BA 9207 Legal Aspects

8/22/2019 BA 9207 Legal Aspects

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Legal Aspects of Business

Unit I

Law refers to all the rules and principles that regulate our relationships with otherindividuals and the State.

Definition of Law A body of rules developed and enforced by the State in theadministration of justice.Objectives of Law Basic rights to citizens, Peace & internal security, Internationalrelations, Socio-economic justice, Business, trade & employment, Social customs &practices, Crime & punishment.

The Indian Contract Act , 1872 Contract- An agreement enforceable by law. Agreement Every promise and set of promises forming the consideration foreach other. Promise A proposal when accepted becomes promise Social & Legal Obligations Only legal obligations are enforceable by law. (Tobe fulfilled)

ClassificationBy EnforceabilityVoid Agreement- An agreement not enforceable by lawVoid Contract- Ceases to be enforceable by law by a subsequent

happening/knowledge.

Void able contract- Enforceable by law at the option of party/parties to contractUnlawful agreement Not approved by law, void ab initio(from the very beginning)Illegal agreement Activity involving crime, immoral or against public policyUnenforceable- Because of technical defects like no witness, less stamp duty etc.By FormationExpress contract- Entered into by words spoken or writtenImplied cont Inferred by activities/conduct of parties or circumstances, not by wordsQuasi contract Imposed by law, not entered into by parties Principle is no one

shall be allowed to enjoy a certain benefit at the cost of other.By PerformanceExecuted contract Both parties have fulfilled their respective obligations.Executory contract Both are yet to fulfill their legal obligationsPartly Executed contract One party has fulfilled & other has to fulfill.

Essentials of a valid Contract


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1. A valid Offer & Acceptance Offer must be precise & clear, Communicated tothe proper person, Absolute & unconditional, In the prescribed mode andBefore offer lapses.

2. Intention to Create legal Relationship- To make it legally binding.3. Lawful Consideration (something in return) Both the parties must give & get

something, which is real & lawful. Need not to be adequate, not necessarilycash / in kind and it may be even a promise to do or not to do something.4. Capacity of parties Competent to contract- Age of majority, of sound mind

and not disqualified by law (Insolvent)5. Free Consent Willingness must be obtained freely. Not by force, suppressingfacts, coercion, undue influence, fraud etc.6. Legality of object- Object must not be illegal, immoral or opposed to public policy.7. Agreement declared void By law it must not be valueless like restraint ofmarriage or trade.

8. Certainty of terms Unambiguous- Must be clear, precise & certain.9. Possibility of Performance Must be possible to perform.

10. Legal formalities Complying with like writing, stamp duty, registration,certification, witness etc.

Difference Between Void & Voidable contractVoid Contract Voidable Contract

1. Valid when made, but becameinvalid due to further happenings.

2. Something beyond control ofparties made it invalid like change

of law, destruction of subject matter.

3. Cannot be enforced4. Third party cannot acquire rights

5. No compensation

1. Valid until avoided/ rescindedby affected party.

2. Free consent is missing

3. Can be enforced till avoided by

affected party4. Scope for third party to acquire

rights over obtained things.5. Affected party can claim

damages


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VOID AGREEMENTS-Unlawful object/consideration Object is forbidden by law Defeats the provisions of any law

Is fraudulent Involves/implies injury to person/property of another Court regards it as immoral Court regards it as opposed to public policy (Harmful to the welfare of the public)ANY AGREEMENT WHICH IS NOT ENFORCEABLE BY LAW IS VOID. Void Agreement - Agreements with only social obligation, withoutconsideration, meaning/terms uncertain, incapable of performance. Unlawful Agreement Restraint of marriage, trade, legal proceedings.

Illegal Agreement Involve commission of crime, violate basic public policy orimmoral in nature. Opposed to public policy Agreement with alien enemy, to stifle prosecution,Maintenance (financial assistance for legal action) & champerty (Similar assistance torecover money/property legally), Sale/transfer of Public Offices & Titles, Interestopposed to duty, Denial of parental rights, Restriction on personal liberty, Payment ofdowry/ marriage brokerage, Restraint of marriage, trade & legal action. Wagering Agreement Betting Depends on happening of an uncertain

agreement like lottery, horse racing. Essentials are uncertain event, to pay money/moneys worth, no control over the event, each must stand to win or loose, eachinterested only in stake. NOTE: Insurance though similar to wagering but valid like a contingentcontract.VOID AGREEMENTSAgreements Expressly declared void by law1.Incompetent parties-11


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2.Mutual mistake of fact - 203.Unlawful object/consideration- 23,244.Without consideration- 255.Restraint of marriage, trade, legal proceedings-26-286.Uncertain meaning-29

7.Wager-308.Contigent on Impossible events-369. Impossible Acts-5610. Both legal & illegal objects- Illegal part is void-57

Essentials are Unconditional Proper time

Proper place Opportunity to examine To proper person For whole of the obligation Payment in legal tender moneyPERFORMANCE OF CONTRACT

A contract is performed when the parties to it, fulfill their respective obligationsarising under it.

Offer to perform / Attempted performance / Tender When the promisoroffer to perform his obligation, sometimes promisee may refuse to acceptperformance. It is equivalent to actual performance and the promisor is notresponsible for non-performance & even has legal right to take action againstpromisee.Who can perform-40 Promisor himself Person Authorized by the promisor

Legal representative Third person Joint promisorsDevolution of joint Rights/Liabilities 42-58 Transfer/passing of rights/liabilities

from one person to another.Appropriation of payments-59-61 When a debtor owes different sums to different

creditors and pays a particular sum, the question is Against which debt thepayment be applied


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Assignment of contract Transferring ones contractual rights/liabilities under acontract to a third person

By act of parties By operation of law- 1. Due to death of a party 2. Due to InsolvencyAll rights/benefits under a contract not involving personal skill Can be assigned

subject to all equities between original parties Sometimes writing is necessarylike in actionable claims Cannot compel other party.Discharge of contact- When contractual obligations/rights come to an end results in

termination of contractual relationship. Can be Discharged by1.Performance- Actual/ Attempted 37 & 382.Mutual consent -3.Impossibility -4.Operation of law- By death, Insolvency or unauthorized material alteration5.Breach-

6.Lapse of time- Specified period(limitation period)2.Mutual ConsentNovation-62 Substitution of new contractRescission-62 Cancellation by mutual consent or by failure of one partyAlteration -62 Contact is varied or changedRemission -63 Acceptance of a lesser fulfillment of promiseWaiver Not to insist on performanceMerger Inferior right merges with superior right

3.Supervening Impossibility - Impossibility arises subsequent to formation ofcontract,by Destruction of subject matter Death/ personal incapacity Change of law Declaration of war Change in state things forming the subject matterNote: Impossibility of performance is not an excuse ----- Difficulty/Commercial

impossibility, Default of 3

rd

person, Strikes, lockouts & civil disturbances, Failureof one of the objects.5. Breach

1. Actual breach- On the due dateDuring Performance

2. Anticipatory Breach- ExpressImplied

Remedies for Breach of Contract


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Breach takes place when a party to a contract fails to fulfill his obligationsarising under it. Remedies

1. Rescission Right of a party to a contract to avoid his obligations.- Partyrescinding has to restore any benefit and is entitled for compensation for

damages if any.2. Damages- Monetary compensation awarded to the affected party by the court forthe loss suffered

Ordinary damages-73 Arise naturally in the usual course of the things from thebreach.

Specialdamages During formation of contract if parties know some damages likelyto result from breach, can claim with advance notice.

Vindictive damages Exemplary/extraordinary Vindictive( revenge) in nature-Only in breach to marry & wrongful dishonour of cheques.

Nominal damages Not for actual loss suffered but as a token of satisfaction forproving the wrong.

Damages for Inconvenience & Discomfort, Loss of Reputation, Cost of Suit,Liquidated

damages & penalty, Payment of interest.

3. Quantum Meruit ( as much as merited/ earned)- Payment in proportion of thework done. When Contract becomes void/ agreement is void-65, Does something

without gratuitous intention-70, No specific remuneration is agreed, Contract isdivisible & does not require complete performance for remuneration, Indivisiblecontract is fully performed but badly.

4. Specific performance Court may direct to perform as per contact whendamages are not adequate remedy, not in a position to pay & actual damagescannot be determined

5. Injunction stay order Order of a court preventing a person from doing aparticular act to restrain a person from doing what he promised not to do.Quasi-contract- Obligation created by law on a person in the absence of any

agreement. Arises automatically when

1. Person receives a benefit that, by law, another is better entitled to receive.2. Person receiving a benefit without paying for it.


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Basic principle is a person shall not be allowed to enjoy a benefit unjustly at the costof another. Quasi contract arises in following situations

1. Claims for necessaries supplied to a person incapable of contracting-682. Reimbursement of amount paid by a person on behalf of another-691. Obligation of a person enjoying the benefit of a non-gratuitous act (lawful,

without intention to do it free and another should have enjoyed the benefit).-702. Responsibility of finder of goods-71- Finder has to take care as his own, try tofind owner (Can sell the goods if goods are perishing, owner cannot be foundnormally, owner refuses to pay the lawful expenses, lawful charges amount totwo third of value of goods found.

3. Liability of a person to whom money is paid by mistake/ coercion-72

The Sale of Goods Act, 1930

Definition 4(1) A contract of sale is a contract whereby the seller transfers oragrees to transfer the property in goods to the buyer for a price.Buyer- Person who buys or agrees to buySeller Person who sells or agrees to sellSale- If ownership is transferred from seller to buyer immediately.Agreement to sell Transferred in future or after fulfilling of certain conditions.Goods- All movable property other than actionable claim & money including stocks& shares, growing crops, grass & things attached to land.

1. Existing goods- Owned and possessed by the seller at the time of sale.Specific goods- Identified & agreed upon at the time of contract of saleAscertained goods are those that are identified out of a mass of unascertained

goods.Unascertainedgoods- Not identified & agreed upon- Only defined by description2. Future goods- Seller doesnt possess at the time of contract but will

acquire/produce afterwards.3. Contingent goods Acquisition of goods by seller depends on some

contingency.Essentials of Contract of Sale1.Two parties2. Goods are subject matter3. Price in terms of money4.Transfer of General Property in Goods5. All essentials of a valid contract.


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Hire-purchaseInstallment- Initially hire with down payment & purchase by payingin installments.

Price- Consideration in terms of money- May be fixed during sale, Left to be fixedlater in a agreed manner, Fixed in due course of dealing. If not buyer to pay areasonable price depending on facts & circumstances

Earnest- Any tangible given as a token of good faith& guarantee againstperformance.Contract for work & Materials- Sale of Goods act does not apply.Document to title of goods RR., Bill of Lading, Delivery order, Dock Warrant etc.Difference Between sale & Agreement to Sell

Sale Agreement to Sell

1.Ow/s rights transferredimmediately

2.Goods are destroyed, loss onbuyer, even possession is withseller

3. Buyer fails to pay price, sellercan sue

4. Seller cannot resell if inpossession, if done defective title

5. Creates right to enjoy goods

against the world jus in rem6. Buyer becomes insolvent seller

can get only proportionatedividend

7. Seller becomes insolvent, buyercan recover goods from OR

1.Ow/s Rights transferred in future2.Goods destroyed, loss on seller

even if possession is with buyer.3.Seller can sue for damages only4.In resale buyer gets good title if ingood faith. First buyer can sue fordamages only5. Creates right to sue seller for

damagesjus in personam6. Buyer becomes insolvent before

paying the price, seller notbound to part with goods

7. Buyer paid price, seller becomesinsolvent buyer can get onlyrateable dividend & not goods

Transfer of title & Risk of lossNeed for knowing the time of Passing of Property (Transfer of Title) are1.Owner to bear the risk of loss2.Action against third party can be only by owner3.Sellers insolvency- Official Receiver can take possession from buyer, only if

Ownership not passed.


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4. Buyers insolvency- Official Receiver can take from seller, only if Ownership hastransfered

5.Suit for price- seller can, only if goods have become property of buyer.Rules for Transfer of title / Passing of Property-Specific goods- Terms & Conditions will decide intended time to pass/transfer 19

-Unconditional Contract of Sale goods in deliverable state property passes whenthe contract is made even if time of payment/delivery is postponed.20- Not in a deliverable state, then as soon as put into a deliverable state.21- Goods in DS, but to be weighed / measured to determine price, until then p of Pdoesn't occur 22

2. -Unascertained goods No Passing of Property until ascertained.- Unconditional appropriation for goods in Deliverable State Passing of Property

happens. Unconditional Appropriation if delivered to buyer/carrier / bailee fortransmission without reserving the right of disposal.

Sale or return Transaction- Use for particular time, if not satisfied returnThe property passes when goods sent on approval and any of the following takes

place- When buyer conveys approval/acceptance- Does any act adopting transaction- Retains beyond fixed period.

Seller reserves right of disposal, the property passes only if certain conditions arefulfilled

By B of L /RR /Exchange ReceiptNemo Dat Quod Non Habet No one can give that which one has not gotPerson who is not the owner has no legal right to sell-Sale by non owners-

Exceptions are1.Sale by Estoppel - Owner by conduct not stopping other showing Ow/s right.2.Sale by Mercantile agent- If buys in good faith, because M.A does not have title

usually (Brokers)3.Sale by one of several joint owners- Has possession & buyer acts in good faith.

4.Sale by person in possession under a voidable contract.- Before avoiding & buyerin good faith (Ex: Fraud / coercion)5. Seller in possession after sale Buyer in Good faith has a clear title6. Buyer in possession before t of T- Good faith, good title7. Unpaid seller Uses right of lien / stoppage in transit, title to buyer is good8. Finder of goods Good title9. Pawnee - 10. Official Receiver -


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Conditions & WarrantiesCondition is the stipulation essential to the main part of the C o Sale- Breached,can repudiate (reject/cancel/disown)Warranty is a stipulation collateral to the main purpose of the C of S Breached;only damages can be claimed.

Implied Conditions1.Title- Selling rights2.Sale by Description Goods correspond to description (Not seen, seen but buys

with description, packing is a part)3.Quality or fitness- Buyer should examine for suitability of purpose (Makes knownthe purpose, abnormality, Under Brand name, Multi purpose buyer to tell the exactpurpose)4.Merchantable quality- Fit for the very purpose for which they are usuallypurchased.

5.Implied by customs6.Sample Sale- sample should correspond to the bulk7.Wholsemness- Good for health.

Implied Warranties1.Quiet Possession Enjoy quiet possession without disturbances- If not canclaim damages2.Freedom from Encumbrances- Goods are not subjected to any charge/ right infavour of third party- If so can claim damages

3.To disclose dangerous nature of goods- Duty of seller- Liable for damages ifinjured

Caveat Emptor- Let the Buyer BewareSeller Need not to disclose all details. Buyer to thoroughly examine goods

Exceptions are1.Consent obtained by fraud- Knowingly conceals a defect which cannot be

discovered on a reasonable examination

2. Sale by description3. Conditions to quality or Fitness4. Merchantable Quality5. Conditions implied by custom6. Sale by samplePerformance of Contract of Sale- when the seller gives delivery of goods to buyer

& buyer pays for the goods.Delivery Voluntary transfer of possession of goods from one person to another


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Actual delivery- Physically handing over goodsSymbolic Bulky goods- a key is given for a car sold

Constructive Third person in possession acknowledges to buyer that he holdsgoods on behalf of buyer.

Rules regarding delivery

Rights of Buyer1.Have delivery as per contract2.Not right quantity, Can reject goods3.Not bound to accept delivery in installments4.If sent by sea buyer to be informed ins5.Right to examine6.Against seller for breach- Claim damages, recover price paid, specific performance,

Damages for breach of implied warranties, Repudiation of contract, Claim interestDuties of buyer

1. .Accept goods & pay for it as per contract2. Apply for delivery3. Demand delivery within a reasonable time4. If specified, accept delivery in installments5. Take risk of deterioration necessarily incident to course of transit.6. Refuses to accept goods, duty to inform seller7. Take delivery within reasonable time8. Seller already passed Ownership rights, pay the price

9. Wrongfully refuses to accept, Pay compensationRights of an Unpaid seller- Price not paid/ Negotiable Instrument given but

dishonouredRights against things- rights in rem1. Right of Lien-To retain possession of goods- Possession is important, Not affected even if parted with title documents, NoExpress exclusion of Right of Lien, Only for price & not for other charges, Partlydelivered Right of Lien in reminder goods.

2. Termination of Right of Lien- If delivered to bailee/carrier, Buyer lawfully obtainspossession, waiver.3. Right of Stoppage in Transit- stopping goods in transit to regain possession

when buyer has become insolvent & goods are in transit-can be done by taking actual possession or giving notice of his claim to carrier

4. Right of Resale- Goods are of perishable nature &


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- Given notice of his intention & buyer not paid price within reasonable time (Ifloss can claim as damages for breach & if profit no need to give)5. Right of withholding Delivery

Rights against buyer personally- rights in personam

Suit for price, Damages for non-acceptance, damages for repudiation, Suit forInterest.AUCTION SALE1. If put up in lots, each lot separate Contract o Sale,2. Sale is completed only by fall of hammer & until then bidder can revoke,3. Right to sell may be reserved expressly,4. Not notified for sale no one can bid for it.5. Reserve/upset price can be notified,6. Seller makes pretended bidding to raise price voidable.

Knock out is legal if no intention to cheat third party. (Knock out is forming groups tobid & share profits)

Negotiable Instruments Act, 1881Negotiable Transferable by deliveryInstrument Written document by which a right is created in favour of some person

Nature Can be transferred by mere delivery, good title even if previous title isdefective & can sue in his own name Characteristics/Requisites

1. Payable to order/ bearer2. Freely transferable- by delivery/and endorsement3. Presumption as to holder- every holder is holder in due course4. Title of holder in due course Free from all defects if in good faith, before maturity

for valuable consideration.5. Presumption as to consideration Made, drawn, accepted, endorsed, negotiated

or transferred for consideration (date, stamp)

Act deals with only Promissory Notes, Bill of Exchange and Cheques.

Promissory Note- An instrument in writing containing an unconditional undertaking,signed by the maker to pay certain sum of money only to or to the order of acertain person/bearer

Requisites are In writing- No oral endorsement- clearly showing unconditional payment of the

sum


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Promise to pay must be unconditional Promise to pay in terms of money only- Even additional goods, invalid Signed by the maker-To Authenticate- sign can be anywhere Payee must be certain Must contain a promise to pay- Promise word is not necessary- Payable on

demand implies a promise. Other formalities Sufficiently stamped and cancelled with sign across by maker

Bill of Exchange - An instrument in writing containing an unconditional order, signedby the maker, directing a certain person to pay certain sum of money only to or tothe order of a certain person/bearer

Requisites-1. In writing2. Must be money to the payee- Drawer orders the drawee to pay money to the

payee, unconditionally3.Drawee must sign for acceptance- can sign any time after issue of bill.4. Drawer, Drawee(acceptor) & Payee- Necessary parties are to be specified with

certainty.

Cheques - Bill of exchange drawn on a specified banker & payable only on demand-No need for acceptor including truncated/electronic cheque.

Bearer cheques- so payable or blank endorsement

Order cheques So payable & not transferable Crossed cheques Only collected through a banker

Crossing of Cheques- By drawing two parallel transverse lines across the facewith/without words

General Left top corner, two lines without words Special Entry of the name of the banker with/without words Restrictive A/c Payee, Not negotiable markings- If not paid to account, can be

held liable on guilty of negligence.

Cheques include 1. Electronic cheque Amendment Act 2002- Cheque which contains the exactmirror image of a paper cheque & is generated, written and signed by a securesystem ensuring minimum safety standards with the use of digital signature andasymmetric crypto system


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2. Truncated cheque Which is truncated during clearing cycle & payingimmediately on generation of an electronic image for transmission substituting thephysical movement of the written cheque. Truncated- shorten by cutting top or end

Transfer of NI1. Transfer by Negotiation- Instrument is transferred by one party to another, so as toconstitute the transfer to the holder thereof. Negotiation by delivery- Instrument payable to bearer is negotiable by deliverythereof. Negotiation by Endorsement & Delivery Instrument payable by the holder byendorsement & delivery thereof2. Transfer by Assignment- Person transfers his right to receive the payment of adebt. Endorsement Writing the name of a person on the face/back or slip of paperattached to NI.Presentment of a NI - Showing an Instrument to the drawee, acceptor or maker for

acceptance(BoE), sight(PN) or payment(NI). Presentment for acceptance- General/Qualified Honouring- Paying or accepting for payment Dishonour By Non Acceptance-1. Not accepted within 48 hrs-

2. Several drawees & all have not accepted3.Presentment for acceptance is excused & bill is not accepted4.Drawee incompetent to contract5. Drawee gives conditional/qualified acceptance6. Drawee is fictious & could not be found after reasonable search

Dishonour by non-payment- Maker of PN/ Acceptor of BoE/ Drawee of Csmakes default in payment. Even if presentment is excused/ Instrument overdue

remains unpaid. Notice of Dishonour- Holder informing the parties about non-payment -Withinreasonable time in oral/writing or delivered by post.

Noting- A convenient mode of authenticating the dishonour- A minute recorded by aNotary Public- Fact, Date, Reason of dishonour & Notary bill are compulsory &attached to the NI- Not a must in inland bills.


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Protest- Certified by Notary after recording the minute - evidence for legal actions-prima facie evidence.

Discharge of NI-Discharge of NI or Discharge of Liabilities of parties1. By Payment

2. By acceptor becoming holder- In his own right at or after maturity3. By Renunciation-(waiver) By giving up the right- In writing & NI is surrendered tothe party primarily liable.

4. By Cancellation- Holder cancels name of maker/ endorser/acceptor with intent todischarge him.

5. By discharge like a simple contract.In addition discharge of liabilities of parties can be effected by

By releasing the party specifically

By allowing drawee more than 48 hours

By non presentment of cheque

By operation of law Insolvency, Order of release, Merger ( Order of

payment), Lapse of Time

By material alteration

Liabilities of Parties Drawer- BoE/Cheq- Compensate if notified of dishonour. Drawee Chq- Compensate if rightful payment is dishonoured.

Maker/ Acceptor- Primarily liable- Compensate Endorser- Liable to subsequent holders before maturity. Prior parties are liable to holder in due course. HOLDER IN DUE COURSE ALWAYS HAS GOOD TITLE & ALL PRIORPARTIES ARE LIABLE TO HIM

Parties to NI Minor- Can draw, indorse, deliver and negotiate without binding himself- othersare liable Persons incapable to contract- Void NI Corporations- Trading Co has the implied power- others only if specificallygiven by Memorandum of Association/Articles of Association. Agents- Per pro sign/ writing name of principal Partners- Binding on co-partners Hindu joint family- Karta represents all members-Minor members liable for theirshare only, not personally. Legal Representatives Liable to their extent/ similar to principal


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Parties to NI 1. PN Maker, Payee, Holder, Endorser, Endorsee 2. Bill of Exchange - Drawer, Drawee, Acceptor, Payee, Holder, Endorser,Endorsee, Drawee in case of need, Acceptor for honour

3. Cheq- Maker, Payee, Holder, Endorser, Endorsee, DraweeContract of Agency Agent A person employed to do an act for another or to represent another in

dealings with third persons. Principal Person for whom such act is done or who is represented. Nature Express/implied Agreement , Competency of principal, consideration

not necessary.Creation of agency

1. Express appointment

2. Implied agreement-(1) Agency by estoppel, (2) Holding out (3) RatificationKinds of Agents1. Special Agent2. General Agent3.Universal AgentBy nature of work

1.Mercantile-selling/buying, consigning,raise money Factors- Possession of goods given for sale

Broker- No possession, to find buyer/seller Auctioner- Seller by auction Commission agent Del-credere agent- Responsibility of ensuring payment is made by parties Banker

2. Non mercantile- Insurance, solicitor, guardian, promoter, estate agent, wife etc. Duties of an Agent1. Duty to execute mandate- Perform work as agreed

2. Follow instructions of the principal-3. Reasonable care & skill4. .Render proper accounts5. Communicate with principal6. Not to deal his own account7. Not to make secret profits.8.Remit sums9. Not to delegate authority


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10. Protect interest of principal on his death/insanity11.Not to use agency information against principal12.Not to set up adverse title Rights of an Agent1. Right to retain money due to himself

2. Receive remuneration3. Right of Lien4. Right to Indemnity

Duties of Principal1.To indemnify the agent against consequences of all lawful acts, 2. acts done ingood faith, 3. any injury caused by principals neglect. 4. To pay commission orother remuneration.

Rights of Principal

1.To see that agencys business is conducted as per his instructions & to becompensated for any loss by deviation.2.Direct compensation for agent negligence, want of skill or misconduct.3. To get proper account when demanded4. To repudiate transaction, if material fact is concealed or when dealing on his ownaccount by the agent.Delegation is not permitted but with exceptions- sub agent- substituted agent.

Liabilities of Principal & agents w.r.t Third Party

Named Principal- existence & name disclosed by agent1. Liable for agents acts, within scope of his authority2. When exceeding authy, that part within authy is liable3. Bound by information given to agent4. Belief based, then Estoppel5. Liable for misrepresentation or fraud by agent Unnamed principal- Principal liable unless a trade, custom or a term which

makes agent personally liable

Undisclosed Principal-Third party may sue either /both if principal issubsequently discovered or he intervenes. Principal may ask for performanceby allowing all payments to agent.

Agent has all rights against principal, but personally liable to third party.Third party can sue either or both, principal is disclosed before completion of

contract he may refuse to fulfill on the ground that he would not have entered into thecontract, can set off against agent & principal may ask performance as with agentand third party.


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Termination of Agency By act of parties

1.By agreement between principal & agent2.By revocation of agents authority by principal

- Operates prospectively- future actions only

- Reasonable notice if for a fixed period-Compensation for revocation without notice& after reasonable time- Renunciation by agent similar to principal

By operation of law1.Completion of agency business2.Death/ insanity of agent/ principal3.By insolvency of principal4. By expiry of time5. By destruction of subject matter

6. By principal becoming an enemy7. By dissolution of a company8. Termination of sub-agents authority by terminating authority of agent

Unit IIThe Company Act, 1956

A company is a group of persons who have come together or who have contributedmoney for some common purpose and have incorporated themselves into a distinct

legal entity in the form of company.

Characteristics1.Separate Legal entity2.Limited Liability3.Perpetual Succession4.Separate Property5.Transferability of Shares

6.Common Seal7.Capacity to Sue & being Sued8.Lifting/ Piercing the Corporate Veil9.Registration- 10 for banking business & 20 for others-Exceptions- JHF Business,Religious/social/charitable without profit motive, exceeding the limit to be registeredunder any Law.10.Consequences of Non-registration11.Public co- minimum 7 members & pvt co 2 members


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Types of Companies1.Public co must have 5 Lacs minimum paid up capital2. Pvt Company- By its AoA limits liability

Difference between Private Co and Public coPrivate Co Public co

1.Min 2 & Max 50 members2.Transfer of shares strictly regulatedby its articles3.Cannot invite public to invest inshares4.Use Pvt ltd at the end

5.Some privileges6.Min 2 directors7.No restriction on appointments8.Less legal controls9.Directors can borrow from co10.Min Paid up 1 lac

1.Min 7 & Max unlimited2.Freely Transferable3. Can invite4.Use Ltd5.No privileges6.Min 3 Directors

7.Director has to register consent8.Strict regulations9.cannot borrow10.Min 5 lacs

3.Limited Co- Limited by shares means liability is limited to the amount of uncalled

share capital-Limited by guarantee means members by MoA guarantee somepayment in case of liquidation.4. Unlimited Co- Liabilities are unlimited5. Holding & subsidiary co- Subsidiary if composition of Bod can be altered/ other coholds more than half in face value of share capital.6. Government Co- More than 51% of paid up share capital held by any Govt7. Foreign Co- Incorporated outside India & established business in India.

Promotion of a company

Entire process by which a Co is brought in to existencePromoters are the persons who conceive the Co & invest the initial funds excludinglawyers, solicitors, CAs etc.Basic duties are not to make secret properties & make full disclosure of all facts oftransaction with the Co.Remedies available to Co against promoters are canceling any contract made bypromoter with recovery of profit if any, retaining property & Suing for breach.


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Rewards for promoters are Remuneration, May have profits with full disclosure, Buy /Sell his property in shares, Commission on shares sold & AoA may provide a fixedsum as benefit.

INCORPORATION BY REGISTRATION

As per the type of Co promoters has to prepare some documents.

I Memorandum of Association- Constitution or Charter of the Co.1. Name clause- Name of Co with Ltd/ Pvt Ltd as required, withoutresembling/identical/suggesting State connection or patronage.2. Domicile clause- Location/ Regd office address of Co in Form 18 to Registrar ofCompanies for registration on the day/ within 30 days -Name to be written in English& local language- any change of address within state with permission from RegionalDirector & special resolution in Co- To other state special resolution & permission of

Co Law Board.3. Objects clause- Specifies the activities which a Co can carry on & cannot.-includes Main objects, Incidental/ancillary & Others if any Other than trading Cosnot confined to one state territories to be specified.Doctrine of the Ultra-vires Transactions outside the objectives & not reasonablyincidental to attainment of objectives are void- No rights & liabilities arise out of it- Cocannot sue/ be sued 7 directors are personally liable. Exceptions are acts of intra-vires nature which can be modified by amending articles / by resolutions to validate it.

4. Liability clause Liabilities if limited to be specifically stated as amount in case ofliquidation.Exceptions are increased liability by altering MoA/AoA, members agree with registrarto make it Unlimited liability and No of members decreased to lower than minimum &operated fo more than 6 months.Capital clause Amount of share capital with type 7 no of shares- increase ispossible with suitable modifications of MoA.6.Association clause. Declaration by the persons subscribing to MoA about desire

to form Co, agree to take shares as specified by promoters.II Articles of Association Rules & regulations of indoor management- A contractbetween Co & members and within members to abide by the rules & regulations-Rights & Duties are also specified.Includes 1.Powers, duties, rights & liabilities of Members/ directors 2. Rules formeetings, Dividends, Borrowing powers of Co, Call on shares, Transfer, transmission& forefeiture of shares, Voting powers.Articles can be amended by resolutions by members.


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Difference Between MoA & AoA

MoA AoA

1.Charter of Co constitution &Activities2.Fundamental3.Must have it4.Alteration is difficult & strictlyregulated

1.Rules & regulations regardinginternal management of Co

2.Subsidiary to superior MoA3.Pub Co limited by shares may/ maynot have it4.Altered easily by special resolution.5.Doctrine of Indoor management Outsiders have a right to assume thatthe Co affairs are as per rules &regulations only.This limitation is DIM.

III Registration of a Co- The documents prepared, vetted, stamped & signed mustbe filed with Registrar of Cos with agreements for directors, MDs, secretaries- ForPublic Co Form 18 Address of Regd Office, 29 written consent of directors & 32Details of directors.IV Certificate of Incorporation Birth certificate- Issued by registrar to prove Cosexistence- Cannot cease to exist unless dissolved.V Commencement of Business- pvt Co without share capital can start businessimmediately- Pub Co with share capital minimum no of shares allotted, their payment

by public & directors, Declaration that no money is payable to share holders andForm 19 signed by a director/ CS declaring all formalities are carried out( Form 20For without Prospectus)V Prospectus Document to show the soundness of Co to the public while invitingfor subscribing of shares informing about Financial background, activities, futureprogrammes, Nature of investment, Element of risk involved etc.- definition includesany invitation to subsribe/ deposit by public including circular, notice andadvertisement.

Contents- with date of publication, registered with Registrar of Cos with sign ofdirector.

Matters specified in Part I, Reports as in Part II subject to provisions of Part III ofschedule II.Misstatements in the Prospectus.Person authorising the prospectus has to ensurethat it contains true state of affairs & does not give any false pictures.- Includesstatements which are Untrue, Produce wrong impression, misleading, Concealingmaterial facts & Omitting facts.


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VI Liability- Director, Person authorised himself to be named in prospectus asdirector/ agreed to become a director, Promoter & any other who authorised issue ofit.1.Civil liability- 1.Compensation for any loss/ damage to every person subscribing 2.Damage for deceit/fraud 3. Rescission of contract for misrepresentation. 4. For non-

compliance to matters as in Schedule fine up to Rs.50,000 5. Liability under generalLaw 6. Penalty for issuing prospectus without registration up to Rs 50,0002.Criminal liability every person authorising issue of prospectus is punishable foruntrue statements with imprisonment up to 2 years or fine up to Rs 50,000 or both.

Statement in lieu of prospects to be issued at least 3 days before allotting shares.VI Restrictions- Without consent by general meeting of Pub Co/Subsidiary of PubCo cannot1.Sell, lease or other wise dispose off undertaking of Co2.Remit/ give time to remit any due by a Director

3.Invest other than in securities any compensation received by Co4.Borrow money beyond aggregate paid-up capital5.Contribute to charitable funds not directly related to business exceeding 50,000 Rs/5 % of Average profit of 3 yearsDuties of Directors1. Fiduciary obligation - Relationship of an Agent of Co based on mutual trust &confidence2. Duty of care Careful to make more profits

3. Attend board meeting Regularly to attend- consecutive absent in 3 meetings/ 3months without leave liable to be removed from board4.Cannot delegate powers (like an agent)5. To Disclose interest- Direct/ indirect interest in arrangement/ contract proposed/existing must disclose interests in a meeting.Liability of Directors1.Liability to Outsiders While acting for Co not personally liable, Act on their ownname personally liable, Ultra vires both not liable, Acting on behalf of Co but fraud

personally liable.To Third persons Mis-statements in prospectus, Irregular allotment, Failed torepay application money within 10 weeks of subscription close,/ within 10 days of notreceiving minimum subscription within 120 days.2. Liability to Co- Ultra-vires acts liable to make good the loss, Negligence ofduties/powers/care,Breach of trust, Misfeasance9 Lawful acts done in wrong manner).


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VIII MEETINGS- Statutory- once in life time (within 1 to 6 months ofcommencement) for Ltd Cos,AGM -within 18 months from commencement, every year with not more than 15months gapExtraordinary GM- As required for special business

Class meeting- For particular type of share holdersIX Winding up of CompanyAssets are realised to pay the debts Dissolution is after winding announcing thedeathBy court- Based on petitions by Co, creditor, shareholder,Registrar, CG authorisedpersons, Official liquidator when resolution is passed, not commenced business

within 1 year, Not fulfilling statutory obligations, members falling below minimum,Unable to pay debts, court opines it is just & equitable to by creditor/member.

UNIT iii1. THE FACTORIES ACT, 1948:

OBJECT AND SCOPE: The factory Act regulates condition of work (health, safety,etc) in factories, it safeguards the interest of workers and it is for the welfare offactory workers.This Act is applicable to any factory in which ten or more than ten workers are

working. The factory Act has provisions in respect ofEmployee health and safety.Hours of work.Sanitary conditions and wholesome work environments.Employee welfare.Leave with wages, Etc

DEFINITIONSFACTORY A place where in ten or more persons are working and in which a

manufacturing process is going on using electricity, steam, oil, etc(20 or more ifwithout power)MANUFACTURING PROCESS A process for

Making, Altering, Repairing, Finishing, Packing, Washing, Cleaning, orotherwise treating a substance for its use, sale, transport, disposal,etc

Pumping oil, water or sewage, or


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Generating, Transforming, or transmitting power etc

Composing types of printing, printing for letterpress, lithography,photogravure or other similar process or book binding.

Constructing, reconstructing, repairing, refitting, finishing or breaking upships or vessels.

WORKER Worker means a person employed directly or through agency, whetherfor wages or not, in any manufacturing process or in cleaning any part of themachinery or premises used for a manufacturing process or in any other kind of workincidental to or connected with, the manufacturing process or the subject ofmanufacturing process.

ADULT A person who has completed his eighteenth year of age.CHILD A person who has not completed his fifteenth year of age.POWER Electrical energy or any other form of energy which is mechanicallytransmitted and is not generated by human or animal agency.MACHINERY It includes

Prime movers: engine, motor, etc

Transmission machinery: shaft, wheel, drum, pulley, belt, etc

And all other appliances whereby power is generated transformed ortransmitted.

OCCUPIER OF FACTORYA person who has ultimate control over the affairs offactory and where the said affairs are entrusted to a managing agent, such agent willbe considered as the occupier of the factory.INSPECTORS State government appoints chief inspector and other inspector

who,

May enter any factory and

May make examination of premises, plants, machinery and anydocument related to factory.

CERTIFYING SURGEONS State government may appoint quality medicalpractitioners as certifying surgeons for

The examination and certification of young workers and

The examinations of workers engaged in dangerous occupation orprocesses.

THE MAIN PROVISIONS OF THE ACT ARE AS FOLLOWSHEALTH

1. CLEANLINESS

Removal and disposal of dirt and refuse from floors, benches etceveryday.


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Washing of floors of work room at least every week, using disinfectant.

Effective means to drainage to avoid collection of water, etc on thework floor.

All inside walls and partitions, all ceiling tops of rooms, passage andstaircase.

To be repainted once in 5 years If they are already painted, and To be white washed and the white washing to be carried out at least

once in 14 months.2. DISPOSAL OF WASTE AND EFFLUENTS Effective and suitable

arrangements should be made for the disposal of waste and effluents due tothe manufacturing process.

3. VENTILATION AND TEMPERATURE In every factory, effective and suitableprovision shall be made for securing and maintaining in every workroom,

Adequate ventilation by fresh air circulation, Suitable temperature to provide conditions of comfort and prevent injury

to the health of workers.4. DUSTS AND FUMES Employershall take necessary steps to keep workrooms

free from dust or fumes offensive or injurious to the health of the worker.5. ARTIFICIAL HUMIDIFICATION In factories (e.g. textile) where humidity of air

is artificially increased, state government may make rules

Prescribing standards of humidification.

Regulating the method of artificially increasing humidity.

Directing prescribed test for determining humidity and

Prescribing method for achieving adequate ventilation and cooling the airin workroom.

The water employed for humidification shall be form a source of drinkingwater.

6. OVERCROWDING No work room should be overcrowded to an extent, whichis injurious to the health of workers.

The minimum space provided for a worker should be 4.2 cu.m. ( 4.2meters above the floor level not to be calculated).

7. LIGHTING

Light whether artificial or nature or both, should be sufficient and suitablein all workrooms.

Sky light and glazed windows for lighting the workrooms should be keptclean and unobstructed.


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Glares and shadows which cause eye strains or risk, accidents shouldbe prevented.

8. DRINKING WATER

Wholesome Drinking water should be available at suitable pointsconveniently situated in the factory. All such points shall be legibly

marked drinking water. No such points shall be located within 6 metersof any latrine, urinal, etc If more than 250 workers, cooled water to beprovided.

9. LATRIENS AND URINALS

Sufficient latrines and urinals accommodation of the prescribed typesshould be conveniently situated and accessible to workers.

Separate enclosed accommodation shall be provided for male andfemale workers.

Latrines and urinal should be adequately lighted, ventilated andmaintained clean at all times.

State government may prescribe the number of latrines and urinals to beprovided in proportion to the number of workers.

10. SPITTONS

There should be a sufficient number of spittoons at convenient placesand maintained in clean hygienic condition

No worker shall spit except in a spittoon and if a person contravenes this,

he shall be published with a fine not exceeding rupees five.SAFETY1. ENCASING AND FENCING OF MACHINERY In every factory the following

shall be securely fenced as they are in such position as to be safe for eachworker.

Moving part of prime mover and flywheel connected to it.

The head race and tail race of water wheel and water turbine.

Any part of stock bar projecting beyond the lathe head stock.The following parts should be securely fenced by safeguard which shall be kept

in position while the parts are rotating.Part of electrical generator, motor, etcPart of transmission machinery.Dangerous parts of any other machinery.

2. WORK ON OR NEAR MACHINERY IN MOTION


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Any part of machinery if it is required to be examined while it is in motionshall be examined only by a specially trained adult male worker wearingtight fitting clothing.

No woman or young worker shall be permitted to clean, lubricate oradjust any part of moving machinery which involves a risk of injury.

3. EMPLOYEMENT OF YOUNG PERSONS ON DANGEROUS MACHINESNo young person shall work on dangerous machinery. UnlessHe has got sufficient training to work at that machine; andHe is under adequate supervision of an adult experienced

worker/supervisor.4. HOISTS AND LIFTS Every hoist and lift shall be

Of good machinery construction, adequate strength and sufficientlyprotected and fitted with gates; and

Adequate maintained and periodically (at least once in six months)examined.

o Hoists and cranes meant for carrying person shall have at least two

ropes or chains separately connected with the cage. Each rope or thechain with its attachments shall be able to carry weight of the cagetogether with its maximum load (e.g. weight of persons).

o Device should be provided to support cage in the event of breakage of

the ropes or chains.5. LIFTING MACHINES, CHAINS, ROPES AND LIFTING TACKLES Factory

cranes and other lifting machines such as crab, winch toggle, pulley block,etc.., shall be of good construction, sound material, and adequate strength,properly maintained and thoroughly examined at least once a year.

6. PRESSURE PLANTS It should be ensured that the working pressure of suchparts does not exceed the safe value.

7. FLOORS, STAIRS AND MEANS OF ACCESS TO DIFFERENT PLACE Theyshould be of sound construction, properly maintained and provided withhandrails.

8. PITS, SUMPS, OPENINGS IN FLOORS, ETCShall be either securely coveredor suitably fenced.

9. EXCESSIVE WEIGHTS No person shall be asked to lift, carry or move any loadso heavy as to cause him an injury.10. PROTECTION OF EYES


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To protect the eyes of workers from the flying particles (such as infettling, revert cutting, scale removal etc) or from exposure to welding rays,each worker shall be provided with effective screens or suitable goggles.

11. PRECAUTIONS AGAINTS DANGEROUS FUMES No person shall beallowed to enter any confined space, chamber, tank, pit, etc in which

dangerous fumes are likely to be present so as to involve risk to the enteringperson.12. EXPLOSIVE OR INFLAMMABLE DUST, GAS, ETC If a

manufacturer process is producing dust, gas, or vapors this can explode onignition,

The plant should be effectively enclosed; and

Such dust, gas, fumes, etc should not be allowed to accumulate.13. PRECAUTIONS IN CASE OF FIRE Every factory shall be

provided with means as follows and others to help escape in case of fire;Fire warning signal.Unlocked doors and opening towards outside the workroom.Free passageways and easily open able windows.

14. Safety Officers should be appointed if 1000 or more workers areemployed.

15. Hazardous processes are those where, unless special care is takenwould cause material impairment to the health of the persons engaged orconnected with, result in the pollution of general employment.

WELFARE1. WASHING FACILITIES

Washing facilities adequately screened for male and female workersshould be provided in the factory.

Washing facilities shall be easily accessible and kept clean.2. FACILITIES FOR SITTING Suitable sitting facilities shall be provided for all

workers obliged to work in standing position so that they may take rest, if anopportunity occurs in the course of their work, without affecting the work.

3. FIRST AID APPLIANCES For every 150 workers, minimum one fully equipped first aid box shall

be kept available during all working hours.

A factory employing more than 500 workers shall have a properequipped ambulance room.

4. CANTEENS A canteen shall be provided in each factory in which morethan 250 workers are ordinally employed.


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5. SHELTERS, REST ROOMS AND LUNCH ROOMS Every factory inwhich more than 150 workers are ordinarily employed, adequate, suitable, clean,sufficiently lighted and ventilated rest and lunch rooms shall be provided.6. CRECHES Every factory shall provide clean, adequately lighted and

ventilated rooms for the use of children (under the age of 6 years) of women

workers, if the number of such women workers exceeds 30.7. WELFARE OFFICERS

Every factory employing 500 workers are more shall employee welfareofficer.

The state government may prescribe the duties, qualification andconditions of service of welfare officers so employed.

WORKING HOURS1. WEEKLY HOURS An adult worker shall be required to work in the factory

for not more than 48 hours a week.2. WEEKLY HOLIDAY No adult worker shall be required to work on Sunday

unless the manager substitutes Sunday by a holiday one or three daysimmediately before or after Sunday.

3. DAILY HOURS No adults workers shall be required to work for more thannine hours on any day.

4. INTERVALS FOR REST No adult workers shall be required to work formore than 5 hours continuously, i.e., after five hours; the worker shall have arest for at least half UN hour.

5. EXTRA WAGES FOR OVER TIME If a worker works for more than ninehours on any day or for more than 48 hours in any week, he will get hisovertime wages at the rate of twice his ordinary rate of rage. (I.e. basic wagesand allowances)

6. RESTRICTION ON DOUBLE EMPLOYEMENT No adult worker shall beallowed to work in a second factory on any day on which he has already been

working in one factory.7. REGISTER OF ADULT WORKERS Factory manager shall maintain a

register of adult worker (stating their names, nature of work, group work etc..,)and make it available to the inspector at all times during work hours.8. RESTRICTION ON EMPLOYEMENT OF WOMEN No women shall be

employed in any factory except between the hours of 6A.M and 7P.MEMPLOYEMENT OF YOUNG PERSONS

1. PROHIBITION OF EMPLOYEMENT OF YOUNG CHILDREN No childunder 14 years of age shall be allowed to work in any factory.


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2. NON ADULT WORKER A child who has even completed his 14 years ofage shall not be allowed to work in a factory unless he carries while at work atoken giving reference to certificate of fitness.

3. CERTIFICATE OF FITNESS It is a certificate of fitness for working in afactory which is given to a young person by a certifying surgeon after examining

him (i.e. the young person).4. WORKING HOURS FOR CHILDREN No child shall be permitted to work

For more than four and half hours on any day; and

During the night, (i.e. 10P.M to 6A.M).REGISTER OF CHILD WORKERS Indicating their particulars and nature of

work shall be maintained by the factory manager and be made available toinspector at all times during hours of work.

ANNUAL LEAVE WITH WAGES A worker who has worked for 240 days ormore during a calendar year shall be permitted during the subsequent calendaryear, leave with wages for a number of days at the rate of

o One day for every 15 days of work performed by a child worker.

o One day for every 20 days of work performed by an adult worker.

o A worker interested to take leave shall apply 15

days in advance.Advance Payment of Wages can be claimed if leave allowed is not less than 5

days for child and not less than 4 days for adult worker.SPECIAL PROVISIONS

DANGEROUS OPERATIONSWhere the state government feels that any operation is of serious risk

or bodily injury, poisoning or disease, it may take rule;

Declaring the operation dangerous;

Stopping employment of women and children in this operation;

Providing protection of all concerned with that operation; and

Periodical medical check up of all concerned with that operations,etc...

NOTICE OF ACCIDENT An accident causing death or bodily injury due towhich the worker cannot work for a period of 48 hours or more immediately after theaccident, shall be brought to the notice of such authorities, within such time as maybe prescribed.NOTICE OF DIESEASE If a worker is suffering from any disease specified inthe schedule, a report immediately shall be sent to chief inspector giving particularsof the worker and the disease from which he is suffering.


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POWER TO TAKE SAMPLES An inspector, during working hours, afterinforming the manager may take sample of any substance being used in the factory.PENALITIES AND PROCEDURESGENERAL PENALITY FOR OFFENCES

In case of any contravention of any of the provisions of this Act, the

occupier and manager shall each be guilty of an offence and punishable withup to 2 years of imprisonment or fine up to Rs. 100,000 or both.

If contravention continues after conviction, there will be a fine ofRs. 1000 per day

After being convicted for an offence, if the person does contravention ofthe same provision again, he shall be punishable with imprisonment up to 3years, a fine up to Rs. 10000 to 3 lacks or both.

PENALITY FOR OBSTRUCTING INSPECTOR

An Occupier/Manager shall be punishable with imprisonment up to 6months or fine up to Rs. 10,000 or both.o Fails to produce registers or other documents on demand by

inspector; ando Prevents any factory worker from being examined by the

inspector.OFFENCE BY WORKER If any worker contravenes any provisions of the Act,he shall be punishable with fine up to Rs. 500.

APPEALS An Occupier/Manager on whom a written order by an inspector has beenserved under the provisions of the Act may within 30 days of the service of order,appeal against it to the prescribed authority.OBLIGATIONS OF WORKERS No factory worker will misuse any applianceprovided for the purpose of securing health, safety and employee welfare.

A worker who contravenes this provision shall be punished with up to 3months imprisonment or a fine of Rs. 100, or both.

RESTRICTION OF DISCLOSURE OF INFORMATIONNo inspector will ever disclose any information relating to

manufacturing processes, etc..., which comes to his knowledge in course of hisofficial duties. An inspector who does so shall have up to 6 months of imprisonment,or a fine of Rs. 1000 or both.

2.THE PAYMENT OF WAGES ACT, 1936 (AMENDED UP TO 1982)AIM To regulate the payment of wages to persons employed in industry anddrawing less than Rs. 1000 per month. This act is about.


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The date of payment of wages; andDeductions (fines or otherwise) from wages.

DEFINITION1. INDUSTRIAL ESTABLISHMENT

It means any,

Motor transport service carrying passengers or goods or both on hire.

Air and water transport service.

Mine or oil field.

Workshop, etc2. WAGES It includes all remuneration (salary+ allowances, etc..,) payable to

an employee in respect of his employment. Wages also includes over timeremuneration, bonus, gratuity, pension, provident fund contribution by theemployer, etc

RESPONSIBILITY FOR PAYMENT OF WAGES-An employer shall be responsible for the payment of wages to his entireemployee.-An employer shall fix wage period (not exceeding one month) by which he shallpay wages to his employee.-If the number of employees is less than one thousand, wages have to be paidbefore the expiry of the seventh day after the last day of wage period. In the othercase, payment shall be made before the expiry of 10 th day after the last wageperiod.

-Wages shall be paid on working day.-Wages shall be paid in current coins or currency notes or in both.

DEDUCTIONS FROM THE WAGE Only those deductions as authorized by thepayment of wage Act will be made from the wages of an employee. Deductions maybe such as,

o Fines;

o Those for absence from duty;

o Due to damage to or loss of goods;

o For house accommodation supplied by employer;o For amenities and services supplied by the employer;

o For recovery of advance and loan given to the employee;

o For income tax.

o Provident fund and

o Those by the order of the court.

IMPOSITION OF FINES


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Fine shall be imposed only after an employee has been given anopportunity of showing cause against the fine.

Total fine shall not be more than an amount equal to 3% of the wagespayable to an employee in respect of that wage period.

No fine will be imposed on an employee below 15 years of age.

Every fine shall be imposed on the day of the Act and shall berecovered within 60 days from the day on which it was imposed and that too in oneinstallment only.

All fines and their realization shall be recorded in a register and kept bythe employer.ENFORCEMENT OF THE ACT Inspector of factories or otherwise appointedshall be responsible for the enforcement of the Act.

AUTHORITY TO HEAR CLAIMS

To hear claims made by the workers in respect of unauthorizeddeductions from wages or delay in payment of wages, state government may appointan authority (who may be a presiding officer of a labor court, a judge of civil court,etc..,) to dispose of such claims.

After hearing, the authority may direct the employer to refund thedeductions to the employee along with such compensation as the authority may feelproper but not more than ten times the amount deducted.

If after hearing, it is found that the employees application was

malicious, he may be punished to pay up to Rs.50, to the employer.PENALITY FOR OFFENCES UNDER THIS ACT

Whoever being required under this Act to maintain any records ofregisters.

o Fails to do so;

o Willfully refuse to furnish such information;

o Willfully furnishes an information which he knows is false;

o Refuse to answer, or gives false answer, shall be punishable with fine

of Rs. 200 to 1000.Whoever,Willfully obstructs an inspector from doing his duty;Refuse or willfully neglects to afford an inspector any reasonable facility,

for making any entry, inspection, examination, etc..,Willfully refuse to produce on the demand of inspector any register or

other document;


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Prevents any employee from appearing before the inspector, shall bepunishable with a fine from 200 1000 Rupees.

s person found guilty of the same offences second time shall bepunishable with imprisonment up to 6 months and a fine of, from 500 to3000 rupees.

An employer who willfully does not pay wages of an employee by the datefixed by the authority in this behalf, he shall without prejudice to anyother action that may be taken against him, be punishable with anadditional fine up to Rs. 100 for each day for which such neglectcontinues.

3.THE PAYMENT OF BONUS ACT, 1965Bonus means something given in addition to what is ordinarily received / strictly

due to the recipient.Earlier it was ex-gratia payment & now it is a matter of right if surplus in profit isavailable & intends to bridge the gap between given wage & living wage.Applicable to every factory & establishment where 20 or more are employed on anyday during an AYNot applicable to Employees of LIC, CG, SG, LA, Employed by IRCS, Universities,Educational Institutes, Non-profit Institutions & Contract employees on buildingoperations.

Employee- Any person other than apprentice employed on salary/wage notexceeding Rs 6500 per month in any industry to do skilled/unskilled, manual,supervisory, managerial, administrative, technical or clerical work for hire or reward Employer Owner/ occupier including agents, legal representatives, manager. Salary/ wage All remuneration expressed in terms of money including DAexcept OT pay Establishment Includes all departments, branches, and undertakings evenin different places.

Assessment Year - In relation to corporation the year ending on the day onwhich the books & accounts are closed & balanced In relation to Company the period of profit & loss A/c laid before AGM- evenless than year Allocable surplus- In relation to Co other than Banking Co not payingdividends within India as per IT Act S 194- 67% of available surplus in an AY. Forothers 60% Available surplus- Calculated as per S 5 of this act


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Eligibility for Bonus- If worked for not less than 30 working days in AY-Disqualification if Fraud, Riotous/violent behaviour, Theft / sabotage /misappropriation of property.

Minimum bonus 8.33% Max 20% Set on & Set Off Allocable surplus exceeding the limit for maximum bonus

up to maximum of 20% of total salary of employees in that Accounting year- carriedforward to succeeding a/c year and so on up to 4 years. No available surplus to pay minimum bonus- no set on profit that amount iscarried forward to succeeding a/c year for set off up to 4 yearsDeductions from bonus- Any loss due to guilty/ misconduct of employee that loss

can be lawfully deducted. Period - Decision pending before court paid within 1 month of award- Othercases within 8 months- A.G may extend up to 2 yearsCalculation of Bonus

Gross Profit as per Schedule 1 for banking Companies & 2 for others Permitted deductions like depreciation, investment allowance, rebate etc Direct Tax Sec 7 D.T for amount equal to gross profit for preceding A.Y after deducting bonuspaid/ payable.

4. THE INDUSTRIAL DISPUTES ACT, 1947AIM To settle the industrial disputes on a new pattern known as adjudicationmachinery and to make industrial peace through voluntary negotiations andcompulsory adjudication.IMPORTANT ASPECTS OF THE ACT:

1. An industrial dispute may be referred to an Industrial tribunal.2. An award shall be binding on both the disputing parties for a period not

exceeding one year.

3. Strikes and lockouts are prohibited during the pendency of, Conciliation and adjudication proceeding.

Settlement reached in the course of conciliation proceeding.

Award of industrial tribunals declare binding by the appropriategovernment.

4. In public interest or emergency appropriate government can declare thefollowing industries to be a public utility service for maximum period of 6months,


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Transport by land, air, and water.

Foodstuff.

Coal.

Cotton textile and

Iron and steel.

IMPORTANT DEFINITION:1. Award means an interim or a final determination of an industrial

dispute. Decision of labor court and industrial tribunals are awards.2. Average pay means the average wages payable to workman;

In case of monthly paid workman, in the 3 calendar month;

In the case of weekly paid workman, in the 4 completed weeks;and

In the case of daily paid workman, in the 12 full working days

Industry means any business undertaking, manufacture, etc. It includesany calling, service, employment, handicraft or industrial occupation or a vocation of

workman.Industrial dispute means

Any dispute or difference,Between employers and employers,

Employers and workmen.Workmen and workmen: and

Connected with employment, orNon-employment, orTerms of employment orConditions of labor, or any person

Lay-off means

Failure, refusal or inability of an employer,On account of shortage of coal, power, raw material, accumulation

of stock, breakdown of machinery or for other reason,

To continent to employ workers (in his industry) whose names areborne on the muster-rolls and who have been retrenched.Lay-off is a temporary phase: the employee-employer relations do

not come to an end, but are simply suspended for some period (ofemergency).Lock-out means the closing of a place of employment or suspension of work

or the refusal by an employer to continue to employ any number ofworkers employed by him.


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Public utility services meanRailway or transport service,Postal, telegraph or telephone service,Any industry supplying power, light or water,Sanitation,

Foodstuffs, andCoal, textile, etc.Retrenchment means the termination of the service of a workers by the

employer for any reason whatsoever other than due to disciplinary action.Retrenchment does not include.

Strike means refusal to work or cessation of work by a body of workman forenforcement of a demand against the employer during an industrialdispute.

Settlement it implies a settlement arrived at in the course of conciliation

proceeding. It includes a written agreement between the workers andemployer.

Workmen means any person (including an apprentice) employed in anyindustry for hire or award to do manual, technical, supervisory or clerical

work.AUTHORITIES UNDER THIS ACT:

WORK COMMITTEE;-Any industry, in which 100 or more workers are and have been

employed on any day in the preceding 12 month, shall constitute a workscommittee.

-works committee shall have representatives of workers and employersboth. Workmen representatives will not be less than those of employer innumber.

-works committee shall promote measures for securing and preservingamity and good relation between the workers and employer. It will commentupon matters of their common interest and try to compose any material

difference of opinion in respect of such matters.-work committee shall smooth away frictions that might arise betweenthe workers and the employer in day-to-day work.CONCILIATION OFFICERS;

Conciliation officers will be appointed by any appropriate governmentand they shall mediate and promote the settlement of industrial disputes.BOARD OF CONCILIATION;


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Appropriate government may constitute a board of conciliation topromote settlement of an industrial dispute.

- Board of conciliation will be heady by a chairman (an independentperson)and shall have two or four other members which will berepresentative of the parties to dispute. But parties, i.e., workers and

employer shall have equal of representatives. COURTS OF ENQUIRY;-Appropriate government may constitute a court of enquiry to look

into any matter connected with industrial dispute.-court (of enquiry) may consist of one or more independent

persons.-The court shall inquire and submit a report ordinarily within six

months from the commencement of inquiry. LABOUR COURT:

-The appropriate government may constitute labour courtconsisting of one person only for adjudication of industrial relating to matter specifiedin the 2nd schedule.

-The matters within the jurisdiction of labour court as 2nd scheduleare;

1. The propriety or legality of any passed by employer underthe standing orders.

2. The application and interpretation of standing orders.

3. Illegality or otherwise of a strike or Lock-out.4. Dismissal of workers including reinstatement or relief to

workers wrongly dismissed.5. Withdrawal of any concession or privilege.

-Presiding officer of one man labour court shall be,1. a judge of a high court; or2. a district judge who has worked for more than 3yrs, etc.

INDUSTRIAL TRIBUNALS;

Appropriate government may constitute one person industrialtribunals for the adjudication of industrial disputes relating to matters specified in,1. Schedule 2(refer to labour court for details of schedule 2),2. Schedule 3-matters such as wages, compensatory and other

allowance, house of work and pauses, holidays and leave withwages, bonus, provident fund, gratuity, rules of discipline, andretrenchment of workers, etc.


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3. Presiding officer of the tribunal shall have the same qualificationas that of a labour court.

NATIONAL TRIBUNALS;-Central government may constitute national industrial tribunals

for the adjudication of the industrial disputes which involve question of national

importance. -The presiding officer of the national tribunal shall be1. An independent person;2. Less than 65 yrs of ago; and3. An existing or retired judge of a high court, etc.

PROHIBITION OF ADJUDICATION BY OTHER TRIBUNALS If any reference hasbeen made to national tribunals, no labour court or tribunal shall have jurisdictions toadjudicate upon any matter which is under adjudication before the national tribunal.STRIKES AND LOCK-OUTS ;No employee of a public utility service shall go strike,

1. Without giving notice of strike, within six weeks before striking; or2. Within fourteen days of giving such notice; or3. Before the expiry of date of strike mentioned in the notice; or4. During the pendency of conciliation proceeding.

No employer of any public utility service shall lock-out,1. Without giving notice of lock-out within six weeks before locking out, or2. Before the expiry of date of lockout mentioned in the notice, or3 .During the pendency of conciliation proceeding.

The employed shall send information of strike or lock-out the specifiedauthority on the day on which it is declared.

RIGHT OF WORKMEN LAID OFF FOR COMPENSATIONA worker having more than of one year continuous service and then an

employer, it is laid of, shall get compensation equal to 50% of the total ofhis basis wages and dearness allowance, subject to the followinglimitation.

Provide that if during any period of 12 months, a workmen is so laid off

for more than 45 days, no such compensation shall be payable inrespect of any period of the lay off after the expire of the 1st 45 days, ifthere is an agreement to that effect between the workmen and theemployer, etc..,

WORKMEN NOT ENTITLED TO COMPENSATION IN CERTAIN CASESNo compensation shall be paid a worker laid off under following

conditions,


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If he refuses to accept alternative employment involving same wages,offered to him in the same concern or in any other concern of the sameemployer.

If the lay off is due to a strike, etcCONDITIONS PRECEDENT TO RETERENCHMENT

No worker who has a continuous service of more than 1 year shall beretrenched by the employer until.

The worker has been given 1 month return notice starting the reason forretrenchment and the period of notice has expired of the worker hasbeen paid in lieu of such notice, wage of the period of notice.

At the time of retrenchment, the worker has been paid compensationequivalent to 15 days average pay for every completed year of service.

CLOSING DOWN THE UNDERTAKING

An employer who intends to close down an undertaking shall serve, atleast 60 days before the date on which he indents closer to becomeeffective, a notice to appropriate government stating clearly the reasonfor closing the under taking.

Compensation by reference to section 25 FFF of the act is provided toworkers who are in continuous service for not less than a year with theundertaking.

PENALITIES Workers who commence illegal strike shall be punishable withimprisonment extending up to 1 month and a fine of up to rupees 50, or both.

Unit IV

The Income Tax Act, 1961

Assessment year- Period of 12 months starting from April 1 of every year andending on March 31 of next year

Previous Year- Income earned is taxable next year & income earned year is

PY-Next year is AY Person An individual, a HUF, a Co, a firm, an

Association of persons or body of individuals whether incorporated or not, a localauthority, every artificial judicial person other than above.

Assessee A person by whom any tax or any other sum of money(penalty/interest) is payable under the act.


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1st Category- Any person, irrespective of the fact whether any proceeding under theact has been taken against him or not

2nd category Any person in respect of whom any proceeding under the act has beentaken (whether he is liable to pay tax / interest / penalty or not) May be for

Either for assessment of income or loss sustained

Of income/loss of any other person in respect whom he is assessedOf the amount of refund due to him or to such other person3rd category Every person who is deemed to be an assessee including

representative assessee u/s 160(2)4th category - Every person who is deemed to be an assessee by default- person not

deducted tax at source, deducted but not paid, u/s218 person not paid advance taxCharge of IT Annual, PY income chargeable in AY, Rate fixed by Finance Act/ Bill,On every person, Levied on total income calculated under the provisions of the act.Income 2(24)- Inclusive of such terms satisfying according to its general & natural

meaning- includes1.Profits & gains2.Dividend3.Voluntary contribution received by trust wholly / partly charitable / religious4.Value of any perquisite or profit lieu of salary (rent free accommodation,accommodation in concessional rate, ESI contribution - as valued by the employees)5.Any special allowances / benefits specifically granted to the assessee to meet hisexpenses wholly, necessarily & exclusively for the performance of his duties

6. Any allowance to meet his personal expenses at the place where he performs hisduties / compensate for the increased cost of living

7. Value of any benefit / perquisite obtained from a company by a director who hassubstantial interest in the company or by a relative of director or such a person

8. Any sum chargeable to tax- interest, salary, bonus, commission, remuneration topartner

9. Insurance profit, Benefit of key man insurance10. Winning of lotteries, crossword puzzles, races

11.Any sum as contribution to any fund from employer12. Any sum received for not carrying out any activity in relation to a business

INCOME - Dictionary meaning is which comes in as the periodical product ofones work, business, lands / investment annual/ periodical receipt accruing toa person.

Gross Total Income Major heads-Salaries-Income from house property


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-Profits & gains of business or profession-Capital gains-Income from other sources-Total Income Gross income minus deduction under 80ccc to 80uDEDUCTIONS

1.National Savings Schemes2.Equity Linked Savings Schemes3.Pension Fund4.Medical Insurance Premia5.Handicap Expenses6.Medical Treatment for Specific Diseases7.Loan for Higher Education8.Donations for certain funds of charity9.Donations for Scientific research & development

10.Rent paid11.Industrial Tax Incentives & rebates12.Royalties received

Tax rate- Finance Act / Finance Bill 1st SchedulePart I Rate for different assessees

II Rates of deductionsIII- Rates for Advance tax payees

ASSESSMENT OF COMPANIES- Domestic, Foreign, Indian Co, Industrial CoGeneral Principles Income under different heads Income of other persons ( Transfer of income with/without transfer of assets ) Current & brought forward losses to be adjusted Total is Gross Income Deductions Tax

Tax rebate, Tax creditTax rate for Companies Indian/domestic1. Domestic Co- 35% +2% sc2. Foreign Co 50%

Other Incomes 48 % Tax should not be lower than 7.5 % of book profit DEDUCTIONS Donations for certain funds of charity


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Donations for Scientific research & development Profit/ gains from projects outside India, Housing Projects Earnings in Foreign Exchange Profit from export of Software, Film Products, Infrastructure undertakings,Development undertakings

Profit from biodegradable waste Employment of new workmen Inter corporate dividends Royalty, fees, commission received from foreign enterprises

Central Sales Tax Act, 1956This provides for registration of dealers for effective collection of tax, specifies thecommodities and the rate of taxation. It defines clearly what is inter-state sale/purchase and what is not- within state or outside state- sales in the course ofimport & export.

Inter-State trade or commerce if the sale or purchase occasions the movement ofgoods from one state to another; or is effected by a transfer of documents of title tothe goods during their movement from one state to another A contract of sale &movement of goods is must

Inter-State sale Subject to the provisions of section 3, a sale/purchase shall bedeemed to take place inside a state if the goods are within a state in the case ofascertained goods at the time of contract of sale is made; in the case ofunascertained or future goods at the time of their appropriation to the contract of sale

by the seller/buyer Physical location of goods is importantRate of CST-Goods exempted from local sales tax- Nil-LST is less than 4%- Same as LST-Inter-state sale to Government concessional rate of 4% - with Form D-Goods intended for resale/ packing/ manufacturing registered dealers is 4% &unregistered dealers 10% or LST whichever is higher

VALUE ADDED TAX

Principle Every time there is a sale, there should be tax on it.- April 1, 2005Enforceability- A better compliance is inbuilt in the system of VAT. Buyers & sellerswould insist on compliance with taxation, improving the collection of tax. The lawenforcer thus has passed the burden of surveillance on the tax payers themselves.Registration- To identify the person & bring him under tax grid. Certain kinds ofpersons are to be compulsorily register- regd dealers- All who make inter-state saleie.. buying & selling across the state.- Exceeding 5 lakhs compulsory- voluntary


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Dealers- Any person who, for the purposes of or in connection with or incidental to orin the course of his business buys, sells goods directly or otherwise. Businessincludes all trade, commerce, manufacture & provision of service. All retailers,distributors, manufacturers are covered. Includes

1.Factor, commission agent, broker, auctioneer, mercantile agent on behalf of any

principal2.Branch outside state, if buys/sells within state3.Clubs, associations, society, trust, Co-ops even selling to members4. Person selling confiscated goods, seized goods, scrap, surplus, old, obsolete,

discarded material or waste products5. Departmentsts of CG, SG, Local authority buying, selling, supplying, distributing

goods6.Industrial, commercial, banking, insurance or trading undertakings buying, selling,

supplying, distributing goods- (Even casual traders- occasional transactions like in

exhibitions- regularity, frequency, quantity, continuity, profit motive do not count)SALE Includes-Conventional sale where ownership is transferred for cash consideration-Supply of goods by a society, club or Company to its members-Transfer of property in goods involved in execution of works contract-Delivery of any goods on hire purchase-Supply of goods / articles by hotels, restaurants as part of serviceQuantum of Tax

Bullion, Gold, Silver, Precious metals, jewellery, precious & semi precious stones 1% of turnover value

Drugs, medicines, agricultural & industrial inputs, capital goods, some commodities ofinterest to general public like bicycles, hawai chappals, IT products, cell phones 4%

Petroleum, tobacco products 20 %Others which are not listed -12.5 %Exemption- 46 commodities with 10 of local State choice, normally of social

implications are exempted from tax by Empowered Committee of State FinanceMinisters - Books, periodicals, maps, newspapersTax Credit Raw materials to capital goods are taxed- Input taxes to those can beclaimed as rebate on tax. These claimable input taxes are called tax credit

Capital goods credit to be claimed in equal proportion for three years.Tax invoice- Words like Retail Invoice, Cash Memorandum, Bill- serial Numbers-Name, address, registration no of seller Description, quantity, value of goodsservices provided inclusive of tax charged Signature & date


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Exemption small dealers less than 5 lakhs turnover (TN 10 Lakhs if sale/purchaseis within TN) 50 Lakhs can opt for 1 % vatTN VAT 20% slab is removed-others are same as above. Petrol, Diesel, ATF,IMFL, Sugarcane are taxed separately- not included in VAT

Unit VThe Consumer Protection Act, 1986

ObjectivesObjectives

1.Better protection to consumers unlike present laws (preventive & punitive) it is1.Better protection to consumers unlike present laws (preventive & punitive) it is

compensatory in naturecompensatory in nature

2.Simple, speedy & inexpensive redressal of grievances and appropriate2.Simple, speedy & inexpensive redressal of grievances and appropriate

CompensationCompensation

3. 1993 & 1999 amended to extent coverage & scope and to enhance powers3. 1993 & 1999 amended to extent coverage & scope and to enhance powers4.Promote voluntary consumer movements & to safeguard interests of C4.Promote voluntary consumer movements & to safeguard interests of CRights ofconsumers1.Protected against marketing of goods & services hazardous to life & property2.Informed about quality, Quantity, Potency, Purity, Standard, Price of G&S to protect

against unfair trade practices3.Possibily assure access to variety of G&S at competitive prices4.Heard & assured that consumers interests will receive due consideration at

appropriate forums5.Seek redressal against unfair/restrictive trade practices, exploitation6. Consumer educationDefinitions1.Complaint-Consumer, Voluntary CA, CG/SG making a complaint against suppliersof goods & services2.Goods3.Services- Service of any description made available to potential users including

facilities like banking, financing, insurance, transport, processing, supply of energy,boarding / lodging, housing construction, entertainment, amusement, purveying ofnews/information, excluding personal services based on contract / free of cost4.Consumer Disputes- denies/disputes the allegation in complaint.5. Restrictive trade Practice- A practice which requires consumer to buy, hire, avail

any G/S as a condition precedent for buying, hiring etc of G/S6. Unfair Trade Practices- MRTP Act- Trade practice to promote sale, use, supply of

G/S adopts unfair method, deceptive practice by False/misleading representation,


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Bargain price, Offering of gifts, prize, contest etc, Non compliance of product safetystandard, Hoarding or destruction of goods.

7.Defect Any fault, imperfection / shortcoming/ inadequacy, in quality, quantity.Price, packing, standard required to be maintained by any law/contract in relationto goods

8.Deficiency Similar to above in quality, nature/ manner of performance in respectto services.

ConsumerConsumer of Goods- One who buys/ agrees to buy for consideration includes

deferred payment systems, Includes any user subsequently with approval ofpurchaser.

Excludes commercial/resale purpose, including self employmentConsumer of Services- One who hires/ avails service for consideration includes

deferred payment and includes other beneficiary of such service with approval ofpurchaser.

Constituents of Complaints- Any unfair / restrictive trade practice, one ormore def

BA 9207 Legal Aspects

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