Business Law

December 2023 Examination

1) If the policy contains an arbitration clause, the courts in India will direct the parties to
arbitrate. The jurisdiction of the court in deciding an application for arbitral reference is
very narrow and limited to examining only the existence of an arbitration agreement, and
all other questions relating to the arbitrability of the dispute have to be decided by the
arbitral tribunal. Explain this statement with the help of recent decision of various courts.
(10 Marks)

Ans 1.

Introduction

Arbitration, as an alternative to traditional litigation, has grown in popularity as a mode of

dispute resolution, especially in commercial contracts. The reason for its attractiveness lies in
the fact that arbitration is often perceived as a quicker, more confidential, and flexible method
to resolve disputes than the traditional court system. However, it hinges on the existence of an
arbitration clause in the agreement between the parties. In India, the arbitration process is
governed by the Arbitration and Conciliation Act, 1996. The Act clearly delineates the role of
courts and arbitral tribunals in the arbitration process.

Concept & Application

In general, the arbitration agreement provides the basis for arbitration. It is defined as an agreement to
submit present or future disputes to arbitration. This generic concept comprises two basic types:

a) A clause in a contract, by which the parties to a contract undertake to submit to arbitration the disputes
that may arise in relation to that contract (arbitration clause); or
b) An agreement by which the parties to a dispute that has already arisen submit the dispute to arbitration
(submission agreement). The arbitration clause therefore refers to disputes not existing when the
agreement is executed.

Such disputes, it must be noted, might never arise. That is why the parties may define the subject matter
of the arbitration by reference to the relationship out of which it derives. The submission agreement refers
to conflicts that have already arisen. Hence, it can include an accurate description of the subject matters to
be arbitrated.

In such cases, one of the purposes of the submission agreement is to complement the generic reference to
disputes by a detailed description of the issues to be resolved.

Negative enforcement: Lack of jurisdiction of courts An arbitration agreement precludes judges from
resolving the conflicts that the parties have agreed to submit to arbitration. If one of the parties files a
lawsuit in relation to those matters, the other may challenge the court’s jurisdiction on the grounds that
the jurisdiction of the courts has been waived. The judge’s lack of jurisdiction is not automatic, nor can it
be declared ex officio. Instead, it must be raised by the defendant no later than when filing the answer to
the complaint. That is so because arbitral jurisdiction is waivable, and the waiver would be presumed if
the plaintiff filed a complaint and the defendant failed to challenge the court’s jurisdiction. To sum up,
once a conflict has arisen over any of the subjects included in the arbitration agreement, the courts will
have no jurisdiction to resolve it unless both parties expressly or tacitly agree to waive the arbitration
agreement.

Positive enforcement: the “submission agreement” The arbitration agreement grants jurisdiction to
arbitrators. By “jurisdiction” we mean the powers conferred on arbitrators to enable them to resolve the
matters submitted to them by rendering a binding decision. The negative enforcement of the arbitration
agreement is universally accepted and does not depend on the kind of agreement. Conversely, the positive
enforcement is inextricably linked to the applicable law. That is so because some local arbitration laws
still do not grant the arbitration clause an autonomous status. In fact, some traditional laws require that,
even when there is a previous arbitration clause, the parties execute a new agreement called “submission
agreement”, which must contain the names of the arbitrators and clearly identify the matters submitted to
them.
1 When a submission agreement is required, the arbitration clause becomes insufficent. Once there are
concrete issues in dispute, the parties must enter into an agreement, whether or not they have previously
signed an arbitration clause. Under those laws, the arbitration clause at best compels the parties to sign the
submission agreement. However, since this obligation is not always complied with voluntarily, such laws
provide for a court’s intervention to enforce the arbitration clause. The judge must supplement the content
of the submission agreement, and his judgment – which replaces the will of the party who has refused to
sign it – is treated as a submission agreement. Lack of cooperation by one of the parties in the execution
of the submission agreement or insuperable differences between the parties as to what should go into it
are settled by a court.

2 The legal requirement of the submission agreement as a condition to arbitrate has been considered one
of the main obstacles to arbitration, even in the cases in which it could be supplied by a court. In fact, if
one of the parties resists arbitration, the refusal to execute the submission agreement allows it to obstruct
the constitution of the tribunal and delay the arbitration itself. This forces the opposite party to enter into a
judicial process to obtain the submission agreement. Arbitration is therefore deprived of one its main
comparative advantages, i.e. expeditiousness.

For Example: Vulcan Industries Co. Ltd Vs Maharaja Singh & Anr. was a case related to denial of
liability of the insurance company. No difference or dispute could be referred to arbitration as the clause
mentioned in the insurance contract. Supreme Court held that the remedy available in such as case was
legal proceedings to be invoked.

The case discusses that if the arbitration clause coaches in a comprehensive language and bears away the
right to sue by impending that any kind of dispute arising under insurance policy framework can start a
legal proceeding only after an arbitral award has been awarded. It was held that such clauses cannot be
conditional precedent as if a dispute raised cannot be referred to arbitration than it must be decided
though legal proceedings.

In the absence of an arbitration clause in the policy, an insured can approach a commercial court or a
consumer court. If the policy contains an arbitration clause, the courts will direct the parties to arbitrate
but the same is not the case when disputes relating to liability are excluded from an arbitration clause.
2) The vehicle owner paid the renewal premium amount to the insurance agent on
January 19, 2022 and a receipt was also issued. However, the insurance agent had credited
the amount to the insurance company only on January 31, 2022. The policy for the vehicle
was issued only with effect from February 1, 2016. On January 24, 2022 accident
happened and the owner of the vehicle died. The insurance company rejected the claim
and hence the legal heirs of the vehicle owner filed a case against the insurance company.
The court mulcted the entire liability upon the insurance agent. Examine whether in this
situation agent was liable with the help of recent case laws. (10 Marks)

Ans 2.Introduction

Insurance is a contractual agreement between the policyholder and the insurance company,
ensuring that in return for premium payments, the insurer will provide compensation for
specified potential future events. An integral part of this contract is the timely payment and
processing of premiums, which ensures the continuity of the coverage. Insurance agents act as
intermediaries between policyholders and insurance companies, and their roles come with
fiduciary responsibilities.

Concept & Application

The liability of the insurance agent could depend on various factors, including:

1. Agency Relationship: The nature of the relationship between the insurance agent and the
insurance company is critical. If the agent is acting within the scope of their authority and there
is a clear agency relationship, the insurance company might still be held liable.

2. Estoppel: If the insurance company led the insured to believe that coverage was in force,
or if the agent's actions created a reasonable expectation of coverage, the concept of estoppel
might come into play. Estoppel prevents a party from denying certain facts if their previous
conduct led the other party to rely on those facts to their detriment.
3. Prompt Payment of Premiums: Some jurisdictions require insurance companies to issue
policies promptly upon receipt of the premium. If there are regulations or laws in place that
mandate prompt policy issuance, the insurance agent's delay in crediting the premium might be
a factor.

4. Terms of the Insurance Policy: The specific terms and conditions of the insurance
policy, including any provisions related to the effective date of coverage, are crucial. If the
policy explicitly states that coverage begins only upon receipt of the premium by the insurance
company, it could affect the outcome.

The contention of the company that their agent was not authorised to receive a renewal premium
is not legally sustainable. Certainly, there is a fault on the part of the agent in remitting the
insurance amount to the company. The insurance company cannot get exonerated for the fault
committed by its own agent, it said, adding that if the company finds its agent was negligent in
belatedly remitting the amount, it is for the insurance company to initiate independent
proceedings.

Acc to the Law Section 168 the insurance company does not have any power whatsoever to
postpone the date of commencement of the policy after receipt of the premium either directly or
through their agent. “The only fault on the part of the agent is that having received the
premium, he has not remitted it to the company in time. The insurance agent does not fall under
any one of the categories of section 168 of the Motor Vehicles Act, which says either the driver,
owner or the insurance company could be charged with liability to pay compensation. The
insurance agent cannot be treated insurer for passing an award,

PROCEDURE FOR INVESTIGATION OF MOTOR VEHICLE ACCIDENTS UNDER

CENTRAL MOTOR VEHICLES

In case of non-settlement, the Claims Tribunal shall conduct an enquiry and pass an award within thirty
(30) days If the offer of the Insurance Company is not fair or is not acceptable to the claimant(s) or if the
Insurance Company has any defence available to it under law, the Claims Tribunal shall proceed to
conduct an inquiry under sections 168 and 169 of the Motor Vehicles Act, 1988. The Claims Tribunal
shall pass an award after hearing the parties, within nine months from the date of the accident. 30. Cases
where the Insurance Company disputes the liability If the Insurance Company disputes the liability to pay
the compensation, it shall disclose the grounds of defence in Form-XI. If the Claims Tribunal considers
the recording of evidence necessary, the Claims Tribunal shall conduct an inquiry in terms of sections 168
and 169 of the Motor Vehicles Act, 1988 to be completed within one year from dateof accident. If the
Claims Tribunal is unable to complete the inquiry within one year, it shall record reasons thereof in the
award. The Claims Tribunal may direct the recording of the evidence by the Local Commissioner, if the
Insurance Company is willing to bear the fees of the Local Commissioner

To determine liability, it would be essential to review the terms of the insurance policy,
relevant laws and regulations, and any communications or representations made by the
insurance agent or the insurance company.

For the most accurate and up-to-date information, it's recommended to consult with a legal
professional who can consider the specific details of the case and provide advice based on the
latest legal developments and case law.

3) Consumers who are unaware of their rights are vulnerable in the marketplace. It is vital
that they be aware of their rights so that they can make choices confidently, and with due
regard to their interests.

(a) What are all the rights available to consumer. (5 Marks)

Ans 3a. Introduction

In the modern marketplace, consumers often find themselves navigating a complex web of
products, services, and providers. Given the diversity and intricacy of options available, the
potential for exploitation or unintentional harm is high.

Concept & Application

Consumer rights are designed to protect individuals from unfair and deceptive practices in the
marketplace. These rights vary across different jurisdictions, but there are common principles
that are widely recognized internationally. Here are some fundamental consumer rights:

1. Right to Safety: Consumers have the right to be protected against goods and services that
are hazardous to health or life. Products should meet safety standards, and consumers should be
provided with clear instructions for safe use.

2. Right to Information: Consumers have the right to receive accurate and complete
information about the products and services they purchase. This includes information about the
price, ingredients, quality, and potential risks.

3. Right to Choose: Consumers have the right to choose from a variety of products and
services at competitive prices. Monopolistic and restrictive trade practices that limit consumer
choices are prohibited.

4. Right to Be Heard: Consumers have the right to express their opinions, concerns, and
complaints about products and services. Companies should have mechanisms in place to address
consumer feedback and resolve disputes.

5. Right to Redress: Consumers have the right to seek compensation or redress for
substandard goods or services. This may involve refunds, replacements, or repairs.

6. Right to Consumer Education: Consumers have the right to be educated about their
rights and responsibilities. Governments and consumer organizations play a role in providing
information to help consumers make informed choices.

7. Right to Privacy: Consumers have the right to privacy regarding their personal
information. Companies must handle consumer data responsibly and protect it from
unauthorized access or use.
8. Right to a Healthy Environment: Consumers have the right to live and work in an
environment that does not endanger their health and well-being. This includes the right to
information about the environmental impact of products and services.

9. Right to Fair and Honest Marketing Practices: Consumers have the right to protection
from deceptive advertising and marketing practices. Companies should provide accurate
information and avoid misleading consumers.

10. Right to Sustainable Development: Consumers have the right to access resources and
services that promote sustainable development. This involves the responsible use of natural
resources and consideration for future generations.

Conclusion

These rights are often encapsulated in consumer protection laws and regulations. While the
specifics may vary by country, international bodies like the United Nations and organizations
like the Consumer International have outlined general principles to guide the protection of
consumer rights globally. It's essential for consumers to be aware of these rights to make
informed choices and hold businesses accountable for fair and ethical practices.

(b) Explain the compliant making process for misleading advertisement and e-commerce
platform. (5 Marks)

Ans 3b.

Introduction

The rise of digital platforms, particularly e-commerce and online advertising, has transformed
the way we shop and consume information. While these platforms offer convenience and a
plethora of choices, they also come with their set of challenges.
Concept & Application

The process of making a complaint about misleading advertisements and e-commerce platforms
typically involves several steps. Here's a general guide to help you understand the
complaint-making process:

Misleading Advertisement:

1. Identify the Misleading Advertisement: Recognize the advertisement that you believe is
misleading. Note specific claims, visuals, or information that you find deceptive.

2. Gather Evidence: Collect evidence to support your claim. This may include screenshots,
videos, or any other documentation that clearly illustrates the misleading nature of the
advertisement.

3. Contact the Advertiser: If possible, contact the advertiser directly. Share your concerns and
explain why you believe the advertisement is misleading. Some advertisers may address the
issue promptly.

4. Check Regulatory Authorities: Research and identify the regulatory authorities responsible
for monitoring and regulating advertising practices in your jurisdiction. For example, in the
United States, the Federal Trade Commission (FTC) plays a significant role.

5. File a Complaint with Regulatory Authorities: Submit a formal complaint to the relevant
regulatory authority. This typically involves filling out a complaint form or providing details
through an online portal. Include the evidence you've gathered to support your case.

6. Follow Up: Keep track of any communication from the regulatory authority. They may
investigate the complaint and take appropriate action.

E-commerce Platform:
1. Document the Issue: Clearly document the issue you are facing on the e-commerce platform.
This could include problems with product quality, delivery issues, false advertising, or any
other concerns.

2. Contact Customer Support: Reach out to the customer support team of the e-commerce
platform. Many issues can be resolved through direct communication. Provide details of your
complaint and request a resolution.

3. Keep Records: Keep records of all communications with the e-commerce platform, including
emails, chat transcripts, or screenshots. This documentation can be useful if you need to
escalate the matter.

4. Review Platform Policies: Familiarize yourself with the platform's policies, terms of
service, and buyer protection policies. This information will help you understand your rights
and the platform's responsibilities.

5. Use Online Resolution Platforms: Some e-commerce platforms have online resolution
centers or dispute resolution processes. Utilize these platforms if available to seek a resolution.

6. File a Complaint with Consumer Protection Agencies: If your issue remains unresolved,
you may consider filing a complaint with consumer protection agencies or regulatory bodies in
your jurisdiction. Provide details of the issue, including evidence if possible.

7. Legal Action: In extreme cases, if all else fails, you may explore legal options. Consult
with a legal professional to understand the feasibility of taking legal action against the e-
commerce platform.

Conclusion

Remember that the specific steps and regulatory bodies involved may vary based on your
location. Always check local laws and regulations to ensure you are following the appropriate
process for your jurisdiction. Additionally, many countries have consumer protection agencies
and ombudsman services that can provide guidance and assistance in resolving disputes with
businesses.