Business Law by Prof. V. Y. Badave

Business Law
What is law ?
“A law is a rule of conduct imposed and
enforced by the sovereign.”
“The body of principles recognized and
applied the state in the administration of
justice.”
Law a a norms of action [what to do & not]

 What is Business law ?
 Business law is a branch of General Law.
It relates to industry, trade and commerce.
It includes law inter alia relating to
contracts, sale of goods, partnerships,
negotiable instruments, companies, co-
operative societies etc.
Business Law

Function of Law
 Maintain law and order in society
 Maintain status que in society
 To ensure maximum freedom of individuals
 To satisfy the basic needs of the people
 Main object of law is to ensure justice

Legal Aspects of Business
 Sources of Indian Law
 Types of business law

The Indian Contract Act, 1872
 Offer
 When one person signifies his willingness
to do or abstain from doing something
to another person with an intention to
abstaining assent to that person to such
act or abstain
 Express Offer
 Implied Offer

 Acceptance
 When a person to whom proposal is
made signifies his assent is said to have
accepted the offer.
 Acceptance shall be
 Absolute
 Unconditional
 Useful & reasonable manner

 Consideration
 Section 2(d) of the Indian Contract Act defines
consideration as under
 “When, at the desire of the promisor, the
promisee or any other person (i) has done, or
abstained from doing or (ii) does or abstains
from doing, or (iii) promises to do or to
abstain from doing something, such act or
abstinence or promise is called a consideration
from the promise.”
Every contract consist two parts
(i) promise
(ii) consideration for the promise.

 Agreement
 Every promise and every set of promise
forming the consideration for each other is
an agreement. [Section 2(e)]
 For constituting an agreement an offer by
one party and its acceptance by other party
are required. In other words, an offer and
its acceptance together constitute an
agreement.
Agreement = Offer + Its acceptance

 Contract
 An agreement enforceable by law is a contract
[Section 2(h)]. Merely an agreement is not a
contract but its enforceability at law together
constitute a contract.
Contract = Agreement + Its enforceability at law

 Essential elements of valid contract
 Proposal and acceptance
 Consideration
 Capacity of parties to contract
 Free consent
 An agreement must not be expressly declared to be
void
 Writing and registration, if so required by law.
 Legal relationship
 Certainty
 Possibility of performance
 Enforceable by law

Capacity to contract
 Who are competent to contract
Every person is competent to contract
I. Who is of the age of majority according
to the law to which he is subject
II. Who is not disqualified from contracting
by any law to which he is subject.

Free consent
 According to section 13 of the act “Two or more
persons are said to consent when they agree upon
the same thing in the same sense.”
 Free consent
 Parties consenting to the same thing in the
same sense is not sufficient. Consent must be
free. Section 14 of the act proceeds to defines
“Free consent” as under
 “consent is said to be free when it is not caused
by (i) coercion, (ii) undue influence, (iii)
fraud, (iv) misrepresentation, or (v)
mistake.”

Free Consent
 Coercion
 Coercion is committing, or threatening to
commit, any act forbidden by the Indian
Penal Code, or the unlawful detaining, or
threatening to detain any property, to
the prejudice of any person whatever,
with the intention of causing any person
to enter into an agreement.

Free Consent
 Undue influence
 Section 16 (1) defines undue influence
as under “A contract is said to be
induced by ‘undue influence’ where the
relations subsisting between the parties
are such that one of the parties is in a
position to dominate the will of the other
and uses that position to obtain an unfair
advantage over the other.”

Free Consent
 Fraud
 Section 17 defines “fraud” as under
“Fraud means and includes any of the
following acts committed by a party to a
contract; or with his connivance; or by
his agent, with intent to deceive another
party thereto or his agent, or to induce
him to enter into the contract.”

Free Consent
 Misrepresentation
 “Misrepresentation means a positive assertion
of what is not true, even though he might
believe it to be true.” a statement made
innocently with a reasonable ground of belief
is no misrepresentation.
 Untrue statement made without any
reasonable ground of belief that it is true with
an intent that a person to whom it is made
shat act upon it, is a misrepresentation, which
makes the contract void able.

Free Consent
 Misrepresentation
 There is no intention to
deceive
 A false innocent statement
without any intention to
deceive is
misrepresentation
 The person making the
statement believes it to be
true
 It makes contract void
able at the option of the
party
 Fraud
 There is intention to
deceive
 A false statement
deliberately made to
deceive is fraud
 The person making the
statement does not believe
it to be true
 Beside making the
contract void able at the
option of the party injured,
it gives right to an
independent action in
court

Free Consent
 Mistake
 An erroneous belief about something is
called “mistake.” when an agreement is
entered into under a mistake, consent is
not free.
 Mistake is of two kinds
 Mistake of fact
 Mistake of law

Void Agreements
 Types of void agreements
 Agreement made by an incompetent persons
 Agreement made under mutual mistake as to
a matter of fact essential to the agreement
 Agreement made under mistake as to a law
not in force in India
 Agreement, the consideration or object of
which is unlawful
 Agreement, the consideration or object of
which is unlawful in part
 Agreement made without consideration
 Agreement in restraint of marriage
 Agreement in restraint to trade

Void Agreements
 Agreement in restraint of legal proceedings
 Agreement, the meaning of which is uncertain
 Agreement by way of wager
 Agreement contingent on an impossible event
 Agreement to do an impossible act
 Agreement to do an act which subsequently
becomes impossible
 Agreement contingent on an uncertain future
event if the event becomes impossible

Performance of contract
 “Parties to the contract must either perform, or
offer to perform their respective promises,
unless such performance is dispensed with or
excused under the provisions of this act, or of
any other law” (sec. 37)
 Every contact consist of reciprocal promises. As
a general rule, the parties to the contract must
perform or offer to perform their respective
promises. When one party performs his
promise, he can enforce the performance of the
other party.

Discharge of contract
 Discharge means “termination” of a contract.
By discharge the rights and obligation of the
parties come to an end. The contract may be
discharge in any following ways
 By performance
 By death
 By refusing tender of performance
 By breach of contract
 By impossibility of performance

Discharge of contract
 By agreement of consent
 By promise failing to offer facilities for
performance
 By operation of law
 By unauthorized material alteration of a
contract
 Discharge by lapse of time

Remedies for breach of contract
 Suit for specific performance
 Suit for injunction
 Suit for damages, for the loss
sustained
 Quantum meruit ( as much as he
deserved)

 Section 3 (1)(i) of the companies act, 1956 defines a
company as
 “A company means a company formed and registered
under this act or an existing company.”
 Section 556 of the act defines a joint stock company
as:“A joint stock company means a company having a
permanent paid up or nominal share capital of fixed
amount divided into shares also fixed amount, or held
and transferable as stock or stock or divided and held
partly in one way and partly in the other. Such a
company when registered with limited liability under
this act shall be deemed to be a company limited by
share.”
Company Act 1956

Characteristics of a company
 Registration
 Distinct person- separate legal entity
 Perpetual succession
 Artificial person but not a citizen
 Transferable shares
 Limited liability
 Common seal
 Separated property
 Capacity to use and be used.

Company v/s. Partnership
Partnership
 Registration of a firm is not
compulsory.
 Minimum two and
maximum twenty persons
constitute a partnership in
case of banking ten
maximum persons.
 A firm has no separate
legal status.
 Property of the firm is the
property of the partners
Company
 Registration of a company is
compulsory under the
company act.
 Minimum 2 and maximum 50
constitute a private limited
company and minimum 7 and
maximum unlimited
constitute a public limited
company.
 A company has a separate
legal existence of its own and
is considered a separate
person from its members.

Company v/s. Partnership
Partnership
 A partner cannot
contract with the firm.
 Management vests in
the hands of the
partners except in the
case of a dormant or
sleeping partner.
Company
 A shareholder cannot
contract with the
company.
 Management vests in
the Board of Directors
elected by the
shareholders.

Kinds of Company
1. Royal charter or chartered companies
2. Statutory companies
3. Registered companies under the act
i. Companies limited by shares
– Public companies
– Private companies
ii. Companies limited by guarantee
iii. Unlimited companies

Royal Charter or Chartered
Companies
 The companies are incorporated under
special Royal Charter issued by the King or
Queen.
 Examples
 East India Company
 Bank of England

Statutory Companies
 These companies are formed under the
Special Statutory Act of the parliament or
State Legislature.
 Examples
 Reserve Bank of India
 State Bank of India
 Industrial Finance Corporation of India
 Life Insurance Corporation of India

Registered Companies
 Companies registered under the Companies
Act, 1956 or under any previous Companies
Act, are companies registered under the
Companies act
 Companies registered under the Companies
Act are either
 Companies limited by shares
 Companies limited by guarantee
 Unlimited companies

Private Limited Companies
 Section 3(1)(iii) of the Companies Act
defines a Private Limited Company. Private
Company means a company which has a
minimum paid up capital of one lac. rupees
or such higher paid up capital as may be
prescribed and by its articles

Public Limited Company
 Section 3(1)(iv) states that all companies
other than private companies are called
public companies
 A company which is not a private company
is a public company.

Memorandum of Association
 Section 2 (28) of the Companies Act defines
‘Memorandum’ : “Memorandum means the
Memorandum of Association of a company as
originally framed or as altered from time to
time in pursuance of any previous companies
law or of this Act.”
 Memorandum of Association is the document
which contains the rules regarding
constitution and activates or objects of the
company.

Memorandum of Association
 Contents of Memorandum of Association
[sec. 13]
 Name of the company with ‘limited’ as
the last word of the name.
 Registered office of the company.
 Objects of the company.
 Liability of the members.
 Details of share capital of the company.
 Subscription or Association clause.

Articles of Association
 Section 2(2) of the Companies Act defines
Articles “Articles mean Articles of
Association of a company as originally
framed or as altered from time to time in
pursuance of any previous companies law
or of this Act, including so far as the apply
to the company, the regulations contained,
as the case may be, in Table A to Schedule
I of this Act.”

Articles of Association
 Contains of Articles of Association
 Share capital and alteration thereof.
 Payment, calls, transfer, lien, transmission,
forfeiture, etc. of shares
 Share certificates and warrants.
 Rights of shareholders.
 Meetings of the company.
 Appointment, remuneration, qualification, power,
etc. of Board of Directors.
 Accounts and audit.
 Dividends.
 Indemnity.
 Winding up.

Prospectus
 Section 2(36) of the Act defines prospectus as
“prospectus means any document descried or
issued as a prospectus and includes any
notice, circular, advertisement or other
document inviting deposits from the public or
inviting offers from the public for the
subscription or purchase of any shares in, or
debentures of a body corporate.”

Management
 ctors” or “Board”.

Management
 Number of Directors [Secs.252,
258,&259]
 Every public company, other than a public
company which has become such by virtue
of section 43A, shall have at least 3
directors. Every other company shall have
at least 2 directors [sec. 252]

Meetings and Proceedings
 Company meetings A meeting is coming together
of two or more persons face to face so as to be in
each other’s presence or company.
 Kinds of meetings
 Shareholders meeting
 Creditors meeting
 Directors meeting
 Statutory meeting
 Annual general meeting
 Extraordinary general meeting
 Class meetings

 Meetings of shareholders
 Statutory meeting u/s 165
 Annual General Meeting u/s 166
 Extra Ordinary General Meeting (Articles)
 Extra Ordinary General Meeting (u/s 169)
 Class of shareholders (preference shareholders)
 Creditors’ meeting
 Debenture holders
 Creditors for purpose of other than winding up
 Creditors for purpose of winding up

 Directors meeting
The meetings of the directors are more
frequent than the meetings of the Shareholders
since they are the persons who are responsible for
the administration and management of the
company.
 Statutory meeting
A statuary meeting is a general meeting
of the company which is held to provide an earlier
opportunity to the members for discussing all
matters relating to the formation of the company.
It is the first meeting of the shareholders of a
public company.

 Annual General Meeting
Annual general meeting is a regular
meeting of the members of a company held
annually for the purpose of transacting
company’s ordinary business. Annual general
meeting of the members is called by the
company for
 The passing of the annual accounts,
 Declaration of dividends,
 Election of directors in place of those who are retiring
by rotation
 Appointment and the fixation of the remuneration of
auditors etc

 Extraordinary General
Meeting All general meetings other than
the statutory meeting and the annual general meetings
shall be known as extraordinary general meetings. All the
general meetings of the members held between two annual
general meetings are called extraordinary general
meetings.
 Class Meetings
Where share capital of the company
consists of different classes of shares, meetings of different
classes of shareholders may have to be called in order to
discuss matters affecting them.

Resolutions
A proposal, when passed and accepted by
the members becomes a resolution.
 Types of resolutions
 Ordinary resolution.
 Special resolution.
 Ordinary resolution
 A simple majority of votes at a general meting
 Which notice required by section 171 of the companies
act has been duly given.
an ordinary resolution is required to pass the
annual accounts, to declare dividends, to hold elections
of directors, to appoint auditors, to issue shares at a
discount, etc.

 Special resolution
1. It must be passed by a majority of three-
fourth of the votes in person or by proxy. In
other words the votes cast in favour of the
resolution must not be less than three times
the number of votes cast against the
resolution.
2. The intention to propose the resolution as a
special resolution must specially be mentioned
in the notice issued for calling the meeting. It
must be accompanied by an explanatory
statement. It must be passed exactly in the
notice for the meeting.
Resolutions

Directors
 The company being an artificial person carries on its
activities and business through individuals called
directors. Directors includes any person occupying the
position of a directors by whatever name called [sec.
2(13)]. Any person in accordance with whose
directions or instructions the Board of directors of a
company is accustomed to act shall be deemed to be a
director of the company.
 The directors of a company collectively are referred to
as “Board of Directors” or “Board”.

Number of Directors
 Every public company, other than a public company
which has become such by virtue of section 43A,
shall have at least 3 directors. Every other company
shall have at least 2 directors [sec. 252]
 However, with the commencement of companies
(Amendment) Act, 2000, a public company having
–
a) A paid up capital of five crores rupees or more;
b) One thousand or more small shareholders
May have a director elected by such small
shareholders in the manner as may be prescribed.

Board Power
 The Board of Directors derive their
powers from
 The companies Act;
 Articles of Association
 Board resolution;
 Resolutions in general meetings;
 Agreements or contracts with the
company.

The Board of Directors shall exercise the
following powers on behalf of the company by
means of resolutions passed at the meeting of
the Board;
i. The power to make calls on shareholders in
respect of money unpaid on their shares;
ii. The power to issue debentures;
iii. The power to borrow money otherwise than on
debentures;
iv. The power to invest the funds of the company;
v. The power to make loand.
Board Power

Restrictions on power of Board
 Sell, lease or otherwise dispose of whole or
substantially the whole of the undertaking of the
company.
 Remit or give time for the repayment of any debt due
by a director.
 Invest, otherwise than in trust securities, the amount of
compensation received by the company in respect of
the compulsory acquisition of any such undertaking or
any premises or property used for any such
undertaking.
 Borrow moneys
 Contribute to charitable and other funds not directly
relating to the business of the company or the welfare
of its employees

Winding-Up of a Company
 Winding up is the process by which a company is
dissolved and its properties are administered for
the benefit of its creditors and members. It
involves realization of a company’s assets,
payment of its liabilities and return of money back
to the members in proportion to the contribution
made by them to the capital of the company.
 Modes of winding up
1. Winding up by the national company law tribunal.
2. Voluntary winding up.

According to section 433, the Tribunal may
order for the winding up of a company on a petition
submitted to it on any of the following grounds:
1. Passing of special resolution for the winding up
2. Default in filling the statutory report or holding
statutory meeting
3. Failure to commence business
4. Reduction in membership
5. Inability to pay debts
6. Just and equitable
7. Default in filling financial statements
8. Acting against the state
9. Non-viable sick industrial company
WINDING UP BY THE TRIBUNAL

VOLUNTARY WINDING UP
 Provisions applicable to members voluntary
winding up
1. Appointment of liquidators
2. Managerial personnel’s powers to cease on the
appointment of liquidator
3. Power to fill up vacancy in the office of the liquidator
4. Notice of appointment of liquidator to be given to the
registrar
5. Power of the liquidator to accept shares
6. Duty of liquidator to call creditors meeting in the case
of insolvency
7. Duty of liquidator to call general meeting at the end
of each year
8. Final meeting and dissolution

The Negotiable Instruments Act,
1881
 Section 13 of the negotiable instruments
act, 1881, defines a negotiable instruments
as : “A negotiable instrument means a
promissory note, bill of exchange or cheque
payable either to order or to bearer.”
 Negotiable means ‘transferable’ and
Instruments means a ‘document.’ therefore
negotiable instrument means ‘a
transferable document.’

Characteristics of a Negotiable
Instrument
1. Property
2. Defect in title
3. Remedy
4. Rights
5. Payable to order
6. Payable to bearer
7. Payment
8. Consideration
9. presumptions

Promissory Notes
 A ‘promissory note’ is an instrument in
writing (not being a banknote or a
currency-note) containing an unconditional
undertaking signed by the maker, to pay a
certain sum of money only to, or to the
order of, a certain person, or to the bearer
of the instrument.
 The person who promise to pay is called
the “maker”. The person who is promised
the payment is called the “payee”.

Promissory Notes
 Essential elements of a promissory note
 Writing
 Undertaking to pay
 Unconditional
 Singed
 Certain persons
 Specific sum
 Promise to pay must be money only
 stamping

Promissory Notes
Rs. 5,000
On demand I promise to pay ABC, the sum of
Rs.5,000(Rupees five thousand) only with interest
at 9 per cent per annum for the value received.
Place : Mumbai
Date : 15th June 2010 XYZ

Bill Of Exchange
 A bill of exchange is an instrument in
writing containing an unconditional order,
signed by the maker, directing a certain
person to pay a certain sum of money only
to, or to the order of, a certain person or to
the bearer of the instrument.

Bill Of Exchange
 Essential elements of bill of exchange
 Writing
 Parties
 Order to pay
 Unconditional
 Singed
 Person directed
 Money
 Payee must be certain
 Certain sum

Rs. 5,000 Mumbai,
date : 15 June,2010
Sixty days after date pay to ABC or Order
the sum of five thousand rupees only for value
received.
To Signed
PQR, Lentin Road, Mumbai. XYZ
Here XYZ is the “drawer” PQR is the “drawee” and ABC is the “payee”
Bill Of Exchange

Cheque
 A ‘cheque’ is a ‘bill of exchange’ drawn on a
specified banker and not expressed to be
payable otherwise than a demand. It
includes the electronic image of a truncated
cheque and a cheque in the electronic from.

Cheque
Date : 15th June, 2010
PAY ABC_____________________________________
__________________________________ OR BEARER
RUPEES Five Thousand Only 5000.00
A/c No.
THE BANK OF INDIA
MUMBAI
Sd./-
XYZ
“340218” 400013020 11

‘Promissory Note & Bill of
Exchange’ distinguished
 Promissory Note
1. There are two parites –maker
or promisor and payee or
promisee.
2. It contains an unconditional
promise to pay.
3. It is payable by a person who
makes it. Therefore, no
acceptance is necessary.
4. The maker of the promissory
note is primiarily and
absolutely liable to payee.
Promisor stands in the
immediate relation to the
payee.
 Bill of Exchange
1. There are three parties –
drawer, drawee and payee.
2. It contains an unconditional
order to pay.
3. It is payable by the other
person directed. Therefore,
it should be presented to the
drawee for acceptance. It
may be accepted
conditionally.
4. The maker of the bill of
exchange is secondarily and
conditionally liable to payee.

‘Promissory Note & Bill of
Exchange’ distinguished
 Promissory Note
5. In case the note is
dishonored, no notice of
dishonor is necessary to the
maker.
6. A note cannot be made
payable to the maker.
7. No protest is required.
8. Cannot be made payable to
bearer. [sec. 31(2) of the
Reserve Bank Of India act,
1934].
5. Notice of dishonor must be
given to all the parties
liable on the bill.
6. The drawer and the payee
may be one and the same
person.
7. A foreign bill must be
protested for dishonor
when such protest is
required by the law of the
place where it is drawn.

‘Cheque and Bill of Exchange’
distinguished
 Cheque
1. Only a banker can be a
drawee.
2. A cheque requires no
acceptance.
3. Payable on demand without
any days of grace.
4. If not presented to the banker
for payment, it does not
discharge the drawer unless
he suffers injury or damages.
5. In case of dishonor no notice
of dishonor is necessary.
6. A cheque may be crossed.
7. Cheque requires no stamp.
1. Any one can be a drawee,
including a banker.
2. It must be presented for
acceptance. Drawee is liable only
after his acceptance.
3. A bill is normally entitled to three
days of grace after maturity,
unless payable on demand.
4. Drawer is discharged, if bill is not
presented for payment to the
acceptor.
5. Notice of dishonor is to be given
to all the parties liable to pay.
6. Bill of exchange can never be
crossed
7. Bill must be properly stamped.

Special Rules Of Evidence
1. Consideration
2. Date
3. Time of acceptance
4. Time of transfer
5. Order of endorsements
6. Stamp
7. The holder is a holder in due course
8. Proof of protest

Holder in Due Course
‘Holder in due course’ means any person who for
consideration became the possessor of a promissory note,
bill of exchange, or cheque, if payable to bearer, or the
payee or endorsee thereof, if payable to order, before the
amount mentioned in it became payable, and without
having sufficient cause to believe that any defect existed in
the title of the person from whom he derived his title.
A person is a holder in due course when he proves that
 Consideration
 Before maturity
 Good faith

Kinds of instruments
1. Accommodation bill
2. Fictitious bill
3. Escrow
4. Instrument payable on demand
5. Bearer and order instrument
6. Inchoate stamped instruments
7. Ambiguous instruments
8. Inland and foreign instruments
9. Forged instruments

Types of crossing
1. Cheques crossed generally
2. Cheques crossed specially
3. Cheques crossed ‘A/c. payee’
4. Cheque bearing ‘Not Negotiable’

Dishonor of Cheques
 Governed by Negotiable Instruments Act of
2000. (effective from 06.02.2003)
 Dishonor of Cheques implies the concept of
inability to obtain payment and that the funds
are not forthcoming

Presumption of Dishonour
 If the cheques issued by the payer returns for
the following reason
 Insufficient funds in the account
 Stop payment on the cheque
 The payment shall be for the discharge of any
debt or liabilities, which is legally enforceable

Conditions
 Cheques must be presented to drawee bank
within six months or the period of its validity
 Issue notice to make payment to payer within
30days of the return of the cheque
 The drawer fails to make payment within
15days of the receipt of the said notice
 File a complaint in writing before a Metropolitan
Magistrate or a Judicial Magistrate of the first
class within a month after issuing the notice

The consumer protection Act,
1986
 Who is consumer ? [sec. 2(1)(d)]
A consumer is a person who
(i) buys any “goods” for a consideration
(ii) Hire or avails of nay “services” for a
consideration
(iii) “use the goods” with the approval of the
persons who has bought the goods for
consideration.
(iv) “is beneficiary of services” with approval of
the
person who has hired the services of
consideration

1986
 "person" includes,—
 a firm whether registered or not;
 a Hindu undivided family;
 a co-operative society;
 every other association of persons
whether registered under the Societies
Registration Act, 1860 (21 of 1860) or
not;

 What are goods
 “Goods means every, kind of movable property other
than actionable claims and money. Good includes stock
and share, growing crops, grass and things attached to
or forming part of the land which are agreed to be
served before sale or inder the contract of sale.”
 What is services
 Services means service of any description which made
available to potential users. It includes, but not limited
to , the provision of facilities in connection with banking,
financing, insurance, transport, processing, supply of
electrical or other energy, boarding or lodging or both,
housing construction, entertainment, amusement or the
purveying of news or other information.
1986

 Manufacturer is a person who-
• Makes or manufactures any goods or parts thereof. or
• Assembles parts of the goods made or manufactured by
others and claims the end product to be goods
manufactured by himself, or Puts his own mark on any
goods made or manufactured by any other manufacturer
and claims such goods to be goods made by him.
 Trader is a person who –
• Distributes any goods for sale,
• Sells goods or,
• Manufacturer of goods for sale,
• Packer of goods who sells or distributes goods in package
form
1986

 "complaint" means any allegation in writing
made by a complainant that—
• an unfair trade practice or a restrictive trade
practice has been adopted by any trader or
service provider;
• the goods bought by him or agreed to be bought
by him; suffer from one or more defects;
• the services hired or availed of or agreed to be
hired or availed of by him suffer from deficiency in
any respect;
• a trader or service provider, as the case may
be, has charged for the goods or for the service
mentioned in the complaint a price in excess of
the price.
1986

 "consumer dispute" means a
dispute where the person against
whom a complaint has been made,
denies or disputes the allegations
contained in the complaint.
1986

 DEFECTS
 Any fault, imperfection or shortcoming in the quality,
quantity, potency, purity or standard which is required to
be maintained by or under any law for the time being in
force or under any contract express or implied or as is
claimed by the trader in any manner whatsoever in relation
to any goods.
 DEFICIENCY
 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.
CONSUMERS NEED
PROTECTION AGAINST

UNFAIR TRADE PRACTICE
 Adopting unfair methods or deception to promote
sale, use or supply of goods or services e.g.
 Misleading public about price (e.g. bargain price
when it is not so).
 Charging above MRP printed.
 Misleading public about another’s goods or services.
 Falsely claiming a sponsorship, approval or affiliation.
 Offering misleading warranty or guarantee.
CONSUMERS NEED
PROTECTION AGAINST

 RESTRICTIVE TRADE PRACTICE
 Price fixing or output restraint re: delivery/flow of supplies to
impose unjustified costs/restrictions on consumers.
 Collusive tendering; market fixing territorially among
competing suppliers, depriving consumers of free choice, fair
competition.
 Supplying only to particular distributors or on condition of sal
only within a territory.
 Delaying in supplying goods/services leading to rise in price.
 Requiring a consumer to buy/hire any goods or services as a
pre-condition for buying/hiring other goods or services.
CONSUMERS NEED
PROTECTION AGAINST

 Central Consumer Protection Council.
The Central Council shall consist of the following
members,
 the Minister in charge of the consumer affairs in the
Central Government, who shall be its Chairman,
and
 such number of other official or non-official
members representing such interests as may be
prescribed.
CONSUMER PROTECTION
COUNCILS

 Objects of the Central Council.—
The objects of the Central Council shall be to promote and
protect the rights of the consumers such as,—
• the right to be protected against the marketing of goods
and services which are hazardous to life and property;
• the right to be assured, wherever possible, access to a
variety of goods and services at competitive prices;
• the right to be heard and to be assured that consumer's
interests will receive due consideration at appropriate
forums;
• the right to be informed about the quality, quantity,
potency, purity, standard and price of goods or services
the right to seek redressal against unfair trade practices
or restrictive trade practices or unscrupulous exploitation
of consumers; and
• the right to consumer education.
CONSUMER PROTECTION
COUNCILS

 The Central Council shall meet as and
when necessary, but at least one
meeting of the Council shall be held
every year.
 The Central Council shall meet at
such time and place as the Chairman
may think fit and shall observe such
procedure in regard to the transaction
of its business as may be prescribed.
Procedure for meetings of the
Central Council.

 The State Council shall consist of the following
members, namely:—
 the Minister incharge of consumer affairs in the
State Government who shall be its Chairman;
members representing such interests as may be
prescribed by the State Government.
members, not exceeding ten, as may be
nominated by the Central Government.
State Consumer Protection
Councils.

 The State Council shall meet as and when necessary
but not less than two meetings shall be held every
year.
 The State Council shall meet at such time and place
as the Chairman may think fit and shall observe
such procedure in regard to the transaction of its
business as may be prescribed by the State
Government.
 Objects of the State Council. —
The objects of every State Council shall be to
promote and protect within the State the rights of
the consumers.
Procedure for meetings of the
State Council.

 District Forums - a Consumer Disputes Redressal
Forum to be known as the "District Forum" established
by the State Government in each district of the State by
notification:
 Each District Forum shall consist of,—
 a person who is, or has been, or is qualified to be a
District Judge, who shall be its President;
 two other members, one of whom shall be a woman,
who shall have the following qualifications, namely —
– be not less than thirty-five years of age,
– possess a bachelor's degree from a recognised university,
– be persons of ability, integrity and standing, and have
adequate knowledge and experience of at least ten years in
dealing with problems relating to economics, law,
commerce, accountancy, industry, public affairs or
CONSUMER DISPUTES
REDRESSAL AGENCIES

 Consumer Disputes Redressal Forums (District
Forum)
 Claims less than or equal Rs.20 lacs.
 Consumer Disputes Redressal Commissions
(State Commission)
 Claim more than Rs.20 lacs & less than Rs.1 crore
& appeals.
 National Consumer Disputes Redressal
Commission (National Commission)
 Claim equal to Rs.1 crore & appeals
FORUM & JURISDICTION

Information Technology Act
2000
 Enacted on 17th May 2000- India is 12th
nation in the world to adopt cyber laws
 IT Act is based on Model law on e-commerce
adopted by UNCITRAL
(The United Nations Commission on
International Trade Law)

To provide legal recognition for transactions:-
 Carried out by means of electronic data
interchange, and other means of electronic
communication, commonly referred to as
"electronic commerce“
 To facilitate electronic filing of documents with
Government agencies and E-Payments
 To amend the Indian Penal Code, Indian
Evidence Act,1872, the Banker’s Books Evidence
Act 1891,Reserve Bank of India Act ,1934
Objectives of the IT Act

 Extends to whole of India and also applies to any
offence or contravention there under committed
outside India by any person {section 1 (2)} read
with Section 75- Act applies to offence or
contravention committed outside India by any
person irrespective of his nationality, if such act
involves a computer, computer system or
network located in India
 Section 2 (1) (a) –”Access” means gaining entry
into ,instructing or communicating with the
logical, arithmetic or memory function resources
of a computer, computer resource or network
Extent of application

 "computer" means electronic, magnetic, optical or other
high-speed date processing device or system which performs
logical, arithmetic and memory functions by manipulations of
electronic, magnetic or optical impulses, and includes all
input, output, processing, storage, computer software or
communication facilities which are connected or relates to
the computer in a computer system or computer network;
 "computer network" means the inter-connection of one or
more computers through-
 (i) the use of satellite, microwave, terrestrial lime or other
communication media; and
 (ii) terminals or a complex consisting of two or more
interconnected computers whether or not the interconnection
is continuously maintained;
Definitions ( section 2)

 "computer system" means a device or collection of devices,
including input and output support devices and excluding
calculators which are not programmable and capable being
used in conjunction with external files which contain
computer programmes, electronic instructions, input data
and output data that performs logic, arithmetic, data
storage and retrieval, communication control and other
functions;
 "data" means a representation of information, knowledge,
facts, concepts or instruction which are being prepared or
have been prepared in a formalised manner, and is
intended to be processed, is being processed or has been
processed in a computer system or computer network, and
may be in any form (including computer printouts magnetic
or optical storage media, punched cards, punched tapes) or
stored internally in the memory of the computer.

 "electronic record" means date, record or date generated,
image or sound stored, received or sent in an electronic form or
micro film or computer generated micro fiche;
 “secure system” means computer hardware, software, and
procedure that-
(a) are reasonably secure from unauthorized access and
misuse;
(b) provide a reasonable level of reliability and correct
operation;
(c) are reasonably suited to performing the intended function;
and
(d) adhere to generally accepted security procedures
 “security procedure” means the security procedure prescribed
by the Central Government under the IT Act, 2000.
 secure electronic record – where any security procedure has
been applied to an electronic record at a specific point of time,
then such record shall be deemed to be a secure electronic
record from such point of time to the time of verification

Scope of the Act
 The Act covers:
 e-Commerce
 Creation and use of digital signature
 Facilitation of electronic records

 Applicability? (Jurisdiction) Extends to
whole of India [Sec 1(2)] Date of
effect? The ACT came into force on the
first day of April, 1947.[Sec 1(3)] How
many Sections and Schedules? 81
Sections and 5 Schedules.
The Industrial Disputes Act,
1947

 Objectives of the law
 investigation and settlement of
industrial disputes. However, it makes
other provisions in respect of lay off,
retrenchment, closure etc. The purpose is
to bring the conflicts between employer and
employees to an amicable settlement. The
Act provides machinery for settlement of
disputes, if dispute cannot be solved
through collective bargaining
The Industrial Disputes Act,
1947

 Definition
Industry means any business,
trade, undertaking, manufacture or
calling of employers and includes any
calling, service, employment,
handicraft or industrial occupation or
avocation of workmen. [section 2(j)].
Thus, the definition is very wide.
What is Industry

What is industrial dispute…
 Industrial dispute means any dispute or difference
between employers and employers, or between
employers and workmen, or between workmen and
workmen, which is connected with the employment
or non-employment or the terms and conditions of
employment or with the conditions of labour, of any
person. [section 2(k)]. Section 2A provides that
dismissal, discharge, retrenchment of even a single
workman will be industrial dispute‘ even if no other
workman or any union is a party to the dispute.

Lay Off
Section 2 (KK) of the Act defines lay – off as “ the failure,
refusal or inability of an employer on account of shortage of
coal & power or raw material or the accumulation of stocks
or the breakdown of machinery or for any other reason to
give employment to a workmen whose name is borne on
the muster roll of his industrial establishment & who has
not been retrenched.”
 Lay – off provisions of the Act:
 Sec, 2 (m) of the Factories Act, 1948.
 Sec. 2 (i) of Mines Act, 1952. &
 Sec. 2 (f) of Plantation Labour Act, 1951.

Lay Off
 In Industrial undertaking where lay – off
provisions apply, only those workmen will
be entitled to lay – off compensation.
 A workmen is entitled for compensation
for all days of lay – off unless there is an
agreement to the contrary between him &
the employer to the limit of 45 days in a
year.

Lay Off
 No compensation shall be paid to the workmen:
 If he refuses to accept any alternative employment in the
same establishment.
 If he does not present himself for work at the establishment
at appointed time during working hours atleast once a day.
 If such laying – off is due to strike or slowing down of
production on the part of workmen.
 If a workmen has been laid – off by his employer due to
shortage of power or natural calamity, the appropriate
government makes an enquiry if he thinks fit. If the authority
does not communicate the permission within 2 mths. With
the employer then lay – off is deemed to be granted. If the
appropriate government refuses the permission for lay – off,
then lay – off is deemed illegal, then the workmen is entitled
for all the benefits from the time he has been laid – off.

LOCK-OUTS
 A lock-out means :-
 the closing of a place of employment; or
 the suspension of work; or
 the refusal by an employer to continue to
employ any number of persons employed by
him.
 It means the closure of the place of
business and not closure of business itself.
 Lock-out is usually used by the employer
as a weapon of collective bargaining.

ILLEGAL LOCK-OUTS
 Penalty for illegal lock-outs
 An illegal lock-out is punishable for a term
extending to 1 month or with fine up to Rs.
1000 or with both.
 Penalty for instigation of illegal lock-outs
 An illegal lock-out is punishable with
imprisonment for a term which may extend
to 6 months or a fine up to Rs. 1000 or with
both.

Retrenchment
 Sec. 2 (oo) defines Retrenchment as the termination
by the employer of the service of the workman for
any reason whatsoever, otherwise than a
punishment inflicted by way of disciplinary action.
 Retrenchment does not include voluntary retiremen
superannuation, termination of employment on
grounds of ill health; do not amount to
retrenchment.
 No workmen who has been employed for 1 year can
be retrenched until:
 1 month notice in written & reason for retrenchment.
 15 days average pay for every completed year of service.
 Notice served to the appropriate government.

 No workmen employed in any industrial
establishment who has been to continuous service
for not less than 1 yr. under an employer shall be
retrenched by that employer until:
 Has been given 3 mths notice in written, indicating
the reasons for retrenchment. – no such notice shall
be necessary if the retrenchment is under an
agreement which specify a date for termination of
service.
 Compensation shall be equivalent to 15 days
average pay for every completed years of
continuous service or any part thereof in excess of 6
months
 Notice shall be given to appropriate government or
such authority & the permission of such government
or authority is obtained.
Retrenchment

 Government or authority after making inquiry
may grant or refuse the permission to the
employer within 3 mths. Of the date of
service of the notice. – if it does not
communicate within 3 mths. Of such notice
then the retrenchment is legal. – if it does
refuse the permission then the retrenchment
is illegal.
 Sec. 25 – N is constitutionally valid.
 Authority under Sec. 25 - N exercises powers
which are quasi-judicial & not purely
administrative.
Retrenchment

Wages
“Wages” means all remuneration capable of being
expressed in terms of money, which would, if the
terms of employment, express or implied, were
fulfilled, be payable to a workman in respect of his
employment, or of work done in such employment,
and includes-
i. Such allowances (including dearness allowance)
as the workman is for the time being entitled to;
ii.The value of any house accommodation, or of
supply of light, water, medical attendance or
other amenity or of any service or of any
concessional supply of food grains or other
articles;

Wages
i. Any traveling concession;
ii. Any commission payable by the promotion of
sales or business or both; But not include –
i. Any bonus
ii. Any contribution paid or payable by the
employer to any pension fund or provident
fund or for the benefit of the workman
under any law for the time being in force.
iii. Any gratuity payable on the termination of
his service.

The Sale of Goods Act, 1930
 The sale of goods act applies only to movables
other than actionable claims and money and not to
immovable which are governed by the Transfer of
property act,1882. Actionable claims mean ‘chose
in action’ or ‘thing in action.’ It means the person
has a right to recover a thing by suit but does not
have enjoyment of the thing.
 Good [sec.2(7)]
 Goods means every kind of movable property
other than actionable claims and money and
includes stock and share, growing crops, grass
and things attached, to or forming part of the
land which are agreed to be severed before sale
or under the contract of sale.

Sale and agreement to sell (sec.4)
 Sale - where under a contract of sale the
property in the goods is transferred from
seller to the buyer the contract is called a
‘sale’.
 Essentials of a valid sale
 Property
 Movable goods
 Price
 Parties
 form

Agreement to sell
 Where the transfer of the property, for example,
ownership in the goods is to take place at a
future date or subject to some condition to be
fulfilled, the contract is called an agreement to
sell. When by a contract of sale the seller
purports to effect the present sale of future
goods, the agreement operates as an agreement
to sell.
 An agreement to sell does not involve any
immediate transfer of property in the goods. An
agreement to sell becomes a sale when the time
lapses or the conditions are fulfilled subject to
which the property in the goods is to be
transferred.

Essential Elements of a Contract for
the Sale of Goods
 Movable Goods
 Movable Goods for Money
 Two Parties
 Formation of the contract of sale
 Method of forming the contract
 The terms of contract
 Other essential elements

Conditions and Warranties
 What is condition? [sec. 12(2)]
 A conditions is a stipulation essential to the main
purpose of the contract, breach of which gives rise to
a right to treat the contract as repudiated or broken.
a) Express condition- a condition that has been
expressly provided for agreed upon by both the parties
at the time of the contract of sale .
b) Implied conditions- conditions are said to be
implied when the law incorporates their existence as
implicit to a contract of sale unless otherwise agreed
upon between parties .both parties shall be bound by
implied conditions unless they are excluded by an
express agreement between them.

Implied conditions are of following seven types:-
1) Condition as to title
2) Condition as to description
3) Condition as to sample
4) Condition as to sample as well as description
5) Condition as to quality or fitness
6) Condition as to merchantability
7) Condition as to wholesomeness

 What is Warranties
 A warranty is a stipulation collateral to the main
purpose of the contract the breach of which gives rise
to a claim for damages but not to a right to reject the
goods and treat the contract as repudiated or broken.
 kinds of warranties:-
a)express warranties- a warranty is said to be express
when the term of the contract expressly provides for
it. At the time of contract of sale, both the parties may
agree upon any number of express warranties

b)Implied warranties- an implied warranty is one
which the law incorporates into a contract of sale. Even
when no express representations have been made in
connection with a contract of sale, the law implies certain
representations as having been made by the parties while
entering into the contract .
following are the three implied warranties:-
1.) Warranty as to quiet
2.) Warranty against encumbrances
3.) Warranty to disclose the dangerous nature of goods

Unpaid Seller
 An unpaid seller is one who has not been paid or
tendered the whole of the price or one who receives
a bill of exchange or other negotiable instrument as
conditional payment and the condition on which it
was received has not been fulfilled by reason of the
dishonor of the instrument or otherwise

Rights of unpaid seller
Where the property in
The goods has passed
Where the property in
The goods has not passed
Lien
Stoppage
in transit
Withholding
delivery
Resale Other
Rights
Rights of unpaid seller

Right of lien (sec. 47)
‘Lien’ is the right to retain possession of goods and refuse
to deliver them to the buyer until the price due in respect
of them is paid or tendered. An unpaid seller in possession
of goods sold is entitled to exercise his lien on the goods in
the following cases:
(a) Where the goods have been sold without any
stipulation as to credit;
(b) Where the goods have been sold on credit, but the
term of credit has expired:
(c) Where the buyer becomes insolvent, even though the
period of credit may not have yet expired.

Right to stoppage in transit
(Sec.50)
The right of stoppage in transit means the right of
stopping the goods while they are in transit, to regain
possession and to retian them till the full price is paid.
“The essential feature of stoppage in transit is that
the goods should be in the possession of a middleman or
some other person intervening between the vendor who
has parted with and the purchaser who has not received
them.”

Conditions under which Right of Stoppage in Transit can
be Exercised [Section 50]: The unpaid seller can
exercise the right of stoppage in transit only if the
following conditions are fulfilled:
(i) The seller must have parted with the possession of
goods, i.e., the goods must not be in the possession of
seller.
(ii) The goods must be in the course of transit.
(iii) The buyer must have become insolvent.
Right to stoppage in transit
(Sec.50)

Right to resale (sec.54)
In the absence of this right, the unpaid seller’s
other rights against the goods, namely, ‘lien’ and ‘stoppage
in transit,’ would not have been of much use because these
rights only entitle the unpaid seller to retain the goods until
paid by the buyer. If the buyer continues to remain in default,
then should the seller be expected to retain the goods
indefinitely, specially when the goods are perishable?
Section 54, therefore, gives to the unpaid seller a limited
right to resell the goods in the following cases:
(a) Where the goods are of a perishable nature; or
(b) Where such a right is expressly reserved in the
contract in case the buyer should make a default

Rights of Withholding Delivery
Where the property in the goods has not passed to
the buyer, the seller has a right to withhold delivery of
the goods.

Other Rights (Sec.55 & 56)
Besides the above rights, the seller has the following rights
against the buyer personally.
1. Sue the buyer for the price of the goods;(Sec.55)
2. The seller may sue the buyer for damages for wrongfully
neglecting or refusing to accept the goods; (Sec.56)
3. Recover interest from the buyer where there is specific
agreement to that effect. If there is no specific agreement,
the seller may charge interest on the price when it
becomes due.

The Indian Partnership Act,
1932
 Section 4 of the Indian Partnership Act,
1932, defines partnership. “Partnership is
the relation between persons who have
agreed to shared the profits of business
carried on by all or any of them acting for
all.”

Characteristics of Partnership
 Associations of two or more persons
 Agreement
 Business
 Share profits of the business
 The business must be carried on by all or
any of them acting for all Mutual agency

Types of Partnership
1. Partnership for a fixed term
2. Particular partnership (sec. 8)
3. Partnership at will (sec. 7 & 43)

Types of Partners
1. Actual of active partner
2. Sleeping of dormant partner
3. Nominal partner
4. Partners in profit only
5. Sub partner
6. Partner by holding out

Dissolution of partnership
 By voluntary acts of the partners
1. By agreement (sec. 40)
2. By compulsory dissolution or by operation of law (sec.41)
3. On the happing of certain contingencies (sec. 42)
4. By notice (sec .43)
 By order of the court (Sec. 44)
1. By insanity of a partner [sec. 44(a)]
2. By permanent incapacity of a partner [sec. 44 (b)]
3. By misconduct of a partner [sec. 44 (c)]
4. By persistent breach of agreement [sec. 44 (d)]
5. By transfer of interest [sec. 44 (e)]
6. By business of the firm working of a loss [sec. 44 (f)]
7. Any other ground [sec. 44 (f)]

The copyright Act, 1959
 For the purposes of this Act, “Copyright”
means the exclusive right, by virtue of and
subject to the provisions of, this act.
 Ownership of copyright:-
 Subject to the provisions of this act, the
author of a work shall be the first owner
of the copyright.

Rights of the owner
1. The author of a work may relinquish all or nay
of the rights comprised in the copyright in
work by giving notice in the prescribed from
to the registrar of copyrights and thereupon
such rights shall, subject to the provisions of
sub-section(3) cease to exist from the date of
the notice.
2. On receipt of a notice under sub-section(1),
the registrar of copyright shall cause it to be
published in the official gazette and in such
other manner as he may deem fit.
3. The relinquishment of all or nay of the rights
comprised in the copyright in a work shall not
affect any rights subsisting in favor of any
person n the date of the notice referred to in
sub-section(1).

Business Law by Prof. V. Y. Badave

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