Business Law
Business Law
Business Law
DEPARTMENT OF MANAGEMENT
AND RESEARCH
SEMESTER:I
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Section – A
Section - B
Section – C
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BUSINESS LAW
UNIT I:
The Contract Act, 1871
authorities.
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TEXT BOOK:
REFERENCE BOOKS:
4. The Law of Intellectual Property Rights, Shiv Sahai Singh, Deep and Deep
Publications.
10. Business Law Including Company Law, Gulshan S.S. and Kapoor G.K., New
Age International.
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Unit 1
Contract – Definition
A contract is an agreement made between two or more parties which are
enforceable by law.
Pollock’s Definition
“Every agreement and promise enforceable at law is a contract”.
Elements of Contract
a) Agreement
b) Enforceability by law
Classification of contracts.
Contracts are classified according to
a) Validity
b) Formation
c) Performance
a) Classification According to Validity
When all the essential elements of a contract is present, it is a valid
contract. If one or more of these elements are missing it is either
voidable, void or illegal contract.
1) Voidable Contract
When the essential element of a contract ‘free consent’ is missing, The
contract is a voidable contract. Voidable contracts are enforceable by law
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at the option of the party whose consent is not free. The party to the
contract whose consent is not free may either cancel it or continue it.
Eg. A promises B to sell his car for Rs.20000. A’s consent is obtained by
threat. As the free consent is missing it is a voidable contract.
2) Void Contract
Void agreements are not enforceable by law. It does not create any legal
obligation on the parties. It is void ab initio, which means it is void from
the very beginning.
Eg. Agreement with a minor, agreement without consideration.
3) Void Contract.
A contract which is not enforceable by law is void contract. A contract
may be valid at the time of entering into contract, subsequently it
becomes void.
Eg. A contract to import goods will become void when the war breaks
out between the countries.
4) Illegal Agreements
Illegal agreements are opposed to public policy or criminal in nature or
immoral. All illegal agreements are void as between the immediate
parties but is has same as effect collateral transaction.
All illegal agreements are void but all void agreements are not illegal.
Eg. A borrows money from B to import prohibited goods from the alien
country. The two contract i.e the contract to borrow money and the
contract to buy goods from alien country are void and illegal.
5) Unforceable Contract
Unforceable contract is the one which is not enforceable in the court of
law due to technical defects like absence of wriiten agreement,
registration etc.
1) Express Contract
Under express contract, the terms of a contract are expressly agreed
either by words spoken or by written.
2) Implied Contract
The contract is inferred from the act or conduct of the parties. The
proposal or acceptance is not made or given either by words spoken or
written.
Eg. Gets into a public bus.
3) Quasi Contract
Quasi contract is created by law. It is not a contract at all. According to
quasi contract a person shall not be allowed to enjoy at the expense of
another person. He is obliged to pay the price for the thing enjoyed by
him.
Eg. C a tradesman, leaves goods at T’s house by mistake. T treats the
goods as his own. T is bound to pay for the goods.
b) Executory contract
An executory contract is one in which both the parties to the contract
have to perform their obligations.
Eg. A agrees to engage B as his servant in the next month.
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d) Bilateral Contract
It is similar to executory contract in which the obligation of both the
parties yet to be performed.
CLASSIFICATION OF CONTRACTS IN ENGLISH LAW
In English law, contracts are classified into
1) Formal contracts and
2) Simple contracts
1) Formal Contracts
Formal Contracts includes
a) Contracts of record
b) Contracts under seal
Contracts of Record
A contract of record is either a judgment of a court or a recognizance. A
judgment is an obligation imposed by the court upon one or more
persons.
Recognisance is a written acknowledgment of a debt due to the
Crown.
Eg. When a person is arrested, he may be released either on a promise to
appear in a court or subject to a penalty if he failed to appear in a court.
Obligation to appear in the court is recognizance.
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2) Simple Contracts
These contracts are not made under seal. It may be in writing or by words
of mouth. For all simple contracts consideration is must.
3) Lawful Consideration
Consideration is important for a valid contract. Consideration means
advantage or benefit moving from one party to the other. Both the parties
give something and get something in return. It may be in cash or kind.
6) Lawful Object
The object of the agreement must be lawful. It should not be illegal,
immoral and opposed to public policy.
8) Legal Formalities
A contract must be oral or written. In order to enforce an agreement
legally, it should be in writing, stamped and registered.
What is Acceptance?
Acceptance is the willingness of the offeree. When he has accepted he is
bound to the terms of the offer.
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Eg. Prescribed mode mentioned by A is telephone. But ‘B’ has sent his
acceptance by post. It is a valid acceptance unless ‘A’ has rejected the
mode followed by ‘B’.
Eg. A wrote to B, “I offer you a car for Rs.10,000. If I do not chear from
you within 7 days, I shall thay you have accepted”.
The offer is mentioned when the offeree fails to fulfill the condition
before he is going to give acceptance.
Eg. ‘A’ agrees to sell the goods to ‘B’ ready to pay certain price before a
certain date.
4) By death or insanity of the offeror.
When an offeree accepts the offer without the knowledge of an offeror’s
death, the acceptance is valid.
5) Counter Offer
Counter offer mean acceptance of an offer with some modificatioin. In
such case the previous offer will terminate.
7) Change of Law
An offer comes to an end if the law is changed and the offer and
acceptance will become invalid.
What is the meaning of Acceptance? Explain its kinds.
Acceptance is the willingness of the offeree. When he has accepted he is
bound to the terms of the offer.
Kinds of Acceptance
a) Express
When an acceptance is communicated by words spoken or written it is
called Express acceptance.
b) Implied
It is known through the activities of a person.
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2) It must be communicated
When an offer is accepted by the offeree, he has to intimate his
acceptance.
Eg. Prescribed mode mentioned by A is telephone. But, ‘B’ has sent his
acceptance by post. It is a valid acceptance unless, ‘A’ has rejected the
mode followed by ‘B’.
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Eg. A wrote to B, ‘ I offer you a car for Rs.10,000. If I do not chear from
you within 7 days, I shall assume that you have accepted”.
Communication of offer
An offer, acceptance and revocation must be communicated by words
spoken written or by conduct.
Offer
Communication of an offer is complete when it comes to the knowledge
of the person to whom it is made.
Acceptance
As for as offeror is considered, communication of acceptance is
completed when it is transmitted to another person.
As for as acceptor is considered, communication of acceptance is
completed when it comes to the knowledge of the proposer.
Eg. B accepts A’s proposal. The letter reaches A on 1st July. For A it is
completed when the letter is posted i.e. 30th June.
2) By lapse of time
If time period is mentioned in the offer, it is revocated after the expiry of a
reasonable.
3) By death or insanity of the offeror
When an offeree accepts the offer without the knowledge of an offeror’s
death, the acceptance is valid.
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4) Counter offer
Counter offer mean acceptance of an offer with some modification. In such
case the previous offer will terminate.
5) Acceptance is not according to the prescribed mode
When an offeree has followed an unprescribed mode, the acceptance is
invalid. But the offeror keeps silence regarding the unprescribed mode, the
acceptance is valid one.
Eg. A agrees to sell the goods to B, if B ready to pay certain price before a
certain date.
7) Change of Law
An offer comes to an end if the law is changed and the offer and acceptance
will become invalid.
Consideration
What is meant by Consideration? Define the term consideration.
It is one of the essential elements of a valid contract. Consideration means
‘something’. The parties to the contract is giving something and getting
something in return.
Eg. A agrees to buy a car from B for Rs.1,00,000. Car is the consideration to
A and money is consideration to B.
Pollock Definition
“Consideration is the price for which the promise of the other is bought and
the promise thus given for value is enforceable”.
Valid consideration
1) It must move at the desire of the promisor
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Eg. A saves ‘B’s goods from fire without the request of ‘B’. A cannot
demand consideration for his service.
Eg. An old lady, by a gift deed, transferred her property to her daughter ‘P’
with an agreement that ‘P’ has to give an agreed amount annually to her aunt
‘D’. Later ‘P’ refused to the amount as no consideration is received from her
aunt ‘D’. D can file a suit because the consideration is already from an old
lady to ‘P’.
Eg. A agrees to pay Rs. 1000 after 1 month for the service rendered by ‘B’.
B recovered the amount after 1 month. It is past condieration.
When the consideration is given simultaneously with promise, it is
called present consideration.
Eg. Selling of goods and receiving the amount on the same date.
6) It may be real.
The consideration must be real has some value in the eyes of the law.
In the following cases, the consideration is not real.
a) Physical Impossibility
‘A’ promises ‘B’ to put life into B’s dead wife.
b) Legal impossibility.
‘A’ borrowed Rs.100 from ‘B’. ‘C’ who is ‘B’ servant agree to discharge
‘A’ from the debt, if he ready to pay Rs.10. It is an illegal impossibility.
c) Uncertain consideration
‘A’ agrees to do some service to ‘B’ for the reasonable remuneration.
The parties to the contract must be competent persons to enter into a valid
contract.
1) Minors
2) Unsound Mind Persons
3) Persons Disqualified by Any Law.
1) Minors
A minor is a person who has not completed 18 years of age.
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g) Partnership contract
Minor cannot enter into contract of partnership. But he may be admitted for
the benefit of partnership firm. His admission should be done with the
consent of other partners.
i) He can be an agent
Minor can act as an agent. As he is acting on behalf of abother party, he does
not incur any personal liability.
A minor is liable to pay our of his property for necessaries supplied by him.
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Sound mind person is a person who can understand the contents of the
contract and able to make rational judgment.
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Corporations
A corporation is an artificial person. Its contractual capacity is regulated by
the Memorandum of Association. If it exceeds it power, that contract is
invalid.
Insolvents.
When a debtor is declared as an insolvent, his official assignee can enter into
contract on behalf of an insolvent.
Convicts
A person who is judged as a convicted cannot enter into a contract.
Free consent
Consent is said to be free when it is not caused by
1) Coercion
2) Undue Influence
3) Fraud
4) Misrepresentation
5) Mistake
When there is no consent there is no contract.
Coercion.
When a person is compelled to enter into a contract under a threat, it
amounts to coercion. These kind of contract is voidable at the option of the
party whose consent was obtained by threat.
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Undue Influence.
When the contract is entered under the persuasion of another party, there is
undue influence. This happens when one party is in position to dominate the
another or uses his post to obtain an unfair advantage.
Eg. A spiritual guru induced his devotees to gift their properties in return of
a promise of salvation of the devotee.
Misrepresentation.
When one person made another to enter into contract by disclosing of false
statement or non-disclosure of materials facts, it amounts to
misrepresentation.
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Fraud
False representation has been made knowingly, unknowingly or recklessly
with an intention to make the other party to enter into a contract.
Mistake
It is an erroneous belief about something. It may be mistake of law or
a mistake of fact.
Mistake of Law
a) Mistake of Law of the country
A party cannot escape from the performance of contract by giving the reason
that he does not aware of law. A mistake of law is not excused and the
contract cannot be avoided.
2) Mistake of Fact
Agreement is entered under a mistake as to a matter fact essential to the
agreement.
Prformance of Contract?
When the parties to the contracthave fulfilled their obligations within the
time and in the prescribed manner, the contract is said to be performed.
b) Executory Contract
c) Unilateral Contract
d) Bilateral Contract
a) Executed Contract
An executed contract is a one in which both the parties to the contract have
performed their obligations.
Eg. A agrees to paint a picture for B for Rs.100. When A paints the picture
and B pays the price i.e. when both the parties performed their obligations.,
the contract is said to be executed contract.
b) Executory Contract
An executory contract is one in which both the parties to the contract have to
perform their obligations.
d) Bilateral Contract
It is similar to execuroty contract in which the obligation of both the parties
yet to be performed.
6) Illegal Contracts.
2) Agent
Agent is a person who is the representative of the promisor. When the agent
is appointed, the contract can be performed by the agent.
3) Legal representative
A general rule is that the legal representatives of the deceased promisor has
to perform the contract. The above rule is not applicable to the contract
which involves use of personal skill of the person.
4) Third person
If the promise accepts the performance of the contract by the 3 rd party, the 3rd
party to the contract can perform it. Afterwards the promisee cannot demand
the promisor to perform it.
Death of promisee
1) Discharge by performance.
The contract is discharged when the parties to the contract have fulfilled
their obligations within a reasonable time and in the prescribed manner.
When one party has fulfilled his obligation, he also discharged and he
can take action against another party who did not perform his obligation.
Eg. A sells goods to B on the condition that he should pay the price within 7
days from the date of delivery of goods.
b) Rescission
It takes place when all the terms of contract are cancelled. It may happen
i) by mutual consent of the parties
ii) One party may rescined the contract and not willing to claim any
compensation from the party who did not perform his promise.
Eg. Agreement between A and B to supply goods after 6 months. If the
goods go out of the fashion. A and B rescined the contract.
c) Alteration
When one or more terms of the contract is altered with the consent of the
parties to the contract, the old contract is discharged.
d) Permission
Remission means acceptance of the lesser of the promise made.
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e) Waiver
When the two parties agreed that they are not bound by the contract, it is
called waiver. It is a mutual abandonment of the rights by the parties.
f) Merger
Merger takes place when a party acquires a superior right in the place or
inferior right in the same contract.
Eg. A holds B’s property under lease. Afterwards the lessee buys the
property.
Eg. A agred to marry B, who has already married C, marrying two person is
forbidden by law. A cannot marry B and he ahs to compensate her.
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a) Difficulty of performance
A contract is not discharged because of the reason that it is difficult to
perform it due to delays.
b) Commercial impossibility
A contract is not discharged because of the reason like non availability of
raw materials or sudden depreciation of currency.
Eg. A agreed to send goods by ship to B. But due to the out break of war the
shipping charge has been increased. It is not a reason for discharge of
contract.
b) Implied repudiation
The performance of the obligation is not possible due to impossibility
created by the act of a party to the contract.
Eg. A person who was engaged by the Japanese Government to act as a
fireman had to leave the job when war broke out between Japan and China.
2) Anticipatory Breach
The party to the contract declares his impossibility of performing his
obligation before the performance is due.
Eg. A has informed B that he could not supply the goods which he has
agreed to supply in the next month.
When contract is broken, the injured party has the following remedies.
1) Rescission
When a contract is broken by one party, the other will rescined and refuse
further performance.
Eg. A has failed to supply goods on the agreed date. B need not pay the
price.
Eg. A agreed to sell wheat per quintal for Rs.450. The price has been
increased to Rs.500. A refused to sell the goods B can claim the damages of
Rs.50 per quintal.
In a contract for the sale of goods, the damages for the breach of
contract are the difference between the contract price and the market price.
b) Special damages
Special damages are those which arise on account of the special or unusual
circumstances. It can be claimed if the special circumstances are bought to
the notice of the other party. The damages must be in contemplation of the
parties at the time when the contract is entered.
Eg. A tailor has delivered the sewing machine and some cloth to a
railway authority to be delivered a t a place where the festival was to be
held. He expected to earn an exceptional profit at the festival but he did not
bring this fact to the notice of the railway authority. The goods were
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delivered after the conclusion of the festival. Held, he could not recover the
loss of profit.
d) Nominal damages
When the injured party has not suffered any loss because of breach of
contract, he can recover nominal amount i.e. small amount as damages.
Eg. B who has been employed in the partnership firm is declined to continue
his employment on the death of two partners. Held, he is entitled to recover
nominal amount as he has not suffered any loss.
e) Damages for the loss of reputation
In case of breach of contract, damages for loss of reputation is not
recoverable. Exception to the above rule is dishonoring of customer’s
cheque wrongly by the bank. If the customer is trader, he will be awarded
larger amount of damages though the amount of cheque is nominal. Others
can recover only small amount as damages.
g) Mitigation of damages.
The injured party has to take all reasonable steps to avaid the loss caused by
the breach of contract. He cannot claim compensation from the other party
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when the loss is not due to breach of contract, but due to the negligence of
the injured person.
Eg. A agreed to deliver 500 bales of cotton to B on a fixed date. A
does not know about B’s mode of conducting business. A failed to deliver
the goods on a fixed date and B was forced to close his mill. Held, A is not
responsible for the loss suffered by B.
h) Difficulty of assessment
When it is difficult to estimate the damages, it cannot be given as reason for
non payment of damages. The court may estimate the loss.
i) Cost of decree
The injured party can claim the damages as well as the cost spent by him to
file a suit.
3) Quantum Meruit
Quantum Meruit means ‘as much as earned’. It arises where a contract,
which partly performed by the party has been discharged by the another
party. The person who has partly performed his promise, has the right to
receive remuneration for the act done by him.
Eg. A has been appointed as an M.D. After rendering service for three
months, it was found that the directors do not have the authority to appoint
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the M.D A has the right o receive remuneration for 3 months under quantum
meruit.
4) Specific Performance
For some cases awarding of damages is not a correct remedy. In these
situations, the court may direct the party to fulfill his obligation at the suit of
the party who is nit in breach.
Eg. A agreed to marry B. But after sometime he refuses to marry her. Held,
A must marry B.
5) Injuction
The court by issuing an order can restrict the person from doing something
which he has agreed not do so.
Eg. N, a film actress, agreed to act exclusively for W for one year. During
the year she agreed to act some other person’s film. Held, W could be
restrained by injuction from doing so.
IMPORTANT QUESTIONS :
UNIT II
SALE OF GOODS
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Contracts for the sale of goods are subject to the general legal
principles applicable to all contracts, such as offer and its acceptance, the
capacity of the parties, free and real consent, consideration, and legality of
the object. The general provisions of the Indian Contract Act continue to
apply to contracts for the sale of goods in so far as they are not inconsistent
with the express provisions of the Sale of Goods.
Sale and agreement to sell. Where under a contract of sale, the property in
the goods is transferred from the seller to the buyer, the contract is called a
‘sale’.
But where the transfer of the property in the goods is to take place at a
future time or subject to some conditions thereafter to be fulfilled, the
contract is called an ‘agreement to sell’. An agreement to sell becomes a sale
when the time elapses or the conditions, subject to which the property in the
goods is to be transferred are fulfilled.
3. Price. The consideration for the contract of sale, called price, must be
money. When goods are exchanged for goods, it is not a sale but a
barter. There is, however, nothing to prevent the consideration from
being partly in money and partly in goods.
4. Transfer of general property. There must be a transfer of general
property as distinguished from special property in goods from the
seller to the buyer.
5. Essential elements of a valid contract. All the essential elements of a
valid contract must be present in the contract of sale.
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A sale creates a jus in rem(right against the whole world), since the
buyer becomes the absolute owner of the goods and can use the same in any
manner he likes. An agreement to sell creates only a jus in personam(right
against an individual). As such, the buyer’s rights are only personal. He can
sue the seller for damages for breach but not for the recovery of the goods by
specific performance.
Risk of loss.
In a sale the risk of loss is that of the buyer. In a contract of sale
because ownership passes immediately to the buyer,the risk also passes. The
rule is risk follows ownership. So whosoever is the owner of the goods shall
bear the risk. Thus, in a contract of sale, if the goods are destroyed the loss
falls on the buyer even though the goods are in the possession of the seller.
Eg. A buys a radio set from B and agrees to take the delivery on the
following day. As a result of fire in the shop that radio set is also destroyed.
Here A shall be liable to pay the price because he will have to bear this loss
since the ownership had already passed to him.
In an agreement to sell, on the other hand, where the ownership in
goods has not yet passed but is yet to pass from seller to buyer. If the goods
are destroyed such loss will have to be borne by the seller, even though he
goods may be in the possession of the buyer.
Consequences of the breach.
Breach by the buyer – in case of sale if the buyer refuses to accept the
goods or to pay for them, the seller can sue for the price, even though the
goods are still in his possession. But in an agreement to sell, if there is a
breach by the buyer, then the seller can only sue for damages and not for the
price, even though the goods are in the possession of the buyer.
Right to re-sell.
In a contract of sale because the property in goods is with the buyer, a
seller who is in possession of goods, cannot resell such goods. If the seller
re-sells, then the original buyer has not only a personal remedy against the
seller for damages but he can also recover the goods from the third person.
The right to recover the goods from the third person is lost if the
subsequent buyer had bought the goods in good faith without notice of the
previous sale.
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4. Where such third party is prevented from making the valuation by the
fault of the seller or buyer, the property not in fault may maintain a
suit for damages against the party in fault. (Sec.10(2))
Eg. A agree to sell ten casks of oil to B at a price to be fixed by C. In case
C refuses to fix the price, the contract between A and B will be void. If,
however, C is willing to fix up the price but is prevented either by A or B
from doing so, the aggrieved party will be entitled to sue the defaulting
party for damages.
IMPORTANT QUESTIONS:
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UNIT III
What is meant by company.Define.
A company, in common parlance, means a group of persons associated
together for the attainment of a common end, social or economic. It
represents different kinds of associations, both business and otherwise.
Generally, the term company shall mostly be concerned with registered or
incorporated companies.
The term registered company means a company incorporated under
the companies Act 1956 or some earlier Companies Act. Companies
incorporated under the companies Act, 1956 are mostly business companies
but they may also be formed for promoting art, charity, research, religion,
commerce, or any other useful purpose.
Definition
Lindley defines a company as “an association of many persons who
contribute money or money’s worth to a common stock and employ it in
some common trade or business and who share the profit or loss arising
therefrom. The common stock so contributed is denoted in money and is the
capital of the company. The persons who contribute it, or to whom it
belongs are members. The proportion of capital to which each member is
entitled is his share. Shares are always transferable although the right to
transfer them is often more or less restricted.”
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2. Registered Companies: These are the companies which are formed and
registered under the companies Act 1956, or were registered under any of
the earlier companies Acts. These are by far the most commonly found
companies.
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2. Unlimited companies
Sec.12 specifically provides that any 7 or more persons (2 or more in
case of a private company) may form an incorporated company, with or
without limited liability. A company without limited liability is known as
an unlimited company. In case of such a company, every member is
liable for the debts of the company, as in an ordinary partnership, in
proportion to his interest in the company.
An unlimited company may or may not have a share capital. If it has a
share capital, it may be a public company or a private company.
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The only restriction is that a private company cannot issue debentures to the
public at large. Joint holders of shares are treated as a single member.
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3.alter the regulations contained in the Articles which are inconsistent with
those of a public company.
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2. Subsidiary companies
1. Holding company. A company is known as the holding company of
another company if it has control over that other company. According
to Sec, 4(4), a company is “deemed to be the holding company of
another if, but only if, that other is its subsidiary.”
2. Subsidiary company. A company is known as a subsidiary of another
company when control is exercised by the latter (called holding
company) over the former called a subsidiary company. According to
Sec. 4(1), a company (say, company S0 is deemed to be a subsidiary
of another company (say, company H) in the following 3 cases.
(1) Company controlling composition of Board of directors. Where a
company (Company H) controls the composition of Board of
directors of another company (Company S), the latter (Company S)
becomes the subsidiary of the former (Company H). For this purpose
the composition of Company S’s Board of directors is deemed to be
controlled by Company H if company H can appoint or remove all or
a majority of directors of Company S.
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CERTIFICATE OF INCORPORATION
When the requisite documents are filed with the Registrar, the
Registrar shall satisfy himself that the statutory requirements regarding
registration have been duly complied with. In exercising this duty, the
Registrar is not required to carry out any investigation. If the Registrar is
satisfied as to the compliance of statutory requirements, he retains and
registers the Memorandum, the Articles and other documents filed with
him and issues a ‘ certificate of incorporation’, i.e., of the formation of
the company
By issuing certificate of incorporation the Registrar certifies under his
hand that the company is incorporated and in the case of a limited company,
that the company is limited.
Effects of Incorporation
When a company is registered and a certificate of incorporation is issued by
the Registrar, three important consequences follow:
1. The company becomes a distinct legal entity. Its life commences from
the date mentioned in the certificate of incorporation.
2. The company acquires a perpetual succession. The members may
come and go, but it goes on for ever, unless it is wound up.
3. The company’s property is not the property of the shareholders. The
shareholders have a right to share in the profits of the company when
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realized and divided. Likewise, any liability of the company is not the
liability of the individual shareholders.
A private limited company can commence business immediately after its
incorporation. A public company has to obtain certificate to commence
business before it can commence business.
PROMOTOR
Who is a promoter?
A promoter is a person who does the necessary preliminary work
incidental to the formation of a company. The first persons who control a
company’s affairs are its promoters. It is they who conceive the idea of
forming the company, with reference to a given object and then to set it
going. It is they who take the necessary steps to incorporate the company,
provide it with share and loan capital and acquire the business or property
which it is to manage. When these things have been done, they hand over
the control of the company to its directors, who are often the promoters
themselves, under a different name.
What is memorandum of association?
A fundamental document. The Memorandum of Association is a
document of great importance in relation to the proposed company. It
contains the fundamental conditions upon which alone the company is
allowed to be incorporated. It is the charter of the company and defines
its raison d’etre(i.e., reason for existence). It lays down the area of
operation of the company. It also regulates the external affairs of the
company in relation to outsiders. Its purpose is to enable shareholders
and those who deal with the company to know what its permitted range
of enterprise is. It not only shows the object of the formation of a
company but also the utmost possible scope of it, as it were, the area
beyond which the actions of the company cannot go; inside that area the
shareholders may make such regulations for their own governance as
they think fir.
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(a) printed,
(b) divided into paragraphs numbered consecutively, and
(c) signed by 7 (2 in case of a private company) subscribers.
Contents of Memorandum
The Memorandum of every company shall contain the following clauses
(described as conditions of the company’s incorporation)
1. The name of the company, with ‘Limited’ as the last word of the name
in the case of a public limited company and with ‘Private Limited’ as
the last words of the name in the case of a private limited company.
2. The State in which the registered office of the company is to be
situate.
3. The objects of the company which shall be classified as-
(a) the main objects of the company to be pursued by the company on its
incorporation and objects incidental or ancillary to the attainment of
the main objects; and
(b) other objects of the company not included in (a)
4. In the case of companies (other than trading corporations) with objects
not confined to one State, the States to whose territories the objects
extend.
5. Limited liability. The Memorandum of a company limited by shares
or by guarantee shall also state that the liability of its members is
limited.
6. Share capital. In the case of a company having a share capital, the
amount of share capital with which the company is to be registered
and the division thereof into shares of a fixed amount. In such a
company each subscriber shall take at least one share and shall write
opposite his name the number of shares he takes. The Memorandum
of a company limited by guarantee shall also state that each member
undertakes to contribute a certain sum to the assets of the company, if
need be, in the event of its being wound up.
ALTERATION OF MEMORANDUM
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Alteration of conditions
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buy additional shares of the company unless all the members agree in
writing to such change either before or after the change.
The Articles of Association or just Articles are the rules, regulations and
bye-laws for the internal management of the affairs of a company. They
are framed with the object of carrying out the aims and objects as set out
in the Memorandum of Association.
The Articles are next in importance to the Memorandum of
Association which contains the fundamental conditions upon which alone
a company is allowed to be incorporated.
Write about the its contents.
1. Share capital, rights of shareholders, variation of these rights,
payments 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 and proceedings threat.
11.Voting rights of members, voting and poll, proxies.
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deposits or offers for shares and debentures from the public. A private
company is prohibited from making any invitation to the public to
subscribe for any shares in, or debentures of, the company. Hence it need
not issue a prospectus.
Definition
Sec 2 (36) defines a prospectus 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. ‘ In simple words, any document inviting deposits from
the public or inviting offers from the public for the subscription of shares
or debentures of a company is a prospectus.
Offer to the public. i.e., public issue. Whether shares have been ‘offered
to the public’ is a matter of fact and will depend on the circumstances of
a particular case.
Part I of Schedule II
1. General Information. (a) Name and address of registered office of the
company, (b) Consent of the Central Government for the present issue
and declaration of the Central Government about non-responsibility for
financial soundness or correctness of statements.(c) Names of Regional
Stock Exchange and other stock exchanges where application is made for
listing of present issue,(d) Provisions relating to punishment for fictitious
applications.(e) Declaration about refund of the issue if minimum
subscription of 90 per cent is not received within 90 days from closure of
the issue.(f) Declaration about the issue of allotment/refund within a
period of 10 weeks.(g) Date of opening of the issue. Date of closing of
the issue. Date of earliest closing of the issue.(h) Name and address of
auditors and lead managers.(i) Name and address of trustee under
debenture trust deed (in case of debenture issue). (f) Raising from
CRISIL (Credit Rating Information Services of India Limited) or any
rating agency obtained for the proposed debenture/preference share issue.
If no rating has been obtained, this fact should be stated. (k)
Underwriting of the issue (Names and addresses of the underwriters and
the amount underwritten by them)
II. Capital structure of the company. (a) Authorised, issued, subscribed and
paid-up capital. (b0 Size of present issue giving separately reservation for
preferential allotment to promoters and others. (c) Paid-up capital:
(i) after the present issue,
(ii) after conversation of debentures (if applicable)
III. Terms of the present issue. (a) Terms of payments. (b) Rights of the
instruments holders, (c) How to apply-availability of forms, prospectus and
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mode of payment. (d) Any special tax benefits for company and its
shareholders.
IV. Particulars of the issue. (a) Objects, (b) Project cost, (c) Means of
financing (including contribution of promoters).
V. Company, management and project. (a) History and main objects and
present business of the company. (b) Subsidiary (ies) of the company, if any.
(c) Promoters and their background. (d) Names, addresses and occupations
of manager, managing director and other directors including nominee
directors, whole-time directors (giving their directorship in other
companies). (e) Location of project. (f0 Plant, and machinery, technology
process, etc. (g) Collaboration agreements, (h) Infrastructure facilities for
raw material, water, electricity, etc. (i) Schedule of implementation of the
project and progress so far. (f) Nature of product, approach to marketing and
export possibilities, (k) Future prospects – expected capacity utilization
during the first 3 years from the date of commencement of production, and
the expected year when the company would be able to earn cash profits and
net profits. Stock market data for share/debentures of the company (high/low
price in each of the last 3 years and monthly high/low during the last 6
months (where applicable).
Part II of Schedule II
A. General information
1. Consent of Directors, Auditors, Solicitors / Advocates, Managers to Issue.
Registrar of issue, Bankers to the company. Bankers to the issue and
Experts.
2. Experts; opinion obtained, if any.
3. Change, if any, in directors and auditors during the last 3 years, and
reasons thereof.
4. Authority for the issue and details of resolution passed for the issue.
5. Procedure and time schedule for allotment and issue of certificates.
6. Names and addresses of the company Secretary, Legal Adviser, Lead
Managers, Co-managers, Auditors, Bankers to the company,
B. Financial information
1. Report by the auditors. A report by the auditors of the company with
respect to (a) its profits and losses (distinguishing items of non recurring
nature) and assets and liabilities ; and (b) the rates of dividends paid by the
company during the preceding 5 financial years.
2. Reports by the accountants. (1) A report by the accountants (who shall be
qualified under the Act for appointment as auditor of a company and who
shall be named in the prospectus) on the profits or losses of the business for
the preceding 5 financial years, and on the assets and liabilities of the
business on a date which shall not be more than 120 days before the date of
the issue of the prospectus. This report is required to be given if the proceeds
of the issue of the shares or debentures are to be applied directly in the
purchase of any business.
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Sweat equity shares. The expression “sweat equity shares” means equity
shares issued at a discount or for consideration other than cash for
providing know-how or making available rights in the nature of
intellectual property rights or value additions, by whatever name called.
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Define debenture.
The most usual form of borrowing by a company is by the issue of
debentures. According to Sec. 2 (12), ‘debenture’ includes debenture stock,
bonds and any other securities of a company, whether constituting a charge
on the assets of the company or not. Sec,2 however, does not explain as to
what a debenture really is. In short, it means a document which either creates
a debt or acknowledges it.
Debentures are commonly issued in a manner similar to the issue of shares
through a prospectus. The amount might be payable by instalments on
application, allotment and calls. But usually the amount is payable in one
lump sum.
Characteristic features of a debenture. In the light of this definition, the
characteristic features of a debenture are as follows;
1. I is issued by a company and is usually in the form of a
certificate which is an acknowledgment of indebtedness.
2. It is issued under the company’s seal. It need not, however, be
necessarily under the company’s seal.
3. It is one of a series issued to a number of lenders. But a single
debenture is also not common. Thus a mortgage of a company’s
property to a single individual as security for a loan is a
debenture within the definition given earlier.
4. It usually specifies a particular period or date as the date of
repayment. It also provides for the payment of a specified
principal and interest at the specified date. But a company is not
debarred from issuing perpetual or irredeemable debentures.
5. It generally creates a charge on the undertaking of the company
or some parts of its property; but there may be debentures
without any such charge.
6. A debenture-holder does not have any right to vote in the
company meetings.
Nature of debenture. The debentures of a company are a movable property,
transferable in the manner provided by the Articles.
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Number of directors
Every public company (other than a deemed public company) shall
have at least 3 directors and every other company (eg., private company,
a deemed public company) at least 2 directors.
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not less than 6 months, and a period of 5 years has not elapsed from the date
of expiry of the sentence.
(e ) A person whose calls in respect of shares of the company held for more
than 6 months have been in arrear.
(f ) A person who is disqualified for appointment as director by an order of
the Tribunal under Sec. 203 (which deals with power of the Tribunal to
restrain fraudulent persons from managing companies) on the ground of
fraud or misfeasance in relation to the company.
(g) A person who is already a director of a public company which –
(i) has not filed the annual accounts and annual returns for any three
continuous financial years commencing on and after the first day of April,
1999; or
(ii) has failed to repay its deposit or interest thereon on due date redeem its
debentures on the date or pay dividend and such failure continues for one
year or more.
The disqualification mentioned in Clause (d) and (e) may be removed by
the Central Government by notification in the Official Gazette.
A private company which is not a subsidiary of a public company may, by
its Articles, provide that a person shall be disqualified for appointment as a
director on any additional grounds.
How the dorectors are removed?
Directors may be removed by-
1. Shareholders (Sec.284). The shareholders may remove a
director before the expiry of his period of office by passing an
ordinary resolution. This does not, however,
(a) apply to the case of a director appointed by the Central
Government under Sec.408.
(b) authorize, in the case of a private company, removal of a
director holding office for life on April 1, 1952.
(c) Apply to the case of a company which has adopted the system
of electing 2/3rds of its directors by the principle of
proportional representation.
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things as the company is authorized to exercise and do. This means the
powers of the Board of directors are co-extensive with those of the company.
This proposition is, however, subject to two conditions:
First, the Board shall not do any act which is to be done by the company in
general meeting.
Second, the Board shall exercise its powers subject to the provisions
contained in the Companies Act, or in the Memorandum or the Articles of
the company or in any regulations made by the company in general meeting.
But no regulation made by the company in general meeting shall invalidate
any prior act of the Board which would have been valid if that regulation
had not been made.
Powers to be exercised at Board meetings (Sec,292). The Board of
directors of a company shall exercise the following powers on behalf of the
by means of resolutions passed at the meetings of the Board, viz., the power
to-
(a) make calls on shareholders in respect of money unpaid on
their shares;
(b) issue debentures;
(c) borrow moneys otherwise than on debentures (say through
public deposits);
(d) invest the funds of the company; and
(e) make loans.
Powers to be exercised with the approval of company in general meeting
(Sec.293). The Board of directors of a public company, or of a private
company which is a subsidiary of a public company, shall exercise the
following powers only with the consent of the company in general meeting;
(a) To sell, lease or otherwise dispose of (say under amalgamation
scheme) the whole, or substantially the whole, of the undertaking
of the company.
(b) To remit or give time for repayment of any debt due to the
company by a director except in the case of renewal or continuance
of an advance made by a banking company to its director in the
ordinary course of business.
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4. Liability for acts of his co-directors. A director is not liable for the
acts of his co-directors provided he has no knowledge and he is not a
party. His co-directors are not his servants or agents who can by their
acts impose liability on him.
Explain the term meetings and resolutions.
The meetings of a company may be classified as follows:
1. General meetings which include-
(1) Statutory meeting,
(2) Annual general meetings and,
(3) Extraordinary meetings.
These meetings are called general meetings of a company as these are
meetings of all the members of the company.
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company may hold its first annual general meeting within a period of 18
months from the date of its incorporation. In that event it is not necessary for
the company to hold any annual general meeting in the year of its
incorporation in the next year.
The Registrar may, for any special reason, extend the time for holding any
annual general meeting by a period not exceeding 3 months. But no
extension of time is granted for holding the first annual general meeting.
There should be at least one annual general meeting per year and as many
meetings as there are years.
Time and place of meeting. Every annual general meeting shall be called
during business hours on a day that is not a public holiday. It shall be held
either at the registered office of the company or at some other place within
the city, town or village in which the registered office of the company is
situate.
21 days’ notice. A general meeting of a company may be called by giving
not less than 21 days’ notice in writing. It may be called with a shorter
notice if it is agreed to by all the members entitled to vote in the meeting.
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2.Notice of meeting.
A proper notice of the meeting should be given to the members and all
others who are entitled to attend the meeting.
Length of notice (Sec.171). A general meeting of a company may be called
by giving not less that 21 days’ notice in writing to the members. The use of
the word ‘may’ in Sec.171 does not mean that the notice can be dispensed
with.
A general meeting may be called by giving a notice of less than 21 days if
it is so agreed-
(1) In the case of an annual general meeting, by all the members entitled to
vote thereat. The members can voluntarily consent to a shorter notice either
before or after the meeting.
(2) (a) In the case of any other meeting (e.g., a statutory meeting or an
extraordinary general meeting) of a company having a share capital, by
members holding not less than 95 percent of the paid-up share capital as give
a right to vote, and
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(b) in a company not having share capital, by members having not less than
95 percent of the voting power exercisable at the meeting.
Notice to whom. Notice of every meeting of a company shall be given to-
(1) every member of the company entitled to vote;
(2) the persons on who, the shares of any deceased or insolvent
members may have devolved ; and
(3) the auditor or auditors of the company.
Contents of notice. Every notice of a company calling a meeting shall
specify the place and the day and hour of the meeting. It shall also contain a
statement of the business to be transacted at the meeting.
The notice of a general meeting must fairly and intelligently convey the
purpose for which the meeting is called to enable a person having the right
to attend reasonably to make up his mind whether to attend or not. It should
not be misleading or equivocal.
3. Quorum for meeting (Sec.174).
‘Quorum’ means the minimum number of members who must be present
in order to constitute a valid meeting and transact business thereat. The
quorum is generally fixed by the Articles.
5 members personally present in the case of a public company
(other than a deemed public company), and 2 in case of any other
company, shall be the quorum for a meeting of the company. If
minimum number of members are not present for the meeting the
Board of directors may adjourn the meeting to some other day.
4. Chairman of the meeting (Sec.175)
Presiding officer of the meeting. A chairman is necessary to conduct a
meeting. He is the presiding officer of the meeting. Unless, the Articles of a
company otherwise provide, the members personally present at the meeting
shall elect one of themselves to be the chairman of the meeting on a show of
hands. If a poll is demanded on the election of the chairman, it shall be taken
forthwith. In such a case, the chairman elected on a show hands shall
exercise all the powers of the chairman. If some other person is elected
chairman as a result of the poll, he shall be the chairman for the rest of the
meeting.
Conduct of the meeting. The way in which a meeting is to be conducted is
a matter for the chairman, with the assent of the persons properly present, to
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be determined in the light of the general law and the company’s Articles of
Association.
4. Minutes of the meeting (Sec.193 to 196)
Minutes are a record of what the company and directors do in meeting.
Minutes of proceedings of meetings (Sec.193). Every company shall
keep a record of all proceedings of every general meeting and of all
proceedings of every meeting of its Board of directors and of every
committee of the Board. This is done by making within 30 days of the
conclusion of every such meeting concerned, entries of the proceedings in
the books kept for that purpose. These records are known as minutes.
Minutes book. The book in which the record of the proceedings of a
meeting is kept is known as the minutes book. Separate minute books are
required to be kept for shareholders’ general meetings of the company and
directors’ meetings and usually there are also separable minutes books for
committee meetings of the Board of directors.
Numbering of pages. The pages of every minutes book shall be
consecutively numbered. In no case the attaching or pasting of papers of
proceedings of a meeting allowed in minutes book.
Signing of minutes. Each page of the minutes which records proceedings of
a Board meeting shall be initialed or signed by the chairman of the same
meeting or the next succeeding meeting. The last page of the record of
proceedings of each meeting in the minutes book shall be dated and signed.
This has to be done-
(a) in the case of a Board or a committee meeting, by the chairman of the
same or the next succeeding meeting, and
(b) in the case of a general meeting, by the chairman of the same meeting
within 30 days of the meeting, or in the event of the death or liability
of that chairman within 30 days of the meeting, by the director duly
signed by the Board for the purpose.
Fair and correct summary. The minutes of each meeting shall contain a
fair and correct summary of the proceedings at the meeting so that the
absentee shareholders may be in a position to form some reliable idea of
what transpired at these meetings.
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PROXIES (Sec.176)
A member entitled to attend and vote at a meeting any vote either in person
or by proxy. A proxy is an authority to represent and vote for another person
at a meeting. It is also an instrument appointing a person as proxy. The
person so appointed is also called proxy.
If the Articles do not otherwise provide-
(1) A proxy can vote only on a poll.
(2) A member of a private company cannot appoint more than one proxy
to attend on the same occasion.
(3) A member of a company not having a share capital cannot appoint a
proxy.
Proxy to be in writing. The instrument appointing a proxy shall be in
writing and signed by the appointer or his attorney duly authorized in
writing.
RESOLUTIONS
The question which generally come for consideration at the general meeting
of a company are presented in the form of proposals called motions. A
motion may be proposed by the chairman of the meeting by any other
member of the company. Before it is placed before the meeting by the
chairman for discussion, it must be seconded by someone. The motion, after
the close of discussion, is formally put to vote by a show of hands. It may
either be carried or rejected. If a sufficient number of members demand, the
motion may be put to poll. The final result is declared after the poll is taken.
If a motion is carried, it becomes a ‘resolution’.
KINDS OF RESOLUTIONS
There are three kinds of resolutions under the Companies Act.1956
1. Ordinary Resolution (Sec.189(1))
An ordinary resolution is a resolution passed at a general meeting of a
company by a simple majority of votes (i.e., votes cast in favour of the
resolution exceed votes cast against it) including the casting vote of the
chairman, if any. The votes may be cast by members in person or by proxy,
where proxies are allowed. The required notice of the meeting should have
been duly given. In ascertaining simple majority of the members, only the
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votes cast, including the casting vote of the chairman, if any, have to be
taken into account.
Unless the Companies Act or the Memorandum or the Articles expressly
require a special resolution requiring special notice, an ordinary resolution is
sufficient to carry out any matter.
When is an ordinary resolution required? Ordinary resolution is
necessary for the following among other purposes;
(a) Rectification of name or adoption of new name by a company
where it resembles the name of an existing company with the
previous approval of the Central Government (Sec.22(1)(a)).
(b) Issue of shares capital(Sec.79(2))
(c) Alteration of share capital (Sec.94(2))
(d) Re-issue of redeemed debentures (Sec.121)
(e) Adoption of statutory report (Sec.165)
(f) Passing of annual accounts and balance sheet, along with
reports of Board of directors and auditors (Sec.210)
(g) Appointment of auditors and fixation of their remuneration
(Sec.224(1))
(h) Appointment of first directors who are liable to retire by
rotation (Sec.255(1))
(i) Increase or redemption in the number of directors within the
limit fixed by the Articles (Sec.258)
(j) Appointment of managing/whole-time director (Sec.269)
(k) Removal of a director and appointment of a director in is place
(Sec.284(1))
(l) Approval of appointment of sole selling agents (Sec.294)
(m) Winding up a company voluntarily in certain events
(Sec.484(1)(a))
(n) Appointment and fixation of remuneration of liquidators in a
members’ voluntary winding up (Sec.490(1))
(o) Nomination of a liquidator in a creditors’ voluntary winding up
(Sec.502(1))
2. Special resolution (Sec.189(2))
A special resolution is one which satisfies the following conditions:
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(b) there are good reasons for the delay, i.e., the suspension
of business is satisfactorily accounted for and appears to
be due to temporary causes.
4. Reduction in membership. If, at any time, the number of
members of a company is reduced in the case of a public
company, below 7 or in the case of a private company, below 2,
the company may be ordered to be wound up by the court. If
the company caries on business for more than 6 months while
the number is to reduced every member who is cognizant of the
fact that it is carrying on business with members fewer than the
statutory minimum, will be severally liable for the payment of
the whole of the debts of the company contracted after those 6
months.
5. Inability to pay its debts. A company may be wound up by
the court if it is unable to pay its debts. The test is whether the
company has reached a stage where it is commercially
insolvent-that is to say, that its existing and probable assets
would be insufficient to meet the existing liabilities.
‘Commercially insolvent’ means that the company is
unable to pay debts or liabilities as they arise in the
ordinary course of business.
POWERS OF COURT
Power of court to say or restrain proceedings against
company. At any time after the presentation of a winding of
petition and before a winding up order has been made, the
company, or any creditor or contributory may apply to the court for
a stay of, or restraint of, further proceedings in the court.
Powers of court on hearing petition.
On hearing a winding up petition, the court may-
(a) dismiss it, with or without costs ; or
(b) adjourn the hearing conditionally or unconditionally ; or
(c) make any interim order that it thinks fit ; or
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VOLUNTARY WINDING UP
Voluntary winding up means winding up by the members or creditors of a
company without interference by the court. The object of a voluntary
winding up is that the company, i.e., the members as well as the creditors,
are left free to settle their affairs without going to the court. They may
however apply to the court for any directions, if and when necessary.
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IMPORTANT QUESTIONS:
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Unit – IV
1. What is meant by Intellectual Property? Explain the Scope of Intellectual
Properties.
Intellectual property is nothing but an outcome of creative functions of one’s own
wisdom, a characteristic feature of the mind. Property is derived from the term
‘Proprietary’. Meaning the right to hold, possess, use and enjoy a thing absolutely to
the exclusion of others as owner.
Intellectual property means intangible property produced by one’s own
intellectual ability or capacity. Intellectual property includes Patent Rights,
Copyrights, Trade marks and Design Rights.
Scope and Meaning.
Property or ownership is a bundle of rights enjoyed by a person exclusively and
absolutely over a movable or immovable, tangible or intangible property. A person’s
property is said to be all that is his in law. There are various theories as regards. The
definition of property.
(a) The Natural law theory states that property is derived from nature and is divided
among men by agreement. Messers Grotius, Pufendorf and Blacktone, the
eminent jurists belong to this school.
(b) The metaphysical theory as advocated by Kant and Hegal defines the essential
elements of leagal transaction of original acquisition are three, namely,
1. ‘Prehension’ an object that belongs to none
2. an act of the free will interdicting all others from using it as their; and
3. appropriation , a permanent acquisition
( c ) According to the positive theory of Mr. Spencer, property is the result of
individuals labour. No one has a moral over another’s property when he has not
acquired by his personal labour.
( d)According to Bentham, who follows the historical theory, property is the basis of
expectation of deriving certain advantages from a thing. Bentham opines that property is
nothing but conception of mind.
( e) The followers of sociological theory Prof. Duguit, Prof. Laksi, Mr. Kari Marx say
that property is a social fact. Social fact signifies the benefit offered by society in the
form of service, etc.
(f) How ever Prof. Salmond interpreted the term property in four ways:
1. In the widest sense, the term property includes rights of all types recognized under
law- right to land, life and liberty including conjugal relation.
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2. In the limited sense, rights signify Proprietary rights such as right of ownership of
land, chattel, copyright, patent, shares, etc. Life, liberty and Reputation are not
subject matters of property.
3. In the narrowest sense, only corporeal properties are considered as property. They
are land, building and chattel.
4. Proprietary rights in Rem are yet another category. The proprietary Rights
authorize a person to enjoy exclusive possession of the same right as owner and
absolute enjoyment of the same. This kind of property gives room for right in Rem
also.
Example. A free hold land, a patent right and a coy right.
It must be understood that the grant of patent could be made only to invention of a
product. Invention signifies combination of thought and creation. It involves a
spontaneous conception of a happy thought of some idea which is not previously in
existence. Invention involves (a) mental thinking focuses on an idea, (b) such material
thinking is streamlined through physical operation of converting the idea to an end
product. Mere discovery of an already existing principle is not an invention. It is not
an invention because what is covered is discovered.
4. What are not inventions for the purpose of the Act (Sec 3)
1. An invention which is frivolous or which claims anything obviously contrary to
well established natural laws.
2. An invention, primary or intended use of which would be contrary to law or
morality or injurious to the health of the public.
3. The mere discovery of a scientific principle or the formulation of an abstract
theory.
4. Mere discovery of any new property or new use for a known substance or the
mere use of a known, process machine or apparatus unless such known process
results in a new product or employs at least one new reactant.
5. A substance obtained by a mere admixture resulting only in the aggregation of the
properties of the components thereof or a process for producing such substances.
6. The mere arrangement or rearrangement or duplication of known devices, each
functioning independently of one another in a known way.
7. A method of process of testing applicable during the process of manufacture for
rendering the machine apparatus or other equipment more efficient or for the
improvement or restoration of the existing machine, apparatus or other equipment
or control of manufacture.
8. A method of agriculture or horticulture.
9. Any process for the medicinal, surgical, curative, prophylactic or other treatment
of human beings or any process for a similar treatment of animals or plants to
render them free of disease or to increase their economic value or that of their
products.
According to section 4, no patent shall be granted in respect of an invention relating
to atomic energy falling within subsection 1 of section 20 of the Atomic Energy Act
of 1962. It must be understood in brief that invention does not cover things that are
used contrary to law, mere discovery, aggregation of properties by mere mixture,
rearrangement or duplication, a method of agriculture or horticulture, process or
medical treatment of human beings, animals or plants and invention relating to atomic
energy.
Inventions are there for which only process is patentable.
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employment cannot apply for patent. The restrictions mentioned above are
imposed not under the Act but by the government under their service rules.
Filing an application.
(a) Every application for a patent shall be for one invention only and shall be made in
the prescribed form and filed in the patent office.
(b) In the case of assignment along with the application, the assignment deed in
favour of the applicant authorizing him to apply for such patent has to be filed
with the application.
(c) The application shall contain a declaration to the office that the applicant is the
true inventor and in possession of the invention. If any other person other than the
inventor applies for a patent as a legal representative or an authorized
representative, he shall disclose the name of the owner claiming to be the first
inventor.
(d) Every such application shall be accompanied by provisional or a complete
specification.
Provisional specification. A provisional specification shall be in form 3 which
should contain (a) the title of invention (b) names, addresses and nationalities of the
applicants (c) description and nature of the invention preceded by a preamble ; and
(d) date and signature of the applicant.
The title of the invention given in the provisional specification should indicate the
art of the industry to which the invention relates. It should be brief, free from
ambiguity and must be precise. Nature of the invention, the use of it and the
advantages of it may be described succinctly. It is not necessary to reveal all the
secrets as regards the process of manufacture and the proportion of ingredients that go
to make up the product in the provisional specification. Every provisional application
must be followed up by a complete specification within a period of twelve months
which can be extended further by three months. Failure to file a complete
specification within the prescribed time limit may amount to abandonment of
application.
Complete specification. Complete specification should be drawn up in Form 3A
which should not vary in its nature from that of the provisional specification. The
complete specification should contain the correct title of invention, the name,
nationality and address of the applicant prescribed preamble to the description of the
invention and the manner in which it has to be preformed. Statement of facts fully
describing all the particulars including the proportion of the ingredients that constitute
the product of the invention, the method and process of operation to be undertaken for
the manufacture of the product which is known exclusively to the applicant which the
applicant seeks to be protected.
(e) Statement of claims and signature of the applicant. Necessary drawings
connected with the invention and statement of particulars with data disclosing
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measurements etc., may also be furnished along with the complete specification.
But it is necessary that all the statements given must contain the signature of the
applicant. It should be noted in respect of priority of claims, the date of claim
shall be calculated form the date of complete specification. However, if a
provisional specification has already been filed, the priority date will be the date
of filing the application with provisional specification.
the patent at a reasonable cost in good shape. (c) A patentee has a duty not to
indulge in making baseless and unjustifiable threats of an action for infringement
against others. (d) Every patentee should submit periodical statements to the
controller regarding the manner with which the patent was manufactured, used
and distributed to the public.
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(d) A criminal complaint may also be lodged for deceiving the public as well
as the original inventor of the patent leading to the prosecution of the
offender vis., the infringer.
(e) The limitation period is three years from the actual date of infringement
against the infringer. No notice need be given to the defendant before
filing a suit by the plaintiff.
(f) The right to file a suit for infringement primarily rest on the patentee but
depending upon the circumstances and situation such right can also be
exercised by the assignee, licensee, heirs, legal representatives and others
who have acquired interest in the patent lawfully.
(g) The suit for infringement may lie against manufacturers, importers,
dealers, agents, and sometimes even against the consumer for having
infringed the rights of the patentee.
(h) The infringer can put up the following defences such as 1. that there is no
infringement 2. that the aggrieved party has no no right to file a suit, 3.
that there is no substance in the allegation of infringement 4. that the
infringer is only a licensee or assignee 5. that the Act complained comes
within the scope of innocent infringement or after the expiry period of the
patent. 6. that there is no infringement at all as the patent is not at all an
invention mush less an object of creativity.
10. Write down the rules of the WTO related with Patent.
The main objective of the WTO is to settle the disputes prevalent among its member
nations. In 1994, all the member states have agreed to abide by the rules and
procedures as laid down by the WTO. On account of this understanding, the WTO
has constituted a Dispute settlement Body to hear the disputes among member states
and find out a settlement for the disputes. It is first left to the member states to consult
with each other and particularly with the respective government so that the
government may be use its good office for an amicable settlement within 60 days
Where consultation fails among member states, WTO may be approached by any
member state with a reques to constitute a special DSB i.e. Dispute settlement Board.
The panel shall be from well qualified members not belonging to any government
party. The DSB may either reject or approve the panel’s recommendation within 60
days unless any one of the parties prefers an appeal before the appellae body is
submitted to the DSB which will either adopt the findings of the appellate body or not
to adopt it by consensus by circulation of the report within 30 das.
The understanding among the member states of World Trade Organization is that
disputes pertaining to transaction of trade must be first through (ADR) i.e. alternate
dispute resolution by consultation mediation. It is only on failure of this negotiation,
they are referred to Dispute Settlement Body and thereafter to the Appellate body if
appeal has to be preferred.
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Important Questions :
UNIT V
Information Technology Act 2000.
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The modern age is the age of computers, new communication-systems and digital
technology. A revolution is occurring in the form of new technology. Business and
consumers are increasingly using computers to create, transmit and store information in
the electronic form instead of traditional paper documents.
Information stored in electronic form has many advantages. It is cheaper, easier to
store, retrieve and speedier to communicate. International trade through the medium of e-
commerce has been growing rapidly in the past few years and many countries have
switched over from traditional paper based commerce to e-commerce.
The United Nations Commission on International Trade Law (UNCITRAL)
adopted the Model Law on Electronic Commerce in 1996. This Model Law provides for
equal legal treatment of users of electronic communication and paper-based
communication. Pursuant to a recent declaration by member-countries, the World Trade
Organisation is likely to form a work programme to handle its work in this area including
the possible creation of multilateral trade deals through the medium of electronic
commerce.
The Information Technology Act, 2000 was passed by both the Houses of
Parliament, and it received the assent of the President on the 9 th June, 2000. It came into
force on 17th October, 2000.
The Act extends to the whole of India
Exceptions
The Act does not apply to –
(a) a negotiable instrument as defined in the Negotiable Instruments Act 1881;
(b) a power of attorney as defined in the Powers of Attorney Act, 1882;
(c) a trust as defined in the Indian Trusts Act, 1882
(d) a will as defined in the Indian Succession Act, 1925, including any other
testamentary disposition by whatever name called;
(e) any contract for the sale or conveyance of immovable property or any interest in
such property; and
(f) any such class of documents or transactions as may be notified by the Central
Government in the Official Gazette (Sec.1(4)).
Digital signature
DIGITAL SIGNATURE (Sec 2 (1)(p)). It means authentication of any electronic
record by a subscriber by means of an electronic method or procedure in accordance with
the provisions of Sec.3.
Authentication of electronic records. Authentication is a process used to confirm the
identity of a person or to prove the integrity of information. Message authentication
involves determining its source and verifying that it has not been modified or replaced in
transit. Subject to the provisions of Sec.3, any subscriber may authenticate an electronic
record by affixing his digital signature.
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The authentication shall be effected by the use of asymmetric crypto system and hash
function which envelop and transform the initial electronic record into another electronic
record.
Asymmetric crypto system. It means a system of secure key price consisting of private
key for creating a digital signature and a public key to verify the digital signature.
Electronic record. It means authentication of any electronic record by a subscriber by
means of an electronic method or procedure in accordance with the provisions of Sec.3 of
the Act.
Digital signature. It means data, record or data generated, image or sound stored, received
or sent in an electronic form or microfilm or computer generated micro-fich.
Hash function. It means an algorithm that maps or translates one set of bits into another
set in such a way that
(i) a message yields the same result every time the algorithm is executed by the
same message as input.
(ii) It is computationally infeasible for a message to be derived or reconstituted
from the result produced by the algorithm.
(iii) It is computationally infeasible to find two different messages that produce the
same hash result using the same algorithm.
Verification. Any person by the use of a public key of the subscriber can verify the
electronic record. The private key and the public key are unique to the subscriber and
constitute a functioning key pair.
Legal recognition of electronic records. Where any law provides that information or
any other matter shall be in writing or in the typewritten or printed form, such
requirement shall be deemed to have been satisfied if such information or matter is –
(a) rendered or made available in an electronic form; and
(b) accessible so as to be usable for a subsequent reference.
Legal recognition of digital signatures (Sec.5). Where any law provides that information
or any other matter shall be authenticated by affixing the signature or any document shall
be signed or bear the signature of any person, such requirement shall be deemed to have
been satisfied. If such information or matter is authenticated by means of digital signature
affixed.
Electronic Records
Use of electronic records and digital signatures in Government and its agencies
(Sec.6).
Where any law provides for-
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1. the filling of any form, application or any other document with any office,
authority, body or agency owned or controlled by the appropriate Government in
a particular manner;
2. the issue or agent of any licence, permit, sanction or approval by whatever name
called in a particular manner.
3. the receipt or payment of money in a particular manner.
Such requirement shall be deemed to have been satisfied if such (a) filing, (b) issue (c)
grant, (d) receipt or payment is effected by means of electronic form as may be
prescribed by the appropriate Government.
Stipulation by the originator. Where the originator has stipulated that the electronic
record shall be binding only on receipt of an acknowledgement of such electronic record
by him, then, unless acknowledgement has been so received, the electronic record shall
be deemed to have been never sent by the originator.
No stipulation by the originator. Where the originator has not stipulated that the
electronic record shall be binding only on receipt of such acknowledgement, and the
acknowledgement has not been received by the originator within the time specified or
agreed or within a reasonable time, then, the originator may give notice to the addressee
stating that no acknowledgement has been received by him and specifying a reasonable
time by which the acknowledgement must be received by him. If no acknowledgement is
received within the aforesaid time limit, the originator may after giving notice to the
addressee, treat the electronic record as though it has never been sent.
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Time and place of dispatch and receipt of electronic record. Save as otherwise agreed to
between the originator and the addressee,
(1) the dispatch of an electronic record when it enters a computer resource outside
the control of the originator;
(2) the time of receipt of an electronic record shall be determined as follows, namely;
(a) if the addressee has designated a computer resource for the purpose of receiving
electronic records,-
(i) receipt occurs at time when the electronic record enters the designated
computer resource ; or
(ii) if the electronic record is sent to a computer resource of the addressee that is
not the designated computer resource, receipt occurs at the time when the
electronic record is retrieved by the addressee.
(b) if the addressee has not designated a computer resource along with specified
timings, if any, receipt occurs when the electronic record enters the computer
resource of the addressee.
An electronic record is deemed to be dispatched at the place where the originator has his
place of business, and is deemed to be received at the place where the addressee has his
place of business.
For the purposes of this section,-
(a) if the originator or the addressee has more than one place of business, the
principal place of business shall be the place of business;
(b) if the originator or the addressee does not have a place of business, his usual place
of residence shall be deemed to be the place of business ; and
(c) “usual place of residence”, in relation to a body corporate, means the place where
it is registered.
Certifying Authorities.
Appointment of controller and other officers (Sec.17).
Appointment The Central Government may, by notification in the Official Gazette,
appoint a Controller of Certifying Authorities for the purposes of this Act. It may also, by
the same or subsequent notification, appoint such number of Deputy Controllers and
Assistant Controllers as it deems fit.
The Controller shall discharge his functions under this Act subject to the general
control and directions of the Central Government. The Deputy Controller and Assistant
Controllers shall perform the functions assigned to them by the Controller under the
general superintendence and control of the Controller.
Qualifications, experience, etc. The qualifications, experiences and terms and
conditions of service of Controller, Deputy Controllers and Assistant Controllers shall be
such as may be prescribed by the Central Government.
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Head Office. The Head Office and Branch officers of the office of the Controller
shall be at such places as the Central Government may specify, and these may be
established at such places as the Central Government may think fit.
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recognize any foreign Certifying Authority as a Certifying Authority for the purpose of
this Act.
The Digital Signature Certificate issued by such Certifying Authority shall be
valid for the purposes of this Act.
Revocation of recognition. The Controller may, if he is satisfied that any
Certifying Authority has contravened any of the conditions and restrictions subject to
which it was granted recognition, he may, for reason to be recorded in writing, by
notification in the Official Gazette, revoke such recognition.
Important Questions :
1. What is mean by company ? (November 2017)
2. What is prospectus? (April 2017)
3. Briefly Explain the Capacities of the parties to made contract.
(November 2017)
4. Explain about the formation of the company. (November 2016)
5. Discuss Environment LAW (November 2017)
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