Sie sind auf Seite 1von 151

Company Law

Nature of a company:
A Company, in common parlance
means a group of persons
associated together for the
attainment of a common end.
Definition of a Company

A Company is defined as an
artificial person created by Law
with perpetual succession and
a common seal.
Characteristics of a Company

1. It is a separate legal entity

2. Limited liability
3. Perpetual succession
4. Common seal
5. Transferability of shares
6. Separate property
7. Capacity to sue
Kinds of Companies
Companies can be classified into various kinds
on the following basis.
1. On the basis of incorporation:-
 Statutory Companies: These are companies created
by a special act of the Legislature

Eg. Reserve Bank of India

State Bank of India
Life Insurance Corporation
Industrial Finance Corporation

 Registered Companies:
These are companies which are formed and
registered under the companies Act 1956.
2. On the basis of liability
1) Companies with liability may be:
a. Companies limited by shares or
b. Companies limited by guarantee

2) Companies with unlimited liability:

1. Where the Liability of the members of a company

is limited to the amount unpaid on the shares, such
a company is known as company limited by shares.

2. Where the liability of the members of a company

is limited to a fixed amount which the members undertake
to contribute to the assets of a company in the event of
being wound up, such a company is known as company
limited by a guarantee.

3. Unlimited Companies: A Company without
limited liability is known as company with
unlimited liability. In such a company every
member is liable for the debts of the company
as in a partnership is proportion to his interest
in the company.
III On the basis of Number of members.

On the basis of number of members a company can


1) Private Limited Company

2) Public Limited Company

A private company is a company which has a

minimum paid up capital of Rs. One lakh
or such higher paid up capital as may be prescribed
by its articles.
1. Restricts the right to transfer its shares if any. This
restriction is needed to preserve the private character
of a company

2. Restricts the number of members of the company to

a maximum of 50.
3. Prohibit any invitation to the public to subscribe for
any shares or debentures of the company

4. Prohibits any invitations or acceptances of deposits

from persons other than its members, directors or
their relatives.
Public Limited Company:

1. Is not a private company

2. Has a minimum paid up capital of

Rs.5,00,000 or such
higher paid up capital as may be
Distinction between Public Limited Company and
Private Limited Company

1.Minimum number:- The minimum number of

persons required to form a public company is 7. It is
‘2’ in case of a private company.

2.Maximum number:- There is no restriction on

maximum number of member in a public
company, whereas the maximum
number cannot exceed 50 in a private

3.Minimum capital:-
A public company must have a minimum of
Rs. 5, 00,000 as capital.
A private limited company must have a minimum
capital of Rs. 1,00,000/-

4. Number of Directors:-
A public company must have at least 3
directors whereas private directors must have 2
5. Restriction on appointment on directors:-
In the case of public company the directors
must file wit the Registrar consent to act the directors or
sign as undertaking for their qualification shares. The
directors of a private company need not to do so.

6.Restriction on Invitation to subscribe for shares:-

A public company invites the general public to subscribe
for the shares in or the debentures of the company. A
private company by its articles prohibits any such
invitation to the public.

7.Transferability of shares or debentures:-
In a public company the shares and
are freely transferable. In a private company
the right to transfer shares and debentures is
restricted by the articles.

8.Special privileges:-
A private company enjoys some special
privileges. A public company enjoys no such
If the articles of a company do not provide for a
larger Quorum, five members personally present in
the case of Public company is Quorum for a
meeting of the company. It is 2 in the case of
private company.

10.Managerial remuneration:-
Total Managerial Remuneration in a public
company cannot exceed 11% on the net profits. No
such restriction applies to a private company.
IV On the basis of control.

On the basis of control companies can be

classified into:
1. Holding Companies and
2. Subsidiary Companies
Holding Companies:
A company is known as the holding company of
another company if it has control over that other
A company is “deemed to be the holding
company of another if, but only if, that other is
its subsidiary”. Now the question is: what is a
subsidiary company?

Subsidiary company:
A company is known as a subsidiary of another
when control is exercised by the latter (called
holding company) over the former called a
V On the Basis of ownership:

On the basis of ownership, a company may be a

Government company , or Non-Government

The latter is controlled and operated by private

Government Company
A Government company means any
company in which not less than 51 percent
of the paid-up shares capital is held by
a. the Central Government or
b. any state Government or Government ,or
c. Partly by the Central Government and partly
by one or more State Governments. For example,
State Trading Corporation of India Ltd. And Minerals
and Metals Trading. Corporation of India Ltd are
Government companies. The subsidiary of a
Government company is also a Government company.
Formation of a company

Before a company is formed, certain preliminary steps are

necessary e.g. whether it should be a private company or
a public company, what its capital should be, and whether
it is worthwhile forming a new company or taking over the
business of an already established concern. All these
steps are taken by certain persons known as “Promoters”.
They do all the necessary
preliminary work incidental to the
formation of a company.
Incorporation of company:

Any 7 or more persons (2 or more

in case of a private company) associated for any law
full purpose may form an incorporated company, with
or without limited liability. They shall subscribe their
names to a Memorandum of Association means
signing the Memorandum.
The Memorandum is a token of their agreement to
associate themselves.
A company for the purpose of incorporation shall file
before the Registrar of Companies an application
along with the following documents and necessary

1.Memorandum of Association duly signed by

the subscribers.

2.Articles of Association duly signed by the

3.Agreement if any which the company
proposes to enter in to with any individual
for appointment as it’s managing or whole
time Director or Manager.

4.A list of the directors who have agreed to become the

First Directors of the company and their written consent to
act as Directors and take up qualifying shares.

5.A declaration stating that all the

requirement of the companies Act and
other formalities relating to registration
have been complied with.
Certificate of Incorporation:

When the requisite documents are filed with the

Registrar, the Registrar shall satisfy himself that statutory
requirement regarding requisition have been duly complied

If the Registrar is satisfied, he retains and registers the

memorandum, the articles and other documents filed with
him and issues a certificate of the incorporation. This is the
proof of the formation of a company.
Memorandum of Association

Memorandum of Association is the charter of the

company and it lays down the area of operation of the
company. It is a document of great importance which
contains the fundamental conditions upon which alone
the company is allowed to be operating.
1. The name clause
2. The registered office clause
3. The objects clause
4. The capital clause
5. The liability clause
6. The association clause
7. The declaration clause

Articles of Association are the rules, regulations & bye-

laws for the internal management of the affairs of the
They are framed with the object of carrying out the aims &
objects as set out in the memorandum of association.

The article are next in importance to the

memorandum of association. In framing
the articles of a company care must be
taken to see that regulations framed do
not go beyond the powers of the company
itself as contemplated by the
memorandum of association.

1. Share capital, rights of share holders, variation of these rights,

payment of commissions, share certificates
2. Lien 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 & proceedings.

11. Voting rights of members, voting & poll, proxies
12. Directors, their appointment, remuneration,
qualifications, powers & proceedings of board of
13. Manager
14. Secretary
15. Dividends & reserves.
16. Accounts, audit & borrowing powers.
17. Capitalization of profits.
18. Winding up.
Distinction between Memorandum of
Association & Articles of Association

Memorandum of Articles of Association

1. It is the charter of 1. They are the
the company regulations for the
indicating the nature internal
of its capital. It also management of the
defines the company & are
company’s subsidiary to the
relationship with memorandum
outside world.
2. It defines the scope 2. They are the rules
of the activities of for carrying out the
the company, or the objects of the
area beyond which company as set out
the actions of the in the memorandum
company cannot go.
3. It, being the 3. They are subordinate to the
charter of the memorandum. If there is a
company, is the conflict between the articles &
supreme the memorandum, the latter
document prevails.

4. Every company 4. A company limited by shares

must have its own need not have articles of its
memorandum own. In such a case, Table A

5. Any act of the 5. Any act of the company which

company which is is ultra vives the articles (but in
ultra vires the intra vires the memorandum)
memorandum is can be confirmed by the
wholly void & shareholders
cannot be ratified
even by the whole
body of

A company has the power to do all such things as are:

1. Authorised to be done by the companies act, 1956
2. Essential to the attainment of its objects specified in
the memorandum
3. Reasonably & fairly incidental to its objects; every
thing else is ultravires the company. ‘Ultra’ means
‘beyond’ & ‘Vires’ means ‘Powers’. The term
ultravires a company means that the doing of the act
is beyond the legal power & authority of the

Every outsider dealing with a company is deemed to

have notice of the contents of the Memorandum & the
Articles of Association. These documents, on
registration with the Registrar, assume the character of
public documents. This is known as constructive notice
of Memorandum and Articles.

There is one limitation to the doctrine of constructive notice

of the Memorandum & the Articles of company. The
outsiders dealing with the company are entitled to assume
that as far as the internal proceedings of the company are
concerned, everything has been regularly done. They are
presumed to have read these documents & to see that the
proposed dealing is not inconsistent therewith, but they are
not bound to do more; they need not inquire into the
regularity of the internal proceedings as required by the
memorandum & the Articles. They can presume that all in
being done regularly. This limitation of the doctrine of
constructive notice is known as the “doctrine of indoor

Prospectus is defined as “any document

described or issued as a prospectus and includes
any notice, circular, advertisement or other
document inviting deposits from the public or
inviting offers from the public for the subscription
or purchase of any shares in, or debentures of, a
body corporate.”
Prospectus must be in writing & it is an invitation
to the public
1. General information
2. Capital structure of the company
3. Terms of the present issue
4. Particulars of the issue
5. Company, management & project
6. Particulars in regard to the company and other
listed companies under the same management
7. Outstanding litigations
8. Management perception of risk factors

The prospectus should be dated & signed

by the directors.

If there is any misstatement of a material fact in a

prospectus or if the prospectus is wanting in any
material fact, there may arise
1. Civil liability
2. Criminal liability
Liability for misstatements in prospectus

Civil Liability Criminal Liability

Against the Against the directors,

company promoters, and

Rescission of contract Claim for damages Damages Compensation under Damages for non-
sec. 62 with sec. 56 compliance

For fraudulent For innocent

misrepresentation misrepresentation

A private company can commence business

immediately after its incorporation. A public company
can do so only after it obtains a certificate of
commencement of business.

Share capital means the capital raised by a company by

the issues of shares.
1. Authorized / Nominal / Registered capital
2. Issued capital
3. Subscribed capital
4. Called up capital
5. Paid up capital
6. Uncalled capital
7. Reserve capital

The company may generally issue 2 kinds of shares.

1. Equity shares
2. Preference shares

Equity share means a share with voting

rights, & differential rights as to dividend.
Preference shares means those shares
which carry preferential rights regarding
payment of dividend & repayment of capital
on winding up.

1. Cumulative preference shares

2. Non-cumulative preference shares
3. Participating preference shares
4. Non-participating preference shares
5. Convertible preference shares
6. Non-convertible preference shares
7. Redeemable preference shares
8. Irredeemable preference shares
The members or share holders of the company are the
persons who collectively constitute the company as a
corporate entity.
A registered share holder is a member but a registered
member may not be a share holder.
A person who owns a bearer share warrant is a share
holder but he is not a member as his name is struck off
the register of members.
This means that a person can be a holder of shares
without being a member. A member may be a share
holder but a share holder may not be a member.
A legal representative of a deceased member is not a
member until his name is registered. He is however, a
share holder even though his name doesn’t appear in
the register of members

1. Membership by subscription
2. Membership by application & registration
3. Membership by beneficial ownership
4. Membership by qualification shares

A person may cease to be the member of a

company by –
1. Act of the parties,
2. Operation of law
1. Cessation of membership by act of the parties. A
person may cease to be the member of a company –
1) If he transfers his shares to another person
2) If his shares are forfeited
3) If the company sells his shares under some
provision in its Articles (eg: to enforce a lien)
4) If he rescinds the contract to take shares on the
ground of mis-representation in the prospectus or
on the ground of irregular allotment
5) If redeemable preference shares are redeemed
6) If he surrenders his shares, where surrender is
7) If share warrants are issued to him in exchange
of fully paid shares
2. Cessation of membership by
operation of law:
This covers the following cases-
1. Insolvency
2. Death
3. Sale of shares in execution of a decree
of a court
4. Winding up of the company
Transfer & Transmission Of Shares
Distinction between transfer & transmission

Transfer of shares Transmission of shares

1. It is effected by a 1. It takes place by
voluntary act of the operation of law, eg:
parties due to death,
2. It takes place for insolvency or lunacy
consideration of a member
3. The transferor has to 2. No consideration is
execute a valid involved
instrument of 3. There is no
transfer prescribed
4. As soon as the instrument of
transfer is complete, transfer
the liability of the 4. Share continue to be
transferor ceases. subject to the
original liabilities


The various meetings of a company may be classified as
I. Meetings of share holders. These meetings may be:
1. General meetings which include –
1) Statutory meetings
2) Annual general meetings &
3) Extra ordinary meetings
2. Class meetings of share holders
II. Meetings of creditors and debenture – holders
III. Meetings of directors

‘Quorum’ means the minimum number of members who must

be present in order to constitute a valid meeting and transact
business threat. The quorum in generally fixed by the Articles. If
the Articles of a company do not provide for a longer quorum,
the following rules apply:
1)5 members personally present in the case of a public
company (other than a deemed public company), & 2 in the
case of any other company, shall be the quorum for a meeting
of the company. For the purpose of quorum a person may be
counted as 2 or more members if he holds shares in different
capacities. eg: as a trustee and also in his own right.
Company Management
 The directors are the brain of a company:-

 ‘Director’ includes any person occupying the position of

director, by whatever name called. The important factor to
determine whether a person is or is not a director is to
refer to the nature of the office and its duties.

 Only individuals can be directors:-

Number of directors:-
Minimum number:-
 Public limited company shall have at least 3
directors and a private limited company shall have
at least 2 directors
Maximum number:-
 Articles of Association of a company may prescribe the maximum
and minimum number of directors for its Board. The number so fixed
may be increased or reduced within the limits prescribed by the
Articles by an ordinary resolution of the company in general meeting.
 Any increase in number of directors beyond the
maximum permitted by the Articles shall be approved
by the Central Government. But where the increase in
number does not make the total number of directors
more than 12, no approval of the Central Government is
Position of Directors:-

 Directors as agents:-

 Directors are not employees:-

 Directors are not prevented from being employees by entering into a contract
of employment with the company.

 For certain matters under the Companies Act, the directors are treated as
officers of the company.

 Directors are treated as trustees.

 True position is that directors are in a fiduciary


 No person to be a director of more than 15

Removal of Directors:-

Directors may be removed by –

 The shareholders,

 The Central Government,

 The Company Law Board,

Managerial Remuneration:-

The total managerial remuneration of the directors

and the manager in respect of any financial year shall
not exceed 11 per cent of the net profit of the
company for that financial year.
Winding up of a

Winding up of a company is a process of putting an

end to the life of the company. It is a proceeding by
means of which a company is dissolved and in the
course of such dissolution, its assets are collected, its
debts are paid off out of the assets of the company and
if any surplus is left, it is distributed among the
members in accordance with their rights
Modes of Winding up
Compulsory winding up by court
A company may be wound up by an order of court
under following grounds,
• If the company has by a special resolution
resolved that it may be wound up by the court.
• Default in delivering statutory report
• Failure to commence business within a year of
• If the number of members is reduced below 7 in
case of a public Ltd company and below 2 in case
of a Pvt Ltd company
• Failure to repay its debts
• On just and equitable grounds.
Voluntary Winding up

The object of a voluntary winding up is that the

company and its creditors are left to settle their
affairs without going to the court, but they may apply to the
court for any directions or orders if and when necessary.
It may be :
Members voluntary winding up
This type of winding up takes place only when the company is
in a position to pay its debts. Declaration of solvency is made
by the director. A meeting of members is called and a
liquidator is appointed. No committee of inspection is formed.
The liquidator can exercise some powers with the
sanction of a special resolution of the company.
The meeting of members is again called on the
completion of the proceedings of winding up.

Voluntary Winding up

Creditor’s voluntary winding up.

This type of winding up takes place only if the
company is not in a position to pay off its debts. Here
the meeting of the members and the creditors is called.
The liquidator is appointed by the creditors and the
remuneration is fixed by the committee of inspection.
The liquidator exercises power with sanction of the
Winding up subject to
supervision of the
At any time after a company has passed a
resolution for voluntary winding up, the court may
make an order that the voluntary winding up will
continue, but subject to the supervision of the
court and with such liberty of creditors,
contributors and others to apply to the court on
such terms and conditions as the court thinks fit.
Nature of Partnership

Definition : Partnership is the relation between

persons who have agreed to share the profits of a
business carried on by all or any of them acting for
all (Sec.4)
Characteristics of partnership:
• Association of two or more persons
• Agreement.
• Business
• Sharing of profits of the business.
• Mutual agency.
Nature of

Partners, firm and firm name: Persons who

have entered into partnership with one another
are called individually partners and collectively a
firm name. the partners may carry on business
under any name and style. But the name should
not resemble the name of any existing firm and it
should not show or imply the parronage of
Law of partnership is an extension of the law of
Nature of Partnership

Partnership and firm: Partnership is merely an abstract

legal relationship between partners. A firm is a collective
name for all the partners. Partnership is an abstract thing;
a firm is a concrete thing.
Formation of partnership: Partnership is a special type
of contract. As such all the essential elements of a valid
contract must be present. But a minor may be admitted to
the benefits of partnership with the consent of all the
partners for the time being and no consideration is
required to create
Nature of

Duration of partnership : A partnership

may be for a fixed period of time. There no
provision is made by the partners for the
duration of the partnership, it is partnership-
at-will. When a person becomes a partner
with another person or persons I a particular
adventure of undertaking, it is a particular
Test of Partnership

In order to determine the existence of partnership between

a group of persons, one has look to the agreement
between them. If there is no agreement, we shall have to
refer to Sec. 6. In determining whether a group of persons
is or is not a firm, or whether a person is or not a partner in
a firm, regard shall be had to the real relation between the
parties as shown by all relevant facts taken together. The
sharing of profits or of gross returns arising from property
by persons holding a joint or common interest in that
property does not of itself make such persons partners.
Again the receipt by a person of a share of the profits of a
business does not of itself make him a partner with
the persons carrying on the business. The business.
The test of partnership is mutual agency and not
necessarily the sharing of profits or the contribution
of capital or the holding of a particular property jointly
Registration of Firms
The partnership Act does not provide for the
compulsory registration of firms. But by creating certain
disabilities from which an unregistered firm suffers, the
Law has made the registration of firms compulsory.
Effects of non-registration:
 A partner of an unregistered firm cannot file a
suit against the firm or any partner thereof for
the purpose of enforcing a right arising from a
contract or a right conferred by the Partnership
 No suit can be filled on behalf of an
unregistered firm against any third party for
the purpose of enforcing a right arising from a
 An unregistered firm cannot claim a set-off
exceeding Rs. 100.
Registration of
Procedure for registration: The registration of a
may be effected any time by filling an application in
the form of a statement giving the necessary details
with the Registrar of Firms of the area. The
application for registration should be accompanied
by the prescribed registration fee. When the
Registration is satisfied that the provisions as laid
down in the Act have been duly complied with, he
records an entry of the statement in the Registry of
Firms, and filed the statement. He then issues a
certificate of registration.
Relations of


The relations of the partners to one another are
usually governed by the agreement among them.
Where there is no specific agreement, their
relations to one another are governed by Secs. 9
to 17 of the Partnership Act.
Relations of Partners

Rights of a partner: Subject to the agreement between the

partners, a partner has the right-
 To take part in the conduct of the business of the
 To be consulted,
 Of access to accounts and books
 To share in the profits of the business
 To interest on capital (only if there is an agreement)
 To interest on advances at 6 per cent per annum
 To be indemnified where he incurs liability in the
ordinary course of business of the firm.
 To have the use of partnership property for the
purposes of the business of the firm
 To retire
 Not to be expelled.
Further as agent of the firm, he has the right to act
in an emergency to protect the firm from loss.
Duties of a partner:

 To observe good faith

 To indemnify for fraud
 To attend diligently to the business of
the firm
 Not to claim any remuneration
 To share losses
 To indemnify for willful neglect
 To hold and use property of the firm for
the firm
 To account for personal profits
 To account for profits in competing
 To act within authority
 To be liable jointly and severally.
 Not to assign his rights
Every partner is the agent of the firm for the
purposes of the business of the firm (Sec. 18)
Authority of a partner. The authority of a partner
means the right of a partner to bind the firm by his
acts. This authority of a partner to bind the firm may
be an express authority or implied authority. Where
there is no partnership agreement or where the
agreement is silent, Sec. 19 (1) provides that the act
of a partner, which is done to carry on, in the usual
way, business of the kind carried on by the firm, binds
the firm. This authority of a partner is called this
implied authority.
No implied authority. In the absence of any usage or
custom of trade to the contrary, the implied authority of a
partner does not empower him to-

• Submit a dispute relating to the business of the firm to

• Open a baking account on behalf of the firm in his own
• Compromise or relinquish any claim or portion of claim by
the firm
• Withdraw a suit or proceeding filed on behalf of the firm;
• Admit any liability in a suit or proceeding against the firm;
• Acquire immovable property on behalf of the firm;
• Enter into partnership on behalf of the firm
[Sec. 19 (12)]
A partner can do any of the above things if –
• He has specific or express authority of the
partners; or
• The usage or custom of trade permits him
Types of partners.
• Actual partner, i.e., one who becomes a partner by
agreement and is actively engaged in the conduct of
the business of partnership
• Sleeping partner, i.e., one who does not take an
active part in the conduct of the business of the firm.
He is, however, liable to outsiders for the debts of
the firm.
• Nominal partner, i.e., one who lends his name to the
firm, without having any real interest in it. He is,
however, liable to outsiders for the debts of the firm.
• Partner in profits only. i.e., one who gets a share in
profits only and is not to contribute towards losses.
He is, however,
liable to outsiders for the debts of the firm.

Types of partners.

• Partner by estoppel or holding out. Anyone who

by words spoken or written or by conduct
represents himself, or knowingly permits himself
to be represented to be a partner in a firm, is
liable as a partner in that firm to anyone who has
on the faith of any such representation given
credit to be a partner does or does not know that
the representation has reached the person so
giving credit.

Types of partners.
• Minor partner. With the consent of all the partners
the time being, a minor may be admitted to the
benefits of partnership. A minor partner has a right
to such share of the property and of the profits of
the firm as may have been agreed upon. He has
also a right to have assess to and to inspect and
copy any of the accounts but not the books, of the
firm. His liability is, however, confined only to the
extent of his share in the profits and property of
the firm. He may, at any time within six months of
his attaining majority, give public notice that he
has elected to
• Become, or
• Not to become a partner in the firm. If he fails
to give a public notice, he is deemed to have
become a partner in the firm on the expiry of the
said six months.
• Introduction of a new partner (Sec. 31).
Subject to contract between the partners, no
person can be introduced as a partner into a
firm without the consent of all the existing partners. An
incoming partner is not liable for any act of the firm done
prior to his admission
• Retirement of a partner (Sec. 32).A partner may retire
from a firm with the consent of all the other partners.
Where the partnership is at will, a partner may retire by
giving notice in writing to all the other partners of his
intention to retire
• Explusion of partner (Sec. 38). A majority
of partners can expel a partner only if such
power is conferred by contract
between the partners, and the power is
exercised bona fide by the majority of

• Insolvency of a partner (Sec. 34).
where a partner in a firm is adjudicated
insolvent, he ceases to be a partner on the
date on which the order of adjudication is
made, whether or not the firm is thereby
• Death of a partner [Sec. 42 (c)]. Subject to
contract between the partners, a firm is
dissolved by the death of a partner.
Dissolution of Firm

The dissolution of partnership between all the

partners of a firm is called the dissolution of the firm
(Sec. 39). Dissolution of firm means complete
breakdown of the relation of partnership between all
the partners. If this breakdown of partnership relation
is between a few and not all the partners, this
amounts to dissolution of partnership which simply
involves only a change in the relation of the partners.
Dissolution of a firm may be voluntary or without the
order of court, or it may take place by the order of

At the suit of a partner, the Court may dissolve a

firm on any of the following grounds, Viz,
 Insanity of a partner
 Permanent incapacity of a partner
 Misconduct of a partner
 Persistent breach of agreement by a partner
 Transfer of interest by a partner
 Business working at a loss
 Any other ground which the court deems just
and equitable.

Rights. On the dissolution of a firm, a partner has

the right to
 Have the business of the firm wound up and the debts of
the firm settled out of the property of the firm
 Share in the profits of the firm earned after dissolution
 Have the premium returned on premature dissolution
 Restrain the use of firm name or property by any partner
for his own benefit.
In case the partnership is rescinded on the
ground of fraud or misrepresentation, the
partner has the right of
 Lien on the surplus assets
 Subrogation, and
 indemnification

Liabilities. If a public notice is not given of the

dissolution of a firm the partners continue to be liable to
third parties for any act done by any of them after
dissolution. After the dissolution of the firm, the partners
continue to be liable for acts done to wind up the affairs
of the firm and to complete transactions begun but
unfinished at the time of the dissolution.


 International Legal Forces: In many ways, the
legal framework of nations is the result of a particular
political philosophical or ideology. Just a each
country has its own political climate, sop does the
based on one of four sources – common law, derived
from English Law found in the United Kingdom,
Common Wealth; civil or code law which is based on
the Roman law of written rules found in Non-Islamic
and non-Marxist countries; Socialist law derived
from the Marxist Socialist System found in
China, Russia, and other socialist nations and

 Common Law: The common laws have been the

outcome of past practices, legal precedents,
interpretations of status and past rulings Interpretations
through the past decisions have become the basis of
deciding the court case. Thus the customary principle of
law or sets of facts have become the basis of common
laws. There are some 25 common law or British law
 Civil Law or Code Law: Civil law traces its origin from
ancient Roman law and more recently
Napoleonic code and is practiced in most
European nations and the former
colonies of those countries.

 Islamic Law: The Religious Law is primarily adhered

by the Muslim countries. In these nations the
Religious law is generally mixed to an extent with
other forms of law such civil or common system.
Concepts and definitions of
International Law:

International law is the sum of the rules accepted by civilized

States, either explicitly or tacitly, as determining their conduct
towards each other, and towards each other’s subjects. It is a
body of rules regarding by the nations of the world as binding
on them in their relations with each other, in peace and war, and
comprises the rights and duties of sovereign States towards
each other.
Briefly – The law of Nations, International law as a social
process involving complex patterns of
interactions and amenable to newly developed
States in their relations with one another.
Public International Law and
Private International Law

Private International Law is a body of principles

determining questions of jurisdiction and questions as to
the selections of the appropriate law, in civil cases which
present themselves for decision before the Court of one
State or Country, but which involve a foreign element.
According to Sir Robert Phillimore, rights arising under
Public International Law are called absolute, or rights strict
jusris and breach constitutes a casus belli and justifies in
the last resort a recourse to war.
Basis of International

Traditionally there are two rival theories which explain

the basis of International Law, these being the Theory
of Fundamental Rights and the Theory of Consent.
Apart from these two, there are three other theories, viz,
the positivist Theory, the Auto Limitations Theory and
the Doctrine of Pacta Sunt Servanda.
Theory of Fundamental Rights

The doctrine of ‘fundamental rights’ observes briefly, is a

corollary of the doctrine of ‘state of nature’ in which men are
supposed to have lived before they formed themselves into
political communities or states, for states, not having formed
themselves into a super State are still supposed by the
adherents of this doctrine to be living in such a condition.
Briefly assails this doctrine on the following grounds.
Theory of Fundamental Rights

 The doctrine implies men or states bring with them

into society certain primordial rights not derived from
their membership of society.
 It is misleading to apply atomistic view of the social
bond to State, for in the society of States the need is
not greater liberty for the individual State, but for a
strengthening of the bond between them.
Consent Theory

The consent may be given expressly, as in treaty, or

may be implied as acquiescence of a State in a customary

The formality of a treaty is the best proof of the consent and

acquiescence of parties, but it is not the only proof, nor does
it exclude other proof and more especially in transactions
with oriental states.

The basis of International Law and the theory

of a common consent of the States or the
positivist theory can be assailed on grounds
more than one.
Theory of Positivism

It denotes the part of the law which consists of rules and

regulations concerning international relations imposed by
sovereigns on themselves.
Auto Limitation

According to this theory States are independent

entities and the actual behaviour of states based on
positivism forms the basis of international law.
According to Emerich De Vattel, independent
States have their inherent rights derived from
natural law, but they were accountable only to their
own consciences for the observances of the duties
imposed by natural law.
This theory inaccurate, in as much if the State were
free to observe the mutual obligations at their
discretion, international law will be very slippery
Pacta Sunt Servanda

It’s a doctrine borrowed fro the Roman law and has

been adopted as a principle governing treaties in
international law. The parties to a treaty are bound to
observe the treaty’s term in good faith. According to
Fenwick, ‘philosophers, theologians and jurists have
recognized with unanimity that unless the pledges
word of a State could be relied upon, the relations of
the entire international community would be imperiled
and law itself would disappear.
 International Convention and Treaties
 Customs
 Customs and Usage
 General Principles of Law
 Judicial Decisions – Tribunal and Prize Quotes
 Text-Writers, Works of Jurists and Commentators
 International Comity
 International State Papers Other than Treaties
 State Instructions for the Guidance of their own
 Place of ‘Reason’ in the Modern System
Sovereignty of States

 Sovereignty
 Sovereign Immunity
 Act of State
 Extraterritoriality
Sovereignty And Independence of State
Sovereignty is a legal term signifying the supreme power
by which any state is governed. It denotes in ordinary
parlance the unrestricted power of self-determination by
the individual state of its external and domestic affairs.
‘Austin’ termed sovereignty as essential, indivisible and
Independence is a fundamental principles of international
law, in as much as no state can, without its consent, be
compelled to submit its disputes with other states either to
mediation or to arbitration, or to any other kind of
pacific settlement.
Jurisdiction of a State
A state had jurisdiction over all persons and things within its territory.
Such persons may be natural born subjects, naturalized subjects or
domiciled aliens. With regard to things –they include all property
under the control of the state. Its jurisdiction also extends over its own
ships in its territorial waters and over all acts committed on them.

 Admission of Aliens: It’s a matter of discretion and every

state is
competent to exclude aliens from its territory.
 Position of Aliens after Admission: The aliens become
to the laws of the state in the same way as citizens are.
 Treatment and Rights of Aliens: is that they are to be
treated in
the same way as citizens are treated.
 Departure of Aliens from the Foreign Country
 Exhaustion of Local Remedies’ Rule
 Expropriation of property of Aliens
 Protection of Human Rights to Aliens
 Expulsion of Aliens
 Mass Expulsion of Aliens

Concepts of Treaty
A treaty is an agreement or a contract entered into
between two or more states whereby hey undertake
to carry out obligations imposed on each of them.
Treaties form an important source of International
law. They may determine legal relations between
parties on a footing different from the pre existing
international law.
Kinds of Treaties:
 Law making Treaties
 Other Treaties
 Treaties Classified According to subject Matter
 Treaties of Alliance
 Treaties of Guarantee
 Treaties of Commerce
 Treaties Neutralizing a State
 Vattel classifies treaties as equal and unequal
and real and personal
 Treaties may be distinguished as unilateral and
bilateral, such treaties may be either political
or non political
Power to Enter into Treaties
A sovereign state had not parted with any portion of its
sovereignty either by confederation or treaty of Alliance,
possesses full treat-making power.

Mutual Consent of the Contracting Parties

Since treaty is an agreement there should be mutual consent
of the parties. Mere proposal, made by one party and not
accepted by the other are not binding upon the proposed.
Contracts and Treaties
In municipal law contracts are agreements
which are enforceable at law having been entered
into between states for the purpose of carrying out various
transactions that emanate on account of international relationships
existing between them

Treaties Inconsistent with Charter and Immoral Treaties

Article 103 of the charter of the United Nations lays down that the
obligations of the members of the United Nations under the charter
shall prevail their obligations under any other international agreement
in case of any

Vienna Convention on The Law Of Treaties, 1969:

Adopted by the UN conference in Vienna in May, 1969, the

convention is a major work of codification and progressive
development of the law of treaties and is a result of the efforts of
the international law commission covering a period of about 20
Constitutional Requirements:
In the case of sovereign states, the power of
entering into treaties rests with the heads of sate
or their representatives. In case they violate
the constitutional limitations imposed by the municipal
of their respective states, the treaties are not binding on
Conclusion of Treaties:
There is no specific form for the conclusion of treaties.
An oral agreement between the representatives of
the state is sufficient to have a binding agreement.
Various steps towards the conclusion of a treaty.
 Accrediting of Representatives
 Negotiation
 Signature
 Ratification

Invalid Treaties:
In accordance with international law treaties may be
deemed invalid if:
 the object of the treaty is illegal
 where fraud or misrepresentation has been practiced on the
 the treaty has been concluded by intimidation or coercion or by
terrorizing the negotiator.
 there is an error produced by fraud in the conclusion of the
 the treaty provided for obligations-the performance of which is
 there is an incapacity from status of the contracting parties to
 treaties are concluded in violation of the principles
of international law or in derogation of the
principles of the charter.

Termination of Treaties:
Treaties can be terminated on any of the following
 On expiry of the specified period for which a treaty was
 In case of treaties imposing no continuing obligations, they
cease to operate on the fulfillment of the object.
 A material breach of a bilateral treaty by one of the parties
entitles the other to invoke the breach as a ground for
terminating the treaty or suspending its operation in whole or in
 By mutual consent of the parties of the treaty
Termination of Treaties:

 Non-performance of certain essential conditions

 When the obligations of the treaty becomes
with the charter of the UN
 When a war breaks out between the contracting
 When one of the contracting parties in extinguished
annexation or merger
 Force Majeure and impossibility of performance.


• Formation of GATT in 1947
• 23 Nations met at GENEVA
• Plan for reduction of import duties and against future
increase in duties by member nations
• This came to be known as GATT
Objectives of GATT

• Provide a framework for conduct of trade relations

• To reduce and eliminate trade barriers and
discrimination in international trade
• To resolve disagreements through consultations
• To provide a set of rules that would inhibit the member
nations from taking unilateral actions.

Principles of GATT

• Non discrimination: Each nation shall be

treated as most favoured nation i.e if any country
then that concession was to be extended to all
other countries to the same extent.
Principles of GATT

• Reciprocity: Reciprocity obligation

required that a country receiving
concession from another country was to
offer an equivalent concession in return.
• Transparency: GATT forbade the use of
direct control on trade particularly
quantitative restrictions, except under a
few designated circumstances such as
balance of payment crisis.

• Raising standard of living

• Ensuring full employment & growth of real
income and effective demand
• Developing full use of the resources of the
• Expansion of production & international

• Increase in number of signatories from 23

in 1947 to 125 in 1995
• Establishment of forum for continuing
consultations in the matter of international
trade and also avoiding disputes and
• GATT achieved considerable and
commendable trade liberalization

• Agricultural trade was clearly an exception

to liberalization
• Trade in textiles was restricted by the
Multifibre arrangement (MFA)
Inspite of some exceptions and drawbacks,
GATT had achieved commendable Trade
(World Trade Organization)

• Formed in 1995 during the Uruguay round

• 125 signatories
• Three Basic subjects for discussion
 Reducing specific trade barriers & improving
market access
 Strengthening GATT disciplines
 Problems of Liberalization of trade in
Functions of WTO

• Necessary framework for implementation,

administration & operation of trade agreements
• To provide negotiation facilities among the
member countries concerning multilateral trade
• To administer the “Understanding on rules &
procedures governing the settlement of disputes”
• To cooperate appropriately with IMF & IBRD and
its affiliated agencies to achieve greater
coherence with them.
Functions of General
Council of WTO

• Supervising on regular basis the operation of revised

agreements and ministerial declarations relating to goods,
services, TRIP’s
• Acting as a dispute settlement body
• Establishing goods council, service council and TRIP’s
council as subsidary bodies.
(Trade Related Intellectual Property Rights)

Intellectual Property Rights may be defined as

“Information with a commercial value”. These
intellectual propert rights may be legally protected by
 Patents
 Trade Marks
 Copyrights
 Industrial Design
 I C (Integrated Circuit)
 Trade Secrets
 Several critics are of the view that TRIPs will
have very serious and disastrous effects on
the Indian economy especially in the areas of
and pharmaceuticals.
 Patent regime will affect drug price seriously in India.
 Heavy payments will have to be made to patent holders
this would result in prices of drugs going up several
 Government of India asserts that the price would not be
allowed to increase very much and it will be controlled
through price control measures on drugs.
However some critics contend that there
is too much exaggeration about the
supposed increase in prices of drugs and
medicines due to patent regime.

 Only in the area of patents are India’s policies,

laws and regulations not in conformity with TRIPs
 Under Indian patent act the product and process patent is
only 10 years as compared to TRIPs.

 Under Indian law there is a ceiling on royalty or fee that a

patent holder con demand for a licence. But in TRIPs there
can be no ceiling on the fee or royalty that can be
demanded from a licence by the patent holder.

 According to Indian patent law following are not

 Agricultural products including seeds and plants
 Animals and all life forms including micro-
 Biological and microbiological processes
 In case of TRIPs only plants (seeds), animals and
biological processes are not patentable. But agricultural
products, micro-organisms and microbiological
processes are patentable.
TRIMs (Trade related investment measures)
 Local content requirement: The host country
should not impose any restrictions of local inputs to be
used in products, which would normally be insisted on by
developed countries.
 Trade balancing requirement: According to this, the
member countries of Uruguay agreement should not
impose any restriction on the quantum of imports i.e
conditions like imports shall not exceed a certain
proportion of exports.
 Trade and foreign exchange balancing requirements:
The countries of the agreement should not make any
attempt or pass laws restricting trade activities to
balance foreign exchange requirements.
 Domestic sales requirement: Member countries
of WTO are prohibited from making any restrictions
that the foreign companies should sell a certain
proportion of their output locally.

 Same treatment must be meted out to domestic capital

as well as foreign capital.
 All privileges, benefits, concessions extended to a domestic
investor must be extended to a foreign investor.
 There will be no limitation on the extent of foreign investment.
 Imports of raw material and components will be allowed freely
the foreign investors will not be obliged to procure or use local
products and materials.
 Exporting part of output by the investors will be mandatory
 There will be no restriction on repatriation of
dividend, interest and royalty.
 There is no question of phased manufacturing
programme which is intended to increase the
indigenous content in manufacture.

 TRIPs and TRIMs are not in the benefit of developing

and underdeveloped countries. They are more favorable
for developed countries.
 Gains for developed countries are far more than that for
developing and underdeveloped countries.
Consumer Protection Act,

Objectives of the act

• Right of protection to life and property
• Right to be informed
• Right to choose
• Right to be heard
• Right to redress
• Right to education

• Consumer means a person who buys any goods for a

consideration which has been paid or promised, or
partly paid and partly promised or under a system of
deferred payment.
• Buyer of goods for a consideration is a consumer
• Person who hires services is a consumer
• Goods means every kind of movable property other
than actionable claims and money, shares, growing
crops, things attached to the land
• Service means service made available to any
potential user and includes provision of facilities in
connection with banking, insurance, transport, supply
of electricity etc
Who are not consumers

• A person who purchased goods for resale

• A person who purchased goods for commercial
• A person who obtains services without
• A person who obtains services under a contract
of personal service
Consumer disputes

• Defect
• Manufacturing defect
• Instruction defect
Complaints are relied upon evidences

• Expert opinion
• Manufacturer’s records
• Government and industry standard
• Post accident changes
• Report of Govt. and other agencies
• Past records

Complaint means any allegation in writing made by

complainant that: as a result of any unfair trade
practice or restrictive trade practice, adopted by trader,
complainant has suffered loss or damage, services
mentioned by complainant suffer any deficiency,
excess of price or under any law for the time being in
Who can make complaints

• The consumer to whom such goods sold or

delivered or such service provided.
• Recognized consumer’s association registered
under law
• Central or state government
How to draft a complaint

• Name and description and address of the

• Name and description and address of the opposite
• The facts related to complaint and when and where
it arose
• Documents
To whom the complaint is to be made

• District forum
• State commission
• National commission
How to file a complaint

• No fees have been prescribed

• Complainant or authorised agent can present
the complaint in person
• The complaint can be sent by post to the
appropriate forum

The Consumer Protection Act has adopted the

definition of ‘Unfair Trade Practices’ as given in the
According to section 36-A of the MRTP
Act, 1969, whenever the methods listed in Section-
36 A are adopted for the purpose of promoting the
sale, use or supply of any goods, or for the
provision of any services
and thereby some loss or injury is caused
to the consumers or such goods or services,
it is an unfair trade practice
The practices mentioned in section 36-A
are grouped into the following five

1. Misleading Advertisement and False Representation

2. Sales offer of bargain price
3. Schemes offering Gifts or Prizes
4. Non-Compliance of prescribed Standards
5. Hoarding, destruction or refusal

a) The trade practices must consist of any of the

practices listed above.
b) The purpose of such trade practice must be to
promote the sale, use or supply of any goods or
provision or of any services.
c) The trade practices must have caused loss or
injury to the consumer whether by eliminating
or restricting competition.

According to section 2(nn) of the Consumer

Protection Act Restrictive Trade Practices are
those trade practices which requires a consumer
to buy, hire or avail of any goods or, as the case
may be, services as a condition precedent for
buying, hiring or availing of other goods or

For the purpose of speedy and simple settlement of

‘consumer’s disputes’ section 9 of the Act, 1986
provides for the establishment of the following three
Consumer Disputes Redressal Agencies:
• Consumer Disputes Redressal Forum
(District Forum)
• Consumer Disputes Redressal Commission
(State Commission)
• National Consumer Disputes Redressal
Commission (National Commission)
District Forum

• Established under section 9(2) of the

Consumer Protection Act, 1986. This is
established by the state government in
each district of the state by means of a
notification. If reasonable and
necessary, the State Government can
establish more than one district forum in
a district.
State Commission
• Established by the State Government with the prior approval of
the Central Government, in the State notification under Section
9(5) of the Consumer Protection Act.

National Commission

• In exercise of the powers conferred under sec 9(c) of

the Consumers Protection Act, the Central Government
established a “National Consumer Redressal
Commission” to be known as the ‘National Commission’
by notification

• Intellectual property is the property created by the human

intellect. In other words, intellectual property relates to
information, which can be incorporated in tangible object
and reproduce in different locations.
• For examples: Patents, Designs, Trade marks and

• Intellectual property is also governed by the law of

country namely law of intellectual property rights.
• Intellectual property is usually divided into two broad
areas, namely industrial property and copyrights act.
• Industrial property consists mainly of patents, industrial
designs and trademarks.

• Copyrights relates to the artistic creations such as

poems, novels, music, paintings, cinematographic works,
computer software/programs etc.,

• Patents are legal rights granted for new inventions

employing scientific and technical knowledge.
• The subject of patent, which involve scientific and legal
issues, is relatively complicated as compared with the other
species of intellectual property.
• The main criteria of securing patents are novelty, inventive
step and utility.

• A patent confers on its holder the

exclusive right for a limited period
(term) the right to the inventions
• The right can be enforced only in the
country, which grants the patent. There
is no such thing as “International
Patent” or “World Patent”.

• A design is an idea or conception as to features

of shape, configuration, pattern or ornament
applied to an article.
• A design can be either two dimensional or three
• The main criteria for securing protection for a
design are novelty and originality of the design,
for example: design as applied to shoes, TV,
textile etc.,

• A trademark is a visual symbol in the form of a

word, device, or a label applied to an article of
manufacturer or commerce with a view to
indicate the purchasing members of the public
about the origin of the manufacture of the
goods affixed with that mark.
• It distinguish such goods from the goods
manufactured by others.
• The main criteria for securing a trademark
registration is its originality.

• Copyright is basically the right to copy and

make use of literary, dramatic, musical, artistic
works, cinematographic films, records and
broadcast. Copyrights are a proprietary right
and come into existence as soon as the work
is created.
• It is governed by statutory law of each
• The main criteria of Copyrights registration
are its originality.
Thank you