BUSINESS LAW

BUSINESS LAW 1. Indian Contract Act -1872 Goisted 2. Sale of Gards Act 1930 3. Consumer protection Act 4. Negotiable Instruments Act 5. Law of partnership Act -1932. 6. Companys Act 1956 7. Law of Insurance 8. Standards of weights & measures Acts. 9. Cyber laws. LAW: Rules & Regulations laid clown by the Govt. Civil, Criminals, Business, Industrial laws. Un-ethical, Immoral, opposed to public policy. Factors affecting Business Environment 1. Political 2. Socio cultures 3. Economical 4. Technical 5. Demographical 6. International 7. Legal

SIGNIFICANCE OF LAW 1. Socio-Economic justice 2. Uniformity. 3. Reduce unbalance

MRTP Act 1'F Act EST Act

Monotypes restricted trade practices. Provident Fund Act. Employee state insurance Act.

Employee minimum wages Act.

UNIT - I LAW OF CONTRACT

They should be legally bounded - support from law. Rules Law of contract ICA (Indian contract Act) 1982. 1. General principles of contract 2. Some special contracts. 3. Parties to contract 4. Boundaries of contract act.

Def : A contract is an agreement between two (or) more parties which the law will enforce. Sec. 2(h) defines Indian contract Act as on contract. Contract = Agreement +Enforced by law

A promise to perform / support by law Social agreement / legal agreement. Agreement = offer + acceptance

All contracts are agreements but all agreements are not contracts

Types of contract: 1. Express Contract: The Contract which is clearly written in word/oral. 2. Implied contract: Understood by the contract

Void,

Valid, later

Voidable, Illegal Invalid at the option of the party (free

Void ab irutio consent) (from the beginning) Quasi Contract:

Happened by accident. The contract which is done (Here both the parties are

Executed Contract: satisfied) Executory Contract: executory.

Both the parties have to perform partly executed & partly

Partly executed & Partly executory: Here one person is performed the activity and another party have to perform. A gives 1 Tonne of oil to B B payment after two days

Unilateral : One party has performed Bilateral :

ESSENTIALS OF VALID CONTRACT: Sec (10) of ICA defined. 1. Offer & Acceptance: Here there must by 2 parties Offer R Offer E 1st party 4 (offerer & Acceptor) 2nd party

Should be definite & clear & absctlute. 2. Intention to create legal relation ship CASE: Mr. Balfour & Mrs. Balfour Promised that he had to give 30 to his wife. after diverse taken he don't want to give she filed a case it is not acceptable because it is not a legal one. 3. Lawful consideration: Something in return The return should be adequate D The return should not be in cash (or) kind
It is in to do an act (car to abstain from doing an act.

Consideration may by past present (or) future. 4. Capacity of parties: Disqualified cry law Competency Minor < 18 years Unsound mind, lunatics & Drunkard

 Insolvent position 5. Force & Genuine consent : Undue Influence Mis representation - B/w master & servant Mistake Bilateral unilateral Froud 6. Lawful Object: Object for which the parties enter into the contract should be lawful should not be illegal, immoral and opposed to public policy. 7) 8). 9) Agreement not declared void Certainty & Possibility of performance; Legal formalities Eg: Sale of land.

OFFER It is a proposal made by one party to another to enter into a legally binding agreement between Section 2(a) defines a person is said to have made a proposal when he signifies to another his willingness to do (or) to abstain from doing anything with a view to obtain the assent of that to such act (or) abstain. Eg: Offer to purchase a car

All offers are not legally regard as offer unless Signify the willingness to do something. To obtain the assent of the offeree. Offer must be definite Offer must be commercial to the offeree. LEGAL RULES 1. Offer must be such as in law should be capable of being accepted and giving rise to legal relationship.
2. Terms of offer should be definite, unambiguous & certain but not loose and

vague. CASE: Taylor & offer Lease for 3 years285 Taylor promised to give a house for lease to portington for 3 years of 285. 3. An offer maybe distinguished from
a)

Portingtori acceptance 4

A declaration of intention and an announcement. A

declaration person that he intends to do something gives no right of action to another. It implies that an offer may be made in the future. b) An invitation to take an offer (or) to do business

Eg: Display of goods in the shop. (it is just our invitation but not an offer)

c) Offer must be communicated. CASE: Lalman Vs Gauri Dalt Master ordered several to find his missed nephew. 4. An offer must be made with a view' to obtain the absent of the other party.
5. Offer should not contain a term the non compliance of which may be

assumed to amount to acceptance (It should be clearly mentioned) 6. Statement of price is not an offer.

CASE:

Harvey Vs Facie H F Lowest price F H $900 H F- We accept for 900$

It is giving is accent to offerer giving his willingness to be bounded by the terms of the offer. ACCEPTANCE: Sec 2(b) says acceptance It is to an offer what a lighted` watch is to a train of gun powder. It produces source thing which cannot be recalled. LEGAL RULES: 1. It must be absolute and unqualified (unconditioned) CASE: Nacle Vs Merret 200 and N said that I can give 80 an advance and

1. M N Sale of Ian

remaining in installments.

2. It must be communicated to the offerer. 3. It must be according to the mode prescribed (or) usual/ reasonable mode. 4. It must be given within a reasonable time. 5. It cannot proceed an offer. 6. Show an intention on the part of acceptor to fulfill terms of promises. 7. It must be given by the party to whom offer is made. 8. It must be given before the offer lapses (or) before the offer withdrawn. 9. It cannot be implied from silence. Offer is completed when he passes message. Acceptance is completed once he posted.

REVOCATION: (with drawl) How should be communicated? a) By notice

b) By lapse of time

c) Non fulfillment of terms. d) By death e) If counter offer is made (here the offer will change the counter offer) f) Not accepted in the prescribed mode.

Performance of Contract Performance of contract takes place were 'the parties to the contract fulfill their obligation arising from the contract within the time and manner

prescribed, Sec.37 (para 1) lays down that the parties to the contract must either perform (or) attempt (or) offer to perform.

Offer to perform (or) Tender: When one of the party (acceptor) offers to perform but the offerer does not accept is called as Tender. The acceptor is not responsible for nonperformance. He will not loose the rights and he can see for breach (Non performance of contract).

Requisites of valid Tender: 1. It must be unconditional.

2. It must be of the whole quantity contracted for (or) of the whole

obligation. 3. By the person by whom the promise is made. 4. It must be made at proper time & place. 5. It must be made to the proper person (or) his authorized agent.
6. It is made to one of the several joint promises:

7. It is given opportunity to inspect the goods.

Contract which need not be performed: 1. When performance becomes impossible 2. When Both parties agree to substitute 3. When promise accept to part of the promise

4. When the contract is widable. 5. When it is illegal. 6. Who must perform the contract (Promises himself) When personal consideration is not necessary. Legal representatives. Third person only if defined in promissory (Joint promisers)

VOID AGREEMENTS: Section (2g) defines void agreements as one which is not enforceable by law. Agreements which are expressively declared as void : (By contract Act) 1. Agreement by incompetent parties [Sec.11] 2. Agreements made under mental mistake of Tact [Sec.20] 3. Agreements the consideration of which is unlawful. [Sec.23] 4. Agreements the consideration of which is unlawful in part [Sec.24] 5. Agreements without consideration [Sec.25] 6. Agreements in restraint of marriage [Sec.26] 7. Agreements in restraint of trade [Sec.27].

Absolute

Partial

Exceptions to Restrains of trade:

Sale of good will.

Partnership Act Trade combinations (syndicates) Sole -dealing agreements. 8. Agreements in restraint of Legal proceedings [Sec.28] Restriction in legal proceedings. Reduction in period of limitation. Extinguishments of a right (Absolute & partial) 9. Agreements the meaning of which is uncertain [Sec.29J 10. Agreements by way of wager (Sec.30J) A wager is an agreement between two parties by which one promises to pay money on moneys worth on the happening of some' uncertain events. In consideration of the other parties promise to pay if the event does not happen.

ESSENTIALS OF WAGING CONTRACT i) ii) iii) iv)

v)

Promise to pay money on moneys worth Uncertain event Each party must stand to win (or) loose No control over the event. No other interest in the event.

THE FOLLOWING ARE NO WAGER i)

ii)

Cross word conception According, to price competition Act 1955 price competition in the games, (or) skills (or) not wages provided the amount of price does not exceed Rs.1000.

iii)

Share market transactions: Where delivery of stocks is intended to begin. and taken.

iv) Contract of insurance: Effect of wagering agreements: They are expossively declared in of Maharastra & Gujarat they are declared illegal.
11. Agreements contingent on impossible events [Sec.34] Creation of treasure

a in state

(or) magic. 12. Agreements to do impossible Act [Sec.56] 13. In case of reciprocal promises to do things legal and also other things illegal [Sec.57]. Restriction: It arises after the contract is declared void.. A part should not gain over a void agreement. In order to protect other party from loss this party should given back the money in again from the contract. LEGALITY OF OBJECT The important element of contract is legality. It is the object of the contract should be legal.

 If it is illegal (or) unlawful it is not enforceable by law [Sec.23]. Sec.23 states when the object is unlawful.

a) If it is forbidden by law: The forbidden acts are punishable by criminal law

of country. b) If the object is fraudulent : Fraudulent activities will not have legal binding. So fraudulent agreements are void.
c) If it is of such a nature that if permitted it would defeat the provisions of

any law. d) If it involves (or) implies injury to the Fersorn (or) property of another.
e) If the court regards it is immoral : Generally social acts like marriage (or)

its coercion to break a marriage are considered as immoral and they does not have legal support. 1. Against public morality. 2. Interference in the marriage relations. 3. Where the court regards it as opposed to public parties (like corruption) Trading with an allies enemy. Agreements interfering with the course of justice Agreements to commit a crime. Agreements for stifling criminal prosecution Maintenance & chamberity.

Chamberity: It is the assist another to bring action for recovering money. Trafficking in public offices & titles (ownership) Agreements restricting personal liberty. Effects of lack of legality of Object: No action can be taken for recovery of money (or) for breach. 'The defendant is in a better position. Remedies for Breach of Contract: A Remedy is the means given by the law for enforcement of a right. When the contract is broken the injured party will have the following remedies. 1) Recission: It is. setting aside the contract. Cases where Recission is not allowed: Where one party does not perform his promissory the other party may refuse for the performance. The court may refuse recession in the following, cases.
a)

Where the party wishing to set aside the contract has expressly (or)

implied by rated the contract (giving concert the act is done)

b)

Change in circumstances the parties cannot restore' to their :' original

position. Eg : Trade with an align enemy.

c)

Where third party have acquired rights in the subject matter in good

faith.

d)

Where only a party of contract is sought to be set aside and that part

cannot be separated from the rest of the contract. The purpose of Recession so to protect the party from unfair loss. The objective of the recession is to make good to the injured party. Damages means monetary compensation to the injured party to put him in the same position. Where he is before entering the contract.

CASE: Hadley Vs Bxendale Hadley has a mill and had a shaft in his machine. He asked the other party to repair the shaft but he delayed. So lie had a loss and filed a case on the other part. So the other party paid the compensation. 2) Sec (73) deals with compensation for damages caused by breach. i) Ordinary damage: Damages arising naturally. Damage: Diff. Between contract price & market price. ii) Special damages: Damages in contemplation of the party. A B 100 (B got Rs 200 1oss and also the Rs.100 profit which he supported to get) C promised 1000 2000

Sec. A should give Rs.300 to B. iii) Vindicive (or) Exemplary Damages : Compensation for loss suffered but not as a punishment other than a) b) iv) Nominal damage Breach of promise to marry. Disorder of check by banker.

v) Damage for loss of reputation: These types of damages tire not recoverable. Eg: Refuse to honour the check of a business man. vi) Damage for inconvenience and discomfort. vii) Mitigation of damages: The case where the damaged can 'be avoided. Even the injured party should take reasonable steps to mitigate the loss caused by breach the cannot claim where the damage can be avoided. viii) Damages agreed upon in advance in case of breach. 3. QUANTUM MERUIT: As much as earned when one party has done some work and other party repudiate the contract the injured party can claim only when original contract is discharged. Quantum meruit arises in the following cases. When the agreement is declared void. When something is done without an intention to do gratuitously. When there is an express (or) implied contract to render services but no agreement as to-remuneration. When act cannot be done because of the act of another party. When the contract is durable. 4) SPECIFIC PERFORMANCE: Where damages are not sufficient compensation the court may order for specific performance. Cases where specific performance is enforced: Where compensation in money is not adequate.

 Where actual damages can't be measured. Where specific performance can't be imposed Damages are inadequate remedy: Contract is not certain. Contract of personal nature. Contract is in its nature revocable (taken back) Contract is made beyond their capacity. Where court cannot supervise.

5) INJUNCTION: An order to stop an act. Injunction is for negative performance. It is ordering not to do an act where a party agreed not to do an act and does the court will give, injunction.
Cases where court doesn't give injunction.

1. Not to carry a certain trade

2. To buy only from a particular party.

QUASI CONTRACT
Under certain circumstances, a person may receive a benefit to which the

law regards another person as better entitled,for which the law considers he should pay to the other person even though there is no contract between the parties. Such relationships are termed quasi contracts because although

there is no contract (or) agreement between the parties. They are put in the same position as if there were a contract between them. Law of Quasi contract is called as law of restitution.
Strictly speaking a Quasi-contract is not a contract at all.

Kinds of Quasi-contracts: 1) 2) 3) 4) 5) Supply of necessaries [Sec.68] Payment by an interested person [Sec.69] Obligation to pay for non-gratitutions Act [Sec.70] Responsibility of finder of goods [Sec.71] Mistake (or) Coercion [Sec.72].

UNIT-2 THE SALE OF GOODS ACT 1930

It states regarding the transfer of goods from seller to buyer. This has legal principles effecting the law of contract. Buyer rights are consumer rights. Seller has duty to give the value to the product offered. Contract of Sale of goods [Sec.14]: It is a contract where by the seller transfer (or) agree to transfer the property in goods to the buyer for price. Contract of sale induces both ale and agreement to sell. Essentials of Contract of Sale
There must be two parties.

Goods which are movable having same value D Price Transfer of general property Essential elements of valid contract Transfer of Property There are three stages in the performance of a contract of sale of goods by a seller viz.
1. Transfer of Property in the goods.

2. The transfer of possession of the good delivery 3. The passing of risk.

It is important to know the precise moment of tune at which the which the property in goods posses from the sellers to the buyer for the following reasons. 1. Risk follows ownership 2. Action against third parties. 3. Insolvency of the seller (or) the buyer. 4. Suit for price. Passing of Property The primary rules for ascertaining when the property in goods passes to the buyer are as follows. 1. Goods must be ascertained. 2. Intention of the parties. When the intention of parties cannot ascertain. a) Specific goods: [Sec.20-22] The rules relating to transfer of property in specific goods are as follows. i) Passing of property at the time of contract. ii) When the goods not in deliverable state. iii) When the price of goods is to be ascertaining weighing. b) Un ascertained goods: [Sec.23] Where there is a contract for the said of unascertained goods, the property in the goods does not pass to the buyer until the goods are ascertained:

c) Goods sent on approval (or) on sale or return: [Sec.24] When goods are delivered on this bases the property will passes when i) ii) He signifies his approval to seller. When he does any act adopting the transaction.

Sale by Non-owners i) ii) iii) iv) [Sec.29]. v) vi) Sale by seller in possession of after sale [Sec.30(1)] Sale by buyer in possession after having bought (or) agreed to buy goods [Sec.30(2)]. vii) Sale by an unpaid seller [Sec.54(3)]. Sale by person, not the owner (or) titled by estopper [Sec.27] Sale by a mercantile agent Sale by one of several joint owners (28) Sale by a person in possession under avoidable contract

Conditions &Warranties: Condition: A condition is a stipulation which is essential to the main purpose of the contract. It goes to the root of the contract. Its non-fulfillment upsets the very basis of the contract. Warranty:

A warranty is a stipulation which is collateral to the main purpose of the contract. It is not a such vital importance as a condition is Distinction between a condition & Warranty: 1. Difference as to value 2. Difference as to breach 3. Difference as to treatment.

When conditions to be treated as warranty: [Sec.13]: 1. Voluntary waiver of condition [Sec.13(1)] 2. Acceptances of goods by buyer [Sec.13(2)]

Types of conditions &Warranties 1. Implied conditions & warranties - stated by law. 2. Express conditions & warranties - clearly defined in contract of sale. 1. Implied conditions & Warranties a) Conditions has to titled [Sec.14(a)] b) Sale by description [Sec.15]: include following situations i) description. ii) description. iii) Packing of goods. Where the buyer sees the goods but relies on seller's Where buyer has not seeing goods & relay on sellers

c) Conditions as to quality (or) fitness [Sec.16(1)] The following points should however be noted in this regard. i) ii) course. iii)
iv) v)

Where the buyer, expressly (or) by implication The goods are of such nature of the dealer sells in normal

Where buyers make known to seller about purpose. Goods used for no. of purposes. The buyer should' feel the purpose.

d) Conditions as to mercantalality [Sec.16(2)] e) Conditions implied by customs [Sec.16(3)] f) Sale by sample [Sec.17] f) Conditions as to wholesomeness.

Implied warranties : a) Warranty of quite possession [Sec.14(b)] b) Warranty of freedom from encumbrances [Sec.14(c)] c) Warranty as to quality (or) fitness by usage of trade [Sec.16(d)] d) Warranty to disclose dangerous nature of goods.

Exclusion of Implied conditions & Warranties Implied conditions & warranties in a contract of sale may be, negative (or) varied by a) Express agreement between the parties.

b) c) CAVEAT EMPTOR

The course of dealing between them. The custom (or) usage of trade.

The means "let the buyer beware" i.e. in a contract of sale of goods the seller is under no duty to reveal. Exceptions: 1. Fitness for buyers purpose [Sec. 16(l)] 2. Sale under patent (or) trade zonic ['Sec.16(1)] 3. Merchantable quality [Sec.16(2)] 4. Use of trade. 5. Consent by fraud.

PERFORMANCE OF CONTRACT OF SALE Right of an Un paid seller: Unpaid seller - If not paid the price of goods. If condition for negotiable instrument is not fulfilled. Seller in the position of agent is called seller [Sec.45(2)]. A person who has sell his goods (or) any person

Right of unpaid seller

Against to the goods

Against to buyer personally

Where the property in goods has passed

Has not passed

Suit for price (Sec 55) Stoppage in transit Suit for damages (Sec 56)

Reputation of control (Sec 60) Suit for Interest (sec 61)

With holding delivers Stoppage in Resale Transit (Sec 54) (Sec 5052)

Lieu Sec 47-49

Against the Good: Where the property in goods has passed Right of Lieu: [Sec. 47-49] Lieu, is, the right to retain the possession of goods until the price is paid. It can be exercised in three conditions i. ii. iii. If the goods are sold without any stipulation of credit. When the terms of expiry of credit. When the buyer becomes insolvent.

How you will tolerate your lieu [sec 49] i) i. ii. When buyer paying price He waves right of lieu on goods either expressly (or) impliedly

Stoppage in Transit [Sec.50-52): The goods are stopped when the goods are in carriage (Transport) Right of stoppage of goods in transit can be exercised after the unpaid seller parted with the goods. He can retain the possession until the price is paid. Even this one can arise when the buyer becomes insolvent. Duration of transit is starting and ends with hiking by the buyer. Rules Regarding Lieu: i. He should take the possession of goods if he losses he will loose the right of lieu.
ii. iii. iv. v.

He should have actual possession not title. Contract o sale must not exclude expressly the right of lieu. Lieu can be exercised only for price but not for the warehouse charges If part delivery of goods ' is made lieu can be exercised on remaining goods.

How you will terminate your lieu: [Sec.49)] i) When buyer paying price. ii) He waves right of lieu on goods either expressly (or) impliedly. Stoppage in transit: [Sec.50-52]: The goods are stopped when the goods are in carriage (Transport) Right of stoppage of goods in transit can be exercised after the unpaid seller parted with the goods.

He can return the possession until the price is paid. Even this one cane arise when the buyer becomes insolvent. Duration of transit is starting and ends with taking by the buyer.

When the transit comes to an end: When it is received by the buyer (or) by his agent. Before they arrive the appointed designation. If carriers acknowledgement is given to buyer that he holds goods on his benefit. When the carriers wrongfully rides to delivery the goods.

Stoppage can be affected in the following ways Taking the actual possession of goods. By giving notice. Rights of Resale [Sec,54] Under the following conditions the unpair seller can resale the goods. When the goods are of perishable nature. When notice is given regarding and the original buyer didn't, respond. Where seller expressly reserves the right of resale. If Profit =:> Loss- => Surplus Deficit => Taken by seller

=> given by buyer & seller.

When the property o goods not passed : Withholding delivery Stoppage in transit => => Keeping it with seller. Stoppage in the traveling.

Rights against the buyer personally 1) Suit for price : He will ask for price. This case even when the goods are not passed and are also passed to the buyer he can suit for the price. 2) Suit for damages for non-acceptance [Sec.73] Breach of contract.
3) Reputation of contracts

He can treat the contract in subsiding and wit for payment

He can treat the contract are rescinded and suit for damage

4) Suit for interest Duties of Buyer

1. Duty to accept good and pay for them in exchange of possession . [Sec.31-32].

2. Duty to apply for delivery [Sec.35]. 3. Duty to demand delivery at reasonable time [Sec.36(4)]. 4. Duty to accept installment delivery and pay for it [Sec.38(2)]. 5. Duty to take risk of deterioration in the course of transit [Sec.40].
6. Duty to intimate the seller where he reject goods. 7. Duty to take delivery even though there is some delay.

8. Duty to pay price [Sec.55]. 9. Duty to hay damages for non-acceptance [Sec.56].

Auctions Auction Sale It is an offer to sales for the public. Misleading the auction. Auctioneer - Agent of seller.

Rules of Auctions: Se.c64 of sale of Goods, Act 1950 stated under Goods put up for sale in lots [Sec.64(1)] Goods put up for sale in lots [Sec.64(i)] Completion of sale [Sec.64(2)] Right of seller to bid [Sec.64(3)] Sale not notified subject to a right to bid [Sec.64(4)] Reverse price [Sec,64(5)] Use of presented bidding [Sec.64(6)].

Consumer Protection Act 1986: Consumer: He is a person who has paid part (or) full values as agreed [Sec.2(i) (d)]. Uses the product. It does not include a person who purchase goods for resale.

Essential Commodities Act:

 Fixes price for certain commodities. Goods of hazardous nature sold with taking sufficient care (or) without disclosing the essential facts.

Unfair Trade Practice - Sec. 2(1) (r) If the trader uses unfair methods (or) making some statements regarding the goods which are not true. Falsely represent the quality of good as superior. Falsely represent the services are of high standards. Selling second hand (or) renovative goods as new goods. Giving impression that the goods have sponsorship (or) 4pproval from a big company. Stating more uses than actually are Giving more guarantee period.

Rights of Consumer
1. Right to be protected - He should be protected regarding some 41 dangerous

effect of a product froth a company. 2. Right toy be informed - The necessary informed about the product are to be 'informed such at quality, quantity, price' contents, mft. Date, place, exp. Date etc. 3. Right to be assured. 4. Right to be heard.

5. Right to seek redressed against unpaired trade practices. 6. Right to consumer education.

Objects of Consumer Act To protect the interest of consumers Protection of right of consumers. Consumer protection counsels. District level. State level Country level Quasi judicial machinery for speedy redressal of consumer disputes Consumer disputes. Consumer disputes redressed forum. 1.District forum [Sec.10-15] 2. State Commission 3. Central Commission.

District (Sec.10-15) Composition [Sec.10]: A person who is qualified as district judge is called Chairman/ President will take over the case. Two members having knowledge, commerce, law, economic, industry, public relations. Act of these one should be women.

Appointment [Sec.10]: Appointment on the recommendation of the selection committee. Selection committee consists of president secretary related law department and secretary relied to consumer affair.

Term of Office : 5 year (or) 65 years. A president can work for 5 years (or) beyond the 65 years which is earlier. Registration : They can resign at any time to the selection committee (or) State Govt.

Jurisdiction Sec.11:
The opposition party Carried business within the limit of district forum at:

the time complaint procedure on receipt of complaint. Version of case within 30 days.
Reference of sample to laboratory where the complaint alleges defect in

goods which' cannot be determined without proper analysis. Deposit of firm. Remission of fee to laboratory and forum roling of report. Objections by any party. Reasonable opportunity to parties o being hard and issue of order. Sec.12 Sec.13 Manner in which the complaint is made. Procedure on report of complaint.

Sec. 14 Sec.15

Finding district forum. Appeal

In which manner the complaint is made

Complaint may be filed in district forum by 1. Consumer to whom the goods are sold(or) agreed to be sold. 2. Any recognized consumer association (or) member of the association to whom the goods are sold. 3. Where there are numerous consumers having same interest. 4. Central (or) State Govts.

Procedure on receipt of complaint : Sending for testing the product and take necessary action. CONSUMER'S DISPUTES REDRESSAL COMMISSION: (Sec.16-19) Composition (Sec.16): A person who has been judge of high court appointed by State Government. He is called as president. Two other members who have known economic, law, commerce are should be woman. All appointments of members are made by State Govt.

Salary of Members It should be decided by the State Govt.

Term of Office 5 years (or) before 67 years old of a person.

Jurisdiction (Sec.17] Cases between 5 lakhs and 20 1akhs Which against to district forum. Procedure [Sec.18]: Provision of. Sec.12, 13, 14 will be applied with any modifications required. Appeal The parties which are dissatisfied faith the Judgement of state commission then they can appeal to National commission within 30 days. . National Consumer redressal commission [Sec.20-23]: 1) Composition [Sec.20]: A person who has been judge in supreme court and appointed by Central Govt. and also known as President. A persons who had knowledge in the industry economics, law, commerce, accounts etc. are of the four member one should be woman. Selection committee constitutes a person who is a judge in Supreme. Co4rf maintained Chief justice of India. He is called as Chairman Secretary should be from department of Legal affairs in the Govt. of India and related to consumers Dept. of India,

Salary: Fixed by the Central Govt. terms of office. Place of National Commission: Delhi.

3. Jurisdiction [Sec.21] More than 20 L. Appeal against the judgement of state commission.

3. Procedure [Sec.221: It will have the power of civil court as specified in section 13. Power to issue an order to opposite party directing him to do things referred in Sec.14 any modifications if necessary. National commission shall follow procedure prescribed by Central Govt.

4. Appeal [Sec.231: Party dissatisfied with the judgement of the national commission they can appeal to supreme court within 30 days of judgement. Additional 30 days time is given of the case is justified

UNIT 3 NEGOTIABLE INSTRUMENTS ACT 1881 Negotiable Instrument A NI is a method of transferring debt from one person to another. Characteristics of NI : The characteristics of negotiable instruments are as follows
1. Freely transferable. 2. Title of holder free from all defects.

3. Recovery. 4. Presumptions a) Consideration b) Date c) Time of acceptance d) Time of transfer. e) Order of indorsement. f) Stamp g) Holder presumed to be a bolder in due course. h) Proof of protest.

TYPES OF NEGOTIABLE INSTRUMENTS 1. Negotiable by Statue The NI Act mentions only three kinds of negotiable instruments (Sec.13). These are promissory note. Bills of Exchange & Cheques - These instruments are negotiable by statue.

2. Negotiable by custom (or) Usage These are certain other instruments which ho\ e acquired the character of negotiability by the usage (or) custom of trade. In India Govt. promissory notes, banker's drafts and pay order, hundis, delivery orders and railway receipts for goods, have been held to be negotiable by usage (or) custom. 1. PROMISSORY NOTES 2. BILLS OF EXCHANGE 3. CHEQUES

1. Promissory Notes It is an instruments in writing promissory to pay the amount on a particular date to a particular person at a particular place are mentioned and signed by the maker.

Maker: The person who makes the promissory notes and promise to pay is called the maker.

Payee: The person to whom the payment is to be made is called the payee.

Essentials: 1. It should be writing.

2. It must contain an express promise to pay. 3. Definite:& Unconditional. 4. Sign by maker. 5. The maker & payee should be certain. 6. The sum payable should be certain. 7. Promise to pay money only. 8. Bank note (or) currency note is not a promissory note. 9. It cannot be made payable to bearer on demand.

2. Bills of Exchange: These bills are generally drawn for 3 months (or) 6 months. It is an instrument in -written containing an unconditional order signed by the maker directing a certain person to pay certain sum of money.

Drawer: The person who gives the order to pay (or) who makes the bills is called drawer. Drawee: The person who is directed to pay is called drawee. Acceptor: When the drawee accepts the bill, he is called as acceptor.

Essentials 1. 2. 3. 4. It should be in writing It is an order to pay It should be unconditional. It consists of three parties.

5. 6. 7. a) b) c) d) 8.

The parties should be certain. Signed by drawee - Giving acceptance. Certain provisions like Presentment for acceptance [Sec.61] Acceptance [Sec.75] Acceptance for honour [Sec.108] Bill in sets [Sec.132] apply to bills but not to notes. Foreign bills must be protested for dishonour.

3. Cheques A cheque is a bill of exchange drawn upon a specified banker and payable on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic form.

A cheque is a species of a bill of exchange, but it has the following two additional qualification viz.
1. It is always drawn on a specified banker &

2. It is always payable on demand. Marking of cheques: Cheques may be marked as good by the drawee banker at the instance of The drawer (or) The holder (or) The collecting banker

Crossing of Cheques: There are two types of cheques, open cheques and -crossed cheques.

Open Cheque A cheque which is payable in case, a cross the counter of a bank is called a open cheque.

Crossed Cheque A crossed cheque is one which two parallel transverse lines with (or) without the words & co. are drawn. The payment of such a cheque can be obtained only through a banker.

LAW OF PARTNERSHIP : ACT OF INDIAN PARTNERSHIP 1932

Partnership; 2,10 banks, 20 unlimited liabilities. Partnership firm is copied from English law. Indian partnership Act is based on English law of partnership Act 1980. Where the partnership act is silently law of contract applies.

Definition of Partnership Partnership is the relation between person who have agreed to share the profits of the business carried on by all (or) any one of them acting for all [Definition from Sec (4) Para 1 on partnership Act].

CHARACTERISTICS OF PARTNERSHIP 1. Association of two (or) more persons: The min no.of persons is 2 and the minimum is 10. In case of banking and 20 in case of other business. 2. Agreement: An agreement between persons is essential to define the terms of the partnership. It may be express(or) implied. 3. Business : The object of` partnership firm is to carry trade, occupation (or) profession. The business should be legal. There should be no-of transaction dealt. 4. Sharing of profits : The partners will share the profits of the business in a predetermined ratio even losses should be shared equally.

5. Mutual Agency: The partner of the partnership form will play both the roles of principal & agent. The liability of the partner is unlimited. The relation of principal & agent is established among partners. a) He, is the agent of the firm i) ii) iii) iv) He should act within the scope of the authority Should perform in firm's name. For the business. The act should be in such a way that it will get satisfaction & does not effect the interest of the other partners. b) He is the principal as the other partners he has the right to question.

FORMATION OF PARTNERSHIP Partnership is formed on the basis of agreement among the partners regarding partnership called as partnership deed. The partnership deed may be express (or) implied but it is always better to have a written partnership deed in order to avoid future dashes & obligations.

Contents, of. Partnership i) ii) iii) Nature of Business Place of operation Name & address of partners

Duration of firm: The period for which the partners will be with the firm.

a) b) c) iv) v)

For a fixed time Partnership at will Particular partnership Profit sharing ratio Interest on Capital & Drawings.

TEST OF'PARTNERSHIP : (Agreement to share) The firm should satisfy the def. of partnership. Sharing profits and carried on by all (or) anyone of them acting for all then there is partnership. There-should be real relationship between them i.e. written (or) verbal and the name of the partner should be there in the partnership deed.

Case where partnership is not there : i) ii) Joint owners sharing gross returns. Sharing of rendal income where the building is purchased jointly, they are lolled co-owners and not partners. iii) Sharing of profits. a) b) c) Commission paid as a percentage of sales. Salary paid as percentage of sales. Whore a widow (or) child of deceased partner receives a

portion of profit.

d)

Where a person has sold. his business along with its good will

and receives percentage of profit.

Registration of Partnership firm The partnership deed should be prepared by the partners and provided to the registrar of partnership firm. Fees should be paid to get registration. Registration of partnership firm is not compulsory but necessary.

Effects of Non-registration. 1) 2) 3) There can't be a suit between partners & firm. There can't be suit between firm & third party. No right to claim for set-off.

RIGHTS OF PARTNERS 1. Right to take part in business. 2. Right to be consulted. 3. Right to access to accounts - Every partner has the right to access to inspect the books of accounts related to business.
4. Right to interest on capital - It call be El fixed rate (or) out of profits.

5. Right to share profits. 6. Right to interest on advance. 7. Right to be indemnified (make good to the loss). 8. Right to use partnership property.

9. Right to partner to act as an agent of the firm. 10. Right to retire. 11. Right not to be expelled. 12. Right to outgoing partner to share in subsequent profits.

DUTIES OF PARTNERS 1. To carry on business to greatest common advantage. 2. To observe good faith. 3. To indemnify for fraud (Making good to the loss) 4. To attend deligently. 5. Not to claim remuneration. 6. To share losses. 7. To use property of the firm exclusively for the firm. 8. To account for personal profits. 9. To be liable jointly & severally - The partner liable jointly with other partners and severally for all acts of the firm. 10. Not to assign his duties & rights.

TYPES OF PARTNERS 1. Actual & active partner 2. Sleeping partner 3. Nominal partner - Partner for name sake 4. Partner in profits only.

5. Sub partners. 6. Partner Estoppel A person by his acts make the other party believe a fact which is impact not a fact. 7. Minor partner.

RECONSTITUTION OF A FIRM : Reorganization of a firm. The following changes will constitute the reconstitution of a firm. 1. Introduction of a partner [Sec.31] 2. Retirement of a partner [Sec.32] 3. Expulsion of partner [Sec.38] 4. Insolvency of partner [Sec.34] 5. Death of a partner [Sec.35] DISSOLUTION OF FIRM

Without the order of court

With the order of court (Sec 44)

By agreement (Sec 40)

Compulsory Dissolution (Sec 41)

Happening of Some contingency (Sec 42)

By notice (Sec 43)

Dissolution by court [Sec.44j:

1. Insanity - where a partner has become of unsound mind, the court may

dissolve the firm [Sec.44(a)] 2. Permanent in capacity - [Sec.44 (b)]

3. Misconduct [Sec.44 (c)] 4. Persistent breach of agreement - breach relating to management of affairs of the firm [Sec.44(d)]
5. Transfer of interest [Sec.44(e)]

6. Business working at loss [Sec.44(e)] 7. Any other ground [Sec.44(f)].

RIGHTS & LIABILITIES OF PARTNERS ON DISSOLUTION: 1. Right to have business wound up [Sec.46]
2. Right to have the debts of the firm settled out of the property of the firm

[Sec.49] 3. Right to personal profits earned after dissolution [Sec.50] If a particular' partner acquired goodwill be can carry on the trade. 4. Right to return of premium on premature dissolution [Sec.51]. 5. Right where partnership contract is rescinded for fraud (or) mis representation [Sec.52]
6. Right to restrain partners from use of firms' name [Sec.53]

Liabilities of a partner on dissolution i) ii) Liability for act of partners done after dissolution [Sec.45]. Continuing authority of partners for the purpose of winding up [Sec.47]

SETTLEMENT OF ACCOUNTS AS PER PARTNERSHIP DEED

If partnership deed is silent the following rules will apply.

1. Sale of Good will: It is shown in the assets side & sold with other assets

[Sec.55(1)] 2. Sharing of deficiencies: a. First out of profits. b. Next out of capital & c. If necessary, by the partners individually in the proportions in which they were entitled to share profits [Sec.48 (a)] 3. Application of Assets a) b) c) d) In paying the debts of the firm to the third parties. Loans & Advances by partners. Capital contributed. Remaining shared in profit sharing ratio.

CASE: Garner Vs Murray All assets contributed by the partners will be used to fulfill the deficiencies of the firm. The deficiency set off should in the order. If the amount (or) assets are not sufficient to pay the capitals of the partners the deficiency should be borne by the partners in the profit sharing ratio.

G, M & W were partners in a firm on the terms that profits should be divided equally. G's capital is more than M, on dissolution the assets are not sufficient to pay capitals after satisfying the liabilities. Nothing can be obtained from W held the principle of division was for each partner to be treated as liable to contribute an equal third share of deficiency and repay as per share capital. Thus 1. Solvent partner should contribute deficiency of capital in cash. 2. The assets then available are applied in paying the capital.

UNIT - IV

THE COMPANIES ACT: 1956 Pass in 1913 from [English companies Act 1908] First taken from English companies Act exactly But our companies are and that much developing In 1913 the companies are not in Govt. contract.

Lindley's Definition An association of many persons who containing money (or) money's worth to a common stock etc in some common trade (or) business and who share the profits (or) losses arising their from.

Nature of Companies Act 1. Separate legal Entity : A company is an entity separate from its

members. So much can enter into the contract by the company. He commonly held liable for the acts of the company. The property of the company is of the company and not of the share holders.

COMPANY DISTINGUISHED HOW PARTNERSHIP The principal difference between a company & a partnership are as follows: 1. Regulating Act 2. Mode of creation. 3. Legal status. 4. Liability of members. 5. Management 6. Transferability of increase. 7. Authority of members. 8. Powers. 9. Restrictions on powers. 10. Insolvency of firm & winding up of company 11. Debts. Min no of partners 2 12. Dissolution. 13. No. of members Min no of members in private and public 14. Maintenance of books. 2. Limited Liability

Limited to the Value of the shares 3. Perpetual succession 4. Commonseal:

Limited by Guarantee

5. Transferability of shares 6. Capacity to she: (Filing a case in court) KIND OF COMPANIES: 1. On the basis of incorporation: a) Statutory Companies: These are the companies which created by a special Act of the legislature. Eg: RBI, SBI, LIC, IFC, UTI These are mostly concerned win the public utilities. Eg: Railways, transways, gas & electricity companies. b) Registered companies: These companies are the companies which are formed & registered under the companies Act 1956, or were registered under any of earlier companies Acts. 2. On the basis of liability: On the basis of liability companies may be classified into. a) b) a) Companies with limited liability. Companies with unlimited liability.

Companies with limited liability i) Companies limited by shares ii) Companies limited by guarantee.

3.

On the basis of no. of members From the point of view of the general public on the basis of the no. of

members, a company

a) A private company b) A public company a) A private company According to Sec 3 (i) (iii), a private means a company which has a minimum paid capital of Rs.1,00,000 (or) such higher paid up capital as may be prescribed, arid, by its articles. a) b)
c)

Restricts the right to transfer its shares Prohibits invitation to public for subscription. Limits the number of its members to 50 not including its

employee-members (Min 2 max 50) > Mar 50 4 called public company. d) Minimum paid up capital not < 1,00,000.

b)

A Public Company: A public company means a company which

a)

has a minimum paid up capital of Rs.5,00,000 (or) such high paid up capital as may be prescribed.

b)

is a private company which is a subsidiary of a company which is not a private company.

4. a)

On the basis of control: Holding companies: A company is known as a subsidiary company of another company if it has control over the other company [Sec 4(4)].

b)

Subsidiary companies : A company is known as a subsidiary of another company when control is exercised by the station over the farmer called

a subsidiary company. According to Sec.4 (1), a company is deceased top be a subsidiary of another company in, the following these cases. i) ii) iii) 5. Company controlling composition of BOD Holding of majority of shares. Subsidiary of another subsidiary.

On the; basis of Ownership The company may be a

a)

Government company: The company is a Government means any company is which not less than 51% of paid-up share capital is held by. i) ii) iii) The Central Government (or) Any State Government (or) Govts (or) Partly by the Central Govt, and party by one is more state Govt's.

b)

Foreign Company: It means any company incorporated outside India

which has an established place of business in India. Where a min of 50% of paid up share capital of a foreign company is held by one (or) more citizen of India or/and by one (or) more bodies corporate in corporate in India, wheather singly (or) jointly, such comply shall comply with such provisions as may be prescribed as if it were an India company.

FORMATION OF COMPANY

Incorporation of Company Any 7 (or) more persons associated for any lawful" purpose may form an incorporated company with or without liability. They shall subscribe their names to a memorandum of association and,,fs,,1 with other formalities in respect of registration. Company formed may be 1) 2) 3) a company limited by shares (or) a company limited by guarantee (or) an unlimited company.

Documents to be filed with the registrar: 1. MOA - It is the primary document of a company. 2. AOA - Public companies limited by shares, Table A in schedule I. 3. Agreement - Any agreement if the company outer for appointment of managing director. 4. List of directors. 5. A declaration stating that all the requirements of companies Act are complied (Informed). a) The advocate should be of High Court, Supreme Court. b) An attorney (or) a pleader entitled to appear before a High Court. c) A secretary (or) a chartered a/c in whole-time practice in India, who is engaged in the formation of the company (or)

d) A person named in the Articles as a director, manager (or) secretary of the company.

CERTIFICATION OF INCORPORATION:

Necessary to start the business COI - Certificate of Incorporation (Legal Assistance)

Effects of Registration 1. The company becomes a distinct legal entity. 2. The company acquires a perpetual successor. 3. Tile company's property is not the property of the share holders.

PROMOTER Promoter is a person who does the necessary preliminary work incidental to the formation of the company. He is responsible fulfilling the requirements of formation of company as per the company's Act 1956.. He will generally become the first director of the company.

Function of Promoter 1. Keeping name of the company. 2. MOA 3. Name of Directors.

4. Name of the solicitors (Lawyers) 5. Name of Banker. 6. Name of Auditors. 7. Secretary of the company. 8. Registrar office of the company.

Legal status of the promoter Although not an agent for the company, nor a trustee for it before its formation, the old familiar principles of the law of agency, and of trusteeship have been extended and very properly extended to meet such cases.

Quasi-trustee Fiduciary Position of Promoter 1. Not to make any profit at the expense of the company. 2. To give benefit of negotiation to the company. 3. To make full disclosure of profit. 4. Not to make unfair use of position.

Remuneration of Promoter Not right to claim compensation unless it is mentioned in the contract. 1. He can sell his property at profit to the company:
2. Option to buy certain no. of shares.

3. Commission of shares sold.

Preliminary Contract Contract formed with other parties before the formation of the company - Incurred & entered by promoter. Position of promoter in case of preliminary contract: 1. Company not bounded by preliminary contract. 2. Company cannot enforce preliminary contracts. 3. Promoter personally liable.

Provisional Contract: Contracts intered into by a public company after its incorporation but before it is issued the certificate to commence business (CCB).

MEMORANDUM OF ASSOCIATION It is a fundamental document. It is a document of great importance in relation to the proposed company.

Purpose of Memorandum: The purpose of the Memorandum is two-fold.

1)

The prospective share holders shall know the field in or

the purpose for which their money is going to be used by the company and what risk they are undertaking in making investment. 2) The outsiders dealing with the company shall know with

certainty as to what the objects of company are and as to whether

contractual rule into which they contemplate to enter with the company is.w~thin the objects of the company.

Printing & Signing of Memorandum: [Sec."14] The MOA of a company shall be in such one of the form~ of table B,C,D and E and schedule 1 to the companies Act, 1956, as may be applicable to the case of the company, or in a Dorms as near tl1(-,rv to as circumstances admit.

CONTENTS OF MEMORANDUM: [Sec.13] The Memorandum of every company' shall contain the following clauses. a) b) The name of the company The state in which the registered office of the company

is to be situated. c) i) ii) d) The objects of the company Main objects Other Objects. In case of companies with objects not confined to one

state, the states to whose territories the objects extended. e) f) Limited liability Share capital.

The memorandum shall conclude with an "association clause" which states that the subscribers desire to form a company and agree to take shares in it. These clauses are now considered in detail. 1. The Name clause [Sec.20] : The name of company establishes its identity and is the symbol of its existence. a) i) ii) b)
c)

Undesirable name to be avoided.. To similar to the name of another company Misleading. Injunction 6f identical name adopted. Limited (or) private limited as the last word (or)

words of the name. d) e) capital. Prohibition of use of certain names. Use of some keywords according to authorized

2. The Registered Office clause [Sec.146] Every company, shall name a regd office from the day on which it begins to carry on business, or as from the 30th day after the date of its incorporation. 3. The Objects clause [Sec.13(1)]

The objects of a company shall be clear set forth in the Memorandum, for a company can do what is within, or incidental to, the objects started in the Memorandum. The purpose of the objects clause is i) To enable subscribers to the memorandum to know the uses to which the their money may be put. ii) To enable creditors & persons dealing with the company to know that its permitted range of enterprises are activities. a) b) Main objects. Other objects.

4.

The Capital Clause [Sec.13(4)]: The memorandum of a company, having a share. capital, shall state the

amount of share capital with which the comp is to be registered and the division thereof into shares of a fixed amount.

5.

The Liability Clause [Sec.13(2)]: The memorandum of a company limited by shares or by guarantee, shall

also state that the liability of its members is limited.

6.

The Association clause [Sec.13(4)]: It states: We, the several persons whose names and addresses are

subscribed, are desirous of the formed into a company in pursuance of this MOA and we respectively agree to take the no. of shares in the capital of the

company set opposite our respective names. Each subscriber has to take at least one share.

ALTERATION OF MEMORANDUM: Alteration of conditions:

1. Change of Name a)

May change its name ordinary resolution. b) Shall change, its name if the Central Govt. directs within 12 months of registration. c) Fresh certificate of incorporation. Change of Regd. Office from one place to another place within the state. b) Change of Regd. office from one state to another state.

2.Change of Regd. office a)

Procedure for alteration i) ii) iii) iv) v) vi) vii) Special Resolution. Confirmation by the Central Govt. Notice to affected parties. Notice to Registrar. Power of Central Govt. to confirm change discretion Rights & interests of members and creditors to be taken are of. Copy of a special resolution and the order of the court to be fixed with

the Registrar. 3. Alteration of objects : It has two limits

a) Substantive (or) physical limit b) Procedural limit

Procedure for alteration: i) ii) iii) Special resolution Copy of special resolution to be filed. Certificate of Registration.

Doctrine of Ultra Virus: Ultra virus is nothing but anact beyond powers. The company leas power to do all such things as are i) ii) Authorised to be done by companies Act. Essential to the attainment of objects, specified in memorandum.

CASE: Ashbury railway carriage & Iron company ltd. Vs Riche A company is incorporated to make sell (or) send on hire, railway carriages and wagons,-to carry on the business of mechanical engineers and general construction to purchase lease work ad sell mines, minerals and building. The company entered into a contract with Riche for financing the construction of railway line in Belgium. The question arised wheather the contract comes under general contracts. Held the court declared the act as Ultravirus.

Ultra virus of Directors If the act is the ultra virus of director but within the power of the company share holding can ratify.

Ultra virus of Articles If the act is ultra virus of articles of the company can, ratify by altering the articles.

Effect of ultra virus act : 1) Injection by port. 2) Personal liability of directors.

Ultra virus' contracts 1.

2.

Void abinito. Ultra virus acquired property:

ARTICLES OF ASSOCIATION Articles of Association is the secondary document of the company. It contains the rules, regulations and by-laws for the internal management of the affairs of the company. It is to carry on the object of the company. It is to carry on the objects of the company. While preparing AOA care should be taken that they will not go beyond MOA & companies Act.

 Contents of Articles : 1. Share capital 2. Lein on shares. 3. Calls on shares. 4. Transfer of shares. 5. Transmission of shares. 6. Forfeiture of shares. 7. Conversion of shares into stock 8. Share warrants. 9. Alteration of capital. 10. General meetings. 11. Voting rights members. 12. Directors their appointment, remuneration, qualification of BOD 13. Manager 14. Secretary 15. Dividends & Reserver. 16. A/cs, Audit & borrowing powers. 17. Capitalisation of profits. 18. Winding up. Companies which must have their own articles (Sec.20) 1. Unlimited Companies. 2. Companies limited by guarantee. 3. Private companies limited by shares.

Alteration of Articles: Procedure for alteration: A company may, by passing a special resolution alter its articles any time. Again any articles many be adopted which could have been lawfully included originally. A copy of every special resolution shall be filed with Registrar with in the 10 days of its passing.

Limitations of Alteration: 1. Must not be inconsistent with the act. 2. Must not conflict with memorandum. 3. Must not sanction anything illegal. 4. Must be for the benefit of the company. 5. Must not increase the liability of members. 6. Alteration by special reduction. 7. Approval of Central Govt. when public company converted into private company. 8. Breach of contract. 9. Must not result in expulsion of a member. 10. No power of the court to amend articles. 11. Alternation may be with retrospective effect.

Constructive Notice of Memorandum & Articles: Every outsider dealing with a company is deemed to have notice of the contents of the Memorandum & the Articles of the Association. These

documents, on registration with the Registrar, assume the character of public documents. This is known as constructive notice of memorandum & Articles.

Doctrine of Indoor Management The persons dealing with limited liability companies are not bound to acquire into the regularity of the internal proceedings & will not be affected by irregularities of which they had no notice.

Exceptions to the doctrine of Indoor management i) ii) iii) iv) Knowledge of irregularity Negligence Forgery: Acts outside the scope of appearent authority.

SHARE CAPITAL: Types of share capital: 1. Authorised capital (or) Nominal capital.
2. Issued and subscribed capital: S.C S .C 3. Called up capital: Sc > A.C

4. Paid up capital: Paid from the public after the call is made. 5. Uncalled capital: Not called from the public.
6. Reserve Capital: For the purpose of windup.

Alteration of Capital We can alter the share capital in 5 ways. 1. Increase the share capital 2. Consolidate & Divide all (or) part of shares capital into shares of larger amount. 3. Convert fully paid up shares into stock (or) vice versa. 4. Subdivide its shares into shares of smaller @@ 5. Cancel shares which house not been taken up and diminish its authorized capital.

Procedure: 1. Ordinary resolution in general meeting 2. Within 30 days notice should be given to the registrar.

Reduction of capital: a) b) With the consent of court. Without the consent of court.

a) i)

With the consent of court: [Sec.100] supports It may extinguish (or) reduce the liability any of its shares in respect of share capital not paid up.

ii)

It may either with (or) without reducing liability on shares cancel any paid up share capital which @@ lost.

iii)

It may either with (or) without extinguish its reduce liability by paying off any paid up share capital which is in excess of wants of the company.

b)

Without the consent of the court: i) ii) iii) iv) v) vi) Forfeiture shares. Surrender of shares. Cancellation of shares. Purchase of shares. Redemption of redeemable preference shares Buy back of shares under [Sec. 79-A]

Reduction of share capital procedure: [Sec.100 to 103] 1. Special Resolution [Sec.100]

2. Application to the Tribunal [Sec.101] 3. Registration of order of Tribunal with registrar [Sec.103].

Further issue of capital 1. By allotment of new shares [known as rights shares]. 2. By conversion of debentures (or) loans into shares.

MEMBERSHIP IN A COMPANY: Who is eligible for Sec.11 of Indian contract Act 1872: i) ii) iii) Partnership firm Foreigner A company can become a member of another company if the articles permit.

How to become a member? A person may become a member of a company in the following ways. 1. Membership by subscription 2. Membership by application & registration. a) By application & allotment b) By transfer c) By succession. d) Agreement to be in writing. 3. Membership by beneficial ownership. 4. Membership by qualification shares.

Cessation of Membership: (Removal as a member) A person may lease to be the member of a company by 1. Act of the parties, or 2. Operation of law.

1. Cessation of Membership by Act of parties: i) ii) iii) iv) If he transfers his shares to another person. If his shares are forfeited. If the company sells his shares under provision in its articled Shares obtained by misrepresentation.

2. Cessation of Membership by operation of law: i) ii) iii) iv) Insolvency Death Sale of shares in execution of a decree of court. Winding up of the composes.

COMPANY MANAGEMENT: No. of Directors: For Public, company - 3 min Private company - 2 min

12 max.

However a public company having a)

b)

A paid up capital of Rs.5 crore (or) more One thousand (or) more small share holders. Shall

have atleast one director elected by such small share holders in the manner as may be prescribed. "Small share holders" means a share holder holding of nominal value of Rs,20,000 (or) less in a public court.

APPOINTMENT OF DIRECTORS: 1) Rules: a) AOA usually name the first director by their respective names.
b) AOA is silent, those who have subscribed for memorandum,

First directors [Sec.254]

consider as 1St director. c) Who signed in the MOA. 2) Appointment of Directors by the Company [Sec.255-257 & Sec.263 & Sec.264]. Ascertainment of director retiring by rotation & filling of vacancies. a) At the Annual general meeting 1/3 of rotatime directors retire by rotation. b)
c)

Those who are for the longest term in office. At AGM new directors should be accepted.

3)

Appointment of Directors by the Directors: [Sec.260,,Sec.262 & Sec.313] The directors may appoint directors. a) As additional directors [Sec.260] b) In a casual vacancy [Sec.262] c) As alternate director [Sec.313]

4.

Appointment of directors by third party: The articles under contain circumstances give power to the debenture

holders (or) the creditors.

5.

Appointment by proportional representation: The articles of the company may provide the appointment of not less

than 2/ 3rd of the total no. of directors of a public company (or) of a private company which is a subsidiary of public company according to the principles of proportional representation.

6.

Appointment of Directors by the-Central Govt. [Sec.403]: Sec.403 empowers the Central Govt. to appoint such no. of directors on

the Board of company as the Tribunal may, by order in writing, specify as necessary.

Restrictions on appointment of Director: [Sec.266] i) ii) Disqualified by [Sec.11] Disqualified AOA

Disqualifications of Directors [Sec.274]: A director must he a) An individual b) Competent to contract and c) Hold a share qualification. The following persons are- disqualified for appointment as directors of a company:

a)

A person of unsound mind. An undischarged insolvent, Convicted by court. Who is already a director of a public company Disqualified for appointment as director by a order of the court.

b) c) d) e)

Vacation of office by Directors: [Sec.273]

The office of a director shall become vacant if a) he fails to obtain within 2 months of his appointment
b) he is adjudged to be of unsound mind.

c) he applied to be adjudicated an insolvent.

d) he is adjudged an insolvent.

e) he is convicted by court. f) he fails to pay any call. g) he absents himself from 3 consecutive meetings of BOD. h) he fails to make disclosures of BOD. i) Accepts any benefit.

Removal of Directors Directors may be removed by 1. Share holders : By passing an ordinary resolution in general meeting. 2. Central Govt. : Any company's performance is based on company Law Board. Cases where Central Govt. can remove the directors. i) ii) iii) iv) 3. i) If he is found guilty Not as per sound business principles. Causing damage to the interest of trade With an interest of to defraud creditors.

By company's law board Removal of oppression & mis management.

Meetings of Directors: 1. No. of meetings - once in every 3 months, every board should meet & they should meet 4 times in one year. 2. 3. Notice of meetings - It should be given to all directors. Quoram of meeting : 1/3 of the director (or) two directors.

Powers of Directors: 1. General powers [Sec.2911 He can do any act other than

a) Act to be done by company in General meeting.

b) As per the provisions of the company's Act. 2. Powers to be exercised by Board Meetings [Sec.292] a) Make calls b) Issue debentures. c) Borrow money (or) loan. d) Invest funds of the company.

Duties of Directors: 1. Fiduciary Duties:

a)

Exercise power honesty and bonafied for benefit of the company. Not to place themselves in possession where they will have conflict between duties of the complete personal interest.

b)

2.

Duties of care, skill and deligance: a) Should carry duties with reasonable care & use his skills.

3.

Other duties a) Attend the board meetings. b) Be within the authorized powers. c) To disclose interest.

Liabilities of Directors: Liability to third parties. i) Under the act:

a)

In connection with issue of prospective beyond company's On irregular allotment of shares. On failure by the company to pay a bill of exchange, promissory notes, cheque.

b) c)

ii)

Independently to the act

2.

Liability to the company i) ii) iii) iv) Ultra virus acts. Negligence Breach of trust Misfeasance

3) 4)

Liability for breach of statutory duties. Liability for acts of his co-directors.

MEETINGS MEETINGS

Members Meetings

Directors Meetings

Creditors & Debtors Meetings

Statutory
Meeting

Extraordinary
Meeting

Board

Committee

During Lifetime

At the time Of weekdays

Extraordinary
Meeting

Statutory Meeting [Sec.165] First meeting after the formation of the company. To make aware the share holders what is the capital obtained from the public. Funds utilized to achieve the objectives.
Any alternations to made.

Rules of Statutory Meeting: Held only once in the life time of a company
Held between 1 month & 6 months after the commencement of business.

Have to give the statutory report.

Contents of Statutory Report: 1. 2. 3. 4. 5. 6. 7. 8. Total shares allotted. Cash received. Abstract of receipts and payments. Directors & auditors share allotment. Contracts. Under waiting contracts. Arrears of calls. Commission & Brokerage.

Annual General Meeting [Sec.166]:

Conducted every year. Max time gap is 15 months. Notice should be-given 21 days before the meeting. He should state the date, time, venue - Regd. Office.

Objects of AGM: 1. The members will exercise control 2. Discuss affairs of the company. 3. Re-elect director. 4. Appointment of Auditor. 5. Check annual accounts. 6. Dividends declaration.

Extraordinary Meeting [Sec.169] Any meeting other than statutory, annual general meeting are called as extraordinary meeting. Director EGM by the direct Member

-Director - call meeting within 21 days from the date of deposit. - Meeting shall` be held within 45`days from the date of the deposit of the requisition.

AUDITORS: Public company have more than score share capital should appoint auditor. Remuneration Renovates going at the time of AGM Auditors report is only for share holders. They should give the true & fair views of the affairs of the company. A report on his observations is to be made to members regarding accounts. A/c - Balance sheet & P & L a/c and other documents annexured to balance sheet. All information to the best of his knowledge. All books as per law are maintained (or) not should be checked.

 True & fair view of the affairs of the company.

Rights & Powers of Auditors:

a) Right of access to books, accounts & vouchers [Sec.227]

b) Right to obtain information & explanations [Sec.227] c) Right to visit branch offices & right of access of books etc. [Sec.228]. d) Right to receive notice of AGM & attend [Sec.231] e) Right to receive -remuneration.

Duties of Auditors: a) Duty to have knowledge of Articles of the company. b) Report to members. c) Duty of care & equation.

PREVENTION OF OPPRESSION &'MIS MANAGEMENT

Oppression: Deviation from the standards (or) violation of conditions which effects the share holders.

Mismanagement: Improper management regarding the affairs of the company.

Principles of Rule of Majority: It states that democratic rule will be considered. As per democratic setup the majority interest will prevail, and bind the minority. It was established in the case of Foss Vs Harbottle.

Two minority share holders in a company alleged that the directors were guilty for buying their own land for company's use at higher prices. ; The share holders in general meeting by majority resolved not to take action .& held, court stated that majority's will be followed.

Minority share holders: Apply to court for wind up. Approach CLB for appropriate relief. Approach to Govt. for appropriate relief.

Prevention of Oppression [Sec.397]: It states the no. of members required of the company to complain.

Relief of CLB: 1. 2. If states the no. of company are conducted properly. For public interest.

Prevention of Mismanagement [Sec.398J: It states the no. of members required of the company to complain (100 members should be there to complain)

Powers of CLB: 1. 2. 3. 4. Regulation. Purchase of shares. Termination It will give 3 months time.

Appointments of Director by Central Govt.

WINDING UP:

Models of Windup: 1. Winding up by the tribunal (Sec.433 to 483) 2. Voluntary winding up, (Sec.484 to 521). This maybe
a) Member's voluntary winding up.

b) Creditor's voluntary.

Winding up by court [Sec.433 - 483] (Compulsory) :

1. Special resolution of company [Sec.433(a)] 2. Default in delivering the statutory report to the registrar [Sec.433 (b)]. 3. Failure to commence (or) suspension of business [Sec.433 (c)] 4. Reduction in membership [Sec.433 (d)] 5. Inability to pay its debts [Sec.433 (e)].

Winding up Voluntary winding up [Sec.484 to 521]: 1. Memorandum Voluntary winding up. 2. Share holders & company should be solvent.

Provisions applicable: a) Appointment & Remuneration of liquidator.

b) 13oard power to seize on appointment of liquidator.

c) Notice to registrar. d) Right of liquidator to accept shares. e) Duty to call for creditors meeting. f) Final meeting & dissolution.
g) Creditors voluntary winding tile.

Provisions related to winding up of companies by creditors : a) Meeting of creditors. b) Notice of resolution to registrar. c) Appointment of liquidator. d) Deciding liquidators remuneration.

UNIT- 5

LAW OF INSURANCE ACT 1938: LIC Act in the year 1956. LIC Act controls life insurance business in the country Marine Insurance Act 1963. General Insurance Corporation in 1972. It will supervises other insurances: The main principle underlying insurance is the poding of risks.

CONTRACT OF INSURANCE: It is a contract by which a person is consideration of a sum of money undertakes to make good the loss of another against a specified risk.

Eg:

Fire (or) to compensate him (or) his estate on happening of a specified event.

Eg:

Accident (or) death.

The parties insurance contract are i) ii) iii) Insurer - who accepts the risk Insured (or) assured Premium person who risk is undertake

The consideration what insurer gets.

Kinds of Insurances are: i) ii) iii) iv) v) vi) vii) Life Insurance Fire Insurance. Marine Insurance Personal accident insurance Burglary Insurance Vehicle Insurance Keyman Insurance

GENERAL PRINCIPLES OF INSURANCE 1. Utmost Good Faith: Insurer How much premium Wheather to accept/not. There should be faith between insurer & insured.
The insured should disclose all the material facts related to the property.

If the assured does not make complete disclosure the insurer cannot judge. i) ii) Wheather he should accept the risk What should be the premium

The insurer can avoid the contract if all the material facts are not disclosed.

2.

Indemnity: Pausing good to the loss.

CASE: Castellain Vs Emptor P insured house against fire sales equently he sold to R for 3100. But before the sale is completed it is destroyed by fire & perceived value from insurance company. P then received from R as per contract held the insurances company can recover.

3.

Insurable Instrument: Every person has the right to get insured. The insured must have legal

relationship with the subject matter and loss should be caused to him.

4.

Cause proxima Loss should be caused in different ways it insured. Th8e loss should be

caused by the perils insured against. If the loss is caused by two (or) more causes the nearest cause will be considered.

5.

Risk must attach There should be some risk involved in the subject matter. Ex: Life Insurance Fear of death Non life - To protect the property from lord.

6.

Mitigation of loss: The insured should take measures to avoid (or) reduce the loss. If the

insured doesn't take proper steps the insurance company is not liable.

7.

Contribution = Sum insured with an insurer x loss Total sum insured

Contribution

If the insured have insurance from two (or) more with the same subject matter the loss will be paid by all the insures together. Eg: A insures his bike for Rs.15,000 from ICICI and Rs.30,000 from Choda

Mandalam. In case of loss of Rs.15,000 ICICI will pay Rs.5000/and the other company Rs.10,000/ 15,000 x 5,000 = 45,000 3 3 5000

Conditions under this: i) ii) iii) iv) Same subject matter. Same perils (Dangers) All policies are in force. If one insurer paid the intire loss (or) amount more than his share the claim from the other insurer.

8.

Subrogation: It applies to fire & marine as payment of loss the insurer is entitled . to

be put ;into the place of assured (insured), he will get the right to be protected against loss. All rights against third party will be held by the insurer.

Conditions for Subrogation: i) ii) Only rights & remedies under the contract of insurance. If insurer pays the amount.

9.

Period of Insurance Life continuous one year (or) for a fixed voyage.

Fire& Marine

LIFE INSURANCE:
The life insurance business in India was, nationalized on January

19,1956.
The nationalization of life insurance is a vital link in the process of

widening and deepening -of all possible channels of public savings for then development of the country. It is an important step toward mobilizing savings.

The points which we have to know in the insurance are 1. Payment of premium 2. Certain to getback the amount. 3. No Indemnity. 4. Insurable Interest

The following persons held to have memorable interest a) b) artists.

c)

In the life of relatives supported by him. Properties of a drama company in the life of

To the life of debtor up to the an1ount of debt. Surity in the life of co-surity. Partners in the life of co-partners.

d) e)

TYPES OF LIFE POLICIES: 1. Endowment policies. 2. Child endowment policies 3. Whole life policies - Here premium is paid throughout the life . time and amount is paid only or death. 4. Limited payment life policy. 5. Joint life policy. 6. Convertible whole life. 7. Anticipated policy.

Pay premium up to - some time after that our money we get in the installment basis. 8. Annuity polity; After paying premium to some years. 5 years - 20% 5 years - 30% 10 years - 50% 9. Sinking Fund policy 10. Janata Policy. If be does here he avail get 80% amount.

SUCIDE: Life policies contain clause that no amount insured commits sucide.

Assignment & Non-Assignment Nomination: Policy of life insurance can be assigned, transferring the rights of the insured in respect of the policy [Sec.38] of the Insurance Act 1938 defines Agreement.
1. Procedure: Assignment may be with (or) without consideration. It can

be indorsed upon the policy (or) by separate instrument, should be signed, and attested by one witness 2. By notice: 3. Priority : 4. Recognition

Nomination: It is the person to whom the money is to be secured in the event of death.- Generally nominee is given at the time of taking the policy. The insured may appoint more than one nominee and can change the nominee before the policy matures. Sec.39 of the Insurance Act 1938 contains the following rules regarding nomination. 1. Procedure. 2. Cancellation & change. 3. Automatic cancellation. 4. Discharges of insurer.

FIRE INSURANCE: A contract of fire insurance is a contract where by the insurer undertakes, in consideration of the premium paid, to make good any loss (or) damage caused by fire during a specific period.

Characteristics of a Fire Insurance Contract: Re Insurance: Every insurer has a limit to undertake risk. So the object of reinsurance is to spread the risk. Re-insurance is not liable to insurer.

Double Insurance : When the issued insures the same risk with two (or) more insurers.

Rules: a) Recovery of actual loss b) Excess amount recovered to be held in trust c) Contribution
d) No limit on life insurer.

1. Indemnity - The maximum amount of loss can be domain. 2. Good faith - Belief in insurer 3. Insurable Interest 4. Loss resulting from fire 5. Subrogation & contribution 6. It is a contract from year to year

Average clause in a fire policy: The subject matter of fire insurance i.e. property (or) goods, may be over-insured (or) under-insured. Over insurance is automatically checked. In case of loss, the insurer is liable to pay the actual amount of loss, subject to the maximum amount. Where the fire causes only a partial to the property insured, the assured is entitled to recover the full amount of loss provided that amount is covered by the policy.

7.

Partial loss The entire subject, matter is not destroyed

Sum to be recovered

V alue of policy Full value of subject m atter

x Loss

INSURABLE INTEREST In case of fire insurance, the assured must have insurable interest ill the subject - matter both at the time of contract and at the time of the loss. The following persons have insurable interest in the subject matter of insurance in case of fire policy a) Owner b) Mortgage (or) pledge c) Insurer
d) Pawn broker e) Official receiver (or) assignee in insolvency.

f) Ware houseman as regards goods of the customer. g) A person is lawful possession h) Common carrier (Transport company) i) Finder of goods. j) Factor k) Commission Agent l) Trustee

Rights of Insurer: The insurer under a fire policy has the following rights. i) To avoid the non-disclosure. ii) Right of control over property iii) Right of entering the property iv) Right of subrogation v) Right of salvage vi) Right of Reinstatement vii) Contribution.

Types of Fire Insurance Policies: 1. Specific policy 2. Comprehensive policy

3. Valued policy

4. Floating policy. 5. Replacement (or) reinstatement - policy.

MARINE INSURANCE: Marine Insurance is an integral part of the present day commerce. It is based on the English Marine Insurance Act 1906, which is itself based on the Law merchant.

Marine Adventure: 1. Any ship, good (or) movable property is exposed in maritime perils dangers in sea.
2. The carving or acquisition of any freight, passage, money, commission,

profit (or) other precautionary benefit (or) security for any advances, loans (or) disbursements is endangered by the exposure of insurable property maritime perils.
3. Any liability of third party.

4. Maritime perils is caused by sea, fire, war, by thieves, jettisons. 5. Losses covered a) Ship striking the sunked rock. b) A loss by foundering, collision with anothership. c) Negligent navigation. d) Damaging to risk. e) Damage caused to cargo by rate. Making a hole in the bottom of a ship and sea water entering the ship through the hole. 6. Hosses not covered a) I loss occasioned by natural chemical action of salt water. b) Damage by rates
c) Action of worms on timbed

d) Death of cattle due to want of fodder, voyage having been lengthened

by the captain of the ship.

Types of Marine Policies 1. Voyage policy. 2. Time policy 3. Mixed policy (Combination of Voyage & time policy)
4. Value policy

5. Unvalue policy 6. Floating policy 7. Wagering policy

Form of Marine Policy: A model form of marine policy is given on a schedule to the Marine Insurance Act. It is an adoption of the Lioyds policy.

Rules for construction of policy: 1. Loss- (or) Not loss 2. Duration of the risk 3. Touch & stay. 4. Incharmra clause 5. Running down (or) collision clause 6. Free or particulars average clause
7. Free of capture and seizure clause

Warranties of Marine Insurance Contract : The assured undertake some particular thing shall (or) shall not be done. 1) Express Warranties: a) The ship is seaworthy
b) The ship will sail on a specified days.

c) The ship will produced to destination without any deviation. d) The ship is neutral & will remain so during the voyage.

2)

Implied Warranties a) The ship is sea worthiness

b) Legality of voyage, (Journey in Sea)

c) Non-d nation

Voyage: Every ship should follow the course specified @@@ policy. If the course is not specified the ship should following the ordinary course. When deviation is excused. A deviation (or) delay in prosecuting the voyage as specified in the policy is exercises.
1) Where it is authorized by a special team.

2) Circumstance beyond contract. 3) For the safety of the ship. 4) Saving human life. 5) Purpose of obtaining medical (or) medical aid.

Losses: Unless the policy otherwise provides, the insurer is liabI6 for any loss proximately caused by a peril insured against. It is two types. 1. Total loss - entire cargo is spoiled 2. Partial loss

1)

- Actual total loss - subject to the matter is lossed. - Constructive total loss - It is avoidable Here the expenses > Losses It is unnecessary to the company 3) Partial loss : Particular average loss General average loss Expenses are incurred to protect the subject matter.

Right of Insurer: on payment: 1. Right of subrogation (step into the shoes of creditors). 2. Right of contribution 3. Right of under insurance.