Legal Aspects of Business (LAB) Constitutional Provisions relating to Business and Indian Legal & Judicial Systems Study

Notes by Dr. N.Y. Phadnis Business Law Law can be defined as set/body of rules & regulations which are recognized and enforced by the state/govt. Laws deal with human conduct in a civilized society and regulates/controls relationships amongst individuals and also with the state. Laws create rights/interests and corresponding obligations/duties which are recognized & enforced by authority/state/govt. Breach/violations of law attract sanctions in the form of monetary compensations and/or penalty and/or punishments. Laws are justiciable through courts of law i.e. remedy lies in the court of law. Justice is administered through law courts as per law. Business is any commercial activity or mercantile transaction undertaken for material gains or profits. Business may deal with & involve manufacture/transportation/supply of goods and/or services for sale/re-sale/use/consumption of customers/consumers (B to B or B to C). Business, Industry, Trade & Commerce are synonyms in the eyes of law. From legal point of view these are equivalent terms. Business does not cover an activity which is solely & purely undertaken for any social, religious, charitable, humanitarian and missionary purpose. It also does not include domestic i.e. family activities and sovereign functions of the state (i.e. basic & fundamental activities relating to countrys governance by govt. authorities or Institutions) Business Law also referred to as Commercial law or Mercantile law is law relating to and dealing with commercial/business transactions in trade, commerce & Industry. It is a branch of civil law dealing with contractual business relations. However it also applies to commercial relations within social groups (relatives & friends) but does not apply to social relations. Business law creates legal/regulatory business environment and regulates, controls and governs formation & execution of business transactions. It ensures & assures Certainty in business dealings and provides mechanism & legal remedies for breach of business commitments. A Business has to operate in the socio-economic & politico-legal environment. The legal aspects of business (LAB) form an important component of a business environment as every major area of a business has legal dimensions. Business Managers are required to take lawful business decisions & act within the boundaries of law while solving managerial issues &

problems. Legal Aspects of Business (LAB) also popularly known as Business Law is an integral & inseparable facet of commercial transactions. Understanding the Legal Aspects of Business (LAB) plays a vital role in smooth & hassle free running of a business house. The course interfaces law with management and deals with various aspects of law having bearing on the business. The LAB course covers only those topics (refer course contents of course outline) which are common for & relevant to all streams/areas of specialization. The legal aspects of Taxation, Banking, Accounts & Finance, Employment, International business, Information technology (cyber) etc are outside its scope as these topics would be dealt with under the respective area specialization courses (electives) during the 2nd year of PGDM program. Constitution of India is Basic, Fundamental & Supreme law in India. All laws & regulations in India are required to be consistent with and cannot be contrary to & conflicting with constitutional provisions. Similarly all govt. authorities & institutions in India are required to perform assigned functions and exercise their powers within the scope & limitations laid down in the constitution. Constitutional Provisions for Business, Trade & Commerce in India are as under:Fundamental Rights (Chapter-III) 1. Equality before Law & Equal Protection of Laws [Art.14] 2. Freedom of Speech & Expression-[Art. 19(1) (a)] which includes commercial speech, advertising & product promotion activities. This also includes consumers right to receive right information about products from the seller or service providers. 3. Freedom to assemble & form unions & associations to protect & promote business interests. [Art.19 (1) (c)] 4. Freedom to move & settle in any part of India for business or residence and to carry out any lawful business, profession, trade, occupation etc. [Art. 19 (1) (d) (e) (g)] 5. Right to life & earn livelihood through legitimate means/sources (through any job, business, industry, profession etc) [Art.21] 6. Right to acquire, own, hold & dispose-off property for business & residence purposes (Art. 300A). Not a fundamental right but a constitutional right. The above freedoms are not absolute but are limited & regulated by reasonable restrictions in the larger public/social & countrys interest. [Art.19 (2) to 19 (6)]

Fundamental Duties (Chapter IV-A) Article-51-A There are 10 fundamental duties for all citizens of India prescribed under the constitution. The fundamental duties relevant for Business Managers are:1. To protect & improve the natural environment including forests, lakes, rivers and wild life. And to have compassion for living creatures. (which is also part of CSR) 2. To develop the scientific temper, humanism and the spirit of inquiry and reform. 3. To strive towards excellence in all spheres of individual & collective activity, so that the nation constantly rises to higher levels of endeavors and achievement. Directive Principles of State Policy (Chapter IV) These principles are not justiciable i.e. cannot be enforced through court of law however the govt. is under duty to apply these principles while making laws. They lay down a code of conduct for administrators in India. The important & relevant principles for business managers are:1. 2. 3. 4. 5. 6. Right to work & adequate means of livelihood. Equal Pay for Equal Work for both men & women. A living wage, conditions of work ensuring a decent standard of life, to all workers. Workers participation in the management of Industries. Organization of agriculture & animal husbandry on modern & scientific lines. Equitable distribution of the natural & material resources of the country to serve the common/collective social interest. (part of CSR)

There are provisions under the constitution relating to finance, property, contracts, suits, trade & commerce (Articles 264 to 307) particularly when govt./public sector industry is one of the parties to such transactions. Judicial System in India Our Constitution has taken special care to establish an independent & impartial judiciary. A single unified judicial system is a unique feature of the Indian Judicial System. The Supreme Court of India is at the apex of the entire judicial system followed by High Courts in each State or group of States. Below High Courts lies a hierarchy of Subordinate Courts & Tribunals. The subordinate courts/tribunals separately deals with matters/litigations of civil, criminal, labour, taxation, consumer etc according to their assigned jurisdictions as stipulated under the specific/particular law(s) creating these courts/tribunals. Supreme Court & High Courts however deals with & decides all types of legal disputes/issues concerning all laws in India as they are established by & under the Constitution of India. The appeals from the

verdicts/judgments of lower/subordinate courts/tribunals would lie to High Court & finally to Supreme Court of India. Supreme Court & High Courts have powers of Judicial Review and Doctrine of Ultra -vires is (Article13) applied while deciding cases i.e. SC & HC are empowered under the constitution to scan & scrutinize any Legislative and/or Executive decisions/actions of the govt. authorities and can declare such decisions/actions being un-constitutional or beyond the scope of the constitution and can strike it down. SC is the custodian, guardian and final interpreter of constitution & laws in India. There is also a fundamental right (Article 32) to approach SC directly for breach of fundamental rights by govt. authorities. Apex Court (SC) has original, appellate and advisory jurisdictions. Verdicts of SC are binding on all authorities in India (Doctrine of Precedent & Stare decisis- Article 141) and all authorities in India are required to act in aid & support to SC (Article 144). Thus Supreme Court of India is fully empowered by the constitution of India to protect its peoples rights & interests and do justice. Parliament of India is the supreme legislative body whereas SC is the supreme Judicial body in India. There is a balance of power between these two institutions. Both these supreme institutions are supposed to act in harmony and as per the powers laid down under the Constitution of India. SC & HC also have powers to issue Writs in the form of directions/orders/commends in the nature of Habeas-Corpus, Mandamus, Certiorari, Prohibition, Quo-Warranto and Public/Social Interest Litigation (PIL). Habeas-Corpus is a Latin term which means have a body or bring a body. The purpose of the writ is to enquire about the un-authorized/illegal confinement (i.e. without any legal justification) of a person by any authority and on such confirmation to order immediate release of a person from unlawful confinement. This writ ensures & assures the liberty & freedom of citizens in India. Mandamus is a Latin word which means We Order or Command. It is an order directing any person or institution to do its legal duties (which they are supposed to do as per law) or to refrain from doing any illegal/un-authorized act (i.e. not authorized by law) Certiorari is an order to quash & set aside the wrong orders/decisions/judgments of lower courts or other govt. authorities whereas Prohibition is a stay order issued in case lower courts or other govt. authorities are proceeding in the wrong direction or without jurisdiction. The SC & HC may also transfer the cases to appropriate court or to itself under both these writ petitions.

Quo-Warranto is writ where court questions any person who holds any office or post to which he/she is not legally entitled to hold or occupy and to direct such person to vacate the office/post and declare such post/office as vacant. Public or Social Interest Litigation (PIL) is an order issued by SC or HC when any public spirited person or social activist takes up the issue of any collective public or social interest (not any personal or individual dispute) with regard to any social/community evil or exploitation. The court directs the concerned govt. authorities to take appropriate steps to resolve the issue. Issues relating to child labour exploitation, under trial prisoners, wild life protection, environmental pollutions etc are few instances where PIL can be filed. SC & HC are empowered to take a su-moto notice of media new or can treat any letter as PIL writ petition. SC or HC can issue any appropriate combination of the above writ orders or commands to do justice in an appropriate case. (Note: - For details please refer to Chapter Nos. 64 & 69 of Ref. Book Legal Aspects of Business by Akhileshwar Pathak-4th Edition-MGH Publishers and Chapter Nos. 1 & 2 of Ref. Book Business Law for Managers by Prof. (Cmde) P.K. Goel- Indian Text Edition- Biztantra Publishers. Both books are available in our LRC). This study note relates to Session No. 1. _________________________________________O___________________________________ You may approach Dr. Narendra Y. Phadnis- Professor-Law & HRM -Course Facilitator Legal Aspects of Business (Sections A, C & F) for clarification/queries (if any) Phone: - 0712-2805123 (O) Mail Id: - nyphadnis@imtnag.ac.in

Course Outline

Batch: 2012-14 Course: - Legal Aspects of Business (LAB) Course Instructor: - Dr. N. Y. Phadnis and Prof. Shiv Nath Sinha Objectives of the course:-

Term: - III Credits: 3 credits

1. To acquaint management students with an overview & salient features of the Indian legal & judicial systems & constitutional provisions relating to business & corporate world. 2. To provide conceptual understanding, interpretation & working knowledge of Business and Corporate Laws. 3. To help student managers to apply law to real life business situations (through case-lets and practical problems) with a view to take appropriate & valid business decisions. 4. To get a firsthand knowledge of the business and corporate related legal issues and its managerial implications. 5. To prepare competent business managers rather than lawyers. Course Outline:A Business has to operate in the socio-economic & politico-legal environment. The legal aspects of business form an important component of Business Environment as every major area of a business has legal dimensions. Business Managers are required to take lawful business decisions & act within the boundaries of law while solving managerial issues & problems. Legal Aspects of Business (LAB) also popularly known as Business Law is an integral & inseparable facet of commercial transactions. Understanding the Legal Aspects of Business (LAB) plays a vital role in smooth & hassle free running of a business house. The course interfaces law with management and deals with various aspects of law having bearing on the business. Learning outcomes: At the end of the course, the students would be able to:1. Exhibit awareness of the salient features of the Business & Corporate laws applicable to corporate world. 2. Demonstrate working knowledge of the legal aspects of business, trade, commerce & Industry. 3. Develop an understanding of the legal issues & its managerial implications for industry stakeholders & be able to effectively deal with and amicably resolve the legal issues.

4. Apply law to real life business situations with a view to take appropriate & legal business decisions. Basic Text Book: Sheth, T. (2012), Business Laws, Pearson, New Delhi

Reference Books: Pathak, A. (2010), Legal Aspect of Business, McGraw Hill, New Delhi Goel, P.K. (2009), Business Law for Managers, Biztantra Publishers, New Delhi Kumar, R. (2010), Legal Aspects of Business, Cengage Learning, New Delhi

E-resources/databases:1. www.indlii.org 2) www.vakilno1.com 3) www.indlegal.com Session Plan: Session No 1 Topic Pre class preparation required

Constitutional Provisions relating to Study Notes Business and Indian Legal & Judicial Systems. Relevant provisions of Law of Chapters 1, 2, 3, 8, 9.10. 11 of Contract and Special Contracts. the Text Book. Sale of Goods Act and Consumer Chapter 13,14 and 15 Protection Act, Negotiable Instruments Act. Guest Lecture Guest Lecture Companies Act Partnership and LLP Chapter 18, 19, 20, 21 & 22 Chapter 12 and Study Notes

2, 3, 4 & 5

6,7,8 and 9

10 11 12, 13, 14, 15, 16 17

18 19 20

Competition Act Intellectual Property Rights (IPR) Intellectual Property Rights (IPR)

Study Notes Study Notes Study Notes

Pedagogy: The Pedagogy consists of a mix of lectures, case discussion and analysis, individual & group presentation and guest lectures. The course would be handled in a different style than it is generally taught to law students in law schools. The legal issues and its managerial implications will be dealt with through real life business situations, case-lets, practical problems, illustrations and examples. The emphasis would be on self-study, off class- group activity, interactive and participative class sessions. The students are expected to be well read & prepared with relevant legal theory and concepts for effective presentations and meaningful participation during the class sessions. Evaluation Scheme: Sr. No. Components 1 2 3 4 Quiz Presentations EndTerm Examination Comprehensive viva Weightages (Max. 30%) 20% 20% 50 % 10% Related Learning Outcomes

Learning outcome 1 Learning outcome 3 Learning outcome 1,2,3 & 4 Learning outcome 1,2,3 & 4

Any other remarks: This is a core course.