time) & Essence.
If time has to be of essence, 5th means same and day no delay, it has to be mentioned as such in the
contract. If not, then it remains indicative, and B cannot hold A accountable.
If sense of essence is added at a later point in time in the contract then A has the right to negotiate the
contract.
What makes it an essence is the line of reasoning why it is needed to be an essence.
Late fee/penalty has to be paid if time is of essence in the contract

Discharge by Agreement
• Agreement to substitute; rescind; or alter
• Novation = new contract substituting the old; could be with new parties
• Recission = released by mutual consent, prospective effect
• Mutual consent is mandatory

Discharge by Impossibility
• Contract to do something impossible is void due to frustration
• Unforeseen development frustrating the performance of the contract
• Should have no relation to either party’s conduct – uncertain event
• Force majeure = occurrence shall enable discharge
o Impact on long-term projects? Need follow-up procedures

The contract can be ended/discharged in cases of impossibility like natural floods, floods, govt issues etc.
legal /policy Causes = Change in the law, regulatory barriers, controls
Human factors – Strikes, pandemic, terrorism
The contract is not resumed automatically. But parties can agree to renew the contract neither party is
obliged to renew.
Irrespective of the terms being mentioned in the contract or not, the companies involved can still
discharge the contract.
Bid can be conditional acceptance has to be unconditional.
In case one party/company discharges but other does not agree it is impossibility, the company goes to
litigation
Natural & legal factors are covered by default. Other factors need to be added by the companies.
Bankruptcy is a factor of impossibility
Impossibility means it has to be impossible. If there is an option of workaround then it is not impossible
even if it means at a higher cost. E.g. AstraZeneca suing Serum Institute. India govt banning export of the
vaccine. SII was bound by contract with Astrazeneca. Since SII had facility out of India it means
impossibility was not a factor.
Who has the power to decide which event can be possibly Force majeure. If parties do not agree, they
need to go to arbitrator.

Discharge by Breach
• Breach = either by failure; repudiation; or voluntary disablement
o An available legal option = “Better an end with horror; than horror without an end”!
• Intentional abandonment of the fundamental promise – not mere non-performance
• Could even be considered as sufficient discharge of contract
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Breach of contract is not illegal.

if there is a loss caused due to the breach, it must be compensated. One may walkout for any reason
without any emotional connotation.
If one party breaches, the other may or may not consider.
Legal expectation – if one party walks away, court will evaluate the commercial loss.
If someone is able to face the consequences, breach is an available option.

Breach & Termination –

Termination – can be provided in the contract as a process. That choice is available and needs to be
added to the document and the invoice.
Breach – it can be in the contract. Includes all possibility where there is dispute between both parties.
Breach is never without a dispute.

Liability and Damages

• Fair & reasonable damages; and not for remote or indirect losses
• Liquidated Damages – stipulated to deter breach
o Considered as the maximum limit
o Unliquidated = reasonable basis
• Unlimited scope of liability = statutory; and tortious
• Indemnity clause – to cover third party claims – could have limitations, unless prohibited by law
• Factors considered – loss incurred or inevitable; profits denied; unfair gains of other Party

Indemnity Clause – Section 124 of the Indian Contract Act’1872 defines Contract of Indemnity as a
contract by which one party guarantees to save the other person from loss caused to him by the action of
the guarantor himself, or by the action of any other person.
applies only if chosen/agreed by parties - consequential and incident damages are reimbursed (actual) -
Monetary Limits; and/or Subject-head wise claim limits are also possible - IP; labor related; immigration
related etc.
if A & B had agreed on liquidated damages (LQD); & indemnity clause of 4x – 8x can be recovered by A
from B
If A d B had no LQD (Un LQD); and indemnity clause of 4x, then 10x + 4x can be recovered by A from B
For IP it is unliquidated with Indemnity
If B has ended up paying 10x to A – there have been lot of other things that A has lost like goodwill,
reputation etc the real loss is a lot more.
From the day you got to know that you are undergoing losses, you have 3 years to go to the court

When the agreement between the parties stipulates the sum payable for non-performance, the damages
hence paid are known as liquidated damages.
Unliquidated damages are awarded by the courts or arbitral tribunals after assessing the loss or injury
caused to the party suffering from such breach of contract.
A breach of the contract is a necessary prerequisite for claiming damages, liquidated or unliquidated.
Indian law recognises no difference between liquidated damages and penalty. The compensation
granted cannot exceed the amount specified in the contract.
Liquidated damages clause can benefit both the owners and the operators. By restricting the amount of
damages that an operator may claim, it allows the owner to delineate risks and minimize time, cost, and
risk of litigating issues pertaining to the operator’s entitlement and value of his / her claim for loss of
profits.
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Unliquidated damages - actual damages resulting from infringement of the contract and the injury
arising from such infringement which is in the nature of unliquidated damages since such damages are
granted by the courts on the basis of an evaluation of the loss or injury caused to the party against which
the infringement occurred. Including a provision for liquidated damages in a contract will most certainly
prove to be an advantage. It helps the client recover losses which were, before the breach of the
contract, unforeseeable or tough to estimate.

Unliquidated damages – parties have no idea what the amount of the damages can be. Always
applicable in case of breach
Liquidated damages – some kind of measure of damages. Loss can be 2 times value of the project. Both
parties may agree for liquidated damages.

Mutatis Mutandis - The phrase mutatis mutandis is used within contracts to incorporate terms from one
agreement into a different and separate agreement. For example, a lease renewal with similar terms to
a previous agreement, save for changes to the tenants, may incorporate terms ‘mutatis mutandis’.

PPPs & Public Contracts

Public-Private Contracts
Public-Private contractual engagements:
• Privatization and sector-specific Licensing
o Dedicated policy and regulatory framework
• Public Procurement and ‘Outsourcing’
o Direct provision of and payment for goods/services
o Bound by strict regulations and procedures
o Clear and pre-determined terms and conditions
• Concession-based arrangements [PPPs/SPs]
o Structured to independently operate
o Comprehensive Public service nature of project
o Competitive bidding (usual mode); or OPP approach

Contracts enabling PPPs: Major Legal Principles

• Status of Multiple Contracts and Parties
• Issues of “Ownership”
• Performance assessment and monitoring
• Data Rights and sharing of IPRs
• Dispute settlement process
• National Policy on PPPs in India 2011 – proposes a possible framework
• Draft PPP Rules, 2012

Public contracts – even if one of the parties belong to the govt. Can be in terms of benefit or in terms of
money. When govt does not have any money to build, it gets into partnership with private bodies. E.g.
Govt gives land and private body builds it and then the sharing is done.
Govt is in it for public benefit. E.g. Govt opening up technology so that public can use, Govt agencies
which help hire stadiums etc.
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CORPORATE STRUCTURING AND GOVERNANCE

Relevant Themes
• Forms and Structuring of Business entities: Proportional regulation
• Not-for-Profit entities: Enabling regulation
• Role, Responsibility and Accountability of Actors: Directors; KMPs and ‘Promoters’
• Corporate Restructuring: Contractual and procedural dynamics

Forms of Business entities

• General Partnership: “Joint and Several Liability”
• Limited Liability Partnership: Limited nature of liability, yet flexible decision-making
• Corporate forms: One-Person, Private, Public, and Listed

Forms of Business Entity

General partnership – ‘joint & several liability’ could be registered or not. Law says the partners may be
jointly or individually liable. Even if one of the partner commits a fraud, the other partners are liable. E.g
bank loan payment. Bank may target any one of the partners for repayment legally, rather than all. This
is a dangerous concept.
Limited Liability Partnership (LLP) – zero liability to the investor. Limited nature if liability yet flexible
decision making. Can have any no. of partners, no limit. LLP can decide what will trigger exit of a partner,
it is very contractual. Law assumes/perceives every partner as responsible for the partnership. There will
be 2 designated partners, but otherwise every partner needs to be equally informed incase something
goes wrong.
Many VCs are LLPs but they don’t usually invest in an LLP

An investor in Pvt Ltd company who is not in day to day running, is not liable/notified or responsible for
any issues within the firm.
Going Public does not mean company needs to be listed in stock exchange. Company can be a public
unlisted company as well. It is more facilitative of investment than being pvt ltd company.
We can have a one-person company but not a one-person LLP

Max limitation for a Pvt Ltd company is 199 investors. From 200 onwards it needs to be a public
company
Pvt Ltd means the law makes it sticky. It is not easy to walk away once done. Not easy to bring in
changes, modifications. External investors prefer investing in Pvt Ltd since its sticky.

Willful Default – when a company is capable of paying but does not pay. This is considered a crime.

Structuring – Criteria
• Different formats available to facilitate kinds of businesses – with options to shift
• Criteria = Nature of business and funding; ‘Entry’ and ‘exit’ norms; Functional flexibilities
required; and Cohesiveness of the investors
• Corporate entity the most preferred and also highly regulated

Formation of a Company
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• Company = organization of persons and funds for common purpose

• Only an Incorporation makes it a legal entity – registration under Companies Act, 2013 –
conclusive proof of valid formation
• Memorandum and Articles of Association – also shareholder’s agreement

Corporate Entity – Principles

• Independent of shareholders
• Capacity to sue and to be sued
• Perpetual succession; common seal; limited liability
• Multiple relationships possible with an individual – Director, Creditor, Shareholder, Employee

Not-for-Profit entities
• Trusts, Societies, Cooperatives, and NFP Companies
• Basic principles:
o Concept of ‘contribution’/donation
o Different forms of regulation
o CSR channel
• Crowd-sourcing of funds?

Registration as an Enterprise is not mandatory to do business in India.

Business enterprise does not need to be registered to raise an invoice.
Though we may avail of tax incentives by registering.
We can do business, have PF a/c for employees without registration
Disputes (internal or external) – registration does not provide any more of an advantage of resolving
them
You don’t need to be registered to be taxable
Partners can authorize to conduct legal contracts without being registered
Once a firm > 10 employees, certain legal compliances are needed. That can be done without registration
as well, e,g, PF accounts
Registration means you need to make a lot of disclosure, lot of reports, which can be viewed by anyone
in the public domain.
Firm can be started and get registered later for public funding

Shareholder – anyone who has a right to profit in the firm. It is possible to be a shareholder without even
investing in the firm.
Investor – an entity with a right to share in the profits if any
As per the law, you need to be registered once you have 100 or more investors

SEBI – dedicated regulator for listed companies. Every registered company has a public record accessible

Employer – Employee is a matter of fact, All rights of the employees are unaffected even if the employer
is unregistered.
Registration does not automatically mean validation/verification. It only means that the details are
made visible in public domain
Same is with registration of land, it only means someone has bought it at the details furnished. There is
no authority checking id the detail was legal and correctly done. Registrar is only registering not
verifying. Verification is done later when there is a legal dispute.
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e.g. Satyam was winning corp governance awards when there was a scam going on. SEBI clarified they
are only a repository of documents and not verifying them unless some issue is brought up to their
notice. Registering authority is not guaranteeing any validity.

Registration is always presumptive and not conclusive. Registration is easy as per new Ease of Business
norms but it is tough to dissolve

Patents – some companies refrain from patenting since they done want to make their product/finding
public and keep it a secret. E.g. coca cola. At times it is advantageous not to patent.

Sole proprietorship – unregistered but only one owner running it. It has no meaning in law. Once you
register then it no longer remains a proprietorship.
RTI can get details of unregistered firms as well
Subsidiary Registration - typically we cannot term anyone as a subsidiary unless it is a separate legal
entity.
US company having office in India, can have it without needing registration, but needs to be registered
once there are significant number of transactions. Then it needs to be registered as an India entity. They
can employ in India without being registered with a person being given an authority to sign and hire.
You don’t need to be a citizen to register a company in India. Some sectors need one of the directors to
be a resident of India for tax purposes.

Incorporation is another term for registration. In Indian context it is Ltd or Pvt Ltd.
To open ofc in SEZ, registration would be needed.

The business is regulated in the interest of the shareholder.

Same person can be a shareholder, director & CEO of the company. But legally they are viewed entirely
differently. The shareholders rights are protected by the law.
All these outcomes are a spinoff of registration of the firm as a legal entity.

Role of Directors
• Board of Directors – The Principal Body
o Family or Professional
• Directors are chosen for management – need not be shareholders
o Fiduciary Duty to take care – and statutory duties
• Difference between ownership and control – elected and voting powers

“Control”
• Control Powers = Proactive (positive) and Reactive (negative)
o Section 2(27) of Companies Act, 2013 – “shall include the right to appoint majority of
the directors or to control the management or policy decisions exercisable by a person
or persons acting individually or in concert, directly or indirectly, including by virtue of
their shareholding or management rights or shareholders agreements or voting
agreements or in any other manner;” (emphases supplied)
• “Protective rights” of financial investors:
o Board representation; quorum rights; supermajority rights
o Kind of ‘veto power’
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Highlights of the 2013 Act

• ‘Class action’ suits by shareholders
• Explicit duties of Directors
• CSR mandates
• Restructuring is better defined and time bound
• Working of the Special Court – NCLTs

‘Corporate Veil’: Criminal Liability

• Lifting of the ‘corporate veil’ to punish natural persons responsible for the legal entity in:
o Commission of Crimes
o Tax evasion
o Fraudulent intent
o Distinguishing between holding and subsidiary
o Not following “arm’s length” principle vis-à-vis its Directors
• Corporate Criminal Liability principles – Corporate Manslaughter and Corporate Homicide Act,
2007 in UK = if Company is negligent - senior management liable
• Whistleblower policy still at infancy in India

• Tests for Prosecution of a Corporation:

o Nature and seriousness of crime
o Complicity and pervasiveness within the Company
o History of similar conduct
o Corporation’s timely, voluntary disclosure and cooperative efforts
o Presence of a compliance and ethics code
• Punishments for Corporations:
o Restitution; Fines; Probation under Court supervision; Forfeiture clauses; and Public
apologies

Culpability of Corporations
• Crime committed by an employee despite strong Corporate policy against it?
• Crimes committed by contractors/ consultants?
• Crimes committed in ignorance or wrong understanding of law?
• Serious frauds committed by senior management?

Elements of Corporate Governance

• In India – Clause 49 of the Listing Agreement between a Company and Stock Exchanges –
introduced in 2000
o In addition to other SEBI Rules and Regulations
• In the US – Public Company Accounting Reform and Investor Protection Act, 2002 – also known
as Sarbanes-Oxley Act
o DIP Guidelines of SEBI in 2000 itself
• Accountability imposed on Public and Listed Companies – monitor aggregation of capital

Corporate restructuring
• “Scheme for reconstruction” through a ‘compromise’ or an ‘arrangement’ = Contractual
• Mergers and amalgamations; acquisitions (shares/assets)
 16

• ‘Fair valuation’ + democratic approvals by Shareholders (overall 90%) and Creditors (majority +
9/10ths in value)
• Subject to statutory approvals (NCLT and CCI)

Issues for Discussion

• “Maximization of shareholder value” vs. “Governance norms”
• Functioning of the Board of Directors
o Collective responsibility?
o Role of ‘Independent Directors’?
• SEBI and enforceability issues

Default is presumed to be Bonafede unless someone proves a Malafide. Malafide is easy to allege but
difficult to prove.
Common law countries say that fiduciary (that people always act in good faith) is not applicable to
everyone.
Bona-fides - Case burden of proof lies with the prosecution, good faith. Bonafide is assumed by law, cort
will not ask to prove that a person/company has bonafide.
Malafide – bad faith
Ubberima-fides - the burden of proof lies with the accused, utmost good faith
Director is a Status holder (not an employee) and is fiduciary of the company. Bankruptcy disqualifies
from becoming a Director. Onboarding a director is easy but impeachment is a more complex process. It
requires shareholder approval in company’s AGM/EGM.
No exhaustive list of responsibilities of directors, anything that is good for the company is the
responsibility.
BoD – principal decision making entity for functioning of company. Running of company, mgmt. of
shareholder value, stakeholder interest comes under purview and legal responsibility of BoD.
Board can't buy, merge Companies
SEBI on the verge of restricting one person from becoming directors of multiple companies.
Citizen cannot go to court against how a company is running.
Shareholder after 3yrs of leaving the position can still go to court abt wht happened 3yrs back
 17

LEGAL PRINCIPLES OF EMPLOYMENT AND LABOUR

Labour Laws in India
To appreciate the typology of purposive Labour legislations

Labour Laws – Typology

• Collective regulations
o Industrial Relations Code, 2020
o TUs, ID Act, Industrial Standing Orders
• Protective and Prohibitive Laws
o Occupational Safety, Health and Working Conditions Code, 2020
o Factories, Contract Labour, Migrant workers, etc.
• Wage-based and Social Security
o The Code of Wages Act, 2019
o Code on Social Security, 2020
o Payment of Wages, Minimum wages, Bonus, Gratuity, Insurance, Compensation, PFs,
etc.
• Related laws:
o Law against Sexual Harassment of Women at the Workplace

The laws are very old.

Industrial relations code 2020 – yet to come into force.
Occupational Safety, Health and Working Conditions Code, 2020 – replaced most of the old laws and has
been passed recently.
States can make laws; but if parliament makes a law on that Subject, then state 's laws are 'subordinates
to it "

• Key Objectives:
o Protection against exploitation
o Labour standards and benefits
o Collective bargaining and redressal mechanisms
Employers need permission/license of the government if they want to close the firm if they have 100+
employees

• Key features:
o “Worker” – skilled or unskilled; manual; technical; supervisory; operational
o But not Managerial or Administrative work
Ceiling to qualify as a worker is Rs 20k/month. If earnings are more then it doesn’t qualify. >20k then
considered managerial. This limit if only for supervisory roles. Even pilots are considered workers & have
a trade union.
Only workers can be part of the trade unions. Trade union law applies only to workers unions & not any
union of managers or non-workers.
Worker definition – clerical has been added to the above categories. Although it means industrial
workers in general, other sectors like agriculture are also covered.
As per 2011 numbers, only 7% of employable people fell into the definition of a worker.
 18

Gratuity was applicable only to workers up to 2009, others have been included later.
Minimum wages are not defined in the law (numerically) but it has mentions it has to be defined
region/zone wise

Typology of Employment
• Employee by Status of Law
• Employment Contract
• Through a Contractor
• Ad-hoc or unorganized
Labour issues are taken up in civil court.
Employee by status of law – where terms and conditions are laid down in the law e.g. govt employees,
PSUs etc
Employment contract – terms & conditions are laid down in a contract e.g. private, corporate employees.
Through a contractor – workers hired through an intermediary contractor. Law does not approve of this
unless it is for non-core functions. E.g., security, housekeeping. Else if it is core then it has to be for a
temporary phase of time. Up to 5 yrs it can be claimed to be temporary. Giving a break & rehiring as
temporary if the break is for a min 3 months.

Pe Pe = principal employer

Ct Ct = contractor

W W = worker

If something happens to the worker during the work, the principal employer is responsible as per law and
is liable.
The law is inclined towards having direct workers employed & not having it through a contractor
The above concept comes into play only when W is working dedicated to Pe and only one principal
employer. If W works for multiple Pe, then they are not liable.
The worker W can be of any nature and not just a worker.
Pe cannot be move the liability over to Ct through a contractual agreement.

Employment Contract
• Basic terms – duration and review
• Position – nature of duties; scope and extent of power/authority; hierarchy
• Compensation, benefits & perquisites
• Conditions for termination
• Restrictive Conditions
o Non-compete clauses
o Non-disclosure agreements
o Sharing of Intellectual Property Rights
o Conditional benefits [e.g., Bonds]
Non -compete clause is not just about working for after resigning. It is about the competition for an
employee resource. Non-compete makes exit process more important than joining process like not
joining competition for 3-6 months.
Bonds = Surety of contract guarantee. There has to be investment of value.
Freelancers/ Part-time employees may work with competition & it is not illegal.
 19

NDA – it is an obligation of the law. Non-compete leads to NDA.

Trade secrets - just refers to brand confidentiality.
Breach of trust/Breach of confidentiality is a criminal offence punishable upto 5 years Of imprisonment

Confidentiality – firms must put in efforts to keep the trade secrets confidential. The onus is on the
employer.
Employee E quits company A and joins company B. this is not illegal to join a competitor as per the law. If
A suspects E is leaking some info, as per the law it can sue E for breach of trust. This is a crime as per IPC.
A can also sue B to recover the loss. This is as per common law. If proved legally that there has been a
breach, law assumes B is the instigator.
As a common practice while hiring E, B checks with A. legally E can join B but it is not supposed to carry
information with it. What matters here is that information is compromised. The threat of trade secret is
not because we don’t have a law, but it is humungous task to prove the crime, getting proofs & going
through the tedious process.

Review of Managerial Decisions

• Concept of Fiduciary duty – different from “best practices”; norms; aspirations
• Due care and good faith to be demonstrated in all actions
o Interest of the company and law as an objective
• Compliance requires fiduciary discharge of functions
o Document actions/decisions extensively

Discrimination at Workplace
• Gender or Sexual harassment or based on Sexuality orientation
• Age or Disability
• Race, religion, ethnicity, national origin
 20

Mergers & Acquisitions: Legal Dimensions & Aspects

CORPORATE FINANCE / FINANCIAL INVESTMENTS
• Various methods of raising finance.
• Broadly divided into – Equity and Debt.
• Some hybrid instruments also exist.
• In India, availability of financial instruments depends on the nature of the company – private,
public unlisted or public listed. Now largely, between listed and unlisted.
• Companies can have access to both domestic and foreign sources of finance.

FINANCIAL INVESTMENTS
• Financial investments vs. Strategic Investments.
• Control vs. Non-Control / Minority Transactions.
• Financial investors – on market; off-market / FIIs vs. PE / VC Funds. “Alternative Investment
Funds”. Issue of Registration / Licensing.
• Scope of Rights sought: Management vs. Governance / Financial vs. Control / “Exit”, realization
of value through RoI not dividends.

Most common financial sources currently

• Private equity / Venture capital.
• IPOs.
• Institutional debt – long term and short term
• Working capital.
• External Commercial Borrowings – FCCBs or regular corporate loans.

Equity Financing
• The Investor takes the equity risk.
• Investor gets various rights both at board level and shareholders’ level.
• Investor gets protection in the form of price protection and pre-emption rights.
• Rights of first refusal; rights of first offer.
• Exit options – sale, co-sale, IPO, IRR.
• Liquidation Preference. Return of capital first.

Preference Shares Financing

• Generally, convertible preference shares if foreign entities are involved.
• Investors negotiate all of the rights involved in equity financing, plus a fixed rate of return.
• Voting rights are tricky as far as preference shares are concerned.
• Conversion ratio is normally the subject matter of serious negotiation.

Debt Financing
• Various hues of debt are available.
• All of them generally involve a loan agreement – negotiated heavily.
• Covenants, both positive and negative are very strict.
• Lenders seek security, pledge, guarantees.
• Lenders also seek board seats and veto rights, have ability to take over management.
• Convertible debt instruments.
 21

• Project debt or debt at the company level. Term Loans.

• Working capital.
• Specific loans which are not project loans or secured.
• Creditors are protected under IBC + Companies Act.
• Institutional creditors also have rights under the SARFESI Act; DRT: etc.

What are we dealing with?

• ‘M&As’ – of different CATEGORIES or TYPES

Categorized by:
• Transactional Intention + Transactional Structural (i.e., Variations)
• Transactional Intention:
o Financial vs. Strategic
• Financial: Corporate Finance & Investment Transactions
o (Private Equity / Venture Capital)
• Strategic: ‘Partnerships’ & Joint Ventures; > 50% to 100% ‘takeovers’
• Equity vs. Non-Equity / Collaboration
• Cross-overs / Hybrids – e.g.: ‘control’ PE transactions

• Transactional Structural / Variety or Types

• Technically, ‘merger’ – transaction where two or more ‘companies’ or ‘entities’, “merge” and
only one company remains from the resulting transaction.
• ‘merger’ generically used – number of other transactions;
• where one company or entity ‘acquires’ all of the shares (or, the assets / businesses /
undertakings) of another company or entity.

• Cross-overs / Hybrids – e.g.: structural limbs of deal; Involving different types of M + A!

Players Involved:
• The acquirer(s); the seller(s); and the target(s)
• Investment bankers or similar deal makers
• Financiers – Lenders, equity funders, etc.
• Lawyers
• Accountants / Auditors
• HR consultants or other industry based special advisors
• Regulators – sectoral (industry verticals; e.g.: IRDA, PFRDA) or horizontal, across sectors (e.g.:
CCI, RBI, SEBI)

Procedures for Mergers

• Application to be made by all the companies involved – Natl. Co. Law Tribunal; a game changer!!
• Fast track merger process – group entities. Key is transparency & regulatory compliance
• Shareholders of both companies need to pass resolutions approving the merger (3/4ths
majority)
• Creditors of both companies need to approve (3/4ths majority)
• Valuation fixed by companies is generally not questioned by Tribunal
• Statutory authorities may object to the merger
 22

• Timelines; procedural lag

Acquisitions: Common Features

• Assets (Businesses / Undertakings) Acquisition
• Share Acquisition
• Hybrid – Asset and Shares
• Share Acquisition is different from Share Subscription. Primary vs. Secondary
• Acquisition of a private company is substantially different from acquiring a public company
• Note, now, the more applicable distinction is between listed and unlisted entities

What kind of acquisition? Issues Involved

• Tax issues – direct, indirect and stamp duty
• Nature of assets – tangible vs. intangible
• History of the Seller – legal and financial due diligence
• Current status of the Seller – important also to look at status of Seller post transaction
• Cross border transactions – inbound and outbound. FEMA; Forex issues – FDI; AIFs; ODI; LRS
• {Issues are the same; only additional factor is FEMA!}

Asset vs. Share Acquisitions

Common Issues
• Existing liabilities – known and unknown – sharing of risks
• Representations and Warranties
• “Change-of-control” clauses
• Tag along; drag along clauses // Rights of First Refusal / Rights of First Offer
 23

• “Non competition” clauses

Asset vs. Share Acquisitions

Common Issues
• Future management of the company
• Staggered sale issues – deferred consideration
• Contingent consideration issues – earn outs
• Employees
• Customers
• Creditors
• Various methods of raising finance
• Broadly divided into – Equity and Debt
• Some hybrid instruments also exist
• In India, availability of financial instruments depends on the nature of the company – private,
public unlisted or public listed. Now largely, between listed and unlisted
• Companies can have access to both domestic and foreign sources of finance

Acquisitions – Public vs. Private

Private Companies
• Equity funding – can have different categories of equity shares with variable rights; preference
shares. Information Rights; Voting; Economic Rights.
• Cannot have more than 200 shareholders.
• Cannot offer shares to the public and cannot accept deposits from, or issue debentures, to the
public – Sahara Case; “public” offer.
• Can take loans from banks, shareholders and other corporates.
• Access to foreign funds is limited – either ECBs or equity capital.
• It is easy to structure investor’s rights in a private company.
• Most venture capital funding happens with private companies.

Public Unlisted Companies

• All of the routes available for private companies.
• Can have access to a wider number of shareholders.
 24

• Structuring is by and large similar to private companies, although the ability to issue shares with
differential rights is limited.
• Access to foreign funds is as limited as in the case of private companies.
• All the routes discussed above.
• In addition, funds can be raised from the public, either through equity or debt instruments.
Public Offering.
• Access to foreign funds is more easier – apart from ECB’s, there is also the FCCB route and listing
of shares outside India.
• Investor’s rights are regulated strictly, so flexibility regarding structuring is limited.

Acquisition - Only one company results from the phenomena of Acquired. Acquisition of an asset is diff
from M&A, here there is individual ownership of the asset.
A company can sell its assets without getting into M&A.
Within 12months of sale of assets if a company gets into bankruptcy, then the transaction related to sale
of assets might be reviewed. If there was a fair valuation then no issues. If the basis is not fair value then
entire transaction can be reversed.

Mergers - One company acquis the shares/assets of another company

How is a merger different from demerger

Acquiring a company but don't want to buy a particular segment of the company. That part of the
company then would require to be demerged before the acquisition can happen.

A + B = C => Amalgamation. The existing company losses the identity.

A merges into B, after a year B can be taken out for several reasons like operations, HR, workforce
incompatibility.
No scheme of arrangement can be approved without shareholders and creditors approval.
Statutory approval is for anybody in public to raise an objection.
Shareholders can raise objection in the general body meeting.
For approval of M&A – 50% + 1 majority of creditors and shareholders have to approve in terms of value,
3/4th of the creditors have to approve.
Change of SEBI is it hasn’t been able to make companies transparent.
Typically, all actions need shareholders approval as per law, but shareholders handover entire set of
decision making to the directors, except scheme of arrangement decisions.
Scheme of Arrangement – Removal of director decision, only shareholders have decision making power.
As per law – In any listed company - 25% of shareholders to be public (retail holding), 30-40%
institutional shareholders (LIC, pension funds) and remaining Individuals/ promoters.
Control is not always related of the quantity of shares. Even minority shareholder can run a company.
Promoter promotes the interest of the company.
Unique shareholder mix can be designed in pvt listed company. E.g. first set may ask for veto powers etc
Once company becomes public listed, SEBI does not allow them to engineer shareholder contract, the
companies need to be transparent.
 25

Technology and the Law

To appreciate the importance of and the criteria to – recognize, establish and enforce – intellectual
property rights
To understand the prevalent legal principles of Data protection and other aspects of Cyber Law

Intellectual Property Rights

IPRs – Basis & Rationale
• Economic (and technological) rationale – aids overall development
• Social benefits – enriches Public Domain and furthers Basic Research
• IPRs are legally monopolistic – need to be fairly enforced/regulated

Forms of IPRs
• Patents – Patents Act, 1970
• Copyrights – Copyright Act, 1957
• Trade Marks – Trade Marks Act, 1999
• Industrial Designs – Designs Act, 2000

• Layout Designs of ICs – Semiconductor Integrated Circuits Layout-Design Act, 2000

• Geographical Indications – Geographical Indications of Goods (Registration and Protection) Act,
1999
• Plant varieties – Protection of Plant Varieties and Farmers’ Rights Act, 2001

• Traditional Knowledge – partly by Biological Diversity Act, 2002

o Turmeric and Neem disputes
o Basmati and Yoga controversy
• Trade Secrets – Contractual – no particular legislation in India
o Latest amendments to the Information Technology Act – render some protection
o Indian Penal Code – data violation as a crime

Pressures of Enforcement
• IPRs = fiercely competitive usage; justifies criminal remedies too
o Interim remedies and permanent declarations
o Compensatory remedies based on ‘attributable profits’

• IPRs and Global recognition

o IPRs are territorial in nature
o Registration is only of presumptive validity

What is a Patent?
• Patent – a monopoly right to an inventor
• 20 year period of monopoly granted for inventions that satisfy:
o Novelty
o Inventive Step or Non-obviousness
o Utility or industrial application
 26

What can you do with a Patent?

• Section 48 of the Patents Act, 1970:
o Make
o Use
o Sell
o Distribute
o Import
• The invention within India
• Effect of Patents – only territorial

Patent Law in India

• The Patents Act, 1970
• The Patents Rules, 2003
• Registering Authorty – Controller General of Patents, Designs and Trade Marks – HO at Kolkata –
Branches at Chennai, Delhi & Mumbai
• Registration – no guarantee of validity

Non-patentability
• Exclusions – abstract ideas, laws of nature, natural phenomena
• Section 3 enlists … :
o Medical & Treatment procedures;
o Traditional Knowledge;
o Mathematical or Business methods;
o Computer programs per se or algorithms;

Patent Cooperation Treaty (PCT)

• Treaty for International rationalization and cooperation in:
o Filing;
o Searching;
o Examination; of Patent specifications
o Dissemination of technical information contained in various applications
• No grant of “international patents” – procedural facilitation – ultimate grant by countries only

Patent Applications
• Who can apply for a Patent?
o “True and first inventor” principle – idea, effort and disclosure
o Even through an assignee or a Legal representative

• Firms/Corporations – cannot be inventors – but can apply as assignees or joint holders

COPYRIGHTS
• Statutorily provided privilege to authors, aiming towards:
o Creative and Intellectual enrichment of the public
o Progress of Scientific and useful Arts (literary, artistic, musical, dramatic,
cinematographic films, sound recordings and now performances & broadcasting)
o Copyleft, Open Source and Creative Commons – emerging notions of open access
 27

• Bundle of rights – right to make copies; communicate to the public; make adaptations and allow
translations

Legal Framework
• Registration – not compulsory, but useful when copyright is infringed - territorial
• Indian Copyright Act, 1957
• International recognition:
o Berne Convention (1886) and
o Universal Copyright Convention (1952)

“Fair Use” Criteria

• Purpose and Character of use
• The nature of the Copyrighted work
• Amount and substantiality of use
• The effect on potential market or value

Some instances of Fair use

• For Teaching, Research or Private Study
• For news, review, or critiques
• For mainly Charitable and non-commercial performances
• For benefit of differently-abled

CYBER LAWS, E-GOVERNANCE & DATA PROTECTION

Geography, is History!
• Contracts & Commerce in Cyberspace and in Electronic format
• Detection, Investigation and Prosecution of Cyber Crimes across the globe
• Re-appreciation of legal principles – jurisdiction, privacy, IPRs, evidence, etc.

IT Law – Objects & Concerns

• To provide privacy and guarantee security in public and unregulated space
• To authenticate and authorize transactions undertaken across several countries
• To keep the legal framework in pace with the changing forms of technology

Online Piracy
• RIAA v. Charter Comm. (2005 USCoA)
o P2P; MP3 technology enabled piracy
o 2.6 billion music works in a month!
o “John/Jane Doe” suits and summons
o Disclosure of subscriber details
o “Safe harbour” (DMCA, 2000) for ISPs = mere transmit and route; “system caching”
temporary storage; user determined process; mere provision of links – prompt action
upon notification
• “Contributory liability” only if:
 28

o Reasonable knowledge of infringement

o Expected knowledge of storage on site
o Fails to prevent “viral distribution”
• “Due diligence” given prominence in Indian Law – Intermediaries’ liability

Liability of “Intermediaries”
• Service Providers are exempted from liability if lack of knowledge despite “due diligence”
• Service Providers can be ordered to preserve and retain information
o Full cooperation is legally mandated
• Comprehensive Search & Seizure Powers given to the Police

Legal Framework
• Information Technology Act, 2000
o Latest Amendments
o Procedural and Evidentiary
• UNCITRAL Model Law on E-Commerce, 1996
• Convention on Cyber Crimes = EU+ Members
• US Acts and EU Directives

E-Governance
• Recognizes electronic records and signatures as valid forms
• Government can accept, issue, create, retain and preserve records electronically – though not
mandatorily
• Mandate of the Right to Information Act

Data Protection
• DATA PROTECTION & PRIVACY
o Compensatory remedy = up to 5 Crores
o Applicable to “body corporate” (commercial or professional activities);
o Reasonable security procedures;
o Protection of “sensitive personal data/ information”
o Disclosure of confidential information penalized
o Violation of Privacy made punishable – crime as per the IPC
 29

Fundamentals of Intellectual Property

There is no clear definition for IP. This is a business term. This means innovation capable of being
converted into property. Forms – patents, copyrights, trade secrets etc.
People assume IP = facts, which is not true. It grants exclusive rights using which you can prevent anyone
else from having access.
IP does not give a right to implement but gives exclusive rights so that others are excluded from
implementing the same3.
These are limited to the tenure of the term. It is not forever. Once the term is over, competition gets
access to the property.
Term if a trademark can be forever. But it ceases to exist once you stop using the trademark.

Patents
• Subject Matter Inventions
• Term 20 years
• Requirements
o New
o Useful
o Non-obvious
• Rights - Use, Make, Sell, Offer for sale and Import

Patents protects inventions. India is at no. 9 in total patents filed in 2020. You need not have developed
the product. It is good enough to have conceived it, meaning it could be thought of but not implemented.
Categories – Implementable/ implemented – patent can be given
- Unimplementable inventions – no patent
 30

There is not clear definition of what stage the idea is patentable. There is not need for a prototype.
5 Requirements
1. Patentable Subject Matter – Govt decides subject matter on which patent can be given, products or
processes which are patentable. Govt has list of 50 prod/processes which cannot be patented. E.g.
animal products/parts, business strategies, computer programs, mathematical algorithms etc. But
algorithm can be used in a product which can be patented.
Similarly computer program which goes out of the system to execute some idea can be patented, rather
than running only on the computer. E.g. program that prints something or collects data from external
sources.
2. Check if the invention is useful or not, even if it is for one person.
3. Novelty – checks if the invention is new. Should have atleast one difference/change from an existing
one.
4. Inventor step – check if the invention would be obvious to someone with basic skills in the same field.
5. Enablement – should have details like pictures, drawings which should enable someone else in the
same field to implement on his own.

There is no concept of a global patent. Patent in one country is not valid in another country. It needs to
be filed individually. Patent can be challenged only in the country of grant.
It cannot be extended beyond 20yrs. It is open to the public domain after that.
Claims section in the document – defines the invention and its scope.

e.g. Carrot icecream – prior art is ice cream & carrot halwa. It is non obvious and has atleats one
difference from the other products, hence patentable

Copyrights
• Idea/Expression Dichotomy
• Tangible Form
• Originality and Modicum of creativity
• Subject matter Literary, Dramatic, Artistic, Musical, Cinematographic, Photographic and Sound
Recording works.
• Term Life plus 60 years
• Rights – Reproduction, Adaptation, Distribution, Public performance, Public Display,
Communication to Public
Protects Expressions e,g, artistic, literary work etc
Must be original. You should have created. It need not be exclusive. E.g.multiple people can take a
picture of the same bird and each can be copyrighted.
It should have some creativity.
It is not territorial like a patent. 170+ countries signed the Berne convention to share the info.
Infringement even if the reproduction is substantially similar, need not be exactly the same.
If someone else’s work is used for fair use or fair dealing like in news story or parody etc, they are not
considered infringement. Some exceptions granted for use – using in marriage ceremonies, for public
events for disability etc.
e.g. lyrics and music used in talk shows considered as a fair dealing & hence no infringement. But it
cannot exceed 60 seconds of usage. But the video cannot be used without consent.
 31

Fair Dealing / Exceptions

• Private use
• Indicational Use
• Criticism
• News Reporting
• Intermediary / Market Places

Trademarks
• Subject matter Representation
• Term Unlimited
• Requirements
o Distinctive
o Deceptive
• Example - Burj Al Arab Vs. Burj Noida, Burj Bangalore etc.
o Bacardi Breezer Vs. Bahety FreezeMix
o Walmart Vs. www.wmartretail.com
o Trademark keywords in Google Ads
Protects consumer association with the brand
Should be distinctive and not deceptively similar. Arises out of the use of the TM. More the usage the
stronger it gets.
Double identify tests – are the TMs identical/ similar
- Are the products also identical/similar
- Is this double identity confusing the consumers

Industrial Designs
• Appearance
• New, Original and Ornamental
• Term: 5 years renewable twice

Trade Secrets
• Any information
• Perpetual Term
• Requirements
o Economic Value
o Not known to public
o Reasonable measures
 32

QUESTIONS FOR PRACTICE

Which of the following is true ?
a) Contracts without any enchange of money are void .
b) Contracts without any consideration are void
c) Contracts without significant consideration are wood
d) All of the above

Contracts require commensurate consideration and not significant Consideration. There has to be
something in it for all the parties

A special Court is special because :

a) They are Instead of general Courts
b) Lawyers are not required
c) Particular subjects or issues are adjudicated
d) All of the above

Liquidated damages clause denotes:

a) The maximum Compensation
b) The total compensation
c) The Calculation of Compensation
d) All of the above

The use of precedents means:

a) It is binding as reference of facts
b) It is binding as reference of decision
c) It is binding as reference of law
d) It is binding as reference of the parties

Which of the following is false?

a) Civil d Criminal remedies are different
b) Civil & Criminal remedies are Independent
c) time & criminal remedies are Supplementary
d) None of the above