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Master of Business Administration – MBA Semester 3

MB0051 – Legal Aspects of Business - 4 Credits

Assignment Set- 2

Q.1 What are the situations which cannot be

referred to arbitration?

Arbitration law is a process that involves the assistance of one or more

neutral parties known as arbitrators. Arbitrators are charged with hearing
evidence from numerous involved parties in a dispute, and their main duty is
to issue an award deciding who gets what in order to resolve the situation. In
some instances of arbitration law, an arbitrator may also issue an opinion in
conjunction with the award, which is designed to explain the award and the
reasoning that led to it. Arbitration law and mediation law are two different
processes and should not be confused. The award and the opinion are not
capable of being reviewed by a court, and there is no availability for appeal.
The purpose of arbitration law is to serve as a substitution to a trial and a
review of the decision by a trial court.

• Subject matter of arbitration:

Any commercial matter including an action in tort if it arises out of or
relates to a contract can be referred to arbitration. However, public policy
would not permit matrimonial matters, criminal proceedings, insolvency
matters anti-competition matters or commercial court matters to be referred
to arbitration. Employment contracts also cannot be referred to arbitration
but director - company disputes are abatable (as there is no master servant
relationship here)5. Generally, matters covered by statutory reliefs through
statutory tribunals would be non-abatable.

Arbitration is an Alternative Dispute Resolution process whereby a

person chosen as an arbitrator settles disputes between parties. Arbitration is
similar to a court trial, with several exceptions:

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 The arbitrator makes the decision called an "arbitration award”
 The arbitration does not take place in a courtroom
 The arbitration award is binding. With rare exceptions, there is no right to
appeal
 Arbitration is not a matter of public record. It is private and confidential
 There is no court reporter or written transcripts
 Lawyers generally prepare their cases in an extremely limited manner
 The rules of evidence are relaxed so that the parties have a broader scope,
more expanded opportunity to tell their stories to present their cases
 With very few exceptions, it is much less expensive than legal litigation
 An arbitration time frame is substantially less than that of litigation and
going to trial
 No jury. The Arbitrator(s) maintain neutrality and conflicts of interests
 Generally, all paperwork and evidence presented are destroyed after the
Arbitration
 The arbitration and arbitration award does not have to adhere to Judicial
Case precedent nor formality of traditional court proceedings
 In India, Arbitration is one of the most effective and trusted proceedings in
regard to private dispute settlement are guided by the Arbitration &
Conciliation Act, 1996.

• Kind of matters cannot be referred for

arbitration:
As per general practice, matters involving moral questions or questions of
public law cannot be resolved by arbitration. For instance, the following
matters are not referred to arbitration:

 Matrimonial matters
 Guardianship of a minor or any other person under disability
 Testamentary matters
 Insolvency, proceedings
 Criminal proceedings

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 Questions relating to charity or charitable trusts
 Matters relating to anti-trust or competition law
 Dissolution or winding up of a company

• Indian Arbitration Act follows the guideline of:

 The Geneva Convention on the Execution of Foreign Arbitral Awards, 1927

 The New York Convention of 1958 on the Recognition and Enforcement of
Foreign Arbitral Awards
 The Geneva Protocol on Arbitration Clauses of 1923

Q.2 What is the role of a Conciliator?

• Conciliator
Conciliation is a process in which the parties to a dispute, with the
assistance of a neutral third party (the conciliator), identify the disputed
issues, develop options, consider alternatives and endeavour to reach an
agreement.
The conciliator may have an advisory role on the content of the
dispute or the outcome of its resolution, but not a determinative role.
The conciliator may advise on or determine the process of conciliation
whereby resolution is attempted, and may make suggestions for terms of
settlement, give expert advice on likely settlement terms, and may actively
encourage the participants to reach an agreement.
In order to understand what Parliament meant by ‘Conciliation’, we
have necessarily to refer to the functions of a ‘Conciliator’ as visualized by
Part III of the 1996 Act. It is true, section 62 of the said Act deals with
reference to ‘Conciliation’ by agreement of parties but sec. 89 permits the
Court to refer a dispute for conciliation even where parties do not consent,
provided the Court thinks that the case is one fit for conciliation. This makes
no difference as to the meaning of ‘conciliation’ under sec. 89 because; it
says that once a reference is made to a ‘conciliator’, the 1996 Act would
apply. Thus the meaning of ‘conciliation’ as can be gathered from the 1996
Act has to be read into sec. 89 of the Code of Civil Procedure. The 1996 Act
is, it may be noted, based on the UNCITRAL Rules for conciliation.
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• Role of conciliator:
 The conciliator shall assist the parties in an independent and impartial
manner in their attempt to reach an amicable settlement of their dispute.

 The conciliator shall be guided by principles of objectivity, fairness and

justice, giving consideration to, among other things, the rights and
obligations of the parties, the usages of the trade concerned and the
circumstances surrounding the dispute, including any previous business
practices between the parties.

 The conciliator may conduct the conciliation proceedings in such a manner

as he considers appropriate, taking into account the circumstances of the
case, the wishes the parties may express, including any request by a party
that the conciliator hear oral statements, and the need for a speedy settlement
of the dispute.

 The conciliator may, at any stage of the conciliation proceedings, make

proposals for a settlement of the dispute. Such proposals need not be in
writing and need not be accompanied by a statement of the masons
therefore.

• Conciliators do not:
 Make decisions for disputing parties
 Make judgments about who is right, who is wrong or what the outcome of
the dispute should be.
 Tell people what to do
 Make rulings
 Force parties to participate in the conciliation process.

Q.3 What are the unfair trade practices under

the MRTP Act?

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• THE MONOPOLIES AND RESTRICTIVE
TRADE PRACTICES ACT, 1969 -
OBJECTIVES AND POLICY:

The Monopolies and Restrictive Trade Practices Commission has been

constituted under Section 5(1) of the MRTP Act, 1969. The Commission is
empowered to enquire into Monopolistic or Restrictive Trade Practices upon
a reference from the Central Government or upon its own knowledge or
information. The MRTP Act also provides for appointment of a Director
General of Investigation and Registration for making investigations for the
purpose of enquiries by the MRTP Commission and for maintenance of
register of agreements relating to restrictive trade practices.

The MRTP Commission receives complaints both from registered consumer

and trade associations and also from individuals. Complaints regarding
Restrictive Trade Practices or Unfair Trade Practices from an association are
required to be referred to the Director General of Investigation and
Registration for conducting preliminary investigation. The Commission can
also order a preliminary investigation by the Director General of
Investigation and Registration when a reference on a restrictive trade
practice is received from the Central/State Government, or when
Commission's own knowledge warrants a preliminary investigation.
Enquiries are instituted by the Commission after the Director General of
Investigation and Registration completes preliminary investigation and
submits an application to the Commission for an enquiry.

• Unfair Trade Practices:

An unfair trade practice means a trade practice, which, for the purpose of
promoting any sale, use or supply of any goods or services, adopts unfair
method, or unfair or deceptive practice.

• 1. False Representation:

The practice of making any oral or written statement or representation

which:
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 Falsely suggests that the goods are of a particular standard quality, quantity,
grade, composition, style or model;
 Falsely suggests that the services are of a particular standard, quantity or
grade;
 Falsely suggests any re-built, second-hand renovated, reconditioned or old
goods as new goods;
 Represents that the goods or services have sponsorship, approval,
performance, characteristics, accessories, uses or benefits which they do not
have;
 Represents that the seller or the supplier has a sponsorship or approval or
affiliation which he does not have;
 Makes a false or misleading representation concerning the need for, or the
usefulness of, any goods or services;
 Gives any warranty or guarantee of the performance, efficacy or length of
life of the goods, that is not based on an adequate or proper test;
 Makes to the public a representation in the form that purports to be-
• warranty or guarantee of the goods or services,
• a promise to replace, maintain or repair the goods until it has achieved
a specified result,

If such representation is materially misleading or there is no reasonable

prospect that such warranty, guarantee or promise will be fulfilled

 Materially misleads about the prices at which such goods or services are
available in the market; or
 Gives false or misleading facts disparaging the goods, services or trade of
another person.

• 2. False Offer Of Bargain Price:

Where an advertisement is published in a newspaper or otherwise,

whereby goods or services are offered at a bargain price when in fact there is
no intention that the same may be offered at that price, for a reasonable
period or reasonable quantity, it shall amount to an unfair trade practice.

The bargain price, for this purpose means:

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 the price stated in the advertisement in such manner as suggests that it is

lesser than the ordinary price, or
 The price which any person coming across the advertisement would believe
to be better than the price at which such goods are ordinarily sold.

• 3. Free Gifts Offer And Prize Scheme:

The unfair trade practices under this category are:

 Offering any gifts, prizes or other items along with the goods when the real
intention is different, or
 Creating impression that something is being offered free along with the
goods, when in fact the price is wholly or partly covered by the price of the
article sold, or
 Offering some prizes to the buyers by the conduct of any contest, lottery or
game of chance or skill, with real intention to promote sales or business.

• 4. Non-Compliance Of Prescribed Standards:

Any sale or supply of goods, for use by consumers, knowing or having

reason to believe that the goods do not comply with the standards prescribed
by some competent authority, in relation to their performance, composition,
contents, design, construction, finishing or packing, as are necessary to
prevent or reduce the risk of injury to the person using such goods, shall
amount to an unfair trade practice.

• 5. Hoarding, Destruction, Etc.:

Any practice that permits the hoarding or destruction of goods, or refusal

to sell the goods or provide any services, with an intention to raise the cost
of those or other similar goods or services, shall be an unfair trade practice.

• 6. Inquiry Into Unfair Trade Practices:

The Commission may inquire into any unfair trade practice:

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 Upon receiving a complaint from any trade association, consumer or a
registered consumer association, or
 Upon reference made to it by the Central Government or State Government
 Upon an application to it by the Director General or
 Upon its own knowledge or information.

• Relief Available:

After making an inquiry into the unfair trade practices if the Commission
is of the opinion that the practice is prejudicial to the pubic interest, or to the
interest of any consumer it may direct that?
 The practice shall be discontinued or shall not be repeated;
 The agreement relating thereto shall be void in respect of such unfair trade
practice or shall stand modified.
 Any information, statement or advertisement relating to such unfair trade
practice shall be disclosed, issued or published as may be specified
 The Commission may permit the party to carry on any trade practice to take
steps to ensure that it is no longer prejudicial to the public interest or to the
interest of the consumer.

However no order shall be made in respect a trade practice which is

expressly authorized by any law in force.
The Commission is empowered to direct publication of corrective
advertisement and disclosure of additional information while passing orders
relating to unfair trade practices.

Q.4 What are essentials of a valid offer?

• Offer
A proposal is an expression of will or intention to do or not to do
something. It is also called an "offer". It is one of the essential elements of
an agreement. It is the very basis of the contract. It becomes a promise when
it accepted. Section 2 (a) of the Contract Act defines the proposal as "when
one person signifies to another his willingness to do or to abstain from doing
anything, with a view to obtaining the assent of that other, to such act or
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abstinence, he is said to make a proposal". The person making the proposal
is called the proposer or offer or the promisor. The person to whom the
proposal is made is called the offeree or promisee.

For example; Sunil offers to sell his car to Padmaja for Rs. 50000. This is a
proposal. Sunil is the offeror and Padmaja is the offeree.

An offer may be express or implied. An offer which is expressed by

words, written or spoken, is called an express offer. An offer which is
expressed by conduct is called an implied offer. An offer may be positive or
negative. It may be in the form of a statement or a question.
for example; Sridhar says to Radhika that he will sell his scooter to her for
Rs.20000. This is an express offer.

The Karnataka State Road Transport Corporation runs omnibuses on various

routes to carry passengers at the scheduled fares. This is an implied offer by
KSRTC.

The offer must be made in order to create legal relations otherwise there
will be an agreement. If an offer does not give rise to legal obligations
between the parties it is not a valid offer in the eye of law. In business
transactions there is a presumption that the parties propose to make legal
relationships. For example a person invite to another person to diner if the
other person accepts the invitation then it is not any legal agreement between
the parties it is social agreement.

An offer must be definite and clear. If the terms of an offer are not
definite and clear it cannot be called a valid offer. If such offer is accepted it
cannot create a binding contract. An agreement to agree in future is not a
contract because the terms of an agreement are not clear. A person has two
motorbikes. He offers to another person to sell his one bike for a certain
price then it is not a legal and valid offer because there is an ambiguity in the
offer that which motorcycle the person wants to sell. There is a difference
between the offer and invitation of offer. Sometime people offer the
invitation for the sale.

• Essentials of a valid offer:

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 A valid offer must intend to create legal relations. It must not be a casual
statement. If the offer is not intended to create legal relationship, it is not an
offer in the eyes of law e.g. Sunil invites Sridhar to a dinner party and
Sridhar accepts the invitation. Sridhar does not turn up at the dinner party.
Sunil cannot sue Sridhar for breach of contract as there was no intention to
create legal obligation. Hence, an offer to perform social, religious or moral
acts without any intention of creating legal relations will not be a valid offer.

 The terms of an offer must be definite, unambiguous and certain. They must
not be loose and vague. A promise to pay an extra Rs. 500 if a particular
house proves lucky is too vague to be enforceable. E.g. Sridhar says to Sunil
"I will give you some money if you marry my daughter". This is not an offer
which can be accepted because the amount of money to be paid is not
certain.

 An offer may be made to a definite person or to the general public. When

offer is made to a definite person or to a special class of persons, it is called
"specific offer". When an offer is made to the world at large or public in
general, it is called "general offer". A specific offer can be accepted only by
that person to whom it has been made and a general offer can be accepted by
any person. E.g. Sunil promises to give Rs.100 to Sridhar, if he brings back
his missing dog. This is a specific offer and can only be accepted by Sridhar.
Sunil issues a public advertisement to the effect that he would give Rs.100 to
anyone who brings back his missing dog. This is a general offer. Any
member of the public can accept this offer by searching for and bringing
back Sunil's missing dog.

 An offer to do or not to do must be made with a view to obtaining the assent

of the other party. Mere enquiry is not an offer.

 An offer should may contain any term or condition. The offeror may
prescribe any mode of acceptance. But he cannot prescribe the form or time
of refusal so as to fix a contract on the acceptor. He cannot say that if the
acceptor does not communicate his acceptance within a specified time, he is
deemed to have accepted the offer.

 The offeror is free to lay down any terms any terms and conditions in his
offer. If the other party accepts it, then he has to abide by all the terms and
conditions of the offer. It is immaterial whether the terms and conditions

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were harsh or ridiculous. The special terms or conditions in an offer must be
brought to the notice of the offeree at the time of making a proposal.

 An offer is effective only when it is communicated to the offeree.

Communication is necessary whether the offer is general or specific. The
offer or may communicate the offer by choosing any available means such
as a word of mouth, mail, telegram, messenger, a written document, or even
signs and gestures. Communication may also be implied by his conduct. A
person can accept the offer only when he knows about it. If he does not
know, he cannot accept it. An acceptance of an offer, in ignorance of the
offer, is no acceptance at all.

It should be noted that an invitation to offer is not an offer. The following

are only invitations to offer but not actual offers:

 Invitations made by a trade for the sale of goods.

 A price list of goods for sale.
 Quotations of lowest prices.
 An advertisement to sell goods by auction.
 An advertisement inviting tenders.
 Display of goods with price-tags attached.
 Railway time-table.
 Prospectus issued by a company.
 Loud speaker announcements.

Q.5 Find out a case where a person appealed

under the Consumer protection Act and
won.

The Consumer Protection Act was born in 1986. It is described as a

unique legislation of its kind ever enacted in India to offer protection to the
consumers. The Act is claimed to have been designed after an in-depth study
of consumer protection laws and arrangements in UK, the USA, Australia
and New Zealand. The main objective of this Act is to provide better
protection to the consumers. Unlike other laws, which are punitive or
preventive in nature the provisions of this Act are compensatory in nature.

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The Act intends to provide simple, speedy and inexpensive re-dressal to the
consumer’s grievances.

The earlier principle of “Caveat Emptor” or “let the buyer beware” which
was prevalent has given way to the principle of “Consumer is King”. The
origins of this principle lie in the fact that in today’s mass production
economy where there is little contact between the producer and consumer,
often sellers make exaggerated claims and advertisements, which they do not
intend to fulfill. This leaves the consumer in a difficult position with very
few avenues for redressal. The onset on intense competition also made
producers aware of the benefits of customer satisfaction and hence by and
large, the principle of “consumer is king” is now accepted. The need to
recognize and enforce the rights of consumers is being understood and
several laws have been made for this purpose. In India, we have the Indian
Contract Act, the Sale of Goods Act, the Dangerous Drugs Act, the
Agricultural Produce (Grading and Marketing) Act, the Indian Standards
Institution (Certification Marks) Act, the Prevention of Food Adulteration
Act, the Standards of Weights and Measures Act, the Trade and
Merchandise Marks Act, etc which to some extent protect consumer
interests. However, these laws required the consumer to initiate action by
way of a civil suit, which involved lengthy legal process proving, to be too
expensive and time consuming for lay consumers. Therefore, the need for a
more simpler and quicker access to redressal to consumer grievances was
felt and accordingly, it lead to the legislation of the Consumer Protection
Act, 1986.

Glossary
Complaint: Complaint many allegation in writing by a complainant
with a view to obtaining any relief under the Act.

Consumer: Any person who buys any goods for consideration which
has been paid or promised or partly paid and partly promised.

Service: Service means service of any description which is available to

potential users and includes, but not limited.

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Consumer Dispute: Dispute where the person against whom a
complaint has been made, denies or disputes the allegation contained in the
complaint.

Q.6 What does the Information Technology

Act enable?

In May 2000, at the height of the dot-com boom, India enacted the IT Act
and became part of a select group of countries to have put in place cyber
laws. In all these years, despite the growing crime rate in the cyber world,
only less than 25 cases have been registered under the IT Act 2000 and no
final verdict has been passed in any of these cases as they are now pending
with various courts in the country.

Although the law came into operation on October 17, 2000, it still has an
element of mystery around it. Not only from the perception of the common
man, but also from the perception of lawyers, law enforcing agencies and
even the judiciary.

The prime reason for this is the fact that the IT Act is a set of technical
laws. Another major hurdle is the reluctance on the part of companies to
report the instances of cyber crimes, as they don't want to get negative
publicity or worse get entangled in legal proceedings. A major hurdle in
cracking down on the perpetrators of cyber crimes such as hacking is the fact
that most of them are not in India. The IT Act does give extra-territorial
jurisdiction to law enforcement agencies, but such powers are largely
inefficient. This is because India does not have reciprocity and extradition
treaties with a large number of countries.

The Indian IT Act also needs to evolve with the rapidly changing
technology environment that breeds new forms of crimes and criminals. We
are now

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beginning to see new categories and varieties of cyber crimes, which
have not been addressed in the IT Act. This includes cyber stalking, cyber
nuisance, cyber harassment, cyber defamation and the like. Though Section
67 of the Information Technology Act, 2000 provides for punishment to
whoever transmits or publishes or causes to be published or transmitted, any
material which is obscene in electronic form with imprisonment for a term
which may extend to two years and with fine which may extend to twenty
five thousand rupees on first convection and in the event of second may
extend to five years and also with fine which may extend to fifty thousand
rupees, it does not expressly talk of cyber defamation. The above provision
chiefly aim at curbing the increasing number of child pornography cases and
does not encompass other crimes which could have been expressly brought
within its ambit such as cyber defamation.

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