AEREN FOUNDATION

REG. NO. F/11724

AN ISO 9001 : 2000 CERTIFIED INTERNATIONAL BSCHOOL

SUBJECT:-CORPORATE LAW Total Marks80 1) All questions carry equal marks. 2) All questions are compulsory

Q1) Write short notes (any two) b) Standard Terms and Freedom of Contract:

(10 Marks)

The freedom of the parties is limited by two factors. There are certain laws for the protection of the employees, and an employer cannot, therefore, induce his employees to enter into any contract favorable to the employer. Further, the standard form of contract (with printed terms and conditions) is in vogue today, and several contracts entered into by laymen are not the result of individual negotiations. Thus, if a person is in need of electricity, or telephone connection, it is not possible for him to settle the terms of the agreement with the Electricity Board or the Telephone Corporation, etc. Each of them has their own printed contracts and the intending customer has either to accept on those terms, or go without electricity or telephone, as the case may be. In such a case, since one does not want to go without such necessary services, the individual is in effect compelled to accept all those standard terms. Thus, absolute freedom of contract is largely an illusion or mostly a myth. The freedom to contract has been intervened in three ways, thereby making it a myth. These are: (i) enactment of laws by the welfare states to protect the interests of those parties to the contract which have a weak bargaining power, (ii) intervention by the courts, which refuse to enforce, and even rewrite terms in private contracts in order to protect the real or presumed victims of one sided or unfair or unconscionable contracts, (iii) widespread adoption of form contracting by business.

d) Negotiable Instruments: An Instrument as referred to in the Act is a legally recognised written document, whereby rights are created in favour of one and obligations are created on the part of another. The word negotiable means transferable from one person to another either by mere delivery or by endorsement and delivery, to enable the transferee to get a title in the instrument. An instrument may possess the characteristics of negotiability either by statute or by usage. Promissory note, bill of exchange and cheque are negotiable instruments by statute as they are so recognised by Sec.13. There are certain instruments which are recognised as negotiable instruments by usage. Thus, bank notes, bank drafts, share warrants, bearer debentures, dividend warrants, scripts and treasury bills are negotiable by usage. An instrument is called negotiable if it possesses the following features: 1. Freely transferable. Transferability may be by (a) delivery, or (b) by endorsement and delivery. 2. Holders title free from defects. The term negotiability means that not only is the instrument transferable by endorsement and/or delivery, but that its holder in due course acquires a good title notwithstanding any defects in a previous holders title. A holder in due course is one who receives the instrument for value and without any notice as to the defect in the title of the transferor. 3. The holder can sue in his own name. Another feature of a negotiable instrument is that its holder in due course can sue on the instrument in his own name. 4. A negotiable instrument can be transferred infinitum, i.e., can be transferred any number of times, till its maturity.

5. A negotiable instrument is subject to certain presumptions. An instrument, which does not have these characteristics, is not negotiable, but is assignable, i.e., the transferee takes it subject to all equities and liabilities of the transferor. Promissory note A promissory note is an instrument in writing (not being a bank or a currency note) containing an unconditional undertaking, signed by the maker to pay a certain sum of money to, or to the order of, a certain person or to the bearer of the instrument (Sec.4). The following are two illustrations of promissory notes. Where A signs instruments in the following terms: i) I promise to pay B or order Rs 500. ii) I acknowledge myself to be indebted to B in Rs 1000, to be paid on demand, for value received. But, the following are NOT promissory notes: Mr B, I.O.U. (I owe you) Rs 1000. I am liable to pay you Rs 500. I promise to pay B Rs 500 and all other sums which shall be due to him. I promise to pay B Rs 500, first deducting there out any money which he may owe me. I promise to pay B Rs 1500 on Ds death, provided he leaves me enough to pay that sum. I promise to pay B Rs 500 seven days after my marriage with C. I promise to pay B Rs 500 and to deliver to him my white Maruti Car 1 January next. Specimen of a promissory note Rs 10,000 New Delhi 1100 01 Jan. 10, 2006 On demand [or six months after date] I promise to pay X or order the sum of rupees ten thousand with interest at 12 per cent per annum only for value received. xii) To X Sd/-A xiii) Address ____________________________ Stamp xiv) ____________________________ i) ii) iii) iv) v) vi) vii) viii) ix) x) xi) Parties to a promissory note

1. The maker the person who makes the note promising to pay the amount stated therein. 2. The payee the person to whom the amount of the note is payable. 3. The holder is either the original payee or any other person in whose favour the note has been endorsed. 4. The endorser the person who endorses the note in favour of another person. 5. The endorsee the person in whose favour the note is negotiated by indorsement. Bill of exchange A bill of exchange is defined by Sec.5 as 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. Specimen of a bill of exchange Rs 10, 000 New Delhi 110 016 Jan. 13, 2006 Six months after date pay to A or order/bearer the sum of ten thousand rupees only for value received. To X Sd/-Y Address _______________________________ Stamp _______________________________ Here Y is the drawer, A is the payee and X is the drawee. X will express his willingness to pay accepting the bill by writing words somewhat as below across the face of the bill: ACCEPTED Sd-X Jan. 16, 2006. The specimen given above is of a usance bill, payable after a specified period of time. A bill of exchange may be drawn payable at sight, i.e., on demand or payable after certain time after sight also. Parties to a bill of exchange The parties of bill of exchange are: The drawer: The person to whom the amount of the bill is payable. The drawee: The person on whom the bill is drawn. Thus, drawee is the person responsible for acceptance and payment of the bill. In certain cases however a stranger may accept the bill on behalf of the drawee. The payee: The person to whom amount of the bill is payable. It may be the drawer himself or any other person. The holder: It is the original payee but where the bill has been endorsed, the endorsee. In case of a bearer bill, the bearer or possessor is the holder. The endorser: It is the person who endorses a bill. The endorsee: It is the person to whom the bill is negotiated by endorsement. Drawee in case of need. Acceptor for honour. Cheques A cheque is the usual method of withdrawing money from a current account with a banker. Savings bank accounts are also permitted to be operated by cheques provided certain minimum balance is maintained. A cheque, in essence, is an order by the customer of the bank directing his banker to pay on demand, the specified amount, to or to the order of the person named therein or to the bearer. Sec.6 defines a cheque. The Amendment Act 2002 has substituted new section for Sec.6. It provides that a cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic from. A cheque in the electronic form means a cheque which contains the exact mirror image of a paper cheque, and is generated, written and signed in a secure system ensuring the minimum safety standards

with the use of digital signature and asymmetric crypto system.

Specimen of a cheque

Every bank has its own printed cheque forms which are supplied to the account holders at the time of opening the account as well as subsequently whenever needed. These forms are printed on special security paper which is sensitive to chemicals and makes any chemical alterations noticeable. Although, legally, a customer may withdraw his money even by writing his directions to the banker on a plain paper but in practice bankers honour only those orders which are issued on the printed forms of cheques.

Requisites of a cheque The requisites of a cheques are: 1. Written instrument. A cheque must be an instrument in writing. Regarding the writing materials to be used, law does not lay down any restrictions and therefore cheque may be written either with (a) pen (b) type writer or may be (c) printed. 2. Unconditional order. A cheque must contain an unconditional order. It is, however, not necessary that the word order or its equivalent must be used to make the document a cheque., Generally, the order to bank is expressed by the word pay. If the word please precedes pay the document will not be regarded as invalid merely on this account. 3. On a specified banker only. A cheque must be drawn on a specified banker. To avoid any mistake, the name and address of the banker should be specified. 4. A certain sum of money. The order must be only for the payment of money and that too must be specified. Thus, orders asking the banker to deliver securities or certain other things cannot be regarded as cheques. Similarly, an order asking the banker to pay a specified amount with interest, the rate of interest not specified, is not a cheque as the sum payable is not certain. 5. Payee to be certain. A cheque to be valid must be payable to a certain person. Person should not be understood in a limited sense including only human beings. The term in fact includes legal persons also. Thus, instruments drawn in favour of a body corporate, local authorities, clubs,

institutions, etc., are valid instruments being payable to legal persons. 6. Payable on demand. A cheque to be valid must be payable on demand and not otherwise. Use of the words on demand or their equivalent is not necessary. When the drawer asks the banker to pay and does not specify the time for its payment, the instrument is payable on demand (Sec.19). 7. Dating of cheques. The drawer of a cheque is expected to date it before it leaves his hands. A cheque without a date is considered incomplete and is returned unpaid by the banks. The drawer can date a cheque with the date earlier or later than the date on which it is drawn. A cheque bearing an earlier date is antedated and the one bearing the later date is called post-dated. A post-dated cheque cannot be honoured, except at the personal risk of the banks manager, till the date mentioned. A post-dated cheque is as much negotiable as a cheque for which payment is due, i.e., the transferee of a post-dated cheque, like that of the cheque on which payment is due, acquires a better title than its transferor, if he is a holder in due course. A cheque that bears a date earlier than six months is a stale cheque and cannot be claimed for.

Q2) Explain the procedure of Incorporation of Companies, issuance of Prospectus and Rising of Capital? (10 Marks)

A company is a voluntary association of persons formed for the purpose of business activities. A company has distinct name and limited liability, it is a juristic person having a separate legal entity different from its members who constitute it, capable of rights and duties of its own and endowed with a potential or perpetual succession. The Companies Act, 1956 prescribes specific procedures for incorporation and registration of companies. A company can be formed either by: (i) incorporation of a new company; or (ii) conversion of existing business (sole proprietorship concern or partnership firm or co-operative societies) into company under the provisions of Chapter IX and Chapter IXA of the Companies Act, 1956; or (iii) companies incorporated under section 25 of the Companies Act, 1956. The incorporation (birth) and winding up and dissolution (death) of a company are governed by the provisions of the Companies Act, 1956. Therefore each company is subject to the provisions of the Companies Act, 1956, as may be amended from time to time. The following procedure involves for incorporation of a company. STEP WISE FORMALITIES FOR FORMATION OF A NEW COMPANY Persons desirous of forming a company must adhere to the step by step procedure as discussed below: I. Selection of type of the company. II. Selection of name for the proposed company. III. Apply for Directors Identification Number and Digital Signatures, if does not have IV. Drafting of Memorandum and Articles of Association. V. Stamping, digitally signing and e-filing of various documents with the Registrar. VI. Payment of Fees. VII. Obtaining Certificate of Incorporation. VIII. Preparation and filing of Prospectus/Statement in lieu of Prospectus and e-Form 19/20 (in case of public companies) for obtaining the certificate of commencement of business. IX. Obtaining Certificate of Commencement of business (in case of public limited companies). Selection of the type of company

The promoters of a company may be individuals or bodies corporate engaged in efforts to incorporate a company. They have the power of defining the object of the company and deciding various connected matters regarding incorporation. Proposed scale of operations, capital involved, etc. depend upon the purposes for which the company is to be incorporated. The promoters are at liberty to select type of the company viz. private company, public company, nonprofit making company, etc. (See my previous Article BASIC UNDERSTANDING ABOUT COMPANIES) Requirement for having DIN As per proviso to section 253 of the Companies Act, 1956, inserted by the Companies (Amendment) Act, 2006, w.e.f. 1-11-2006, no company shall appoint or re-appoint any individual as director of the company unless he has been allotted a Director Identification Number under section 266B. New section 266A has been inserted by the Companies (Amendment) Act, 2006 which provides that every individual, intending to be appointed as director of a company shall make an application for allotment of Director Identification Number (DIN) to the Central Government in the prescribed DIN Form. Therefore, before submission of e-Form 1A all the directors of the proposed company must ensure that they are having DIN and if they are not having DIN, it should be first obtained, however on the basis of the provisional DIN allotted online will serve the purpose. Specific care should be taken that a person cannot have more than one DIN, therefore, a DIN once obtained shall serve the requirement for all the companies in which he is director or intended to be a director. Requirement for having digital signatures After 16th Sept., 2006, every documents prescribed under the Companies Act, 1956 is required to be filed with the digital signature of the managing director or director or manager or secretary of the Company, therefore, it is compulsorily required to obtain digital signatures of at least one director to sign the eForm 1A and other documents. Selection of name Six names are required to be selected in order of preference after taking notes of numerous clarifications, circulars and rules made by the Ministry of Company Affairs (DCA), etc. In case key word is required, significance of each key word should be given in the e-Form 1A. APPLYING FOR ASCERTAINING THE AVAILABILITY OF THE SELECTED NAME The promoters are required to make an application to the concerned Registrar of Companies be submitted electronically to the Ministry of Company Affairs on the portal of MCA. An application shall be in e-Form 1A as prescribed by Notification No. GSR 56(E) dated 10th Feb., 2006 duly digitally signed by any one promoter or managing director or director or manager or secretary of the company alongwith the required fee of Rs. 500 only for ascertaining whether the selected name is available for adoption by the promoters of the proposed company. APPROVAL OF THE NAME After receipt of completed application in e-Form 1A, the Registrar shall intimate whether the proposed name is available for adoption or not. The confirmation of the name made available by the Registrar shall be valid for a period of six months from the date of letter issued in these regards. In case, if the promoters fails to submit all the required documents for incorporation within that period, then they are required to submit another application for revalidation of name with fresh filing fee of Rs. 500 only. Preparation of the Memorandum of Association (MOA) and Articles of Association (AOA) Drafting of the MOA and AOA is generally a step subsequent to the availability of name made by the

Registrar. It should be noted that the main objects should match with the objects shown in e-Form 1A. These two documents are basically the charter and internal rules and regulations of the company. Therefore, it must be drafted with utmost care and with the advise of the experts and the other object clause should be drafted in a very broader sense. Estimate of registration fees for a new company The fees payable to the Registrar at the time of registration of a new company varies according to the authorised capital of a company proposed to be registered as per Schedule X to the Act. Fees can be calculated at the MCA portal using fees calculator. Filing of documents with the Registrar Next step for the promoters is to file the following documents with the Registrar for incorporation of the company. The following documents shall be submitted to the Registrar alongwith the adequate filing fees as applicable for registration of the company electronically on line basis within a period of six months from the date of intimation of availability of name: (i) Memorandum of Association, duly signed by the subscribers and witnessed, showing the number of shares against their names electronically attached in PDF file. It should also be properly stamped as per the stamp duty applicable in the State, where the registered office of the company is to be situated. Photographs of the subscribers shall also be attached. Simultaneously original stamped copy of the Memorandum of Association shall be submitted (physical submissoin) with the Registrar of Companies concerned. (ii) Articles of Association should also be duly signed by the subscribers and witnessed, showing the number of shares against their names electronically. It should also be properly stamped according to the authorised share capital. Photographs of the subscribers shall also be attached. Simultaneously original stamped copy of the Article of Association shall be submitted with the Registrar of Companies concerned. (iii) Copy of the agreement, if any, which the company proposes to enter into with any individual for appointment as its managing or whole-time director or manager shall be attached in the PDF file. (iv) Declaration in e-Form 1 by an advocate or company secretary or chartered accountant engaged in whole time practice in India or by a person named in the Articles as a director, manager or secretary of the company, that all the requirements of the Companies Act, 1956 and the rules made thereunder have been complied with in respect of registration. [Refe Section 33(2)] (v) Power of Attorney for should be furnished by all the subscribers in favour of any one subscriber or any other person authorising him to file these documents and to with the Registrar and to obtain certificate of incorporation. The power of attorney should be given on Non-Judicial stamp paper of appropriate value and shall be submitted to the Registrar. (vi) Other agreement if any, which has been stated in the Memorandum or Articles of Association shall also be filed in the PDF file with the Registrar because in such cases the agreement will form part of this basic document. (vii) E-Form 18 is to be filed with the Registrar electronically with the digital signatures in regard to location of the registered office. E-Form 18 shall also be certified by the company secretary or chartered accountant or cost accountant in whole-time practice. [Section 146(2)] (viii) E-Form 32 is required to be filed with the Registrar electronically for filing particulars of directors. The personal details should match with the information provided in the DIN. Following additional details are also required to given in e-Form 32: E-Form 32 is required to be digitally signed by the director or managing director or manager or secretary of the company. E-Form 32 shall be filed along with the adequate filing fee as prescribed under

Schedule XIII of the Companies Act, 1956. SUBMISSION OF E-FORM 1 E-Form 1 has to be submitted with following enclosures: (1) Memorandum of Association (MoA) and Article of Association (AoA) of the company [Not required for a company licensed under section 25]; (2) Annexure containing details of subscribers (Optional); (3) Power of Attorney/Authority letter given by the subscribers/promoters/directors to the professional i.e. advocate or attorney or pleader or CS or CA (in whole-time practice) for formation of a company. (4) Copy of Memorandum of Association (MoA) and Article of Association (AoA) after stamping and physically signed by all the subscribers should be delivered at the RoC office where company is to be registered. Note: In case, if any subscribe put his name, and other descriptions and sign in a language other than, in which the Memorandum and Articles of Associates, then it is required by the witness to give statement that he had explained the contents of all the documents in such language and the subscriber has signed the same after proper understanding of the same. Further that an Affidavit on the stamp paper of adequate value that he had been explained the contents of the Memorandum and Articles of Association and all other relevant documents for incorporation of the company and he/she had put his/her signature after proper understanding of the same and this affidavit should also be furnished with the Registrar along with all the documents as described above. Certificate of Incorporation (Sections 33 and 34) On the satisfaction of the Registrar that the requirements specified in sections 33(1) and 33(2) have been complied with by the company, he shall retain the documents and register the MOA, AOA and other documents. Section 34(1) cast an obligation on the Registrar to issue a Certificate of Incorporation, normally within 7 days of the receipt of documents. It is advisable to authorise some person to collect the certificate personally from the ROC Office. Commencement of Business A Private limited company and a company not having share capital may commence its business activities from the date of its incorporation. However, a Public Limited Company having share capital is also required to obtain a separate certificate of commencement of business according to section 149(2A) of the Companies Act, 1956. PROSPECTUS In order to finance its activities , a company needs capital which is raised by a public company by issue of a prospectus. To raise the capital GSP TRANSPORTATION company issue the prospectus and invite general public to buy the shares of the company. They also send a copy of prospectus to registrar for the registration of the prospectus because without this a company cannot issue the prospectus. The important contents of prospectus are as follow:1 General information about the company 2 Capital structure of the company 3 Terms of the present issue 4 Company, management and project 5 Management perceptions to risk factors

6 Financial information 7 Statutory and other information Raising capital: This paperwork is written to explain how Large Companies raise capital from the equity and bonds markets and to discuss the relevance of capital asset pricing model (CAPM) to a company evaluating its Cost of Capital. Therefore, it will start with explaining the methods of issuing stocks and bonds. Then, it will move to explaining what is meant by Cost of Capital and CAPM in order to discuss the relevance CAPM to a company seeking to evaluate its cost of capital.

Q3) Explain the law of Contract and discuss the term Offer, Acceptance and Agreement? (10 Marks)

A contract is a legally binding agreement or relationship that exists between two or more parties to do or abstain from performing certain acts. A contract can also be defined as a legally binding exchange of promises between two or more parties that the law will enforce. For a contract to be formed an offer made must backed acceptance of which there must be consideration. Both parties involved must intend to create legal relation on a lawful matter which must be entered into freely and should be possible to perform. An agreement is a form of cross reference between different parties, which may be written, oral and lies upon the honor of the parties for its fulfillment rather than being in any way enforceable. All contracts are agreement because there must be mutual understanding between two parties for a contract to be formed. All parties should agree and adhere to the terms and conditions of an offer. The following cases illustrate ways in which all contracts are agreements; In the case of invitation to treat, where an invitation to treat is merely an invitation to make an offer. When a firm's offer is accepted it results into a contract provided other elements of contracts are accepted. Considering person A buying a radio on hire purchase from person B who deals with electronics and its appliances. Both parties must come to an agreement on payment of monthly installment within specified period of time. Such an agreement result to specialty contract which a contract under seal. All contracts are agreement until avoided for example, avoidable contract where one of the parties can withdraw from it if s/he wishes. This occurs due to minor agreement and misrepresentation or undue influence. Considering a case where person A make contract with person B but during the contract period B realizes that he was engaged to perform an agreement under undue influence. Definition of contract According to section 2(h) of the Indian Contract Act: " An agreement enforceable by law is a contract."

A contract therefore, is an agreement the object of which is to create a legal obligation i.e., a duty enforceable by law. From the above definition, we find that a contract essentially consists of two elements: (1) An agreement and (2) Legal obligation i.e., a duty enforceable by law. We shall now examine these elements detail. 1. Agreement. As per section 2 (e): " Every promise and every set of promises, forming the consideration for each other, is an agreement." Thus it is clear from this definition that a 'promise' is an agreement. What is a 'promise'? the answer to this question is contained in section 2 (b) which defines the term." When the person to whom the proposal is made signifies his assent thereto the proposal is said to be accepted. A proposal, when accepted, becomes a promise." An agreement, therefore, comes into existence only when one party makes a proposal or offer to the other party and that other party signifies his assent (i.e., gives his acceptance) thereto. In short, an agreement is the sum total of 'offer' and 'acceptance'. On analyzing the above definition the following characteristics of an agreement become evident: (a) At least two persons. There must be two or more persons to make an agreement because one person cannot inter into an agreement with himself. (b) Consensus-ad-idem. Both the parties to an agreement must agree about the subject matter of the agreement in the same sense and at the same time. 2. Legal obligation. As stated above, an agreement to become a contract must give rise to a legal obligation i.e., a duty enforceable by law. If an agreement is incapable of creating a duty enforceable by law. It is not a contract. Thus an agreement is a wider term than a contract. " All contracts are agreements but all agreements are not contracts," Agreements of moral, religious or social nature e.g., a promise to lunch together at a friend's house or to take a walk together are not contracts because they are not likely to create a duty enforceable by law for the simple reason that the parties never intended that they should be attended by legal consequences Essential Elements of a Valid Contract A contract has been defined in section 2(h) as "an agreement enforceable by law." To be enforceable by law, an agreement must possess the essential elements of a valid contract as contained in sections 10, 29 and 56. According to section 10, all agreements are contracts if they are made by the free consent of the parties, competent to contract, for a lawful consideration, with a lawful object, are not expressly declared by the Act to be void, and where necessary, satisfy the requirements of any law as to writing or attention or registration. As the details of these essentials form the subject matter of our subsequent chapters, we propose to discuss them in brief here. The essential elements of a valid contract are as follows. 1. Offer and acceptance. There must a 'lawful offer' and a 'lawful acceptance' of the offer, thus resulting in an agreement. The adjective 'lawful' implies that the offer and acceptance must satisfy the requirements of the contract act in relation thereto. 2. Intention to create legal relations. There must be an intention among the parties that the agreement should be attached by legal consequences and create legal obligations. Agreements of a social or domestic nature do not contemplate legal relations, and as such they do not give rise to a contract. An agreement to dine at a friend's house in not an agreement intended to create legal relations and therefore is not a contract. Agreements between husband and wife also lack the intention to create legal relationship and thus do not result in contracts.

Try to work out the solution in the following cases and then go to the answer. 3. Lawful consideration. The third essential element of a valid contract is the presence of 'consideration'. Consideration has been defined as the price paid by one party for the promise of the other. An agreement is legally enforceable only when each of the parties to it gives something and gets something. The something given or obtained is the price for the promise and is called 'consideration' subject to certain exceptions; gratuitous promises are not enforceable at law. The 'consideration' may be an act (doing something) or forbearance (not doing something) or a promise to do or not to do something. It may be past, present or future. But only those considerations are valid which are 'lawful'. The consideration is 'lawful'. unless it is forbidden by law; or is of such a nature that, if permitted it would defeat The provisions of any law; or is fraudulent; or involves or implies injury to the person or property of another; or is immoral; or is opposed to public policy (sec.23). 4. Capacity of parties. The parties to an agreement must be competent to contract. But the question that arises now is that what parties are competent and what are not. The contracting parties must be of the age of majority and of sound mind and must not be disqualified by any law to which they are subject (sec.11). If any of the parties to the agreement suffers form minority, lunacy, idiocy, drunkenness etc. The agreement is not enforceable at law, except in some special cases e.g., in the case of necessaries supplied to a minor or lunatic, the supplier of goods is entitled to be reimbursed from their estate (sec 68). 5. Free consent. Free consent of all the parties to an agreement is another essential element. This concept has two aspects.(1) consent should be made and (2) it should be free of any pressure or misunderstanding. 'Consent' means that the parties must have agreed upon the same thing in the same sense (sec. 13). There is absence of 'free consent,' if the agreement is induced by (i)coercion, (ii) undue influence, (iii) fraud, (iv) mis-representation, or (v) mistake (sec. 14). If the agreement is vitiated by any of the first four factors, the contract would be voidable and cannot be enforced by the party guilty of coercion, undue influence etc. The other party (i.e., the aggrieved party) can either reject the contract or accept it, subject to the rules laid down in the act. If the agreement is induced by mutual mistake which is material to the agreement, it would be void (sec. 20) 6. Lawful object. For the formation of a valid contract it is also necessary that the parties to an agreement must agree for a lawful object. The object for which the agreement has been entered into must not be fraudulent or illegal or immoral or opposed to public policy or must mot imply injury to the person or the other of the reasons mentioned above the agreement is void. Thus, when a landlord knowingly lets a house to a prostitute to carry on prostitution, he cannot recover the rent through a court of law or a contract for committing a murder is a void contract and unenforceable by law. 7. Writing and registration. According to the Indian contract Act, a contract to be valid, must be in writing and registered. For example, it requires that an agreement to pay a time barred debt must be in writing and an agreement to make a gift for natural love and affection must be in writing and registered to make the agreement enforceable by law which must be observed. 8. Certainty. Section 29 of the contract Act provides that " Agreements, the meaning of which is not certain or capable of being made certain, are void." In order to give rise to a valid contract the terms of the agreement must not be vague or uncertain. It must be possible to ascertain the meaning of the agreement, for otherwise, it cannot be enforced Illustration. A, agrees to sell B " a hundred ton of oil" there is nothing whatever to show what kind of oil

was intended. The agreement is void for uncertainly. 9. Possibility of performance. Yet another essential feature of a valid contract is that it must be capable of performance. Section 56 lays down that "An agreement to do an act impossible in itself is void". If the act is impossible in itself, physically or legally, the agreement cannot be enforced at law. Illustration. A agrees with B, to discover treasure by magic. The agreement is not enforceable. 10. Not expressly declared void. The agreement must not have been expressly declared to be void under the Act. Sections 24-30 specify certain types of agreements that have been expressly declared to be void. For example, an agreement in restraint of marriage, an agreement in restraint of trade, and an agreement by way of wager have been expressly declared void under sections 26, 27 and 30 respectively.

Q4) Discuss the Fundamental Rights of the Business?

(10 Marks)

Do businesses have any fundamental rights? Should businesses have any fundamental rights? Strange as these questions may seem, it is important to pose them at this point of our economic development. Fundamental rights are important because they guarantee certain basics that are needed for realising the full potential of the individual. Though India became an independent nation on 15 August 1947, it was not until 26 January 1950 that its citizens at least the educated ones came to know about the exact fundamental rights that were being guaranteed to them by the Constitution. Of course, the Constitution gave the Indian citizens many other rights as well. But the fundamental rights were written as a special category simply because they were so crucial for the growth and development of the Indian citizens. Of course, when the Constitution was written, there were no fundamental rights provided for the corporate or business entity per se. Indeed, it would have been quite extraordinary if such provisions had been made at all. There is no constitution anywhere in the world that has anything called fundamental rights for businesses. Not even in the US, the country in which the business entity has overarching importance. And even if there were precedents anywhere around the world, why would India need to create any fundamental rights for business in its Constitution? The fundamental rights for the citizens already guaranteed by the Constitution, when read along with the directive principles of state policy, pretty well cover anything that the countrys businesses could want. The right to freedom, for example, explicitly states that all citizens are free to choose any trade, set up any business or follow any occupation. The right against exploitation and the right to equality are not just important for the individual, they are equally important for business entities. And the right to constitutional remedies is the final protection. These rights were designed for the individual but they fit nicely for business entities as well. So in this 62nd year of Indias independence, why is there any need to debate on the necessity of certain fundamental rights of business? Arent there a plethora of laws both corporate as well as pertaining to specific industries and sectors that lay down and clarify the rights (and duties) of business entities? And arent these laws enforceable in courts of law the corporate equivalent of the right to constitutional remedies? And shouldnt the fundamental rights for citizens also help businesses in the natural course of things? Actually, there is a need to debate the necessity of fundamental rights for businesses for a few good reasons. First, since 1991, the country has moved towards a path of giving increasing economic freedom and independence to its businesses. But those freedoms have not been backed by the kind of fundamental guarantees that businesses in the developed world can take for granted. These might be unwritten guarantees, but they are an important part of doing business properly. Then again, the Indian government is hoping for many years of 9 per cent plus growth rates and it is depending largely on the corporate entities, both in the manufacturing and services sector, to achieve that ambition. But that growth rate is unlikely to be achieved year after year unless businesses count on certain very basic conditions and rights. And finally, none of the rights that are being focused on in the following pages are unusual or extraordinary or require any special effort. They are all essentially provisions that are already provided for the Indian citizen that now need to be interpreted keeping the business entity in mind. What are these fundamental rights of business that we are talking about? The first one is right to infrastructure to good roads, ports, airports and uninterrupted power supply. The second one is right against corruption. The third, right to rational taxation. The fourth, right to fair labour laws. The fifth, right to speedy clearances. And finally, the sixth the right to an educated and skilled workforce, something that should naturally flow from the recently passed Right to Education Act. These are the very basics that every business in every developed country can bank on. These are the

basics that all developed nations guarantee to their corporate entities. In no other country is a corporate entity asked to create its own infrastructure, educate its own workforce even in the basics, or deal with complicated structures to open businesses. This is our basic case: it is high time the government thought in terms of guaranteeing certain basic fundamental rights to our corporate citizens, much like it does for individuals. This is necessary to help India take its place among the economic superpowers around the globe. Implement the fundamental rights for business and you will have created a more conducive ground for business to flourish as well. You would have created the environment for 9 per cent plus growth for years to come.

Q5) Discuss the aims and objectives Indian Sale of Goods Act, 1930? (10 Marks) Definition: A contact of sale of goods is a contract whereby the seller transfer or agrees to transfer the property in goods to the buyer for a price. There may be a contract of sale between one party owner, and another. [Sec 4(1)] Essentials of a contract of sale: 1. Two parties: There must be two distinct parties, i.e., buyer and seller, to effect a contract of sale and they must be competent to contract. Ex: A partnership firm was dissolved and the surplus assets were divided among the partners. Held it was not a sale as the partners were the joint owners of the goods and they could not be buyers and sellers themselves. STAT OF GUJRAT (VS) RAMANLAL AND CO. (1965) 2. Goods: These must be some good, the property in which is or is to be transferred from the seller to the buyers. The goods, which from the subject matter of the contract of sale must be movable. Transfer of immovable property is not regulated by the sale of goods Act. Ex: A Hotel co. provided the residence and food making, a consolidated charge for both the services. No rebate was allowed if food was not taken by the customers. Held supply of food was not sale of goods, but simply service. ASSOCIATED HOTELS OF INDIA (VS) EXCISE AND TAXATION OFFER. (1966) 3. Price: The consideration for the contract of sale is called price, and must be specifically, money. When goods are exchanged for goods, it is not sale, but barter. However, consideration can be partly in money and partly in goods. Ex: A agreed to exchange with B, hundred quintals of barley for 52 bullocks, and pay the balance in cash. ALRIDGE (VS) JOHNSON. (1857) 65

SALE AND AGREEMENT TO SELL DISTINCITON Transfer of performance: In a sale, the property in the goods passes from the seller to the buyer immediately, so that, the seller is no more the owner. In an agreement to sell, the transfer of property takes place at a future date or subject to certain conditions to be fulfilled. Type of goods: A sale can be only in case of existing and specific goods. An agreement to sell is mostly in case of future and contingent goods. Risk of Loss: In a sale, if the goods are destroyed, the loss falls on the buyer, even though the goods are in the possession of the seller. In an agreement to sell, if the goods are destroyed, the loss falls on the seller. Consequences of Breach: In a sale, if there is a breach of contact by the buyer, the seller can sue for price, even though the goods are in his possession. In an agreement to sell, the seller can sue only for damages and not for the price. Right of Re-Sale: In a sale, the seller cannot re-sell the goods, after the sale. In an agreement to sell, in

case of resale by the seller, the buyer can sue the seller only for damages. General and Particular Property: A sale is a contract and creates jus-in-rem ; i.e., gives right to the buyer to enjoy the goods. An agreement to sell is merely a contract and creates jus-in-personam i.e., gives the right to the buyer to sue the seller for damages only. However, agreement to sell would become a sale, once the value of the goods is paid and accepted by the seller. Insolvency of Buyer: In a sale, if a buyer becomes insolvent, the seller must return the goods to the official receiver or assignee. In an agreement to sell, the seller is not bound to part with the goods, until he is paid for . Insolvency of Seller: In a sale, if a seller becomes insolvent, the buyer is entitled to recover the goods from the seller and not incase of agreement to sell. SUBJECT MATTER OF CONTRACT OF SALE: Goods from the subject-matter of a contract of sale, according to sec 2(7) Goods means every kind of movable property other than actionable claims and money, and includes stocks, shares, growing crops, etc.

66

CLASSIFICATION OF GOODS: Goods may be either existing goods or future goods. - Sec 6(1) Existing Goods: These are the goods which are owned or possessed by the seller at the time of the sale. The existing goods may by: Specified Goods: There are the goods which are identified and agreed upon the time of contract of sale. Ascertained Goods: These are the goods which become ascertained and subsequent to the formation of contract of sale. Unascertained/General Goods: These are the goods which are not identified and agreed upon at the time of contract of sale. They are defined only by the description and may form part of sale lot. Future Goods: These are the goods which the seller does not possess at the time of the contract, but which will be procured by him after making the contract of sale- Sec 2(6) Ex: A railway co. entered into a contract for the sale of coal-ash that might accumulate during the period of contract. Held the contract amounts to an agreement of sale. UNION of INDIA (VS) TARACHAND Contingent Goods: Though a type of future goods, these are the goods, the acquisition by which, by the seller, depends upon a contingency which may or may not happen. Ex: A agrees to sell specific goods to B, in a particular ship to be delivered on the arrival of the ship. Held the ship arrives but with no such goods on board, the seller is not liable.

Q6) What is the Intellectual Property Rights Law. Discuss its relevance to liberalization and Globalization? (10 Marks ) In earlier times, the concept of property meant something tangible. Man used to be in possession of property and property became the source of wealth and status in the society for him. As time went by, property created by the scope of ones intellect became what is known as Intellectual Property Right. The problem with Intellectual Property was that it was intangible in nature. Property has always been a symbol of power and strength for every individual and that is why every individual tries to maximize his property. A human being is the sole proprietor of his brains and even law gives him a proprietor right in it. Just as John Locke had pointed out, a person has his property, two things:The person himself or to say the human body. The skill of doing labour with his body and the work of his hand. Similarly, intellect too is an integral part of his personality and it plays vital role in deciding what works his body can engage into or what works his hands would do or in other words we can say that a person intellect is exclusively his own. Every object whether it is material/ non material, owns its existence to ideas and hence to the origin of ideas, that is intellect. This also holds further that any property in the generic sense, which can claim a proprietary right, is called Intellectual Property. Further, if intellect or intellectual works is ones personal characteristic or property, then anything that is the outcome of this application of his intellect is equally his own. This provides the law to give a person the right to own what he has created or produced. And this proprietor right over a product produced out of his intellect is called Intellectual Property Right. The Twenty First Century is a century of knowledge, indeed the centaury of the Intellect. A nations ability to translate knowledge into wealth and social good through innovation hold the key to creation as well as processing of knowledge consequently issues generation, evaluation, exploitation of Intellectual Property would become critically important all over the world. Intellectual Property can be characterized as the property in Idea or their expression. Its a creation of mind for example: A technological Innovation, a poem or a design. It protects the rights of individuals and business who have transformed their ideas into property by granting rights to the owner of those properties. The need arose for laws to protect such kinds of Intellectual Property laws to protect the various forms of Intellectual Property like Trade Marks, copy Rights, Designs, Patent & Geographical Indication. For instance Tata Nano car: The entire car and its innovative engineering are protected by patents. The name TATA NANO is protected by Trade Marks. The design of car has design protection and all the pamphlets made for advertisement of car are protected of copy right. The rights have been modified and new provisions have been created in order to cover new areas of Science and Technology like Information Technology, Biotechnology and Non Service Sector. It may be observed that World Trade Organization (WTO) agreement on Trade-Related Aspects of Intellectual Property Right( popularly known as TRIPS) has extended minimum standards for protection globally. Hence India is under a pressure to increase the level of Intellectual Property protection in its own regime, based on standards in developed countries. There are various forms of IPR. The Trade Related Aspects of Intellectual Property Rights (popularly

known as TRIPS) in the Agreement of the World Trade Organisation (WTO) recognises seven forms of IPR, namely, patents, designs, trademarks, copyrights, geographical indications, integrated circuits and trade secrets. Patents: These are legal rights granted for new inventions employing scientific and technical knowledge. Example: A new drug for the treatment of AIDS and a new cell phone. Industrial Designs: A design is an idea or conception as to the features of shape, configuration, pattern, ornament or composition of lines or colours applied to any article, two or three-dimensional or both, by any industrial process or means which in the finished article appeal to and are judged solely by the eye or product. Examples: Designs as applied to shoes, TV, textiles. Trade Marks: A trade mark is a visual symbol in the form of a word, device or label applied to an article of manufacture or commerce with a view to indicating to the public the origin of manufacture of the goods affixed with that mark .It distinguishes such goods from others in the trade. Examples: Coca Cola in soft drinks, SONY in electronic goods. Copyrights: A copyright is basically the right to copy and make use of literary, dramatic, musical, artistic works, cinematographic films, records and broadcasts. It is a proprietary right and comes into existence as soon as the work is created. The concept had its origin in the Common Law. Subsequently it came to be governed by the statutory laws of each country. Examples: Poems, artistic drawings, paintings, computer / programs. Protection for new plant varieties: TRIPS provisions of the WTO Agreement make it mandatory for member countries to provide protection for new plant varieties. Examples: New variety of rice or wheat. The provisions have given member countries two options for providing protection to new plant varieties : (i) Under the patent law itself and; (ii) By a separate system (called Sui generis system). Geographical Indications: These are indications that identify goods as originating in the territory of a country, a region or a locality in that territory, where a specific quality, reputation or other characteristic of the goods is essentially attributed to their geographical origin. Examples: Darjeeling tea, Kancheepuram sari. Indian Government has taken a comprehensive set of initiatives to modernize the intellectual property administration in the country in view of the strategic significance assumed by intellectual property in the context of globalisation and liberalization of the Indian economy and the increasing administrative steps to create a modern and facilitative set up. The Designs Act, 2000, the Trade Marks Act, 1999 and the Geographical Indications of Goods (Registration and Protection) Act 1999 have already been enacted to harmonize the Indian IP administration with the global system. In the Ministry of Commerce and Industry, the office of the 'Controller General of Patents, Designs and Trade Marks (CGPDTM)' has been set up under the Department of Industrial Policy and Promotion. It administers all matters relating to patents, designs, trademarks and geographical indications and also directs and supervises the functioning of :The Patent Office (including Designs Wing) The Patent Information System (PIS) The Trade Marks Registry (TMR), and The Geographical Indications Registry (GIR)

Besides, a 'Copyright Office' has been set up in the Department of Education of the Ministry of Human Resource Development, to provide all facilities including registration of copyrights and its neighbouring rights. As far as issues relating to layout design of integrated circuits are concerned, 'Department of Information Technology' in the Ministry of Information Technology is the nodal organisation. While, 'Protection of Plant Varieties and Farmers' Rights Authority' in Ministry of Agriculture administers all measures and policies relating to plant varieties. For complementing the administrative set up, several legislative initiatives have been taken. It includes, the Trade Marks Act, 1999; the Geographical Indications of Goods (Registration and Protection) Act 1999; the Designs Act, 2000; the Patents Act, 1970 and its subsequent amendments in 2002 and 2005; Indian Copyright Act, 1957 and its amendment Copyright (Amendment) Act, 1999; Semiconductor Integrated Circuit Layout Design Act, 2000; as well as the Protection of Plant varieties and Farmer's Rights Act, 2001. A human endeavour which promotes Social, Economical, Scientifical or Cultural Development of the society must be encouraged and the creator or the innovator needs to be rewarded by suitable legal protection for his intellectual creation. Consequently Intellectual Property Right are those legal rights which govern the use of creation of Human Brains. Protection of Intellectual Properties is a very critical element in the offshore business model. There have been many cases where companies have lost their position in the market due to the loss of intellectual property. Understanding the countrys IP Rights and following the best practices described in this paper can drastically reduce the risk of losing the companys intellectual property. Commitment to protect the intellectual property of a company should be developed and nurtured at all levels of the organization. The bottom-line is that India considers itself a responsible member of the WTO which suggests that international class IPR protection should be in place. For instance even Bill Gates, the chief executive officer of Microsoft Corporation, has distinguished India as a most promising base for software development. If such an IPR-conscious business leader like Gates is of this opinion, one can only conclude that India's IPR scene is no deterrent. And in near future India will formulate more effective law in order to cope up with new areas which are yet to come in the field of IPR. Intellectual Property Rights (IPRs) play an important role in the social, economic and cultural development of a society. Intellectual Property Rights in India (IPRs in India) are gaining lot of attention and importance in India. India has begun to see some positive results as awareness of the need for greater IP protection has increased. India must continue to improve its IPR protection, or risk being left behind as other countries in the developing world implement protections and build their own knowledge based economies.what is a patent.

Q7) What is the aims and objectives of the Standards of Weights and Measures Act, 1976? (10 Marks)

The Act is another piece of consumer welfare legislation. The Standard of weights and measures Act, 1976, aims at introducing standard in relation to weights and measures used in trade and commerce. The ultimate objective is to subserve the interests of the consumers. The purpose of this Act is to:i) Replace the bewildering varieties of weights and measures in use in the country by standards

based on the metric system

ii)

Provide better protection to consumers by ensuring accuracy in weights and measures

Objectives: The Act enlists the following objectives a) b) Establish standards of weights and measures Regulate inter-State trade or commerce in weights & measures and other goods, which are

sold or distributed by weights, measures and number. Legal metrology: The branch of knowledge concerning weights and measures is known as metrology. The law relating to weights and measures is known as legal metrology. The scope of legal metrology extends to three broad fields of human activity, namely, commercial transactions, industrial measurements and measurements needed to ensure public health and human safety. Enforcement of the Act: Though the act is a central legislation, its enforcement lay with the State Governments. For enforcement, a new Act was enacted the Standards of Weights and Measures (Enforcement) Act, 1985. STANDARD UNITS: Section 4 of the act stipulates that every unit of weight or measure shall be based on the units of the metric system. Section 15 to 19 deals with the physical representation of standard units. Manufacture/Sale/distribution: Only licence holder can manufacture weights and measures and shall have approved models. Repairs etc. shall be recorded in a register and produce the records for inspection to the director. Penal Provisions: a) A fine of Rs. 500/- to 1000/- and imprisonment upto seven years, if violation (use of non-

standard units in non-metric system for weights and measures) of any provison of the Act is found. b) the offence. c) d) Non-registration Not maintaining prescribed registers/records. Authorities also have the power to inspect, search, seize and forfeit the goods involved in

Packaged Commodities Rule 1977: 1) 2) 3) All the manufacturers of packaged products shall register under the Act. All the weights and measures are to be indicated only in standard units All the commodities sold in packaged form shall contain a clear declaration regarding the

following in print or inscribed on the package.

a) packer). b) c) d) e) f) g) h) i) -

Name & address of the manufacturer and also of the Packer (if the manufacturer is not the

The description of the commodity The net quantity in terms of standard unit in the metric system The unit sale price (only if the same is fixed by the manufacturer) If required, printing of package shall be maximum Price Rs L.T.extra. The month and year of manufacture (not required for metallic products) Package held in storage should also contain the details. The manufacturer should maintain prescribed registers and make available for inspection The size of the display panel should be as followsIn case of rectangular container-,40% of the area of the largest surface If cylindrical container, 20% of the total area For any other shape, 20% of the surface area. It is mandatory that the weights and balances be checked and sealed once a year. Every

consumer must know how to identify false weights and measures. As a proof of having been inspected, there should be three seals on the back of the weights; ;the number assigned to the sealing Inspector, the year in which the seal is affixed and the quarterly seal.

Q8) Discuss in brief the Consumer Protection Act 1986? (10 Marks) The Consumer Protection Act, 1986 (68 of 1986) is a milestone in the history of socio-economic legislation in the country. The main objective of the new law is to provide for the better protection of the consumers unlike existing laws, which are punitive or preventive in nature. The Act intends to provide simple, speedy & inexpensive redresses to the consumer's grievances. In India various Acts intended to protect the consumers against different forms of exploitation were enacted, such as, the Indian Penal Code, I860; Indian Contract Act, 1872; Drugs Control Act, 1950; Industries (Development and Regulation) Act, 1951; Indian Standards Institution (certification marks) Act, 1952; Drug and Magic Remedies (Objectionable Advertisement) Acts, 1954; Prevention of Food Adulteration Act, 1954; Essential commodities Act, 1955; Trade and Merchandise Marks Act, 1958; Hire purchase Act, 1972; Cigarettes (Regulation of Production, Supply and Distribution) Act, 1975; Prevention of Black marketing and Maintenance of Supplies of Essential Commodities Act, 1980: Essential commodities (Special Provisions) Act, 1981; Multi-State Cooperative Societies Act, 1984; Standard of Weights and Measures (Enforcement) Act, 1985; and Narcotic Drugs and Psychotropic Substances Act, 1985. Some significant consumer protection enactments of pre-independence time are the Sale of Goods Act, 1930; Agriculture Produce (Grading and Marketing) Act, 1837 and Drugs and Cosmetics Act, 1940. II. A brief historical background about the enactment the Act The Consumer Protection Act, 1986 (here in after to be referred to as the Act) is one of the benevolent social legislation intended to protect the large body of consumers from exploitation. The Act has come as a panacea for consumers all over the country and has assumed the shape of practically the most important legislation enacted in the country during the last few years. It has become the vehicle for enabling people to secure speedy and in-expensive redressal of their grievances. With the enactment of this law, consumers now feel that they are in a position to declare sellers be aware whereas previously the consumers were at the receiving end and generally told buyers be aware. III. Extent and coverage of the Act The C.P. Act applies to all goods and services, excluding goods purchased for resale or for commercial purpose & services rendered free of charge & under contract of personal service. The provisions of this Act cover Products as well as Services. The products are those which are manufactured or produced and sold to consumers through wholesalers and retailers. The services are of the nature of transport, telephones, electricity, constructions, banking, insurance, medical treatment etc. etc. The services are, by and large; include those provided by professionals such as Doctors, Engineers, Architects, and Lawyers etc. IV. Procedures and practices of this ActA written complaint, as amended by Consumer Protection (Amendment) Act, 2002, can be filed before the District Consumer Forum (upto Rupees twenty lakhs), State Commission (upto Rupees One crore), National Commission ( above Rupees One crore) in relation to a product or in respect of a service, but does not include rendering of any service free of cost or under a contract of personal service. The service can be of any description, the illustrations given above are only indicative and not exhaustive. The Consumer Protection Act is an alternative and cheapest remedy already available to the aggrieved persons/consumers by way of civil suit. In the complaint/appeal/petition submitted under the Act, a consumer is not required to pay any court fees or even process fee. Proceedings are summary in nature and endeavour is made to grant relief to the parties in the quickest possible time keeping in mind the spirit of the Act, which provides for disposal of the cases within possible time schedule prescribed under the Act. If a consumer is not satisfied by the decision of the District Forum, he can challenge the same

before the State Commission and against the order of the State Commission a consumer can come to the National Commission. In order to attain the objects of the Consumer Protection Act, the National Commission has also been conferred with the powers of administrative control over all the State Commissions by calling for periodical returns regarding the institution, disposal and pendency of cases. National Commission is empowered to issue instructions regarding, (1) adoption of uniform procedure in the hearing of the matters; (2) prior service of copies of documents produced by one party to the opposite parties; (3) speedy grant of copies of documents; and (4) generally over-seeing the functioning of the State Commissions or the District Forums to ensure that the objects and purposes of the Act are best served without in any way interfering with their quasi-judicial freedom.