UNIT I - THE INDIAN CONTRACT ACT 1872

Part – A
1. Define contract
Section 2 (h) of Indian Contract Act states that “an agreement enforceable by law is a
contract". It is an agreement between two parties which can be legally enforceable.
Contract = Agreement + enforcement by law

2. Compare agreement with contract

Agreement
An offer and its acceptance constitute an agreement.
Every agreement is not a contract.
Contract
An agreement and its enforceability constitute a contract.
All contracts are agreements

3. Who can perform the contract?

Promisor himself
Agents of the promisor
Legal representatives of the promisor
Third party
Joint promisors

4. Write short note on quasi contract

A quasi contract is an agreement between two parties without previous obligations to one
another that has been created and legally recognized by the court system. Under a quasi-
contract, neither involved party is expected to create such an agreement; this contract is
arranged and imposed by a judge to correct a circumstance in which one party acquires
something at the expense of the other party.

For example, consider an ordered good (with flip kart) that is delivered to the wrong address.
The goods have already been paid for. If the individual does not correct the delivery man and
instead keeps the good, the court system could issue a quasi contract that would require the
individual to pay back the amount of the goods to the party that purchased or ordered the
goods. The contract is used to prevent any party from benefiting from the situation at the
other party's expense. The restitution required under the contract is to make the situation fair.

5. State the features of quasi contract

It is not a real contract

It is not based on express or implied intention of the parties
It is not based on the offer - acceptance rule
It doesn’t arise from formal agreement but it is imposed by law
6. Compare and contrast void contract with voidable contract

7. What is supervening impossibility?

Supervening impossibility is the impossibility arising after the formation of a contract.
However, this arises at the time when the promisor's performance is due. Such
impossibility usually arises due to facts that the promisor had no reason to anticipate and
did not contribute to the occurrence of

8. State the requirements of an offer under contract act

Offer occurs when (a) one party stated their terms and indicated their terms to be bound
(b)when the other party accepts them

9. Write short note on contract of agency

When a person employs another person to do any act for himself or to represent him in
dealing with third persons, it is called contract of agency

10. Who is competent to enter into contract of agency?

Every person is competent to contract if he (i) is of the age of majority, (ii) is of sound
mind, and (iii) is not disqualified from contracting by any law to which he is subject.

11. Who is an agent and principal under contract of agency?

Agent is a person employed by the principal on behalf to do any act for another or to
represent another in dealing with third persons.
The person employing the agent, for whom such act is done by the agent, or who is so
represented, is called the principal.

12. Compare agent with subagent

Agent
An agent is appointed by a principal and is under his control.
An agent acts under the principal
Sub-agent
A sub-agent is appointed by an agent and as such is under the control of the agent.
A sub-agent acts under an agent.
Q1. All agreements are not contract but all contracts are agreements, Discuss the statement
explaining the essential elements of a valid contract.

1. Offer and Acceptance

An agreement is composed of two elements – offer and acceptance. The party making the
offer is known as the "offeror" and the party to whom the offer is made is known as the
“offeree”. It is important that they must agree to the same thing and in the same sense. In
other words, there must be “consensus-ad-idem”.
Example:
A has 2 houses, one in Mumbai and the other in Chennai. He has offered to sell one house to
B.B accepts the offer with the idea of purchasing the house in Mumbai, while A was
intending to sell the house in Chennai. There is no identity of minds. So the agreement is
void.
2.Intention to Create Legal Relationship
There must be an intention among the parties to create a legal relationship. If there is no such
intention, then there is no contract. In case of social agreements, generally, there is no
intention to create legal relationship and, therefore, there is no contract.
Example
A husband agreed to pay 30 pounds to his wife every month while he was abroad. As he
failed .to pay the promised amount, his wife sued him for the recovery of the amount. Held,
she could not recover it as it was a social agreement and the parties did not intend to create
legal relations.
3.Genuine & Free Consent
For a contract to be valid, it is essential that there must be free and genuine consent of the
parties to the contract. Consent is said to be free when it is not caused by coercion, undue
influence, fraud, misrepresentation or mistake. A contract without free consent is voidable.
The consent of parties must be genuine. The term ‘consent’ means parties to a contract must
agree upon the same thing in the same sense. i.e. there should be consensus-ad idem. In such
cases, the contract becomes voidable at the option of the party whose consent is not free.
Example
A threatened to shoot B if he (B) does not lend him Rs. 2,000 and B agreed to it, Here the
agreement is entered into under coercion and hence voidable at the option of B.
4.Capacity of parties to Contract
The parties to a contract must have capacity (legal ability) to, make valid contract. In every
case there must be assent the parties. The assent presupposes a free, fair, and serious exercise
of the reasoning faculty. If, therefore either of the parties to an agreement is deprived of the
use of his understanding or if he be deemed by law not be have attained it; there can be no
such agreement which shall bind him. Section 11 of the Indian Contract Act specifies that
every person is competent to contract provided,
He is of the' age of majority according to the law to which he is subject, and
He is of sound mind and
He not disqualified from contracting by any law to which he is subject.
In other words (a) a minor, (b) a person of unsound mind (a person of unsound mind can
enter into a contract during his lucid intervals) and (c) a person disqualified from contracting
by any law to which he' is subject, (e.g an alien enemy, foreign Sovereigns and accredited
representatives of a foreign state; insolvents and convicts are, not competent to contract.
5.Lawful Consideration
An agreement' must' be supported 'by, consideration. Consideration means something in
return'. Consideration may be an act (doing something) or forbearance not doing something)
or a promise to do or not to do something.
The consideration may be past, present or future.
Consideration must be real
The consideration should also be lawful.
The consideration is considered lawful unless it is forbidden by law, or is fraudulent, or
involves or' implies injury to the person or property of another, or is immoral, or is opposed
to public policy.
"Lawful consideration is an essential element of a valid contract. Consideration is' a technical
word meaning thereby quid pro quo i.e. something in return. It must result. in the benefit to
one party and detriment to the other party or detriment to both.
Example
A agrees to, sell his books to B for Rs. 100, B .promises to pay Rs. 100 in consideration for
A’s promise to sell his books and A's, promise to sell the books is the consideration for B's
promise to pay Rs. 100.
6.Lawful Object
The object or purpose of the agreement must be lawful. It should not be immoral or illegal or
opposed to public policy. If it suffers from any legal flaw, it is not enforceable.
Example
If A rents out a house for use as a' gambling den, the agreement is an agreement expressly or
impliedly prohibited by law.
The agreement must not be one which the law declares to be either illegal or void. A void
agreement is one, which is without any legal effects. Illegal agreement is an agreement
expressly or impliedly prohibited by law.
Example
Agreements in restraint of trade, marriage, legal proceedings etc, are void agreements. Those
agreements prohibited by the Indian Penal Code Eg. Threat to commit murder or publishing
defamatory statements or agreements, which are opposed, to public policy are illegal in
nature.
7.Agreement not Explicitly Declared Void
The agreement must not have been expressly declared void under the contract Act. Sections
24 to 30 specify certain types of agreements, which have been expressly declared void. They
include agreements in restraint of marriage, agreements in restraint of legal proceedings,
agreements in restraint of trade and agreements by way of wager.
8.Certainty of Terms
Section 29 of the Contract Act provides that agreements, the meaning of which is not certain
or capable of being made certain, are void. Thus, to make a valid contract, it is
absolutely essential that its terms must be clear and not vague or uncertain. .
Example
P agreed to sell 10 tons of oil to Q. It is not clear what kind of oil is intended to be sold.
Therefore, this agreement is not valid on the ground of uncertainty. If, however, the meaning
of the agreement could be made certain from the circumstances of the case, it will be treated
as a valid contract.
9.Possibility of Performance
The agreement must be capable of being performed. An agreement to do an impossible thing
or act cannot be enforced.
Example
A agrees with B to discover treasure by magic. It is not enforceable.
10.Compliance with Legal Formalities
An agreement may be oral or written. Where the agreement is to be in writing, it must
comply with the necessary legal formalities as to writing, registration and attestation, or
otherwise, it is not enforceable.
Example
Time barred debt, a promissory note with inadequate stamps

Q2. Discuss the different kinds of contract under Companies Act

On the basis of Formation
Express contract – A contract expressed in oral or written words
Implied contract – A contract inferred from the conduct of the parties
Quasi-contract – A contract implied by law to prevent unjust enrichment
On the basis of Validity
Valid contract – A contract that meets all of the essential elements to establish a contract
Void contract – No contract exists
Voidable contract – A party has the option of voiding or enforcing the contract
Unenforceable contract – A contract that cannot be enforced because of a legal defense
On the basis of Performance
Executed contract – A contract that is fully performed on both sides
Executory contract – A contract that is not fully performed by one or both parties
Bilateral contract – a promise for a promise
Unilateral contract – A promise for an act

Q.3 Discuss the various modes by which a contract can be discharged

Discharge of a contract means termination of the contractual relations between the parties to a
contract. A contract is said to be discharged when the rights and obligations of the parties
under the contract come to an end. Modes of discharge of contract
Discharge by Performance A contract can be discharged by performance in any of the
following ways:
(a) By Actual Performance A contract is said to be discharged by actual performance when
the parties to the contract perform their promises in accordance with the terms of the contract.
(b) By Attempted Performance or Tender A contract is said to be discharged by attempted
performance when the promisor has made an offer of performance to the promisee but it has
not been accepted by the promisee.
Discharge by Mutual Agreement
Since a contract is created by mutual agreement, it can also be discharged by mutual
agreement. A contract can be discharged by mutual agreement in any of the following ways:
(a) Novation [Section 62] Novation means the substitution of a new contract for the original
contract. Such a new contract may be either between the same parties or between different
parties. The consideration for the new contract is the discharge of the original contract.
Eaxample - A owes money to B under a contract. It is agreed between A, B and C that B shall
henceforth accept C as his debtor, instead of A. The old debt of A to B is at an end and a new
debt from C to B has been contracted.
(b) Rescission [Section 62] Rescission means cancellation of the contract by any party or all
the parties to a contract.
By mutual consent :- Parties may enter into a simple agreement to rescind the contract before
it’s breach.
By the aggrieved party :- Where a party has committed a breach of the contract, the aggrieved
party can rescind the contract without in any way effecting his right of getting compensation
for the breach of contract.
(c) Alteration [Section 62] Alteration means a change in the terms of a contract with mutual
consent of the parties. Alteration discharges the original contract and creates a new contract.
However, parties to the new contract must not change.
(d) Remission [Section 63] Remission means acceptance by the promisee of a’ lesser
fulfillment of the promise made. According to Section 63, “Every promisee may dispense
with or remit, wholly or in part, the performance of the promise made to him, or may extend
the time for such performance, or may accept instead of it any satisfaction which he thinks
fit.”
Example-A owes B Rs. 5,000. A pays to B and B accepts in satisfaction of whole debt Rs.
2,000 paid at the time and place where Rs. 5,000 were payable. The whole debt is discharged
(e) Waiver - Intentional relinquishment of a right under the con-tract. Thus, it amounts to
releasing a person of certain legal obligation under a contract.
Example: A promises to paint a picture for B.B afterwards forbids him to do so. A is no
longer bound to perform the promise.
Discharge by Operation of Law
A contract may be discharged by operation of law in the following cases:
(a) By Death of the Promisor A contract involving the personal skill or ability of the
promisor is discharged on the death of the promisor.
(b) By Insolvency When a person is declared insolvent, he is discharged from his liability up
to the date of his insolvency.
(c) By Unauthorised Material Alteration If any party makes any material alteration in the
terms of the contract without the approval of the other party, the contract comes to an end.
(d) By the Identity of Promisor and Promisee When the promisor becomes the promisee,
the other parties are discharged.
Discharge by Impossibility of Performance
The effects of impossibility of the performance of a contract may be discussed under the
following two heads:
(a) Impossibility existing at the time of agreement – It exists at the time of formation of a
contract. It makes the contract void ab initio i.e., void from the beginning, which can be of
known to parties, unknown to parties
(b) Impossibility arising subsequent to the formation of contract - It is also known as
post-contractual or supervening impossibility. Such impossibility makes the contract void and
the parties are discharged from performing the contract further.
Effects of Supervening Impossibility
By means of..
Destruction of subject matter – If the subject matter of the contract is destroyed subsequent
to the formation of the contract, without any fault of either of the parties
Example: A music hall was let for a series of concerts on certain days. The hall was burnt
down before the date of the first concert. The contract was held to be void
Non-existence and non accurance of state of things - If a contract is made on the basis of
continued existence of certain state of circumstances, the contract stands discharged if the
state of things ceases to exist
Example: A and B contracted to marry each other. Before the time fixed for marriage, A goes
mad. The contract become void.
Death or incapacity of personal things- Contracts involving personal skill of the promisor will
stand discharged in the case of his death or personal incapacity.
Example: A contracts to act at a theatre for six months in consideratin of a sum paid in
advance by B. On several occasions A is too ill to act. The contract to act on the occasions
becomes void.
(c) Declaration of War The pending contracts at the time of declaration of war are either
suspended or declared as void.
(d) Change of Law The contract is discharged if the performance of the contract becomes
impossible or unlawful due to change in law after the formation of the contract.
Example: X sold to Y a specific parcel of wheat in a godown. Before delivery could be made,
the godown was sealed by the Government and the entire quantity was requisitioned by the
Government under Statutory Power. The contract was held discharged
Discharge by Lapse of Time
A contract is discharged if it is not performed or enforced within a specified period, called
period of limitation. The Limitation Act, 1963 has prescribed the different periods for
different contracts, e.g. period of limitation for exercising right to recover a debt is 3 years,
and to recover an immovable property is 12 years. The contractual parties cannot exercise
their rights after the expiry of period of limitation.
By Breach of Contract
Breach means failure of a party to perform his or her obligation under a contract Breach of
contract may arise in two ways.
Actual Breach : Actual breach means breach committed either; (i) at the time when the
performance of the contract is due; or (ii) during the performance of the contract.
Example - If on 1st February, 1975 A is prepared to supply the required number of bags of
sugar and B without any valid reasons refuses to accept them, B is guilty of breach a contract.
Anticipatory Breach
Breach of a contract committed before the date of performance of the contract is called
anticipatory breach of contract. (Sec. 39). The contract in this case is repudiated before the
time fixed for its performance arrives and is so discharged.
Example: A agrees to employ B from 1st of March. On 1st February, he writes to B that he
need not join the service, the contract has been expressly repudiated by A before the date of
its performance.
Q4. Identify the remedies available to the aggrieved party on the breach of contract under
Indian Contract Act 1986.
Breach of contract is a legal cause of action and a type of civil wrong, in which a binding
fails to perform their obligations under the contract in whole or in part.
Remedies for Breach of Contract
When a contract is broken, the injured party can claim any of the following remedies
(a) Recession of Contract
When one of the parties to a contract does not fullfil his obligations, then the other party can
rescind the contract and refuse the performance of his obligations. As per section 65 of the
Indian Contract Act, the party that rescinds the contract must restore any benefits he got
under the said agreement. And section 75 states that the party that rescinds the contract is
entitled to receive damages and/or compensation for such a recession.
(b) Sue for Damages
Section 73 clearly states that the party who has suffered, since the other party has broken
promises, can claim compensation for loss or damages caused to them in the normal course of
business.
1. Compensatory Damages. Compensatory damages (also called “actual damages”) cover
the loss the non breaching party incurred as a result of the breach of contract. The amount
awarded is intended to make good or replace the loss caused by the breach.
There are two kinds of compensatory damages…..
(i)General Damages. General damages cover the loss directly and necessarily incurred by
the breach of contract. General damages are the most common type of damages awarded for
breaches of contract.
Example: Company A delivered the wrong kind of furniture to Company B. After
discovering the mistake later in the day, Company B insisted that Company A pick up the
wrong furniture and deliver the right furniture. Company A refused to pick up the furniture
and said that it could not supply the right furniture because it was not in stock. Company B
successfully sued for breach of contract. The general damages for this breach could include:
Refund of any amount Company B had prepaid for the furniture; plus • reimbursement of any
expense Company B incurred in sending the furniture back to Company A; plus• payment for
any increase in the cost Company B incurred in buying the right furniture, or its nearest
equivalent, from another seller.
(ii) Special Damages. Special damages (also called “consequential damages”) cover any loss
incurred by the breach of contract because of special circumstances or conditions that are not
ordinarily predictable. These are actual losses caused by the breach, but not in a direct and
immediate way. To obtain damages for this type of loss, the nonbreaching party must prove
that the breaching party knew of the special circumstances or requirements at the time the
contract was made.
Example: In the scenario above, if Company A knew that Company B needed the new
furniture on a particular day because its old furniture was going to be carted away the night
before, the damages for breach of contract could include all of the damages awarded in the
scenario above, plus payment for Company B’s expense in renting furniture until the right
furniture arrived.

2. Punitive Damages. Punitive damages (also called “exemplary damages”) are awarded to
punish or make an example of a wrongdoer who has acted willfully, maliciously or
fraudulently. Unlike compensatory damages that are intended to cover actual loss, punitive
damages are intended to punish the wrongdoer for egregious behavior and to deter others
from acting in a similar manner. Punitive damages are awarded in addition to compensatory
damages.
Punitive damages are rarely awarded for breach of contract. They arise more often in tort
cases, to punish deliberate or reckless misconduct that results in personal harm
(c)Sue for Specific Performance
This means the party in breach will actually have to carry out his duties according to the
contract. In certain cases, the courts may insist that the party carry out the agreement.
So if any of the parties fails to perform the contract, the court may order them to do so. This
is a decree of specific performance and is granted instead of damages.
For example, A decided to buy a parcel of land from B. B then refuses to sell. The courts can
order B to perform his duties under the contract and sell the land to A.
(d) Injunction
An injunction is basically like a decree for specific performance but for a negative contract.
An injunction is a court order restraining a person from doing a particular act.
So a court may grant an injunction to stop a party of a contract from doing something he
promised not to do. In a prohibitory injunction, the court stops the commission of an act and
in a mandatory injunction, it will stop the continuance of an act that is unlawful.
(6) Quantum Meruit
Quantum meruit literally translates to “as much is earned”. At times when one party of the
contract is prevented from finishing his performance of the contract by the other party, he can
claim quantum meruit. So he must be paid a reasonable remuneration for the part of the
contract he has already performed. This could be the remuneration of the services he has
provided or the value of the work he has already done
Q5. Explain the different kinds of quasi contract with examples

Kinds of Quasi Contract

(a) Supply of Necessaries (Section 68)
Person incapable of entering into a contract like a lunatic or a minor. If a person supplies
necessary suited to the condition in life of such a person, then he can get reimbursement from
the property of the incapable person.
Example - John is a lunatic. Peter supplies John with certain necessaries suited to his
condition in life. However, John does not have the money or sanity and fails to pay Peter.
This is termed as a Quasi contract and Peter is entitled to reimbursement from John’s
property.
However, to establish his claim, Peter needs to prove two things:
John is a lunatic
The goods supplied were necessary for John at the time they were sold/ delivered.
(b) Payment by an Interested Person (Section 69)
If a person pays the money on someone else’s behalf which the other person is bound by law
to pay, then he is entitled to reimbursement by the other person.
Example - Peter is a zamindar. He has leased his land to John, a farmer. However, Peter fails
to pay the revenue due to the government. After sending notices and not receiving the
payment, the government releases an advertisement for sale of the land (which is leased to
John). According to the Revenue law, once the land is sold, John’s lease agreement is
annulled.
Obligation of Person enjoying the benefits of a Non-Gratuitous Act (Section 70)
Imagine a person lawfully doing something or delivering something to someone without the
intention of doing so gratuitously and the other person enjoying the benefits of the act done or
goods delivered. In such a case, the other person is liable to pay compensation to the former
for the act, or goods received. This compensation can be in money or the other person can, if
possible, restore the thing done or delivered.
However, the plaintiff must prove that:
The act that is done or thing delivered was lawful
He did not do so gratuitously
The other person enjoyed the benefits
Responsibility of Finder of Goods (Section 71)
If a person finds goods that belong to someone else and takes them into his custody, then he
has to adhere to the following responsibilities:
Take care of the goods as a person of regular prudence
No right to appropriate the goods
Restore the goods to the owner (if found)
Example - Peter owns a flower shop. Olivia visits him to buy a bouquet but forgets her purse
in the shop. Unfortunately, there are no documents in the purse to help ascertain her identity.
Peter leaves the purse on the checkout counter assuming that she would return to take it.
John, an assistant at Peter’s shop finds the purse lying on the counter and puts it in a drawer
without informing Peter. He finished his shift and goes home. When Olivia returns looking
for her purse, Peter can’t find it. He is liable for compensation since he did not take care of
the purse which any prudent man would have done.
Money paid by Mistake or under Coercion (Section 72)
If a person receives money or goods by mistake or under coercion, then he is liable to repay
or return it.
Example - Peter misunderstands the terms of the lease and pays municipal tax erroneously.
After he realizes his mistake, he approached the municipal authorities for reimbursement. He
is entitled to be reimbursed since he had paid the money by mistake.
Similarly, money paid by coercion which includes oppression, extortion or any such means,
is recoverable

Q6. Discuss the methods of creating an agency under contract of agency

(a)By express appointment by the principal
The standard form of creating an agency is by direct or express appointment by the principal.
When a person, in writing or oral appoints another person as his agent, an agency is created
between the two. Generally, authority is conferred by the Principal to the Agent. If the agent
exceeds this authority, then the principal will not be bound and the agent will be personally
liable to the third party for breach of warranty of authority.
(b) By Implication
When an agent is not directly appointed but his appointment can be inferred from the
circumstances, an agency by implication is created. Implied authority, is not specifically
mentioned by contract but assumed or implied by the nature of the relationship, are presumed
to be given to an agent if that authority is necessary to perform the duties or responsibilities
otherwise assigned to the agent or representative.
(C) Necessity
In a situation of necessity, one person can act on behalf of another to save the person from
any loss or damage, without expressly being appointed as an agent. This creates an agency
out of necessity. An person can act as agent beyond his or her authority by intervening on
behalf of the principal in an emergency. Because of the circumstances of necessity,
particularly the impracticability of the agent communicating with the principal, the courts
were prepared to treat the agent as though he or she had the necessary authority to do what
was reasonably necessary to save the principal’s property. If an agency of necessity was
established, the agent would be reimbursed for the expense incurred in rescuing the
principal’s property.
An agency of necessity may be created if the following three conditions are met:
a) It is impossible for the agent to get the principal’s instruction.
b) The agent’s action is necessary, in the circumstances, in order to prevent loss to the
principal to prevent them from rotting.
c) The agent must have acted in good faith.
In an urgent situation, an agent has authority to act in the best interest for the purpose of
protecting his principal from losses.
(d) Estoppel– An agency can also be created by estoppel. In a situation where one person
behaves in such a manner in front of a third person, as to make someone believe he is an
authorized agent on behalf of someone, an agency by estoppel is created.
A person cannot be bound by a contract made on his behalf without his authority. However, if
he by his words and conduct allows a third party to believe that that particular person is his
agent even when he is not, and the third party relies on it to the detriment of the third party,
he (principal) will be estopped or precluded from denying the existence of that person’s
authority to act on his behalf
(e) Ratification– When an act of a person, who acted as another person’s agent (on his
behalf) without his knowledge is later ratified by that person, this creates an agency by
ratification between the two.
Agency by ratification can arise in any one of the following situations:
 An agent who was duly appointed has exceeded his authority; or
 A person who has no authority to act acted as if he has the authority.

When one of the above said situations arise, the principal can either reject the contract or
accept the contract so made.
When the principal accepts and confirms such a contract, the acceptance is called ratification.
Ratification may be expressed or implied.
The effect of ratification is to render the contract as binding on the principal as if the agent
had been properly authorized beforehand.

Q7.What are the different kinds of agents under contract of agency?

1. General Agent:
The principal appoints a general agent to do anything within his authority in all transactions or
appointed to do all acts relating to a specific job. The principal grants the authority to the agent
to act on his behalf.
It may be assumed by the third party that such an agent has the authority to do all that is usual
for a general agent to do. Any private restrictions on the agent’s authority do not affect the third
party.
2. Special Agent:
He is the one who is appointed or employed to do or perform only a specific act, task or
function. Outside of this special act, task or function, he has no authority or power. In this case,
the third party cannot assume that the agent has unlimited authority. Thus, any act of the agent
outside his authority cannot bind the principal.
3. Mercantile Agent:
section 2(9) of the Sale of goods act, 1930, a mercantile agent is a person who in the customary
course of business has an agent’s authority either to sell or consign the goods for the purpose of
sale or to buy goods or to raise money on the security of goods. Thus, this definition covers the
following:
a. Factors:
A factor is a person who is appointed to sell goods which are put in his possession or to buy
goods for his principal. An agent who is remunerated by a commission (one who looks like
the apparent owner of the things concerned). He is the evident owner of the goods in his
custody and can thus sell them in his own name and receive payment for them.
He also has an insurable interest in the goods in his custody and a general lien regarding any
claim that he may have to arise out of the agency.

b. Brokers:
A broker is a person whose job is to create a contractual relationship between two parties or
whose business is to make contracts with the other parties for the sale and purchase of goods or
securities for brokerage.
He does not have the possession of the goods and acts in the name of the principal. Also, he has
no lien over goods because he has no possession of goods.
c. Delcredere Agent:
A delcredere agent is a person who ensures or guarantees his principal that the creditors of goods
will pay for the goods they buy for extra remuneration. In the case of failure to pay by the third
party, he needs to pay the due amount to his principal.
d. Auctioneers:
An auctioneer is a person who sells the goods by auction or an agent who acts a seller for the
Principal in an auction. An auction is a process by which goods are sold to the highest bidder in
a public competition. He cannot warrant his principal’s title to the goods.
He is the agent of the seller until the goods are auctioned or knocked down. However, after the
knockdown, he becomes the agent of the buyer. Also, he is evidence that the sale took place.
e.Commission agents--also known as commercial agents--work as middlemen between
vendors and buyers. These individuals find employment in myriad industries for large and
small businesses, depending on their area of specialization. Commission agents work in
countries throughout the world and may seek work from a number of employers
simultaneously if their field of specialization provides the opportunity to do so. These expert
purchasers and vendors provide a valuable service to their clients.

Q.8 Identify the duties owed by a principal to an agent?

Rights and Duties of the Principal

Termination of Agency- Agency may be terminated by any of the following ways.
(a) By agreement between the principal and agent
In some cases contract of agency itself may contain provisions as regard the termination of
agency. They may be express or implied, which may be inferred from the circumstances of
the case and terms of the contract.
(b) By revocation of agency by the principal
Principal may either expressly or impliedly, after giving reasonable notice, revoke the
authority of the agent before it has been exercised by the latter so as to bind the former (Sec.
207).
Example: A empowers B to let A’s house. Afterwards A lets it himself. This is an implied
revocation of B’s authority.
Principal shall have to pay compensation to the agent for any earlier revocation of his
authority without sufficient cause before the period for which it was given to him.
(c) Irrevocable agency:
However, the principal will not be entitled to revoke the authority of the agent in the
following circumstances.
(i) Where the agency is coupled with interest An agency where the agent himself has an
interest in the property which form the subject matter of agency is said to be agency coupled
with interest. Such an agency cannot be revoked.
Example: A gives authority to C to sell A’s land and to pay himself out of the proceeds the
debt due to him from A. A cannot revoke this authority, nor can it be terminated by his
insanity or death.
(ii)Where authority has been partly exercised by the agent: If the authority has partly
been exercised by the agent, the principal cannot revoke the authority of the agent so far as
regards such acts and obligations as arise from acts already done in the agency (Sec. 204).
Example: A asks B, his agent, to pay out of A’s funds a sum of Rs. 1,000 to C in two equal
installments. By a subsequent letter A revokes B’s authority. Before this revocation B had
already paid a sum of Rs. 500 to C. A is bound by this payment.
(iii) Where agent has incurred personal liability: Where the agent has purchased bounds
in his personal name for the principal has thereby made himself personally lilable, the
principal cannot revoke agent’s authority.
Example: A authorised B to buy 1,000 bales of cotton on account of A and to pay for it but
of A’s money remaining in B’s hands B buys, 1,000 bales of cotton in his own name, so as to
make himself personally liable for the price. A cannot revoke B’s authority so far as regards
payment for the cotton.
(d) By renunciation of business by the agent
Agent, after giving reasonable notice to the principal, may renounce the business of agency.
In case the contract of agency is enterest into for a fixed period, agent shall have to pay
compensation to the principal for his earlier renunciation of the business of agency.
(e) By insolvency of the principal
The contract of agency will come to an end when the principal becomes insolvent and the fact
of his insolvency comes to the knowledge of the agent. As against third persons, the agency
will terminate when it comes to their knowledge. Insolvency of an agent will not lead to the
termination of the contract of agency.
(f) Destruction of the subject matter of the contract of agency
The contract of agency will come to an end when the subject matter of the agency will come
to an end or when it ceases to exist or when the principal is deprived of his powers on the
subject matter of the contract of agency.
(g) Principal becoming an alien enemy
Breaking out of war between two countries in one of which resides principal and in the other
resides the agent, shall cause the termination of the authority of an agent

Q.9 Explain the rights of an agent under contract of agency

Rights of an Agent
1.Right to claim reimbursement for expenses:
Agent has the right to retain, out of the money received on behalf of the principal, money
advacned or expenses properly incurred in conducting the agency business (Sec. 217). The
agent may have paid the money at the request of the principal, or on account of the
understanding implied by the terms of the agency or through mercantile usage.
2.Right to receive remuneration:
He has also a right to claim remuneration as may be payable to him for acting as an agent. In
the absence of any contract to the contrary, this right to claim remuneration will arise only
when he has carried out the object of the agency in full without being guilty of misconduct
(Sec. 219).
An agent who is guilty of misconduct in the business of the agency is not entitled to any
remuneration in respect of the part of that business which had been misconducted (Sec. 220).
Example: A employs B to recover 1,00,000 rupees from C, and to lay it out on good security.
B recovers, 1,00,000 rupees and lays out 90,000 rupees on good security, but lays out 10,000
rupees on security which he ought to have known to be had, whereby A losses 2,000 rupees.
B is entitled to remuneration for recovering the 1,00,000 rupees and for investing the 90,000
rupees. He is not entitled to any remuneration for investing the 10,000 rupees and the he must
make good the 2,000 rupees to A.
3.Right to indemnification against consequences of all lawful acts :
An agent has a right to be indemnified by the principal against the consequences of all lawful
acts done in exercise of his authority. (Sec. 222).
Example: B, a broker at Calcutta, by the orders of A, merchant there, contracts with C for the
purchase of 10 casks of oil for A. Afterwards A refuses to receive the oil and C sues B. B
informs A, who repudiates the contract altogether. B defends, but unsuccessfuly, and has to
pay damages and incurs expenses. A is liable to B for such damages, costs and expenses.
4.Rights of indemnification against consequences of acts done in good faith:
An agent has a right to be indemnified by the principal for any compensation which he may
be required to pay to the third parties for injuries caused to them by his wrongful acts within
the scope of his actual authority done in his good faith, i.e., without any wrong or dishonest
intentions (Sec. 223).
Example: B at the request of A, sells goods in the possession of A, but which A had no right
to dispose of B does not know his, and hands over the proceeds of the sale to A. Afterwards
C, the true owner of the goods sues B and recover the value of the goods and cost. A is liable
to indemnify B for what he has been compelled to pay to C and for B’s own expenses.
But where one person employs another to do an act, which is criminal, the employer is not
liable to the agent either upon an express or an implied promise, to indemnify him against the
consequences of the act (Sec. 224).
Example: A employs to B to beat C, and agrees to indemnify him against all consequences of
the act. B thereupon beats C, and has to pay damages to C for so doing. A is not liable to
indemnify B for those damages.,
5.Right of indemnification for injuries caused by Principal’s neglect
An agent has a right to claim compensation from the principal for injuries caused to him by
the negligence or want to skill on the part of the principal (Sec. 225).
Example: A employs B as a bricklayer in building a house, and puts up the scaffolding
himself. The scaffolding is unskillfully put up, and B is in consequence hurt. A must make
compensation to B.
6.Right of particular lien
An agent is entitled to retain under the possession both movable and immovable of the
property of the principal received by him until the amount due to him for commission,
disbursements and services has been paid or accounted for him, provided the contract does
not provide otherwise (Sec. 221).

Q.10 Discuss the duties of an agent under contract of agency

Duties of an Agent
1.To follow the instructions of his principal:
The agent must conduct the business of the principal according to the directions of the latter.
In the absence of any such directions, he must follow the custom of the business prevailing in
the locality where the agent is conducting such business. If the agent acts otherwise and the
principal sustains a loss, the former must compensate the latter for it. He will have to account
for the profits to the principal if there are any. He will also lose his remuneration (Sec. 211).
Example: A, an engaged in carrying on for B a business in which it is the custom to invest
from time to time, at interest, the money which may be in hand omits to make such
investment. A must take good to B the interest usually obtained by such investment.
2. Duty to act, with skills and diligence (Sec. 212): The agent must conduct the business of
agency with as much skill as is generally possessed by persons engaged in similar business
unless the principal has notice of his want of skill.
Example: A, an agent for the sale of goods, having authority to sell on credit, sells to B on
credit without, making the proper and usual enquires as to the solvency of B. B. at the time of
such sale is insolvent. A must make compensation to his principal in resepct of any loss
thereby sustained.
3.Duty to render accounts:
An agent is bound to render proper accounts to his principal on demand. He must explain
those accounts to the principal and produce the vouchers in support of the entries (Sec. 213).
4.Duty to communicate with the principal:
In cases of difficulty it is the duty of the agent to use all reasonable diligence in
communicating with the principal and in seeking to obtain the instructions. It is only in an
emergency where there is no time to communicate that he may act bonafide without
consulting the principal (214).
5. Duty not to deal on his own account:
The relationship of principal and agent is of a fiduciary character. An agent, therefore, should
not deal on his own account and should not do anything which may indicate a clash between
his interest and duties. An agent shall have to pay all the benefits to the principal, which may
have resulted to him from his dealings on his own account in the business of the agency
without the knowledge of the principal (Secs. 215 & 216).
Example: A directs B, his agent, to buy a certain house for him. B tells A that it cannot be
bought, any buys the house for himself. A may, on discovering that B has bought the house,
compel him to sell it to A at the price he gave for it.
6.Duty not to delegate his authority:
An agent cannot delegate his authority to another person unless authorised or warranted by
the usage of trade or nature of the agency. A work entrusted to the agent must be done by
him.
7.Duty to protect the interest of principal or his legal representative in the event of
principal’s unsoundness of mind or his death:
When an agency is terminated by the principal dying or becoming of unsound mind, the agent
is bound to take on behalf of the representatives of his late principal, all reasonable steps for
the protection and preservation of the interests entrusted to him (Sec. 209).
8.Duty to pay sums received for principal
The agent is bound to pay to his principal all sums received on his account after deducting for
his own claim (Sec. 218).
 UNIT II - SALE OF GOODS ACT 1930

Part – A
1. Compare condition with warranty
Condition
It is essential to the main purpose of the contract
Beach of condition gives the aggrieved party a right to repudiate the contractor and get
damages
Breach of condition will affect the legality of the contract
Warranty
It is subsidiary to the main purpose of the Contract
Breach of warranty gives the aggrieved party a right to claim damages only
Breach of warranty will not affect the legality of the contract

2. State two contracts that is not applicable under Sale of Goods Act

Bailment of goods
Contract of work and skill

3. Write short note on specific goods under sale of goods act

Specific goods denote goods identified and agreed upon at the time a contract of sale is made.
Example - you want to sell your mobile phone online. You put an advertisement with its
picture and information. A buyer agrees to the sale and a contract is formed. The mobile, in
this case, is specific good

4. Write short note son (a) sale (b) agreement of sell

Sale - transfer of property or ownership of the goods passes immediately from the seller to
the buyer.
Agreement to sell - transfer of property or ownership of goods occurs at future time or to
fulfillment of certain condition.

5. What is meant by implied conditions and warranties?

Implied conditions and warranties are those which the law incorporates into the contract
unless the parties stipulated to the contrary

6. State the conditions by which the buyer can make the seller responsible for the goods
under contract of sale.

If the buyer shares with the seller his purpose for the purchase
The buyer relies on the knowledge and/or technical expertise of the seller
And the seller sells such goods
Part – B

Q.1 Explain the essential characteristics of a contract of sale of goods?

1. Two parties:
The first essential is that there must be two distinct parties to a contract of sale, viz., a buyer
and a seller, as a person cannot buy his own goods. However, there may be a contract of sale
between one part-owner and another, e.g., if A and B jointly own a computer, A may sell his
ownership in the computer to B, thereby making B sole owner of the goods [Sec. 4(1)].
Similarly, a partner may buy the goods from the firm in which he is a partner and vice-versa.
2. Transfer of property:
‘Property’ here means ‘ownership’. Transfer of property in the goods is another essential of a
contract of sale of goods. A mere transfer of possession of the goods cannot be termed as
sale. To constitute a contract of sale the seller must either transfer or agree to transfer the
property in the goods to the buyer.
3. Goods:
The subject-matter of the contract of sale must be ‘goods’. According to Section 2(7), “goods
means every kind of movable property other than actionable claims and money; and includes
stock and shares, growing crops, grass, and things attached to or forming part of the land
which are agreed to be severed before sale or under the contract of sale.”
Thus every kind of movable property except actionable claim and money is regarded as
‘goods’. Goodwill, trademarks, copyrights, patents right, water, gas, electricity, decree of a
court of law, are all regarded as goods. Shares and stock are also included in goods.
‘Actionable claims’ means claims which can be enforced by a legal action or a suit, e.g., a
book debt (i.e., a debt evidenced by an entry by the creditor in his Account Book or Bahi). A
book debt is not goods because it can only be assigned as per the Transfer of Property Act but
cannot be sold. It is not regarded goods because it is the medium of exchange through which
goods can be bought. Old and rare coins, however, may be treated as goods and sold as such.
4. Price:
The consideration for a contract of sale must be money consideration called the ‘price.’ If
goods are sold or exchanged for other goods, the transaction is barter, governed by the
Transfer of Property Act and not a sale of goods under this Act. But if goods are sold partly
for goods and partly for money, the contract is one of sale
5. Includes both a ‘sale’ and ‘an agreement to sell:
The term ‘contract of sale’ is a generic term and includes both a ‘sale’ and an ‘agreement to
sell’ [as is clear from the definition of the term as per Section 4(1) given earlier)].
Sale. Where under a contract of sale the property in the goods is immediately
transferred at the time of making the contract from the seller to the buyer, the contract
is called a ‘sale’ [Sec. 4(3)]. It refers to an ‘absolute sale’, e.g., an outright sale on a
counter in a shop.
 There is immediate conveyance of the ownership and mostly of the subject-matter of
the sale as well (delivery may also be given in future). It is an executed contract.
An agreement to sell:
Where under a contract of sale the transfer of property in the goods is to take place at
a future time or subject to some condition thereafter to be fulfilled, the contract is
called ‘an agreement to sell’ [Sec. 4(3)]. It is an executory contract and refers to a
conditional sale.
Example
(a) On 1 January, A agrees with B that he will sell B his scooter on 15 January for a
sum of Rs 3,000. It is an agreement to sell, since A agrees to transfer the ownership of
the scooter to B at a future time.
A agrees to purchase B’s Car for Rs 50,000 provided B stands surety for him with C.
It is an agreement to sell for B. It becomes a sale when the condition is fulfilled by B.
B agrees to buy A’s car for Rs 30,000 and pay for it, if his solicitor approves. It is an
agreement to sell for A and an agreement to buy for B.
A buys some furniture for Rs 2,000 and agrees to pay for that in two monthly
instalments, the ownership to pass to him on the payment of second instalment. There
is an agreement to sell for the furniture dealer.
‘An agreement to sell’ becomes a ‘sale’ when the time elapses or the conditions are
fulfilled subject to which the property in the goods is to be transferred [Sec. 4 (4)].
6. No formalities to be observed (Sec. 5):
The Sale of Goods Act does not prescribe any particular form to constitute a valid contract of
sale. A contract of sale of goods can be made by mere offer and acceptance. The offer may be
made either by the seller or the buyer and the same must be accepted by the other.
Neither payment nor delivery is necessary at the time of making the contract of sale. Further,
such a contract may be made either orally or in writing or partly orally and partly in writing
or may be even implied from the conduct of the parties.
Where articles are exhibited for sale and a customer picks up one and the sales assistant packs
the same for him, there has resulted a contract of sale of goods by the conduct of the parties.
Q.2. Identify the difference between Sale and Agreement to sell under sale of goods act
1. Nature of contract:
Sale is an executed contract while an agreement to sell is an executory contract.
Agreernent to sell something remains to be done. It shall become sale only when the
conditions of contract are fulfilled.
2. Transfer of property:
In a sale the transfer of property takes place immediately but in an agreement to sell,
it does not pass to the buyer immediately. As the buyer, in a sale immediately
becomes the owner of goods, so the risk also passes to him.
In agreement to sell seller still remains the owner so the risk does not pass to the
buyer and if the goods are destroyed, the loss will fall on the seller even though they
are in the possession of the buyer.
3. Creation of right:
An agreement to sell creates a personal right only against the buyer while a sale
creates right in the goods against the whole world.
4. Remedies in case of breach:
In an agreement to sell, the seller can sue only for damages for non-performance of
contract by the buyer.
In sale, the seller can sue for the price of the goods. In addition to that he has the right
of lien, stoppage in transit and re-sale. In case of breach of contract of sale by the
seller, the buyer can sue for the delivery of goods or for damages but in an agreement
to sell the buyer has only a personal remedy against the seller.
5. Consequences of Insolvency:
In a sale if the buyer is adjudged insolvent; the seller must deliver the goods to the
official receiver and can claim dividend like other unsecured creditors for the price
unpaid on his goods. In a sale, if the seller is adjudged insolvent, the buyer is entitled
to receive the goods from the official receiver.
In an agreement to sell the seller can refuse to deliver the goods unless paid for the
goods. But in an agreement to sell, if the buyer has made the payment in advance to
the seller, he can only ask for dividend and not the delivery of goods.
Q3. What are goods and discuss the classification of goods under Sale of Goods Act?
Sec 2(7) of the sale of Goods Act 1930, defines goods as “Every kind of movable property
(other than actionable claims and money) which includes stock and shares, growing crops,
grass, and things attached to or forming part of the land which are agreed to be severed before
sale or under the contract of sale will be considered goods”
1. Existing Goods
The goods that are referred to in the contract of sale are termed as existing goods if they are
present (in existence) at the time of the contract. In sec 6 of the Act, the existing goods are
those goods which are in the legal possession or are owned by the seller at the time of the
formulation of the contract of sale. The existing goods are further of the following types:
A) Specific Goods
According to the sec 2(14) of the Act, these are those goods that are “identified and
agreed upon” when the contract of sale is formed. For example, you want to sell your
mobile phone online. You put an advertisement with its picture and information. A
buyer agrees to the sale and a contract is formed. The mobile, in this case, is specific
good.
B) Ascertained Goods:
This is a type not defined by the law but by the judicial interpretation. This term is
used for specific goods which have been selected from a larger set of goods. For
example, you have 500 apples. Out of these 500 apples, you decide to sell 200 apples.
To sell these 200 apples, you will need to separate them from the 500 (larger set).
Thus you specify 200 apples from a larger group of unspecified apples. These 200
apples are now the ascertained goods.
C) Unascertained Goods:
These are the goods that have not been specifically identified but have rather been left
to be selected from a larger group. For example, from your 500 apples, you decide to
sell 200 apples but you don’t specify which ones you want to sell. A seller will have
the liberty to choose any 200 apples from the lot. These are thus the unascertained
goods.
2. Future Goods
In sec 2(6) of the Act, future goods have been defined as the goods that will either be
manufactured or produced or acquired by the seller at the time the contract of sale is made.
The contract for the sale of future goods will never have the actual sale in it, it will always be
an agreement to sell.
For example, you have an apple orchard with apples in it. You agree to sell 1000 apples to a
buyer after the apples ripe. This is a sale that has to occur in the future but the goods have
been identified already and the agreement made. Such goods are known as future goods.
3. Contingent Goods
Contingent goods are actually a subtype of future goods in the sense that in contingent goods
the actual sale is to be done in the future. These goods are part of a sale contract that has
some contingency clause in it. For example, if you sell your apples from your orchard when
the trees are yet to produce apples, the apples are a contingent good. This sale is dependent
on the condition that the trees are able to produce apples, which may not happen.

Q.4Explain the implied conditions and warranties in a contract of sale of goods

IMPLIED WARRANTIES (SECTION 14)
(1) The buyer must get quiet possession: In a contract of sale of goods there is an implied
warranty that the buyer shall have and enjoy quiet possession of the goods [Sec. 14 (b)].
Example: A had given his bicycle on hire for a period of ten days to B. Soon after A sold it
to C without disclosing to him that B was entitled to use the bicycle on account of hire
agreement. B claims the bicycle from C. C’s possession is disturbed. He is entitled to get
damages from A.
(2) The goods must be free from encumbrance: That the goods shall be free from any
charge or encumbrance (Legal burden) in favour of any third party which are not declared or
known to the buyer before or at the time when the contract is made. [Section 16 (3)].
Example: A pledge his bicycle with C for a loan of Rs. 100 and promises him to give its
possession the next day. Soon after he sells the bicycle to B, an innocent buyer, who does not
know about the fact of bicycle being pledged. B may either ask A to clear the loan or may
himself pay the money and then file a suit against A to recover the money with interest.
(3) By usage of trade: An implied warranty or condition as to quality or fitness for a
particular purpose may be annexed by the usage of trade. [Section 16(3)].
IMPLIED CONDITIONS (SECTIONS 14 TO 17)
(1) Conditions as to title: In a contract of sale of goods there is an implied conditional that
the sellers shall have the right to sell the goods in the case of a sale and in an agreement to
sell he shall have such a right at the time when the property is to pass. [Section 14 (a)]. For
example where a buyer of a car was deprived of the same due to the defective title of the
seller, the court decided that the buyer can recover the full price of the car even though he has
used the same for a few months. The above implied warranties, in fact, depend upon this
condition because a buyer can only enjoy those goods which the seller has right to sell.
[Section 14 14].
(2) Condition as to description: Where there is a sale of goods by description the goods
shall correspond with the description and if the sale is by description as well as by sample it
is not sufficient if the bulk of the goods corresponds with the sample alone and not with the
description. [Section 15].
Example (1) : A Building Co., sold to a buyer a copper fastened ship and the ship was sold
under the condition that is to be taken by the buyer subject to all the defects. Later on the ship
was found not to be copper fastened in the language of the ship trade. The court, decided that
there has been a breach of condition because the ship did not correspond to the description
and the buyer was allowed to repudiate the contract.
Example (2) : There was a contract between a buyer and a seller for the sale of ‘Foreign
Refined Rape Seed Oil’ warranted equal to the sample shown to the buyer. On when supplied
was equal to the sample shown but was not refined rape seed oil. The court decided that the
buyer had the right to repudiate the contract because the goods supplied did not correspond to
the description as well as the sample, although they were similar to the sample exhibited to
the buyer.
(3) Condition as to quality of fitness for a particular purpose: As a general rule the rule of
Caveat Empter applies when a purchaser purchases the goods for satisfying needs but there
are cases when the buyer makes known to the seller the particular purpose for which the
goods are required and relief upon seller’s skill and judgement for supplying the goods of his
requirement and the goods are of such a nature that they are sold by the seller in the course of
his business, (whether he is the manufacturer or producer or not), there would be a breach of
condition as regards quality fitness if the goods supplied are not fit for the purpose for which
they have been purchased.
Example: A buyer agreed to purchase from the seller jute bags for the purpose of packing
food articles but when supplied jute bags had a peculiar smell which rendered them unfit for
packing food stuff. The court decided that there is not breach of the condition relating to
fitness for any particular purpose because the particular purpose for which bags were to be
used was not make known to the seller and so although bags might have been purchased must
be unfit for packing food articles, they were fit for other purposes.
A cultivator purchases Ruston Oil Engine to be fitted in his well for irrigation his field but
when put to use it was found unable to cope with the requirements of irrigation, the court
decided that there is no breach of such a condition, because the buyer has exposed more
confidence in the trade name rather than in the skill of the seller.
(4) Implied condition of merchantability: According to section 16 sub-section 2 where
goods are purchased by description from a person who usually sells them (although he may
be a manufacturer or producer or not) there is an implied condition that the goods supplied
shall be of merchantable quality.
For example where black woollen yarn was supplied by the seller to the buyer. The work
merchantable has not been defined anywhere in the Act but it has been taken by the courts to
mean the quality of the goods of which, if properly tendered to the buyer will compel him to
accept their delivery but this does not imply that the seller is guaranteeing the goods to be
easily saleable.
Q.5 What is Doctrine of Caveat Emptor? Identify the expectations to this doctrine
under contract of sale of goods

The doctrine of Caveat Emptor means “let the buyer beware”. “There is no implied
warranty or condition as to the quality or the fitness for any particular purpose of goods
supplied under such a contract of sale“.i.e. the seller makes his goods available in the open
market. This doctrine says that the seller will not be responsible for this. The buyer himself is
responsible for the choice he made. It is the duty of the buyer to check the quality and the
usefulness of the product he is purchasing.
Example. A bought a horse from B. A wanted to enter the horse in a race. Turns out the
horse were not capable of running a race on account of being lame. But A did not inform B of
his intentions. So B will not be responsible for the defects of the horse. The Doctrine of
Caveat Emptor will apply.
Exceptions to the Doctrine of Caveat Emptor
The doctrine of caveat emptor has certain specific exceptions. Let us take a brief look at these
exceptions.
1] Fitness of Product for the Buyer’s Purpose
When the buyer informs the seller of his purpose of buying the goods, it is implied that he is
relying on the seller’s judgment. It is the duty of the seller then to ensure the goods match
their desired usage.
Say for example A goes to B to buy a bicycle. He informs B he wants to use the cycle for
mountain trekking. If B sells him an ordinary bicycle that is incapable of fulfilling A’s
purpose the seller will be responsible. Another example is the case study of Priest v. Last.
2] Goods Purchased under Brand Name
When the buyer buys a product under a trade name or a branded product the seller cannot be
held responsible for the usefulness or quality of the product. So there is no implied condition
that the goods will be fit for the purpose the buyer intended.
3] Goods sold by Description
When the buyer buys the goods based only on the description there will be an exception. If
the goods do not match the description then in such a case the seller will be responsible for
the goods.
4] Goods of Merchantable Quality
Section 16 (2) deals with the exception of merchantable quality. The sections state that the
seller who is selling goods by description has a duty of providing goods of merchantable
quality, i.e. capable of passing the market standards.
So if the goods are not of marketable quality then the buyer will not be the one who is
responsible. It will be the seller’s responsibility. However if the buyer has had a reasonable
chance to examine the product, then this exception will not apply.
5] Sale by Sample
If the buyer buys his goods after examining a sample then the rule of Doctrine of Caveat
Emptor will not apply. If the rest of the goods do not resemble the sample, the buyer cannot
be held responsible. In this case, the seller will be the one responsible.
For example, A places an order for 50 toy cars with B. He checks one sample where the car is
red. The rest of the cars turn out orange. Here the doctrine will not apply and B will be
responsible.
6] Sale by Description and Sample
If the sale is done via a sample as well as a description of the product, the buyer will not be
responsible if the goods do not resemble the sample and/or the description. Then the
responsibility will fall squarely on the seller.
7] Usage of Trade
There is an implied condition or warranty about the quality or the fitness of goods/products.
But if a seller deviated from this then the rules of caveat emptor cease to apply. For example,
A bought goods from B in an auction of the contents of a ship. But B did not inform A the
contents were sea damaged, and so the rules of the doctrine will not apply here.
8] Fraud or Misrepresentation by the Seller
This is another important exception. If the seller obtains the consent of the buyer by fraud
then caveat emptor will not apply. Also if the seller conceals any material defects of the
goods which are later discovered on closer examination then again the buyer will not be
responsible. In both cases, the seller will be the guilty party
 Unit 3 – Companies Act
Define company
“A company formed and registered under Companies Act 1956 or an existing
company which was formed and registered under any of the previous company
laws.
State any two objectives of Companies Act
A minimum standard of good behaviour and business honesty in company
promotion and management.
Provision for greater and effective control over the management for shareholders.
A fair and true disclosure of the affairs of companies in their annual published
balance sheet and profit and loss accounts.
Proper standard of accounting and auditing.
Recognition of the rights of shareholders to receive reasonable information and
facilities for exercising an intelligent judgment with reference to the management.
A ceiling on the share of profits payable to managements as remuneration for
services rendered.
A check on their transactions where there was a possibility of conflict of duty and
interest.
A provision for investigation into the affairs of any company managed in a manner
oppressive to minority of the shareholders or prejudicial to the interest of the
company as a whole.

Who is a promoter?
A person who devises a plan for a business venture; one who takes the
preliminary steps necessary for the formation of a corporation. Promoters are the
people, who, for themselves or on behalf of others, organize a corporation. They
issue a prospectus, obtain stock subscriptions, and secure a charter.
Identify the fiduciary duties of a promoter
Promoter may not make any profit at the expense of the company
Promoter has to give benefit of negotiations to the company
Promoter has to make a full disclosure of interest or profit
 Promoter has not to make unfair use of position.
What do you mean by preliminary contracts?
Preliminary contracts are contracts entered into by the promoters on behalf of the
company before its incorporation with third parties as agents or trustees of the
company, which has not yet come into existence. Such contracts are legally not
binding upon the company even after it comes into existence. The company can
neither ratify those contracts nor sue the vendors on them after its incorporation
because ratification requires existence of the principal at the time when the contract
was entered into.

What is memorandum of association?

A Memorandum of Association is a legal document prepared in the formation and
registration process of a limited liability company to define its relationship with
shareholders. The Memorandum of Association is accessible to the public and
describes the company’s name, physical address of registered office, names of
shareholders and the distribution of shares.
Define articles of association.
Articles of association are a document that specifies the regulations for a company's
operations and defines the company's purpose. The document lays out how tasks are
to be accomplished within the organization, including the process for appointing
directors and the handling of financial records.
What is prospectus?
A prospectus is a formal document that is required by and filed with the Securities
and Exchange Commission (SEC) that provides details about an investment offering
for sale to the public. A prospectus is filed for stock, bond, and mutual fund
offerings. A prospectus is used to help investors make a more informed investment
decision.
Define director under companies Act
Section 2 (34) is defined as “a director appointed to the Board of a company”.,
wherein Board of Directors‖ or Board‖, in relation to a company, means the collective
body of the directors of the company.
Identify the mandatory composition of Bard of directors under company law
Public Company: Minimum 3 and maximum 15 nos. of Directors; at least 1/3 rd
number of Independent Directors
Private Company: Minimum 2 and maximum 15 nos. of Directors
One person Company: minimum 1 director
At least 1 woman director
At least 1 Director who has stayed in India for minimum 182 days in the previous
calendar year.

Who is a Residential Director?

As per Section 149(3) of Companies Act,2013 every company shall at one director
who has stayed in India for a total Period of not less than 182 days in the Previous
calendar year.

State any two situations where directors are personally liable to third parties of
contracts.
Contract with outsiders in their personal capacity
Contract as agents of an undisclosed principal
Enter into a contract on behalf of a prospective company.
When the contract is ultra-vires the company

Part B
Q. 1 Explain the essential characteristics of a company under company law
Separate Legal Entity
Limited Liability
Perpetual Succession
Separate Property
Transferability of Shares
Common Seal
Capacity to sue and being sued
Separate Management
One Share-One Vote
A company as an entity has many distinct features which together make it a
unique organization. The essential characteristics of a company are following:

Separate Legal Entity:

Under Incorporation law, a company becomes a separate legal entity as
compared to its members. The company is distinct and different from its
members in law. It has its own seal and its own name, its assets and liabilities are
separate and distinct from those of its members. It is capable of owning property,
incurring debt, and borrowing money, employing people, having a bank account,
entering into contracts and suing and being sued separately.

Limited Liability:
The liability of the members of the company is limited to contribution to the
assets of the company upto the face value of shares held by him. A member is
liable to pay only the uncalled money due on shares held by him. If the assets of
the firm are not sufficient to pay the liabilities of the firm, the creditors can force
the partners to make good the deficit from their personal assets. This cannot be
done in the case of a company once the members have paid all their dues
towards the shares held by them in the company.

Perpetual Succession:
A company does not cease to exist unless it is specifically wound up or the task
for which it was formed has been completed. Membership of a company may
keep on changing from time to time but that does not affect life of the company.
Insolvency or Death of member does not affect the existence of the company.

Separate Property:
A company is a distinct legal entity. The company's property is its own. A
member cannot claim to be owner of the company's property during the
existence of the company.

Transferability of Shares:
Shares in a company are freely transferable, subject to certain conditions, such
that no share-holder is permanently or necessarily wedded to a company. When
a member transfers his shares to another person, the transferee steps into the
shoes of the transferor and acquires all the rights of the transferor in respect of
those shares.

Common Seal:
A company is an artificial person and does not have a physical presence. Thus, it
acts through its Board of Directors for carrying out its activities and entering into
various agreements. Such contracts must be under the seal of the company. The
common seal is the official signature of the company. The name of the company
must be engraved on the common seal. Any document not bearing the seal of the
company may not be accepted as authentic and may not have any legal force.

Capacity to sue and being sued:

A company can sue or be sued in its own name as distinct from its members.

Separate Management:
A company is administered and managed by its managerial personnel i.e. the
Board of Directors. The shareholders are simply the holders of the shares in the
company and need not be necessarily the managers of the company.

One Share-One Vote:

The principle of voting in a company is one share-one vote i.e. if a person has 10
shares, he has 10 votes in the company. This is in direct distinction to the voting
principle of a co-operative society where the "One Member - One Vote" principle
 applies i.e. irrespective of the number of shares held, one member has only one
vote.
Q.2 Examine how the company can be classified into various kinds as per
Companies Act, 1956
(A) On the basis of incorporation - (i) Registered companies, (ii) Statutory companies
(B) On the basis of Liability - (i) Company limited by shares, (ii) Company limited by
guarantee, (iii) Companies with unlimited liability
(C) On the basis of number of members - (i) Public company, (ii) Private company
(D) On the basis of Ownership - (i) Government company, (ii) Non- Government
company
(E) On the basis of Control - (i) Holding company, (ii) Subsidiary company
(F) Foreign Company
(G) One man Company

Q.3 Briefly describe the various documents to be filed with the registrar for
incorporation of company
a) Memorandum of association duly signed by the subscribers
b) Article of association, if any, signed by the subscribers t the Memorandum of
association. A public company limited by shares may not have its own Article of
association, it may adopt Table A in the schedule I to the Act.
c) A copy of the agreement, if any, which the company proposes to enter into with
any individual for his appointment as managing or whole-time director or
manager
d) A written consent of the directors to act in that capacity, if necessary
e) A statutory declaration stating that all the legal requirements of the Act prior to
incorporation have been complied with. Such declaration shall be signed by any
of the following persons….
(i) An advocate f the supreme court or High court
(ii) An attorney or a pleader entitled to appear before a supreme court
 (iii) A secretary or a chartered accountant in whole time practice in India, who
is engaged in the formation of the company
(iv) A person named in the articles as a director, manger r secretary f the
company
Then within 30 days of the incorporation of company, a notice of the situation of
the registrar office of the company shall be given to the registrar ho shall record
the same

Q.4 The memorandum of association is the fundamental law defining the objects
and limiting the powers of the company – Examine
Name Clause - This clause states the company's proposed name. It must end in the
word "limited" if it's a public company or "private limited" if it's a private company.
It can't be identical to any existing company's name. It can't allude to the new
company doing the business of an existing company. It should not be misleading in
any way.
Registered Office Clause - The registered office clause lists the name of the state
where the company's registered office is physically located. The registered office's
physical location determines which jurisdiction the Registrar of Companies and
which court the company would fall under. It also confirms the company's
nationality.
Objects or Objective Clause - Considered the most important in the MOA. It defines
and limits the scope of the company's operations. It details the company's scope of
activity for the members and explains how the members' capital will be used. It
protects shareholders funds and ensures the funds will be used for the specific
business purposes for which they were raised and that they won't be risked in other
endeavors.
Object Clause - Explained why the company is establishing. Companies aren't
legally allowed to do any kind of business other than the kind of business that is
specifically stated in this clause. An object clause should contain:
 A list of the main objects the company will be pursuing after it's Incorporated
 Incidental objects that are necessary to achieve the main object
  Any other objects that aren't included in the main objects or incidental object
 Nothing illegal
 Nothing that's against the public interest
 Nothing that's against the country's general rule of law
Liability Clause - The liability clause explains what liability each of the company's
members faces. If the company is limited by shares, the liability that each member
faces can be no more than the face value of shares that he or she holds. If it's a
company that's limited by guarantee, this clause must define how much liability
each individual company member holds. If it's an unlimited company, this particular
clause would not be included in the MOA.
Capital Clause - The capital clause lists information about the total capital held by
the proposed company. This amount is called the company's authorized capital.
Companies aren't permitted to collect more money than the amount listed under
authorized capital. The way the capital is divided into equity share capital and
preference share capital also needs to be listed in the capital clause. The number of
shares the company puts in equity share capital and preference share capital,
alongside their value, needs to be included in the MOA.
Association Clause -
The association clause explains that any individual signing the bottom of the MOA
wants to be part of the association that's being formed by the memorandum. The
MOA has to be signed by at least seven people or more if it's a public company. It
has to be signed by at least two or more people if it's a private company. The
signatures also have to be affirmed by witnesses. There can be one witness for all of
the signatures, but none of the subscribers can witness the signatures of the others.
All subscribers and witnesses must provide their addresses and occupations in
writing.

Q.5 Discuss the contents of Articles of Association and the limit upon the powers
of the company to alter the Articles of Association.
 Share capital including sub-division, rights of various shareholders, the
relationship of these rights, payment of commission, share certificates.
  Lien of shares
 Calls on shares
 Transfer of shares
 Transmission of shares
 Forfeiture of shares
 Surrender of shares
 Conversion of shares in stock
 Share warrant
 Alteration of capital
 General meetings and proceedings
 Voting rights of members, voting by poll, proxies
 Directors, their appointment, remuneration, qualifications, powers and
proceedings of the boards of directors meetings.
 Dividends and reserves
 Accounts and Audits
 The auditing of a company shall be done subject to the provisions of the
articles of association of the company.
 Borrowing powers
 Winding up

1. Share capital including sub-division, rights of various shareholders, the

relationship of these rights, payment of commission, share certificates.
2. Lien of shares: - to retain possession of shares incase the member is unable to
pay his debt to the company.
3. Calls on shares - Calls on shares include the whole or part remaining unpaid
on each share which has to be paid by the shareholders on the company’s
demand.
4. Transfer of shares: The articles of association include the procedure for the
transfer of shares by the shareholder to the transferee.
5. Transmission of shares: Transmission includes devolution of title by death,
succession, marriage, insolvency, etc. It is not voluntary but is in fact brought
about by operation of law.
6. Forfeiture of shares: The articles of association provide for the forfeiture of
shares if the purchase requirements such as paying any allotment or call
money, are not met with.
7. Surrender of shares: Surrender of shares is when the shareholders voluntary
return the shares they own to the company.
8. Conversion of shares in stock: In consonance with the articles of association,
the company can convert the shares into stock by an ordinary resolution in a
general meeting.
9. Share warrant: A share warrant is a bearer document relating to the title of
shares and cannot be issued by private companies; only public limited
companies can issue a share warrant.
10. Alteration of capital: Increase, decrease or rearrangement of capital must be
done as the articles of association provide.
11. General meetings and proceedings: All the provisions relating to the general
meetings and the manner in which they are to be conducted are to be
contained in the articles of association.
12. Voting rights of members, voting by poll, proxies: The members right to vote
on certain company matters and the manner in which voting can be done is
provided in the articles of association.
13. Directors, their appointment, remuneration, qualifications, powers and
proceedings of the boards of directors meetings.
14. Dividends and reserves: The articles of association of a company also provide
for the distribution of dividend to the shareholders.
15. Accounts and Audits: The auditing of a company shall be done subject to the
provisions of the articles of association of the company.
16. Borrowing powers: Every company has powers to However, this must be
done according to the articles of association of the company.
 17. Winding up: Provisions relating to the winding up of the company finds
mention in articles of association of the company and must be done
accordingly.

Limitations to alter the articles of Association

 Articles can be altered only by a special resolution
 Alteration can neither be beyond the provisions of the companies Act nor the
memorandum of association.
 Alteration of articles seeking to take away the company’s power to alter its
articles would be void as being contrary to the provisions of the Act
 Alternation seeking to impose an additional liability on a member of the
company after the date on which he became a member
 Alteration should not be illegal or against public policy besides not being
contrary to any other statute in force.
 The power to alter the Articles must be exercised by the shareholders in good
faith for the benefit of the company as a whole
 Certain provisions of the Articles cannot be altered except with the prior
approval of the Central Government. These include increasing the
remuneration of directors of public company not in accordance with Schedule
XIII of the Act, conversion of a public company into a private company etc.
 Company can alter its articles even if it causes a breach of an agreement with
the outsider. Company cannot be prevented by injunction from altering its
articles which constitute a breach of contract although it may be liable to pay
damages, if it acts upon them.

Q.6 Discuss the different methods of borrowing under Companies Act

Short- Term Methods of Borrowing

1. By arranging an Overdraft, Cash Credit or Loan from Bankers
An overdraft is an arrangement by which a company is allowed to draw more than
what is to the credit of its account at the bank.
Cash credit is an arrangement by which a company borrows from its bankers up to a
certain limit against a bond of credit by one or more securities or some other
security. The company is charged interest on the amount actually utilized and not on
the limit sanctioned.
In a loan arrangement, the full amount of the loan sanctioned is placed to the credit
of the company and the loan account of the party is debited with the full amount.
The company has to pay interest on the full amount of the loan whether it makes use
of the full amount or not.
2. By issuing a Bill of Exchange, Hundi or Promissory Note
This is another method of obtaining short-term finance. Here an officer authorized
by the company draws or executes a bill of exchange, hundi or promissory note on
behalf of the company, and gets the same discounted, either with a banker or a
financier.
3. By Pledging any Movable Property
Securities can be pledged by lodging them with the banker along with a blank
transfer and the relative scrips and executing in favour of the banker a document
called the “Memorandum of Charge“, giving necessary power to the Banker to
complete the transfer, and to dispose of the securities, if and when necessary.
Similarly, goods lying in the godown of the company may be pledged by handing
over the key of the godown to the banker together with a letter of hypothecation.
4. By Mortgaging Immovable Property
Under this form, the securities are the lands and buildings belonging to the
company. These securities can be mortgaged in which the whole legal interest in a
property is conveyed to the mortgagee subject to the right to redeem. The mortgagee
is given the power to sell the security in case of default.
Equitable mortgage is created by deposit of the title deeds of the property with the
mortgagee, along with an undertaking to execute a legal mortgage, when called
upon.
Long-Term Methods of Borrowing
1. By Charging the Uncalled Share Capital and Book Debts
This is a long-term method of obtaining finance. In this method, the company may
create a charge on its uncalled capital, if it is allowed to do so by its Articles of
Association. A company, however, is not allowed to borrow on the security of its
reserve capital, as the reserve capital is not capable of being called up, except when
the company is wound up.
A company may also create a charge on its book debts. The expression “Book Debts”
refers to those debts which become due to the company in the ordinary course of its
business and which are entered in the books of the company as such.
2. By Creating a Floating Charge on the Property
A company may borrow by giving, what is called, a floating charge on its property
or assets. It is an arrangement in which the company gives security-its assets, present
as well as future. However, the company is not prevented from dealing with such
assets, as it pleases, as long as it goes on paying the interest.
3. By the Issue of Debentures or Debenture Stock
This is the most important method of obtaining loan for a longer period. The
difference between “Debenture Stock” and “Debenture Bonds” is very much like the
difference between “Stock” and “Shares”. In case of debenture stock, each lender is
given a certificate called Debenture Stock Certificate for the amount he lends.

Q.7 Examine the duties and liabilities of Board of Directors under company law

Duties of the Directors

A. Fiduciary duties: As fiduciaries, the directors must:
(a) Exercise their powers honestly and bona fide for the benefit of the company as a
whole; and
(b) Not to place themselves in a position in which there is a conflict between their
duties to the company and their personal interests. They must not make any secret
profit out of their position. If they do, they have to account for it to the company.
B. Duties of care, skill and diligence: Directors should carry out their duties with
reasonable care and exercise such degree of skill and diligence as is reasonably
expected of persons of their knowledge and status. He is not bound to bring any
special qualifications to his office.
C. Standard of care: The standard of care, skill and diligence depends upon the
nature of the company’s business and circumstances of the case. They are various
standards of the care depending upon:
(a) The type and nature of work
(b) Division of powers between directors and other officers
(c) General usages and customs in that type of business; and
(d) Whether directors work gratuitously or remuneratively
D. Duty to disclose interest: Where a director is personally interested in a
transaction of the company, he is required to disclose his interest to the board. An
interested director is neither to vote on the matter of his interest nor his presence
shall count for the purposes of quorum.
E. Duty to attend board meetings: The Act only says that the office of a director is
automatically vacated if he fails to attend three consecutive meetings of the board or
all meetings for a period of 3 months, whichever is longer. Moreover, a director’s
habitual absence may become evidence of negligence.
F. Duty not to delegate: A director should not delegate his functions to another
person. But delegation of functions may be made to the extent to which it is
authorized by the Act or the constitution of the company.

Liability of directors:
1. Liability to outsiders:
The directors are not personally liable to outsiders if they act within the scope of
powers vested in them. The general rule in this regard in that wherever an agent is
liable, those directors would be liable, but where the liability would attach to the
principal only, the liability is the liability of the company.
a. They contract with outsiders in their personal capacity
b. They contract as agents of an undisclosed principal
c. They enter into a contract on behalf of a prospective company.
d. When the contract is ultra-vires the company.
In default of statutory duties, the directors shall be personally liable to third parties
in the following cases:
1. Mis-statement in prospectus.
2. Irregular allotment.
3. Failure to repay application money if the minimum subscription is not subscribed.
4. Failure to repay application money if allotment of shares and debentures is not
dealt in on the stock exchange as provided in the prospectus.
2. Liability to company:
The directors shall be liable to the company for the following:
(a) Where they have acted ultra-vires the company.
It is not necessary to prove fraud in such cases or that they acted bonafide. For
example, where they apply the funds of the company to objects not specified in the
memorandum of association or when they pay dividends out of capital.
(b) When they have acted negligently.
Negligence may give rise to liability; there need not be fraud. But they will not be
liable where they have acted bonafide and for the benefit of the company.
(c) Where there is a breach of trust.
Directors being the trusted of the company, they should discharge their duties in the
best interest of the company; they should discharge their duties in the best interest of
the company. Where they commit a breach of trust resulting in a loss to the
company. Where they commit a breach of trust resulting in a loss to the company,
they are bound to make god the loss. For example, where the directors apply
company property of their own benefit they are guilty of breach of trust.
(d) Misfeasance:
Directors are liable to the company for misfeasance. The word misfeasance covers
willful negligence. Mere failure on the part of the director to take necessary steps for
recovery of debts due to the company does not constitute misfeasance. If the
company is in the course of winding up, the court may, on the application of the
liquidator, creditor or contributory examine in to the conduct of a director for any
misfeasance or breach of trust in relation to the company.
3. Criminal liabilities of directors:
So far we have dealt with the civil liability of directors. For act of fraud, default in
discharging their duties and misdemeanor, the act provides penalties by way of fine
or imprisonment. Section 75, 95, 113,115, 143, 162, 168, 303, etc. impose penalties
upon the directors for omitting to company with or contravening certain provisions
of the act.

Q.8 Discuss the legal rights, duties and liabilities of promoters under Companies
Act 2013.

Rights of Promoter:
1. Right of indemnity:
Where more than one person act as the promoters of the company, one promoter can
claim against another promoter for the compensation and damages paid by him.
Promoters are severally and jointly liable for any untrue statement given in the
prospectus and for the secret profits.
2. Right to receive the legitimate preliminary expenses:
A promoter is entitled to receive the legitimate preliminary expenses which he has
incurred in the process of formation of the company such as cost of advertisement,
fee of solicitor and surveyors. The right to receive the preliminary expenses is not a
contractual right. It depends upon the discretion of the directors of the company.
The claim for expenses should be supported by vouchers.
3. Right to receive the remuneration:
A promoter has no right against the company for his remuneration unless there is a
contract to that effect. In some cases, articles of the company provide for the
directors paying a specified amount to promoters for their services but this does not
give the promoters any contractual right to sue the company. This is simply an
authority vested in the directors of the company.
However, the promoters are usually the directors, so that in practice the promoters
will receive their remuneration.
The remuneration may be paid in any of the following ways:
(i) A commission may be paid to the promoter on the purchase price of the business
or property taken over by the company through him.
(ii) The promoters may be granted by the company a lumpsum amount.
(iii) The promoters may be given fully or partly paid shares in consideration of their
services rendered.
(iv) The promoter may be given a commission at a fixed rate on the shares sold.
(v) The promoter may purchase the business or other property and sell the same to
the company at an inflated price. He must disclose this fact.
(vi) The promoters may take an option to subscribe within a fixed period for a
certain portion of the company’s unissued shares at par.
Whatever be the nature of remuneration, it must be disclosed in the prospectus if
paid within the preceding two years from the date of prospectus.
Duties of Promoter:
1. To disclose the secret profit:
The promoter should not make any secret profit. If he has made any secret profit, it
is his duty to disclose all the money secretly obtained by way of profit. He is
empowered to deduct the reasonable expenses incurred by him.
2. To disclose all the material facts:
The promoter should disclose all the material facts. If a promoter contracts to sell the
company a property without making a full disclosure, and the property was
acquired by him at a time when he stood in a fiduciary position towards the
company, the company may either repudiate the sale or affirm the contract and
recover the profit made out of it by the promoters.
3. The promoter must make good to the company what he has obtained as a
trustee:
A promoters stands in fiduciary position towards the company. It is the duty of the
promoter to make good to the company what he has obtained as trustee and not
what he may get at any time.
4. Duty to disclose private arrangements:
It is the duty of the promoter to disclose all the private arrangement resulting him
profit by the promotion of the company.
5. Duty of promoter against the future allottees:
When it is said the promoters stand in a fiduciary position towards the company
then it does not mean that they stand in such relation only to the company or to the
signatories of memorandums of company and they will also stand in this relation to
the future allottees of the shares.
Liabilities of Promoter:
1. Liability to account in profit:
As we have already discussed that promoter stands in a fiduciary position to the
company. The promoter is liable to account to the company for all secret profits
made by him without full disclosure to the company. The company may adopt any
one of the following two courses if the promoter fails to disclose the profit.
(i)The company can sue the promoter for an amount of profit and recover the same
with interest.
(ii) The company can rescind the contract and can recover the money paid.
2. Liability for mis-statement in the prospectus:
Section 62(1) holds the promoter liable to pay compensation to every person who
subscribes for any share or debentures on the faith of the prospectus for any loss or
damage sustained by reason of any untrue statement included in it. Sec. on 62 also
provides certain grounds on which a promoter can avoid his liability. Similarly Sec.
63 provides for criminal liability for mis-statement in the prospectus and a promoter
may also become liable under this section.
The promoter may also be imprisoned for a term which may extend to two years or
may be punished with the fine upto Rs. 5,000 for untrue statement in the prospectus.
(Sec. 63).
3. Personal liability:
The promoter is personally liable for all contracts made by him on behalf of the
company until the contracts have been discharged or the company takes over the
liability of the promoter.
The death of promoter does not relieve him from liabilities.
4. Liability at the time of winding up of the company:
In the course of winding up of the company, on an application made by the official
liquidator, the court may make a promoter liable for misfeasance or breach of trust.
(Sec. 543).
Further where fraud has been alleged by the liquidator against a promoter, the court
may order for his public examination. (Sec. 478)

Q.9 Identify the various powers of directors under companies act

The powers which vest in the board can be classified under different heads:
1) General Powers: General powers are those which can be exercised in accordance
with the articles. These powers are laid down in sec. 179 of the Companies Act, 2013.
It empowers the board to exercise all such powers and do all such acts and things, as
the company is authorised to exercise and do. There are, however, two limitations
upon their powers:
• 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.
2) Powers to be exercised at Board meetings [Sec. 179 (3)]: The Board of directors of
a company shall exercise the following powers on behalf of the company 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 money otherwise than on debentures
(d) Invest the funds of the company
(e) Make loans
(f) To approve financial statement and the board’s report
(g) To diversify the business of the company.
3) Powers to be exercised with the approval of company in general meeting (Sec.
180)
(a) Sale or lease of the company’s undertaking
(b) Extension of the time for payment of a debt due by a director
(c) Investment of compensation received on acquisition of the company’s assets in
securities other than trust securities
(d) Borrowing of money beyond the paid-up capital of the company
(e) Contributions to any charitable fund beyond Rs.50,000 in one financial year or 5%
of the average net profits during the preceding three financial years, whichever is
greater.
4) Powers under rule 8: Rule 8 of the Companies rule, 2014 provides that, the
following powers shall be exercised only by means of resolutions passed at meeting
of the board, namely:
a) To make political contribution;
b) To appoint or remove key managerial personnel;
c) To appoint internal auditors and secretarial auditors;
d) To take note of the disclosure of director’s interest and shareholding
e) To accept or renew or review the terms and conditions of public deposits.
5) Other powers: In addition to the items referred above, there are various other
matters, as illustrated below in the routine working of a company which are
considered by the board at board meeting:
(a) Issuance of shares;
(b) Allotment of shares and debentures;
(c) Appointment of directors and managing directors;
(d) Merger and acquisition of companies;
(e) Capitalisation of reserves and issuance of bonus shares.

Q.10 Discuss the procedures for altering the name clause and situation clause of
Memorandum of Association.
ALTERATION OF THE NAME CLAUSE IN MOA
The procedure to be followed in regard to the change of the name under different
circumstances is as follows.
General change of the name
The name of the company can be altered at any time. For the purpose, a special
resolution has to be passed and a written approval of the Central Government is to
be obtained. A copy of the special resolution should be filed with the Registrar
within 30 days of its passing.
Change of name under the direction of the central government
If by mistake or otherwise a company has been registered by a name, which the
Central Government thinks, is identical with or closely resembles the name of an
existing company, the Government may direct the company to change its name. The
direction of the Central Government is required to be complied with, within a period
of 3 months from the date thereof.
Any default in complying with the direction by the Government, render the
company and its officers in default liable for punishment with fine which may
extend to Rs.1,000 for every day during which the default continues. The following
procedure should be followed.
The company should pass an ordinary resolution.
The company should get the written approval of the Central Government.
A copy of the ordinary resolution has to be filed with the Registrar within 30 days of
its date.
Addition or Deletion
On conversion of a private limited company into a public limited company and vice
versa, the addition or deletion of the word ‘Private’ is to be made. It requires no
Government’s approval.
Minor Mistakes
A minor mistakes like spelling mistakes etc. may be altered by an ordinary
resolution.
2. ALTERATION OF THE SITUATION CLAUSE OF MOA
The procedure for altering the situation clause can be studied under the following
heads:
Change of registered office in the same town or village
A mere resolution of the Board of Directors is enough for the change. A notice of the
change should be filed with the Registrar within 30 days of the change. This does not
involve alteration of Memorandum
Change of registered office from one place to another within a state
A company can change the place of its registered office from one place to another
within a State, if the Regional Director confirms it. For this purpose, the company
has to make an application to the Regional Director for confirmation. This
confirmation shall be communicated to the company within four weeks. The
company shall then file with the Registrar a certified copy of the confirmation by the
Regional Director, within 2 months from the date of confirmation, together with a
printed copy of the Memorandum of Association as altered. The Registrar shall
register the same within one month from the date of filing of such document.
Change of registered office from one state to another
The change of registered office from one state to another state involves alteration of
Memorandum, and the change can be effected by a special resolution of the
company which must be confirmed by the Central Government.
The following procedure should be followed for the purpose:
A special resolution must be passed.
A copy of the special resolution should be filed with the Registrar within one month
of its passing.
The alteration is to be confirmed by the Central Government.
A certified copy of the Central Government’s order and a copy of the altered
Memorandum should be filed with the Registrar within 3 months
 Unit IV- Industrial Law
Part -A

How does the Employees’ Compensation Act1923 protect employees?

Provides compensation to employees in capacitated by an injury from accident arising out of and
in the course of employment. It is a guarantee against hazards of employment to which an
employee is exposed because of his employment.

Define Factory under Factories Act, 1948

According to Sec 2 (m) “Factory is a premise whereon 10 or more persons are engaged if power
is used, or 20 or more persons are engaged if power is not used, in a manufacturing process”.

Whereon 10 or more workers are working or were working on any day of the preceding 12
months, and in any part of which a manufacturing process is being carried on with the aid of
power, or is ordinarily so carried on

State any two objectives of factories Act

The Act aims to protect workers employed in factories against industrial and occupational
hazards and to ensure safe and healthy conditions of life and work.

It makes detail provisions regarding health, safety and welfare of workers in order to provide
good working conditions and other facilities to enhance their welfare.

Brief the objectives of Industrial dispute Act 1947

Preventing and settling industrial disputes between the employers and workmen.

Securing and preserving amity and good relations between the employers and workmen through
an Internal Works Committee.

Promoting good relations through an external machinery of conciliation, Courts of Inquiry,

Labour Courts, Industrial Tribunals and National Tribunals

What is an Industrial Dispute?

‘Industrial dispute’ means any dispute or difference between
Employers and employees, Employers and workmen, or Workmen and workmen, which is
connected with (a) the employment or non-employment, (b) the terms of employment or (c) the
conditions of Labour of any person.
Write short note on strike

Temporary cessation of work by a group of employees in order to express their grievance or to

enforce a demand concerning changes in work conditions

In other words Cessation of work by a body of persons employed in any industry acting in
combination, or a concerted refusal under a common understanding of a number of persons who
are or have been so employed to continue to work or to accept employment”.

Write short notes on (a) Lockout (b) Layoff

Lock out
Lockout means closing of a place of business or employment or the suspension of work, or the
refusal by an employer to continue to employ any number of persons employed by him.
It is an action of an employer in temporarily closing down or shutting down the undertaking or
refusing to provide its employees with work with the intention of forcing them either to accept
the demands made by them or to withdraw the demands made by the employees.
Layoff
Layoff means failure, refusal or inability of an employer, shortage of power, or raw material or
accumulations of the stocks or the breakdown of the machinery or for any other reason to give
employment to a workman whose name is borne on the muster rolls of his industrial
establishment and who has not been retrenched.

State any to objectives of payment of Wages Act

To regulate the payment of wages to certain classes of persons employed in industry.

It provides against irregularities in payment of wages and unauthorized deductions there from by
the employers.
It ensures payment of wages in a particular form and at regular intervals, without unauthorized
deductions.

Who is covered under Payment of Wages Act ?

The Wages Act regulates the payment of wages to persons employed in factories, railways,
industrial and other establishments specified under the Wages Act.

Write short note on Trade Union

A Trade Union is a combination whether temporary or permanent, formed for regulating the
relations not only between workmen and employers but also between workmen and workmen or
between employers and employers.
What are the objectives of Trade Union Act 1926?

To protect workers against exploitation by employers

To represent the grievance of employees on behalf of them to the management
To protect & safeguard rights of workers provided to them under employment clause or labour
laws

How much is the minimum wage in India?

In July 2015 the National Floor Level of Minimum Wage was raised to Rs 160 per day. National
Floor Level Minimum Wage has been revised again to Rs 176/day. The new rates came into
effect from June 1, 2017.

Who is eligible for ESI?

All employees of a covered unit, whose monthly incomes (excluding overtime, bonus, leave
encashment) does not exceed Rs. 21,000 per month, are eligible to avail benefits under the
Scheme. Employees earning daily average wage up to Rs.176/- are exempted from ESIC
contribution.

Part - B

Q1. Discuss the health provisions under Factories Act 1948

Health Measures
Chapter III (Sec. 11 to 20) of the Act deals with the provisions ensuring the health of the workers
in the conditions under which work is carried on in factories. These provisions are as follows:
1. Cleanliness (Sec.11)
Factory to be kept clean and free from effluvia and dirt:
a) Every factory shall be kept clean and free from effluvia arising from any drain, privy, or
other nuisance.
Accumulation of dirt and refuse shall be removed daily by some effective method. The floor or
every work-room shall be cleaned at least once in every week by washing, using disinfectants,
where necessary, or by some effective method.
b) Effective means of drainage.
Where a floor is liable to become wet in the course of any manufacturing process to such an
extent as is capable of being drained, effective means of drainage shall be provided.
c) Use of disinfectants, etc., painting and varnishing.
Use of disinfectants, detergents, painting, repainting and varnishing, re-varnishing, whitewashing
or color washing shall be resorted to.
2. Disposal of wastes and effluents (Sec.12).
(a) Treatment of wastes and effluents and their disposal.
Effective arrangements shall be made in every factory for the treatment of wastes and effluents
due to the manufacturing process carried on therein, so as to render them innocuous, and for their
disposal [Sec.12(1)].

b) Rules by the State Government prescribing arrangements.

The State Government may make rules prescribing the arrangements to be made in this regard. It
may also require that such arrangements shall be approved by such authority as may be
prescribed [Sec.12 (2)].
3) Ventilation and temperature (Sec.13)
(i) Maintenance of adequate ventilation and temperature.
Effective and suitable provision shall be made in every factory for securing and maintaining in
every workroom—
a) adequate ventilation by the circulation of fresh air, and
b) such a temperature as will secure to workers therein reasonable conditions of comfort and
prevent injury to health.
ii) Process producing high temperature to be separated.
The walls and roofs shall be of such materials and so designed that the temperature shall not be
exceeded but kept as low as practicable. The process which produces high temperatures shall be
separated from the workroom, by insulating the hot parts or by other effective means [Sec.13
(1)].
iii). Standard of adequate ventilation and temperature to be prescribed and provision of
measuring instruments.
The State Government may prescribe a standard of adequate ventilation and reasonable
temperature for any factory and direct that proper measuring instruments shall be provided and
such records as may be prescribed shall be maintained [Sec.13 (2)].
iv). Prescription of measures by the State Government to reduce temperatures.
Where excessively high temperatures can be reduced by such methods as whitewashing,
spraying, or insulating and screening outside walls or roofs or windows, or by raising the level of
the roof or by insulating the roof, the State Government may prescribe such of these or other
methods as shall be adopted in the factory [Sec. 13 (3)].
v). Service of notice by the Chief Inspector on the occupier to adopt measures for reduction of
temperatures.
If it appears to the Chief Inspector that excessively high temperatures in any factory can be
reduced by the adoption of suitable measures, he may serve on the occupier an order in writing
specifying the measures which in his opinion should be adopted and requiring them to be carried
out before a specified date [Sec. 13 (3)].

iii) Notice of maximum of workers to be employed in a workroom.

If the Chief Inspector by order in writing so requires, there shall be posted in each workroom of
the factory a notice specifying the maximum number of workers who may be employed in the
workroom [Sec.16 (3).
7. Lighting (Sec.17).
(i) Sufficient and suitable lighting in every part of factory.
In every part of a factory where workers are working or passing there shall be provided and
maintained sufficient and suitable lighting, natural or artificial, or both (Sec.17 (1)].
ii) Glazed windows and skylights to be kept clean.
All glazed windows and skylights used for the lighting of the workrooms shall be kept clean on
both the inner and outer surfaces and free from obstruction [Sec.17 (2).
iii) Measures for prevention of glare and formation of shadows.
Effective provision shall also be made for the prevention of (a) glare, either directly from a
source of light or by reflection from a smooth or polished surface; and (b) the formation of
shadows to such an extent as to cause eye strain or the risk of accident to any worker [Sec.17
(3)].
iv) Prescription of standards of sufficient and suitable lighting.
The State Government may prescribe standards of sufficient and suitable lighting for factories or
for any class or description of factories or for any manufacturing process [Sec.17 (4)].
8. Drinking Water (Sec.18).
(i) Suitable points for wholesome drinking water.
In every factory, effective arrangements shall be made to provide and maintain at suitable points
conveniently situated for all workers employed therein a sufficient supply of wholesome
drinking water [Sec.18(1)].
ii) Drinking points to be legibly marked and to be away from urinal, latrine etc.
All points for supply of drinking water shall be legibly marked ‘drinking water’ in a language
understood by a majority of the workers employed in the factory. Such points shall be situated
beyond 6 metres of any washing place, urinal, latrine, spittoon, open drain carrying silage or
effluent or any other source of contamination unless shorter distance is approved in writing by
the Chief Inspector [Sec.18(2)].
iii) Cooling of drinking water where more than 250 workers employed.
In every factory wherein more than 250 workers are ordinarily employed, provision shall be
made for cooling drinking water during hot weather by effective means and for distribution
thereof [Sec.18 (3)].

9. Latrines and urinals (Sec.19).

(i) Separate latrines and urinals for male and female workers conveniently situated and
adequately lighted and ventilated.
In every factory, separate enclosed accommodation of latrines and urinals of prescribed types of
male and female workers shall be provided for. Such accommodation shall be conveniently
situated and accessible for workers at all times. It shall be adequately lighted and ventilated and
maintained in a clean and sanitary condition. Sweepers shall also be employed for keeping clean
latrines, urinals and washing places [Sec.19 (1)].
ii) Latrine and urinal accommodation to be prescribed sanitary types-floors and walls to be
glazed and their cleaning. In factories wherein more than 250 workers are ordinarily employed
(1) all latrine and urinal accommodation shall be prescribed sanitary types; (b) the floors and
internal walls, up to a height of 90 centimeters, of the latrines and urinals and the sanitary blocks
shall be laid in glazed tiles or otherwise finished to provide a smooth polished impervious
surface; (c) the sanitary pan of latrines and urinals shall be thoroughly washed and cleaned at
least once in every 7 days with suitable detergents or disinfectants, or with both [Sec. 19(2)].
10. Spittoons [Sec.20].
(i) Sufficient number of spittoons.
In every factory, there shall be provided a sufficient number of spittoons in convenient places
and they shall be maintained in a clean and hygienic condition. [Sec.20 (1)].
ii) Display of notice of provision of spittoons.
No person shall spit within the premises of a factory except in the spittoons provided for the
purpose. A notice containing the provision of spittoons in the factory shall be prominently
displayed at suitable places in the premises. The penalty for spitting anywhere except in the
spittoons shall also be prominently displayed [Sec.20 (3)].
iii) Penalty.
Whoever spits in contravention of Sec. 20 (3) shall be punishable with fine not exceeding Rs.5
[Sec.20 (4)].

Q.2 Discuss the various welfare measures which are statutory provision under the
Factories Act 1948?

III-Welfare
Chapter V (Sec.42 to 50) of the act deals with facilities for the welfare of workers. The various
provisions in this regard are as follows:
1. Washing facilities (Sec 42)
In every factory
(a) adequate and suitable facilities (separately and adequately screened for the use of male and
female worker s) shall be provided and maintained for the use of the workers therein; and
(b) such facilities shall be conveniently accessible and shall be kept clean,
2. Facilities for storing and drying clothing (Sec. 43)
The State Government may make rules requiring the provision of suitable places for keeping
clothing of workers not worn during working hours and for the drying of wet clothing in respect
of any factory or class of factories.
3. Facilities for sitting (Sec. 44)
(i) Provision of sitting arrangement for workers obliged to work in a standing position.
In every factory, suitable arrangements for sitting shall be provided and maintained for all
workers who are obliged to work in a standing position. This has been done in order that the
workers may take advantage of any opportunities for rest which may occur in the course of their
work [Sec. 44(1)].
ii) Provision of seating arrangement for workers doing work which can be done in a sitting
position.
If the workers in any factory engaged in a particular manufacturing process or working in a
particular room are able to do their work efficiently in a sitting position, the Chief Inspector may
require the occupier of the factory to provide such seating arrangements as may be practicable
[Sec. 44(2)].
iii) Exemption. The State Government may, by notification in the Official Gazette, exempt any
factory or class of factories or manufacturing process from the application of the provisions of
sec. 44 [Sec.44(3)].
4. First-aid appliances [Sec. 45]
(i) At least one first aid box with prescribed contents for every 150 worker s.
There shall in every factory be provided and maintained so as to be readily accessible during all
working hours, first-aid boxes or cupboards with the prescribed contents. There shall be at least
one such box for every 150 workers ordinarily employed at any one time in the factory [Sec.
45(1)].
ii) First Aid box to have prescribed contents.
Only the prescribed contents shall be kept in a first aid box or cupboard [Sec.45 (2)].
iii) First aid box to be in the change of responsible person.
Each first aid box or cupboard shall be kept in the charge of a separate responsible person who
holds a certificate in the first aid treatment recognized by the State Government. Further, such
person shall always be readily available during the working hours of the factory [Sec. 45(3)].
iv) Ambulance room in a factory employing more than 500 workers.
In every factory wherein more than 500 workers are ordinarily employed there shall be provided
and maintained an ambulance room containing the prescribed equipment.
The room shall be in the charge of such medical and nursing staff as may be prescribed and those
facilities shall always be made readily available during the working hours of the factory [Sec.
45(4)].
5. Canteens [Sec. 46(1)
i) Canteen in factory employing more than 250 workers-the State Government may make
rules.
The State Government may make rules requiring that in any specified factory wherein more than
250 workers are ordinarily employed, a canteen or canteens shall be provided and maintained by
the occupier for the use of the workers (Sec. 46(1)].

ii) Provisions in rules.

The rules made by the State Government as to canteens may provide for (a) the date by which
canteen shall be provided, (b) the standards in respect of construction, accommodation, furniture
and other equipment of the canteen, (c) the foodstuffs to be served therein and the charges which
may be made thereon, (d) the constitution of a managing committee for the canteen and
representation of the workers in the management of the canteen, (e) the items of expenditure in
the running of the canteen which are not to be taken into account in fixing the cost of foodstuffs
and which shall be borne by the employer, and (f) the delegation to the Chief Inspector, subject
to such conditions as may be prescribed, of the power to make rules under Clause (c) [Sec.
46(2)].
6. Shelters, rest rooms and lunch rooms [Sec. 47]
(i) Provision for shelters, rest rooms, lunch rooms in factories employing more than 150
workers.
In every factory wherein more than 150 workers are ordinarily employed, there shall be a
provision for shelters, rest rooms and a suitable lunch room where workers can eat meals brought
by them with provision for drinking water. However, any canteen maintained in accordance with
the provisions of Sec. 46 shall be regarded as part of this requirement. Where a lunch room
exists, no worker shall eat any food in the workroom [Sec.47 {1)].
ii) Shelters etc. to be sufficiently lighted ventilated and cooled.
The shelters or rest room or lunch rooms shall be sufficiently lighted and ventilated and shall be
maintained in a cool and clean condition [Sec. 47 (2)].
7. Crèches (Sec.48).
i) Provision of crèches in factories employing more than 30 women workers.
In every factory wherein more than 30 women workers are ordinarily employed, there shall be
provided and maintained a suitable room or rooms for use of children under the age of 6 years of
such women [Sec.48 (1)].
ii) Crèches to be adequately lighted and ventilated and to be under the charge of trained
women.
Rooms for use of children shall provide adequate accommodation, shall be adequately lighted
and ventilated. Further they shall be maintained in a clean and sanitary condition and shall be
under the charge of women trained in the care of children and infants [Sec. 48 (2)].
iii) Prescription of rules by the State Government.
The State Government may make rules prescribing the location and the standards in respect of
construction, accommodation, furniture and other equipment of rooms for use of children. it may
also make rules for the provision of additional facilities for the care of children belonging to
women workers, including suitable provision of facilities (a) for washing and changing their
clothing, (b) of free milk or refreshment or both for the children, and (c) for the mothers of
children to feed them at the necessary intervals [Sec.48 (3)].
8. Welfare Officers (Sec.49).
(i) Employment of welfare officers in factories employing more than 500 or more workers.
In every factory wherein 500 or more workers are ordinarily employed the occupier shall employ
in the factory such number of welfare officers as may be prescribed [Sec. 49 (1)].
ii) Duties, qualifications and conditions of service to be prescribed by the State
Government.
The State Government may prescribe the duties, qualifications and conditions of service of
welfare officers [Sec. 49 (2)].

Q.3Discuss the safety measures which are statutory provision under the Factories Act
1948?

1.Fencing of machinery (Sec.21).

In every factory every dangerous part of every machinery shall be securely fenced by safeguards
of substantial construction which shall be constantly maintained and kept in position while the
parts of machinery they are fencing are in motion or in use.
2. Work on near machinery in motion (Sec.22).
Examination of machinery in motion by a trained adult male worker - such examination shall be
made only by a specially trained adult male worker wearing tight fitting clothing. No woman or
young person shall be allowed to clean, lubricate or adjust any part of machinery in motion
3. Employment of young person’s on dangerous machines (Sec.23).
No young person shall be required or allowed to work on any machine to which this Section
applies unless: If any one sells or lets on hire either directly or as an agent, any machine which
does not comply with the provisions of Sec. 26, he shall be punishable with imprisonment up to
3 months or with fine up to Rs.500 or with both (Sec. 26(2)].
4. Striking gear and devices for cutting off power (Sec.24).
In every factory, suitable striking gear or other efficient mechanical appliance shall be provided
and maintained and used to move driving belt to and from fast and loose pulleys which form part
of transmission machinery.
5. Self acting machines (Sec. 25).
Traversing part not allowed running within a distance of 45 centimeters from any fixed structure.
6. Casing of new machinery (Sec.26).
All machinery driven by power and installed in any factory after 1st April, 1949, every set screw,
bolt or key on any revolving shaft, spindle, wheel or pinion shall be so sunk, encased or
otherwise effectively guarded as to prevent danger.
7. Prohibition of employment of women and children near cotton openers (Sec.27). No
woman or child shall be employed in any part of a factory for pressing cotton in which a cotton-
opener is at work.
8. Hoists and lifts (Sec. 28).
Hoists and lifts to be of good, mechanical construction and to be properly maintained and
examined once in every 6 months. A register containing the prescribed particulars of every such
examination shall be kept. The maximum safe working load shall also be plainly marked on
every hoist or lift.
9. Lifting machines, chains, ropes and lifting tackles (Sec. 29)
Cranes and lifting machines etc. to be of good construction and to be examined once in every 12
months. Cranes and lifting machines not to be loaded beyond safe working load. Crane not to
approach within 6 meters of a place where any person is employed or working
10. Revolving machinery (Sec. 30).
Notice of maximum safe working speed of grindstone or abrasive wheel, etc. to be kept near
machine
11. Pressure plant (Sec.31).
Safe working pressure not to be exceeded above atmospheric pressure, effective measures shall
be taken to ensure that the safe working pressure is not exceeded (Sec. 31(1)].
12. Floors, stairs and means of access (Sec. 32).
In every factory: a) all floors , steps, stairs passages and gangways shall be of sound construction
and properly maintained (b) there shall, so far as is reasonably practicable, be provided and
maintained safe means of access to every place at which any person is at any time required to
work;
13. Pits, sumps, openings in floors, etc. (Sec. 33)
(i) Pits, sumps, etc. to be securely covered or fenced.
In every factory, pits, sumps, fixed vessels, tanks, openings in the ground or in the floor shall be
securely covered or securely fenced (Sec. 33(1)].
14. Excessive weights (Sec. 34)
Prohibition on lifting or carrying of exercise wrights - No person shall be employed in any
factory to lift, carry or move any load so heavy as to be likely to cause him injury (Sec. 34(1)].
15. Protection of eyes (Sec. 35).
In very factory, screen or suitable goggles shall be provided for the protection of persons
employed on, or in immediate vicinity of mechanical or other processes which involve any
danger or injury to the workers` eyesight.

16. Precautions against dangerous fumes (Sec. 36)

(i) Prohibition on entry into any chamber, tank, vat, pit, pipe, etc. where any gas, fume etc. is
present. ii) Practicable measures to be taken for removal of gas, fume, etc.
17. Precautions regarding the use of portable electric light (Sec 36A).
No portable electric light or any other electric appliance of voltage exceeding 24 volts shall be
permitted for use inside any chamber, tank, vat, pit; flue or other confined space in a factory,
unless adequate safety devices are provided.
18. Precautions against explosive or inflammable dust, gas, etc. i. Practicable measures to
prevent explosion on ignition of gas, fume etc.
All practicable measures shall be taken to prevent any such explosion by:
a) effective enclosure of the plant or machinery used in the process,
b) removal or prevention of the accumulation of such dust, gas, fume or vapor and
c) exclusion or effective enclosure of all possible sources of ignition (Sec. 37(1)].
19. Precautions in case of fire. (Sec. 38 as substituted by the Amendment Act of 1967).
(i) Practicable measures to prevent outbreak of fire and its spread.
In every factory, all practicable measures shall be taken to prevent outbreak of fire and its spread,
both internally and externally, and to provide and maintain:
a) safe means of escape for all persons in the event of a fire, and
b) the necessary equipment and facilities for extinguishing fire (Sec. 38(1)].
20. Power to require specifications of defective parts or tests of stability (Sec. 39) If it
appears to the Inspector that any building or part of a building, machinery or plant in a factory
may be dangerous to human life or safety, he may ask occupier or the manager or both of the
factory:
a) to furnish drawings, specifications and other particulars as may be necessary to determine,
whether such building, ways, machinery or plant can be used with safety; or
b) to carry out the tests in the specified manner and inform the Inspector of the results thereof.
21. Safety of building and machinery (Sec. 40).
Service of order by Inspector on occupier to take specified measures in case of dangerous
building or machinery or plant
Where it appears to the Inspector that the use of any such building, machinery, etc. involves
imminent danger to human life or safety, he may prohibit its use until it has been properly
repaired or altered (Sec. 40(2)].
22. Maintenance of building (Sec. 40-A).
Where it appears to the Inspector that any building or any part of the building in a factory is in
such a state of disrepair as is likely to lead to conditions detrimental to the health and welfare of
the workers
23. Safety Officers (Sec. 40-B)
In every factory wherein 1,000 or more workers are ordinarily employed, or
The duties, qualifications and conditions of service of Safety Officers shall be such as may be
prescribed by the State Government (Sec. 40-B (2)].
24. Power to make rules to supplement the above provisions (Sec. 41)
The State Government may make rules requiring the provision in any factory of such further
devices and measures for securing the safety of persons employed therein as if may deem
necessary.

Q.4 Identify the various forms of Industrial Disputes in India

Strikes
A strike is a spontaneous and concerted withdrawal of labour from production temporarily. It is a
collective stoppage of work by a group of workers for pressuring their employers to accept
certain demands. Strike as “an assertion of work by a body of persons “employed in industry
acting in combination, or a concerted refusal or a refusal under a common understanding of any
number of persons who are or have been so employed to continue to work or to accept
employment.
Strikes can occur with reasons like Dissatisfaction with company policy, salary and incentive
problems, increment not up to the mark, wrongful discharge or dismissal of workmen,
withdrawal of any concession or privilege, hours of work and rest intervals, leaves with wages
and holidays, bonus, profit sharing, provident fund and gratuity, retrenchment of workmen and
closure of establishment, dispute connected with minimum wages

Lockouts
A lockout is a work stoppage in which an employer prevents employees from working. It is
declared by employers to put pressure on their workers. Lockout is the weapon of employers’ by
temporary closing of a place of employment or the suspension of work or the refusal by an
employer to continue to employ any number of persons employed by him.
The purpose of a lockout is to put pressure on a union by reducing the number of members who
are able to work.
Example - Employer may impose a lockout is to avoid slowdowns or intermittent work-
stoppages. Occupation of factories has been the traditional method of response to lockouts by the
workers’ movement.
Layoffs
Layoffs occur when a company undergoes restructuring or downsizing or goes out of business.
In some cases, a layoff may be temporary, and the employee is rehired when the economy
improves. ... Generally, when employees are laid off, they're entitled to unemployment benefits.
Retrenchment
Retrenchment means termination by the employer of the service of a workman for any reason
whatsoever, otherwise than as a punishment inflicted by way of disciplinary action
It does not include
(a) voluntary retirement of the workman, or (b) retirement of the workman on reaching the
age of superannuating if the contract of employment between the employer and the
workman concerned contains a stipulation in that behalf; or (C) termination of the service
of the workman as a result of the non-removal of the contract of employment between the
employer and the workman concerned on its expiry or of such contract being terminated
under a stipulation in that behalf contained therein; or (d) termination of the service of a
workman on the ground of continued ill-health.

Q.5 Explain the conciliation machinery for settlement of industrial disputes.

Conciliation Machinery
Works Committees, Conciliation Officers, Board of Conciliation, and Courts of Inquiry
constitute the conciliation machinery for settlement of industrial disputes. They can only
promote settlement of industrial disputes or inquire into them but cannot make any awards which
are binding on the parties.
1. Works Committees (Sec. 3)
In the case of any industrial establishment in which 100 or more workmen are employed or have
been employed on any day in the preceding 12 months, the appropriate Government may, by
general or special order, require the employer to constitute a Works Committee.
The Committee shall consist of representatives of employers and workmen engaged in the
establishment. The number of representatives of workmen on the Committee shall not be less
than the number of representatives of the employer. The representatives of the workmen shall be
chosen in the prescribed manner from among the workmen engaged in the establishment and in
consultation with their trade union, if any, registered under the Trade Unions Act, 1926
Conciliation Officers (Sec. 4).
The appropriate Government may, by notification in the Official Gazette, appoint such number
of persons as it thinks fit to be Conciliation Officers. The duty of the Conciliation Officers shall
be to mediate in and promote the settlement of industrial disputes [Sec. 4 (1)].
Appointment
A conciliation Officer may be appointed for a specified area or for specified industries in a
specified area or for one or more specified industry. He may be appointed either permanently or
for a limited period [Sec. 4 (2)]. He shall be deemed to be a public servant within the meaning of
Sec. 21 of the Indian Penal Code, 1860 [Sec. 11 (6)].
Duties (Sec.12)
1) To hold conciliation proceedings.
2) To investigate the dispute
3) To send a report and memorandum of settlement to appropriate Government.
4) To send full report to appropriate Government setting forth the steps taken by him in case no
settlement is arrived at.
Time for the submission of the report - The report by the Conciliation Officer shall be submitted
within 14 days of the commencement of the conciliation proceedings or within such shorter
period as may be fixed by the appropriate Government [Sec. 12 (6)].
3. Boards of Conciliation (Sec. 5)
Appointment and constitution
The appropriate Government may as occasion arises, by notification in the Official Gazette
constitute, a Board of Conciliation (hereinafter called the Board) for promoting the settlement of
an industrial dispute [Sec. 5 (1)].
The Board shall consist of a Chairman and 2 or 4 other members, as the appropriate Government
thinks fit [Sec. 5 (2)]. The chairman shall be an independent person [For the definition of
‘independent person’, refer to Sec. 2 (i)]. The members shall be persons appointed in equal
number to represent the parties to the dispute. A person appointed to represent a party shall be
appointed on the recommendation of that party [Sec. 5 (3)]. But if any party fails to make a
recommendation within the prescribed period, the appropriate Government shall appoint such
persons as it thinks fit to represent that party [Proviso to Sec. 5 (3)].
Duties (Sec. 13)
1. To bring about a settlement of the dispute
2) To send a report and memorandum of settlement to the appropriate Government
3) To send a full report to the appropriate Government setting forth the steps taken by the
4) To communicate reasons to the parties if no further reference made.
5) To submit report within 2 months - Report of the Board to be in writing and to be signed and
its publication - The report of the Board shall be in writing and shall be signed by all the
members of the Board. A member of the Board may record any minute of dissent from a report
or from any recommendation made therein.

4. Courts of Inquiry (Sec. 6).

Appointment and constitution
The appropriate Government may, by notification in the Official Gazette, constitute a Court of
Inquiry (hereinafter called the Court) for inquiring into any matter appearing to be connected
with or relevant to an industrial dispute [Sec. 6 (1)]. A Court may consist of one independent
person [For the definition of ‘independent person’, refer to Sec. 2 (i) or of such number of
independent persons as the appropriate Government may think fit. Where a Court consists of 2 or
more members, one of them shall be appointed as the chairman [Sec. 6 (2)].
All members of the Court shall be deemed to be public servants within the meaning of Sec. 21 of
the Indian Penal Code, 1860 [Sec. 11 (6)].
Duties
The duty of a Court is to abide by the principle of fair play and justice Powers
(1) Power to enter premises
A member of a Court may for the purpose of inquiry into an existing or apprehended industrial
dispute, after giving reasonable notice, enter the premises occupied by any establishment to
which the dispute relates [Sec.11(2)].
(2) Powers of Civil Court. A Court shall have the same powers as are vested in a Civil Court
under the Code of Civil Procedure 1908, when trying a suit in respect of the following matters,
namely—
a) Enforcing the attendance of any person and examining him or oath;
b) Compelling the production of documents and material objects;
c) Issuing commissions for the examination of witnesses;
d) in respect of such other matters as may be prescribed.
Every inquiry or investigation by a Court shall be deemed to be a judicial proceeding within the
meaning of Secs- 193 and 228 of the Indian Penal Code, 1860
A Court may, if it so thinks fit, appoint one or more persons having special knowledge of the
matter under consideration as assessor or assessors to advise it in the proceeding before it.

Q.6 Examine the various methods of settling industrial dispute in India

Conciliation
Conciliation is a process, by which a third party persuades the parties to the industrial dispute to
come to an amicable settlement. Such third party process is called 'Conciliation’
1. Works Committees (Sec. 3)
In the case of any industrial establishment in which 100 or more workmen are employed or have
been employed on any day in the preceding 12 months, the appropriate Government may, by
general or special order, require the employer to constitute a Works Committee.
The Committee shall consist of representatives of employers and workmen engaged in the
establishment. The number of representatives of workmen on the Committee shall not be less
than the number of representatives of the employer. The representatives of the workmen shall be
chosen in the prescribed manner from among the workmen engaged in the establishment and in
consultation with their trade union, if any, registered under the Trade Unions Act, 1926
Conciliation Officers (Sec. 4).
The appropriate Government may, by notification in the Official Gazette, appoint such number
of persons as it thinks fit to be Conciliation Officers. The duty of the Conciliation Officers shall
be to mediate in and promote the settlement of industrial disputes [Sec. 4 (1)].
Boards of Conciliation (Sec. 5)
The appropriate Government may as occasion arises, by notification in the Official Gazette
constitute, a Board of Conciliation (hereinafter called the Board) for promoting the settlement of
an industrial dispute.
The Board shall consist of a Chairman and 2 or 4 other members, as the appropriate Government
thinks fit. The chairman shall be an independent person. The members shall be persons appointed
in equal number to represent the parties to the dispute. A person appointed to represent a party
shall be appointed on the recommendation of that party. But if any party fails to make a
recommendation within the prescribed period, the appropriate Government shall appoint such
persons as it thinks fit to represent that party.
4. Courts of Inquiry (Sec. 6).
The appropriate Government may, by notification in the Official Gazette, constitute a Court of
Inquiry (hereinafter called the Court) for inquiring into any matter appearing to be connected
with or relevant to an industrial dispute. A Court may consist of one independent person or of
such number of independent persons as the appropriate Government may think fit. Where a
Court consists of 2 or more members, one of them shall be appointed as the chairman [Sec. 6
(2)].
All members of the Court shall be deemed to be public servants within the meaning of Sec. 21 of
the Indian Penal Code, 1860 [Sec. 11 (6)].
Arbitration
Arbitration is a process in which the conflicting parties agree to refer their dispute to a neutral
third party known as ‘Arbitrator’. Arbitration differs from conciliation in the sense that in
arbitration the arbitrator gives his judgment on a dispute while in conciliation, the conciliator
disputing parties to reach at a decision.
The arbitrator does not enjoy any judicial powers. The arbitrator listens to the view points of the
conflicting parties and then gives his decision which is binding on all the parties. The judgment
on the dispute is sent to the government. The government publishes the judgment within 30 days
of its submission and the same becomes enforceable after 30 days of its publication. In India,
there are two types of arbitration: Voluntary and Compulsory.

Voluntary Arbitration
In voluntary arbitration both the conflicting parties appoint a neutral third party as
arbitrator. The arbitrator acts only when the dispute is referred to him/her. With a view to
promote voluntary arbitration, the Government of India has constituted a tripartite
National Arbitration Promotion Board in July 1987, consisting of representatives of
employees (trade employers and the Government. However, the voluntary arbitration
could not be successful because the judgments given by it are not binding on the
disputants. Yes, moral binding is exception to it.

Compulsory Arbitration
In compulsory arbitration, the government can force the disputing parties to go for
compulsory arbitration. In other form, both the disputing parties can request the
government to refer their dispute for arbitration. The judgment given by the arbitrator is
binding on the parties of dispute.

Adjudication
The ultimate legal remedy for the settlement of an unresolved dispute is its reference to adjudica-
tion by the government. The government can refer the dispute to adjudication with or without the
consent of the disputing parties. When the dispute is referred to adjudication with the consent of
the disputing parties, it is called ‘voluntary adjudication.’ When the government herself refers
the dispute to adjudication without consulting the concerned parties, it is known as ‘compulsory
adjudication.

The Industrial Disputes Act, 1947 provides three-tier machinery for the adjudication of
industrial disputes:

(a)Labour Court
Under Section 7 of the Industrial Disputes Act, 1947, the appropriate Government by notifying
in the official Gazette, may constitute Labour Court for adjudication of the industrial disputes
The labour court consists of one independent person who is the presiding officer or has been a
judge of a High Court, or has been a district judge or additional district judge for not less than 3
years, or has been a presiding officer of a labour court for not less than 5 years. The labour court
deals with the matters specified in the second schedule of the Industrial Disputes Act, 1947.
These relate to:
The property or legality of an employer to pass an order under the standing orders.
The application and interpretation of standing orders.
Discharge or dismissal of workers including reinstatement or grant of relief to workmen
wrongfully dismissed.
Withdrawal of any statutory concession or privilege.
Illegality or otherwise of a strike or lockout.
All matters other than those reserved for industrial tribunals.
Industrial Tribunal
Under Section 7A of the Act, the appropriate Government may constitute one or more Industrial
tribunals for the adjudication of industrial disputes. Compared to labour court, industrial
tribunals have a wider jurisdiction. An industrial tribunal is also constituted for a limited period
for a particular dispute on an adhoc basis.
The matters that come within the jurisdiction of an industrial tribunal include the
following:
Wages, including the period and mode of payment.
Compensatory and other allowances.
Hours of work and rest periods.
Leave with wages and holidays.
Bonus, profit sharing, provident fund, and gratuity.
Classification by grades.
Rules of discipline.
Rationalisation.
Retrenchment of employees and closure of an establishment or undertaking.
Any other matter that can be prescribed.
National Tribunal
This is the third one man adjudicatory body appointed by the Central Government by notification
in the Official Gazette for the adjudication of industrial disputes of national importance. The
central Government may, if it thinks fit, appoint two persons as assessors to advise the National
Tribunal. When a national tribunal has been referred to, no labour court or industrial tribunal
shall have any jurisdiction to adjudicate upon such matter.

Q.7Explain the provisions regarding rules for payment of wages under wages act 1936

1. Responsibility for payment of wages (Sec. 3).

Every employer shall be responsible for the payment to persons employed by him of all wages
required be paid under the Payment of Wages Act (Sec. 3). But in the case of persons employed
(otherwise than by a contractor) in factories, industrial establishments or upon railways, the
following persons shall also be responsible for the payment of wages:
a) in factories, the person named as the manager;
b) in industrial or other establishments, the person, if any, who is responsible to the employer for
the supervision and control of the industrial or other establishment;
c) upon railways (otherwise than in a factories), the person nominated by the railway
administration in this behalf for the local area concerned [Proviso to Sec. 3].
2. Fixation of wage-periods (Sec. 4)
Every person responsible for the payment of wages under Sec. 3 shall fix periods, known as
wage-periods, in respect of which such wages shall be payable {Sec. 4 (1)]. A wage-period shall
not exceed one month [Sec. 4 (2)].
3. Time of payment of wages (Sec.5)

The rules relating to time of payment of wages are as follows:

i) Wages to be paid before 7th or 10th day.
The wages of every person employed upon or in any railway, factory or industrial or other
establishment upon or in which less than 1,000 persons are employed, shall be paid before the
expiry of 7th day of the following wage-period. In case the number of workers exceeds 1,000,
the wages shall be paid before the expiry of the 10th day of the following wage-period [Sec. 5
(1)].
In the case of persons employed on a dock, wharf or jetty or in a mine, the balance of wages due
on completion of the final tonnage account of the ship or wagons loaded or unloaded, as the case
may be, shall be paid before the expiry of the 7th day from the day of such completion [Proviso
to Sec. 5 (1)].
ii) Wages in case of termination of employment.
Where the employment of any person is terminated by or on behalf of the employer, the wages
earned by him shall be paid before the expiry of the 2nd working day from the day on which his
employment is terminated [Sec. 5 (2)]. Where the employment of any person in an establishment
is terminated due to the closure of the establishment for any reason other than a weekly or other
recognized holiday, the wages earned by him shall be paid before the expiry of the 2nd day from
the day on which his employment is so terminated [Proviso to Sec. 5 (2)].
iii) Exemption.
The State Government may, by general or special order, exempt the person responsible for the
payment of wages from the operation of the above provisions in certain cases [Sec. 5 (3)].
iv) Wages to be paid on a working day. All payment of wages shall be made on a working day
[Sec. 5 (4)].
4. Medium of payment of wages (Sec. 6).
All wages shall be paid in current coin or currency notes or both (Sec. 6). Payment of wages in
kind is not permitted.

The process of payment of wages in cash is very cumbersome where the number of workers is
very large. It is also risky where the sum involved is large and the factory or industrial
establishment is situated at a remote palace. In order to obviate these difficulties and save the
worker from carrying cash on the pay day and mis-spending it, a Proviso has been added to Sec.6
by the Payment of Wages (Amendment) Act, 1976. According to it, the employer may after
obtaining the written authorization of the employed person, pay him the wages either by cheque
or by crediting the wages in his bank account.
The provision in the Amendment Act for paying wages by cheque or depositing wages in bank
account will also inculcate the banking habit among the workers and also make the process of
payment simpler for the employer.

Q.8 Identify the various types of deductions from wages of an employed person under
Wages Act.

1) Deductions for fines [Sec.7 (2) (a) and 8]

No fine shall be imposed on an employed person until he has been given an opportunity of
showing cause against the fine and has completed the age of 15 years.
The total amount of fine which may be imposed in any one wage period on any employed person
shall not exceed 3 per cent of the wages payable to him in respect of that wage-period.
2. Deductions for absence from duty [Sec. 7 (2) (b) and 9]
Deductions may be made on account of the absence of an employed person from duty [Sec. 7 (2)
(b)] from the place or places where, by the terms of his employment, he is required to work. The
absence may be for the whole or any part of the period during which he is so required to work
[Sec. 9 (1)]. But the ratio between the amount of such deductions and the wages payable shall
not exceed the ratio between the period of absence and total period within such wage-period
[Sec. 9 (2)].
3. Deductions for damage or loss [Sec. 7 (2) (c), (m), (n) and (o) and 10]
A deduction for damage to or loss of goods expressly entrusted to the employed person for
custody or for loss of money for which he is required to account shall not exceed the amount of
damage or loss caused to the employer by the neglect or default of the employed person. Same is
the case as regards losses sustained by a railway administration on account of any rebates or
refunds incorrectly granted by the employed person [Sec. 7 (2) (c) and 10 (1)].
4. Deductions for services [Sec. 7 (2) (d), (e) and 11].
A deduction for house accommodation [Sec. 7 (2) (d)] and such amenities and services supplied
by the employer as have been authorized by the State Government [Sec.7 (2) (e)] shall not be
made from the wages of an employed person, unless such services have been accepted by him as
a term of employment or otherwise. Deductions in respect of these services shall not exceed the
value thereof. In case of deductions as regards services and amenities, the State Government may
impose conditions (Sec. 11).
5. Deductions for recovery of advances [Sec. 7 (2) (f) and 12].
A deduction for recovery of an advance given to an employed person is subject to the following
conditions, viz.,
1) recovery of an advance of money given before employment began shall be made from the first
payment of wages in respect of complete wage-period, but no recovery can be made of such
advance given for traveling expenses;
2) recovery of an advance of money given after employment began shall be subject to such
conditions as the State Government may impose;
3) recovery of advances of wages not already earned shall be subject to any rules made by the
State Government in this regard. The State Government may regulate the extent to which such
advances may be given and the installments by which they may be recovered (Sec.12).
6. Deductions for recovery of loans [Sec. 7 (2) (fff) and 12-A].
Deductions for loans granted for house-building or other purposes and the interest due in respect
thereof [Sec. 7 (2) (fff)] approved by the State Government shall be subject to any rules made by
the State Government regulating the extent to which such loans may be granted and the rate of
interest payable thereon (Sec. 12-A).

7. Deductions for payment to co-operative societies and insurance schemes [Sec. 7 (2) (j)
and (k) and 13].
These deductions shall include:
a) deductions for payments to co-operative societies approved by the State Government or to a
scheme of insurance maintained by the Indian Post Office [Sec. 7 (2) (j)]; and
b) deductions made with the written authorization of the person employed for the payment of any
premium on his life insurance policy to the Life Insurance Cooperation of India or for the
purchase of securities of the Government of India or of any State Government or for being
deposited in any Post Office Saving Bank in furtherance of any saving scheme of any such
Government [Sec. 7 (2) (k)].
These deductions shall be subject to such conditions as the State Government may impose (Sec.
13).
Other deductions.
The following deductions shall also be permitted under the Act:
1) deductions of income-tax payable by the employed persons [Sec.7 (2) (g)];
2) deductions required to be made by order of a Court or other authority competent to make such
order [Sec. 7 (2) (h)];
3) deductions for payments to co-operative societies of advances from any provident fund to
which the Provident Fund Act, 1925 applies or any recognized provident fund (as defined in Sec.
58-A of the Indian Income-tax Act, 1922) or any provident fund approved in this behalf by the
State Government [Sec. 7 (2) (i)];
4) deductions for payment of insurance premium on Fidelity Guarantee Bonds [Sec.7(2)(l)];
5) deductions for recovery of losses sustained by a railway administration on account of any
default by the employed person. The default may consist of acceptance of counterfeit or base
coins or forged currency notes, or allowing excess rebates or refunds [Sec. 7 (2) (m)];
6) deductions made, with the written authorization of the employed person, for contribution to
the Prime Minister’s National Relief Fund or to such other Fund as may be specified by the
Central Government [Sec. 7 (2) (p)]; This Clause was added by the Payment of Wages
(Amendment) Act, 1976]; and
7) Deductions for contributions to any insurance scheme framed by the Central Government for
the benefit of its employees [Sec. 7 (2) (q)]; This Clause was added by the Payment of Wages
(Amendment) Act, 1977].

Q.9 Identify the rights and liabilities of a registered Trade Union in India

Rights of a registered trade union:

1. Right of Admission: Admission as a member of trade union is not an absolute right. A

registered trade union may impose certain qualifications and restrictions for admissions
subject to the provisions of the Trade Unions Act and Rules as well as any other law in
force.
2. Right of Representation: A trade union can represent the employees in any industrial
dispute and in case of individual dispute, with the written authorization of the employee.
With such authorization, a trade union can represent before any conciliation officer,
industrial tribunal, labour courts etc.
3. Right to Contract: A registered trade union, being a legal person, can enter into
agreements and contracts on its own name.
 4. Right to own property: A registered trade union can purchase and own movable and
immovable property in its own name.
5. Right to Sue: A trade union is a juristic person. It can sue, argue before any labour courts,
authorities and other courts on behalf of itself, and on behalf of its members.
6. Right to inspect books: Section 20 confers an important right to the members of the trade
union. The office bearers or the members can inspect the books of account at such time as
may be provided for in the rules of the trade union. The members, however, have no right
to take copies of such books of account.
7. Right to Amalgamate: According to Section 24 of the Trade Unions Act, 1926, two or
more registered trade unions may amalgamate as one trade union with or without
dissolution or division of funds of such unions.

Duties and Liabilities:

1. A registered trade union has a duty to inform the Registrar of Trade Unions by sending a
notice to that effect as to the change of address of the registered trade union.
2. The Act imposes on the registered trade union, duty to spend the funds (general fund,
political fund), specifically allotted for the purposes as stated in the provisions of the act.
3. A registered trade union is under a duty to see that not less than 1/2 of the total number of
its office bearers in the case of unorganized sector and 1/3 or 1/5 whichever is less in
other sectors (according to amendment in 2001) must be persons actually engaged or
employed in an industry with which the trade union is connected with. Appropriate
governments by an order (general or special order) exempt a trade union from this
provision.
4. Every registered trade union must submit every year, to the registrar of trade unions, a) a
general statement, audited in the prescribed manner of all receipts and expenditures
during the year ending 31st December, b) an audited statement of its assets and liabilities
as on 31st December, c) a statement showing change of office bearers made by the trade
union during that year and, d) a copy of the rules of the trade union amended up to date.
5. Whenever any alteration is made in the rules of the registered trade union, a notice
regarding the altered rules must be submitted to the registrar of trade unions within 15
days of such alteration.
6. Failure to submit the above said returns, or give notice of alterations, shall make every
office bearer or other persons who are responsible for such submission of particulars,
liable to pay fine which may extend to Rs.5 and in case of continuing default additional
fine of Rs. 5 for each week not exceeding Rs. 50 in total.
7. Any person who gives false information to any member of the registered trade union with
an intention of deceiving him is liable to be punished with fine which may extend to
Rs.200.
8. While electing a person as a member of the executive committee or for any other office
as office bearer must be confirmed that such person has completed the age of 18 and such
 person is not convicted of any offence involving moral turpitude. (In case of any
conviction and a period of 5 years has elapsed since his release then he is qualified to be
elected for these posts.)
9. A minister or a person holding an office of profit in the Union or State shall not be
elected as a member of executive or other office bearer of a registered trade union
(according to amendment in 2001).

Q.10 Discuss the different types of benefits provided by ESI Act

Benefits of ESI registration

Medical Benefit
Full medical care is provided to all persons registered under ESI and their family members –
from the day the person enters insurable employment. There is no ceiling on expenditure on the
treatment of an Insured Person or his family member. Medical care is also provided to retired
and permanently disabled insured persons and their spouses on payment of a token annual
premium of Rs.120/-.
Sickness Benefit
Sickness benefit in the form of cash compensation at the rate of 70% of wages is payable to
insured workers during the periods of certified sickness for a maximum of 91 days in a year. In
order to qualify for sickness benefit, the insured worker is required to contribute for 78 days in a
contribution period of 6 months. Workers suffering from malignant and long-term diseases can
claim extended sickness benefit for upto two years at an enhanced rate of 80% of wages.
Also, enhanced sickness benefit equal to full wage is payable to insured persons undergoing
sterilization for 7 days/14 days for male and female workers respectively.
Maternity Benefit
Maternity benefit for confinement/pregnancy is provided for three months, which is extendable
by further one month on medical advice at the rate of full wage subject to contribution for 70
days in the preceding year.
Disablement Benefit
From the day of entering insurable employment and irrespective of having paid any contribution,
90% of wage is payable so long as temporary disability continues. Permanent disablement
benefit is payable at the rate of 90% of wage in the form of monthly payment, in case of
permanent disablement based on the extent of loss of earning capacity as certified by a Medical
Board.
Dependant Benefit
Dependant benefit is paid at the rate of 90% of wage in the form of monthly payment to the
dependants of a deceased insured person, in cases death occurs due to employment injury or
occupational hazards.
Funeral Expenses
An amount of Rs.10,000/- is payable to the dependents or to the person who performs last rites
from day one of entering insurable employment.
Unemployment Allowance
Under the Rajiv Gandhi Shramik Kalyan Yojana, unemployment allowance is payable to
an insured Person who become unemployed after being insured three or more years, due to
closure of factory/establishment, retrenchment or permanent invalidity. The applicable
unemployment allowances provided are:
 Unemployment Allowance equal to 50% of wage for a maximum period of upto one
year.
 Medical care for self and family from ESI Hospitals/Dispensaries during the period IP
receives unemployment allowance.
 Vocational Training provided for upgrading skills – Expenditure on fee/travelling
allowance borne by ESIC
 UNIT 5 - Consumer Protection Act and Introduction of Cyber Laws
State the objectives of Competition Act
To prevent practices having adverse effect on competition
To promote and sustain competition in markets
To protect the interests of consumers
To ensure freedom of trade carried on by other participants in markets in India

Explain the features of Competition Act 2002

A. The pattern of the law
In line with prevailing pattern of modern competition laws, the Act seeks to –
1. prohibit anti-competitive agreements, which determine prices or control or limit or share markets among players or result in bid
rigging.
2. prohibit abuse of dominance through unfair and discriminatory prices or conditions limiting or restricting production, denying
market access, etc.
3. regulate combination (acquisition, mergers and amalgamations etc.) that causes or likely to cause appreciable adverse effect on
competition.
4. entrust the Competition Commission of India the responsibility of undertaking competition advocacy, awareness and training
about competition issues.
B. Wide coverage of the Act
Section 2(h) - “Enterprise” means a person or a department of government engaged in all the activities of a value chain of products
and services directly or indirectly. However the activity of the Government relatable to sovereign functions and the activities carried
on by the departments of the government dealing with atomic energy, currency, defence and space are kept out of the purview of the
Act. Even statutory authorities regulating production or supply of goods or provision of any services or any markets for these are
covered within the ambit of the Act.
C. Anti-competitive agreements
Section 3 -Agreements among enterprises or persons or association of persons, which causes or likely to cause appreciable adverse
effect on competition. Such agreements are rendered void pursuant to this section.
Horizontal and vertical agreements are not outright prohibited but subject to ‘rule of reasoning’. Only if they cause or likely to
appreciable adverse effect on competition, they are prohibited.
However, exemption has been provided to agreements involving intellectual property rights (IPRs) and to the right of any person to
export goods from India to the extent the agreement relates exclusively to production, supply, distribution or control of goods or
provision of services for such exports.
D. Abuse of dominance
Section 4 - ‘Dominance’ or ‘Dominant Position’ means a position of strength, enjoyed by an enterprise, in the relevant market, in
India which enables it to –
a. operate independently of competitive forces in the relevant market; or
b. affect its competitors or consumers or the relevant market in its favour
Dominance is determined by several factors e.g. market share of the enterprise concerned, market share of competitors, entry barriers,
size and resources commanded by the enterprise or competitors, etc.
Examples of abuse include –
Exclusionary practices such as predatory pricing, denying market access, use of dominance in one market to enter into, or protect,
other relevant market.
Exploitative practices such as discriminatory pricing and imposing discriminatory conditions of trade, conclusion of main contract
contingent upon accepting supplementary obligations unrelated to main contract.
E. Regulation of combinations
Section 5- Combination includes acquisition of shares, acquiring of control and mergers and amalgamations. These combinations can
be horizontal, vertical or conglomerate. It is the horizontal type of combinations that has very high potential to thwart competition
when compared to other two kinds of combinations.
In line with the market realities, the Act provides for very liberal regime of combination regulation. The salient features of
combination regulations are –
The Act has set very high threshold limit based on turnover or assets of the enterprises involved in combination for notification of
combinations. The objective is to keep smaller combinations outside regulation and encouraging Indian enterprises to grow in size
as well market share in globalised market.
Higher threshold limit is set for combination involving parties having operation both in India and outside India.
The notification of combination to the Commission is voluntary not mandatory.
Such notification has to be disposed off by the Commission within 90 working days, failing which the same is deemed to be approved.
The commission also has the suo moto enquiry power.
Limited exemption is given to combination involving public financial institution, foreign institutional investors and venture capital
fund.
F. Remedies in Competition Act.
Section 27 of the Act provides various remedies for restoring competition and penalizing the offenders in case of contravention of this
law. They are –
- passing ‘cease and desist order’
- providing agreements having appreciable adverse effect on competition to be void
- imposing penalty upto 10% of the turnover or 3 times of cartelised profit, whichever is higher
- awarding compensation or damages as per Section 34
- directing modifications to agreements
- in case of combinations, they can be approved with or without modification or even be refused approval
- in case of dominant enterprise, order can recommend division as provided in Section 28 of the Act

Who is a consumer under Consumer Protection Act 1986?

A consumer is a person or group who pays to use the goods or services produced by a seller for satisfaction of his wants.

What information one should check before buying packed medicines?

While buying medicines, one should check the information like directions for proper use, information related to its side effects, risks
associated with its usage, manufacturing date and expiry date.

What information one should check before buying any packed food?
Before buying any packed food, one should check the information related to ingredients used, price, batch number, manufacturing
date, expiry date and address of the manufacturer.

Explain the importance of Consumer Protection Act in India

From Consumers point of view
Consumer Ignorance: Consumer when seeing it from their point of view then we have gathered some aspects to it. Of which,
Consumer Ignorance needs to be taken care of they should know how to exercise their rights and how to seek reliefs.
Unorganised Consumer: We need a Consumer Organisation which can unify the consumers and help them seek relief with their
consumer issues.
Widespread Exploitation of Consumer: Consumer is been exploited through the ways of adulteration, false practice, fake weights,
incomplete information on packaged products, Misleading Advertisements. For instance, there are many products that claim to make
you fair or reduce your weight but when you use the products it does not provide what is promised.
From Business point of view
Long-Term Interest of Business: If one wants to increase their customer base in long-term then they need to make a satisfied
customer. A satisfied customer with their word of mouth would make more customer and increase the consumer base.
Business uses society’s Resources: Business should not hamper consumer confidence as most of the resources taken from the society.
In turn, business keeps in mind public interest and provide products accordingly.
Social Responsibility: Business have responsibilities towards the consumer, government bodies and society and they should work in a
way which should be beneficial to them and the business as in return it will flourish their business.
Moral Justice: Business has a moral duty to the society and consumer and they should take steps which should not hamper the society
or consumer. They should prevent any sort of exploitation like adulteration, unfair practices, defective product, fair price and weight.
Government Intervention: To avoid the situation of government intervention in the business which could be a hectic task. For that
business should design their trade practice in such a way which would be in the interest of the consumer.

What are unfair trade practices? Explain the unfair trade practices prevails in India

Key:
Unfair trade practice” means a trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the
provision of any service, adopts any unfair method or unfair or deceptive practice including any of the following practices, namely:—
The practice of making any statement, whether orally or in writing or by visible representation which,
Falsely represents that the goods are of a particular standard, quality, quantity, grade, composition, style or model
Falsely represents that the services are of a particular standard, quality or grade
Falsely represents any re-built, second-hand, renovated, reconditioned or old goods as new goods;
Represents that the goods or services have sponsorship, approval, performance, characteristics, accessories, uses or benefits which
such goods or services do not have;
Represents that the seller or the supplier has a sponsorship or approval or affiliation which such seller or supplier does not have;
Makes a false or misleading representation concerning the need for, or the usefulness of, any goods or services;
Gives to the public any warranty or guarantee of the performance, efficacy or length of life of a product or of any goods that is not
based on an adequate or proper test thereof
An advertisement published in any newspaper or other means of communication to the general public may also result in unfair trade
practice if the price communicated is misleading or a bargain price. This means that an unfair trade practice would be when a rational
individual on reading, hearing or seeing the advertisement would think to be a bargain price as compared to the product’s ordinary sale
price.
Wrongful or deceitful permissions or expressions like:
– Offering gifts, prizes and so on without any intention of actually fulfilling the expression.
– Putting across a product as free of charge when it is actually not as the cost is being covered partly or wholly in the transaction
amount.
– Conducting games of chance or skill like the lottery in order to promote a particular product directly or indirectly.
– Not granting participants of a scheme their prize by closing the information about the final results of the scheme.
4. Allowing the sale of products, having the knowledge or reason to believe that the product is not up to the standards of a competent
authority. This could be in terms of design, contents, packaging, etc.
5. Permitting the hoarding or destruction of products with the intention of raising the prices of the goods.
How does right to safety help consumers with an example?
Pressure cookers have a safety valve, which if defective can cause a serious accident. The manufacturers should ensure high
standards and the consumers should read all the instructions given on the box of the pressure cooker.

Identify any two organizations responsible for the standardization of products in India
Organizations responsible for the standardization of products in India are
Agmark (for eatables)
ISI (for electrical and electronic goods).

Discuss the various rights of consumers under Consumer Protection Act 1986
Consumers’ rights under section-6 of the consumer protection act are as follows:
(1) Right to Safety:
A consumer has the right to safety against such goods and services as are hazardous to his health, life and property.For example,
spurious and substandard drugs; appliances made of low quality raw material, such as, electric press, pressure cooker, etc. and low
quality food products like bread, milk, jam, butter, etc. The consumers have the right to safety against the loss caused by such
products.
(2) Right to be Informed/Right to Representation:
A consumer has also the right that he should be provided with all the information on the basis of which he decides to buy goods or
services. Such information relate to quality, purity, potency, standard, date of manufacture, method of use, etc. of the commodity.
Thus, a producer is required to provide all such information in a proper manner, so the consumer is not cheated.
(3) Right to Choose:
A consumer has the absolute right to buy any goods or services of his choice from among the different goods or services available in
the market. In other words, no seller can influence his choice in an unfair manner. If any seller does so, it will be deemed as
interference in his right to choice.
(4) Right to be Heard:
A consumer has the right that his complaint be heard. Under this right, the consumer can file a complaint against all those things
which are prejudicial to his interest. Several large organisations have set up Consumer Service Cells with a view to providing the
consumer the right to be heard. The function of the cell is to hear the complaints of the consumers and to take adequate measures to
redress them. Example :Many daily newspapers have also special columns to entertain the complaints of the consumers.
(5) Right to Seek Redressal:
This right provides compensation to the consumers against unfair trade practice of the seller. For instance, if the quantity and quality
of the product do not conform to those promised by the seller, the buyer has the right to claim compensation. Several redressal are
available to the consumer by way of compensation, such as free repair of the product, taking back of the product with refund of
money, changing of the product by the seller.
(6) Right to Consumer Education:
Consumer education refers to educating the consumer constantly with regard to their rights. In other words, consumers must be aware
of the rights they enjoy against the loss they suffer on account of goods and services purchased by them. Government has taken
several measures to educate the consumers.
For instance, Ministry of Civil Supplies publishes a quarterly magazine under the title “Upbhokta Jagran”. Doordarshan telecasts a
programme like the “Sanrakshan Upbhokta Ka” and apart from this, Consumer Day is observed on March 15 every year.
(7) Right to Basic Needs:
The basic needs mean those goods and services which are necessary for a dignified living of people. It includes adequate food,
clothing, shelter, energy, sanitation, health care, education and transportation. All the consumers have the right fulfil these basic needs.
(8) Right to Healthy Environment:
This right provides the consumers, protection against environmental pollution so that the quality of life is enhanced. Not only this, it
also stresses the need to protect the environment for the future generations as well.

State the provisions of Information Technology Act

Grant legal recognition to E-Transactions
Provide legal recognition to Digital Signatures for authentication
Facilitate E-Filing of data and information
Allow Electronic storage of data
Grant recognition to maintenance of books of accounts in Electronic Form

Write short note on Electronic Digital Signature

A digital certificate is an electronic document issued by a Certificate Authority. It contains the public key for a digital signature and
specifies the identity associated with the key, such as the name of an organization. The certificate is used to confirm that the public
key belongs to the specific organization.

Identify the legal provisions available to the cyber offences under information Technology Act
Section 65: Any person tamper, conceal, destroy, or alter any computer source document intentionally, then he shall be liable to pay
penalty upto Rs.2,00,000/-, or Imprisonment upto 3 years, or both.
Section 66: Any person dishonestly, or fraudulently does any act as referred in Section 43, then he shall be liable to pay penalty upto
Rs.5,00,000/-, or Imprisonment upto 3 years, or both.
Section 66B: Any person dishonestly, or fraudulently receives or retains any stolen computer resource or communication device, then
he shall be liable to pay penalty upto Rs.1,00,000/-, or Imprisonment upto 3 years, or both.
Section 66C: Any person dishonestly, or fraudulently make use of Electronic Signature, Password or any other Unique Identification
Feature of any other person, then he shall be liable to pay penalty upto Rs.1,00,000/-, or Imprisonment upto 3 years, or both.
Section 66D: Any person dishonestly, or fraudulently by means of any communication device or computer resource cheats by
personating, then he shall be liable to pay penalty upto Rs.1,00,000/-, or Imprisonment upto 3 years, or both.
Section 66E: Any person intentionally captures, publishes, or transmits image of private area of any person without consent, then he
shall be liable to pay penalty upto Rs.2,00,000/-, or Imprisonment upto 3 years, or both.
Section 66F: Any person does any act electronically, or with use of computer with intent to threaten unity, integrity, security, or
sovereignty of India, then he shall punishable with Imprisonment for Life.
Section 67: Any person publishes, or transmits in electronic form any material which appeals to prurient interest, or if its effect is such
as to tend to deprave and coorupt persons who are likely to read, see, or hear matter contained in it, then he shall be liable to pay
penalty upto Rs.5,00,000/-, or Imprisonment upto 3 years, or both, And in the event of second or subsequent conviction, he shall be
liable to pay penalty upto Rs.10,00,000/-, or Imprisonment upto 5 years, or both.
Section 67A: Any person publishes, or transmits in electronic form any material which contains sexually explicit act, or conduct, then
he shall be liable to pay penalty upto Rs.10,00,000/-, or Imprisonment upto 5 years, or both, And in the event of second or subsequent
conviction, he shall be liable to pay penalty upto Rs.10,00,000/-, or Imprisonment upto 7 years, or both.
Section 68: The Controller may, by order, direct a Certifying Authority or any employee of such Authority to take such measures or
cease carrying on such activities as specified in the order if those are necessary to ensure compliance with the provisions o f this Act,
rules or any regulations made there under and if any person who intentionally or knowingly fails to comply with the order, then he
shall be liable to pay penalty upto Rs.1,00,000/-, or Imprisonment upto 2 years, or both.
Section 69: Where the Central Government or a State Government or any of its officers specially authorized by the Central
Government or the State Government, as the case may be, in this behalf may, if satisfied that it is necessary or expedient so to do, in
the interest of the sovereignty or integrity of India, defense of India, security of the State, friendly relations with foreign States or
public order or for preventing incitement to the commission of any cognizable offence relating to above or for investigation of any
offence, it may with reasons to be recorded in writing, by order, direct any agency of the appropriate Government to intercept, monitor
or decrypt or cause to be intercepted or monitored or decrypted any information generated, transmitted, received or stored in any
computer resource, Any person who fails to comply with the order, then he shall be liable to Imprisonment of 7 years, along with the
fine (amount of fine is not specified in the act).
Section 70: The appropriate Government may, by notification in the Official Gazette, declare any computer resource which directly or
indirectly affects the facility of Critical Information Infrastructure, to be a protected system, Any person who fails to comply with the
notification, then he shall be liable to Imprisonment of 10 years, along with the fine (amount of fine is not specified in the act).
Section 71: Whoever makes any misrepresentation to, or suppresses any material fact from the Controller or the Certifying Authority
for obtaining any License or Electronic Signature Certificate, as the case may be, then he shall be liable to pay penalty upto
Rs.1,00,000/-, or Imprisonment upto 2 years, or both.
Section 72: If any person who has secured access to any electronic record, book, register, correspondence, information, document or
other material without the consent of the person concerned discloses such electronic record, book, register, correspondence,
information, document or other material to any other person, then he shall be liable to pay penalty upto Rs.1,00,000/-, or
Imprisonment upto 2 years, or both.
Section 72A: If any person who has secured access to any material containing personal information about another person, with the
intent to cause or knowing that he is likely to cause wrongful loss or wrongful gain discloses, without the consent of the person
concerned, or in breach of a lawful contract, then he shall be liable to pay penalty upto Rs.5,00,000/-, or Imprisonment upto 3 years, or
both.
Section 73: If any person publishes a Electronic Signature Certificate, or make it available to any other person with the knowledge
that
 Certifying Authority has not issued it, or
 Subscriber has not accepted it, or
 Certificate has been revoked or suspended
then he shall be liable to pay penalty upto Rs.1,00,000/-, or Imprisonment upto 2 years, or both.
Section 74: If any person knowingly creates, publishes, or otherwise makes available Electronic Signature Certificate for any
fraudulent or unlawful purpose, then he shall be liable to pay penalty upto Rs.1,00,000/-, or Imprisonment upto 2 years, or both.
Section 75: If any person have committed an offence, or contravention committed outside India, and if the act or conduct constituting
the offence or contravention involves a computer, computer system or computer network located in India, then the provisions of this
Act shall apply also to any offence or contravention committed outside India by any person irrespective of his nationality.
Section 76: Any computer, computer system, floppies, compact disks, tape drives, or any other accessories related thereto, in respect
of which any provision of this Act, rules, orders, or regulations made there under has been, or is being contravened, shall be liable to
confiscation. However, if it is proved that such resources were not used in committing fraud then only person in default will be
arrested.

Define copyright
Copyright is a right given by the law to the creators of literary, dramatic, musical and artistic works and producers of cinematograph
films and sound recordings. In fact, it is a bundle of rights including rights of reproduction, communication to the public, adaptation
and translation of the work.

Write short note on patent

Patent is a form of protection that provides a person or legal entity with exclusive rights for making, using or selling a concept or
invention and excludes others from doing the same, also for claiming damages from those who infringe the invention.

Identify the requirements every trademark has fulfilled for registration

The mark should be non- generic – A generic trademark is a trademark or brand name that has become the colloquial or generic
description for (or synonymous with) a general class of product or service, rather than the specific meaning intended by trademark’s
holder.
The mark should be non- descriptive – Descriptive trademarks are those which describe some aspect, characteristic or quality of the
products on which they are used.
The mark is not identical or similar to existing marks- A proposed mark should not be similar or identical to that for which the earlier
trademark is registered in the name of a different proprietor
The mark should be non- deceptive – A deceptive trademark is one that wrongly indicates that the goods over which it is used have
certain qualities but they do not.

Explain the procedure of registration of Trademark in India and the legal documents required for trademark registration
Trademark Registration Process
Step 1: Trademark research
In the initial stage, you need to do the proper research before selecting a trademark for your business. You need to follow the certain
steps:
Identify the mark to be registered as trademark with the registry
Search the availability of the selected mark
Identify the class of the trademark
Step 2: TM form filing
Once the uniqueness is achieved in mark while searching for the mark, you need to file an application in form TM-A with the registrar
for registration of a trademark. After filing the application with the requisite fee and documents, the company can use the symbol
‘TM’ until the trademark approved. A single trademark application can be filed for one or multi-class.
Step 3: Allotment of application number
After filing the trademark registration application with the Registrar, an application number will be generated which helps you to track
the application status online. After allotment of application number, the applicant can use the ‘TM’ symbol with the selected mark.
Step 4: Examination of application
After trademark application filed at the trademark registrar office who has the jurisdiction over the state, trademark examiner check
the trademark application in accordance with the provisions of Trademark Act. The registrar may accept or object the application on
the relative or absolute grounds.
Step 5: Receipt of examination report
Once the trademark examiner reviews the application, an examination report issued by the registry. Usually, report would be issued
within 3 months to 1 year depending on the back log of the registry.
Step 6: Reply to the examination report
Once you get the examination report, you need to file the reply with the registrar to escape the objection raised by the trademark
examiner. You need to file the reply within30 days counted from the day of receiving the examination report. Non filing of the reply
leads to abandon the trademark application.
Step 7: Advertisement of trademarks journal
If no objection is raised by the registrar the or in case of objection, satisfied with the reply, the trademark registrar will publish the
mark in trademark journal. The filed trademark application is advertised in trademark journal to invite the public to oppose for the
mark.
Step 8: Opposition (if any)
After publishing the trademark the third party have an opportunity to raise the objection within 90 days from the date of publication. If
the third party opposed the trademark application then both the parties have the chance to appear at the hearing.
Step 9: Certificate of registration
When objections and oppositions (if any) are satisfied which are raised by the examiner or third party, then trademark registration
certificate issued to the applicant. Registration of the trademark granting the exclusive use to the owner of the registered trademark.
For registered trademark symbol ‘R’ has to be used.
Documents required for Trademark Registration
For trademark registration the documents you need to have:
Power of attorney
Trademark or logo copy
Board Resolution (in case of company)
Deed (in case of LLP), Incorporation Certificate (in case of company), MSME certificate (in case of small company)
Basic trademark registration form (TM-A)
Apart from the documents some of the mandatory information is required to file the trademark registration application:
Applicant details
Company details
Date of first use of trademark
Goods or services which are to be registered

How do Consumer Redressal forums help consumers?

They guide consumers on how to file a case in consumer courts.
They may represent individual consumers in the consumer courts.
They create awareness among the people
To safeguard consumers from unfair trade practices

Discuss the details for filing a customer complaint and the remedies available to customers
Individuals who may file a complaint
The following persons may file a claim under the Consumer Protection Act of 1986:
 The individual must be a consumer.
Any recognised voluntary consumer association if the consumer is a member of the association or not.
The Central Government or the State Government.
One or more consumers along with numerous other consumers having the same interests.
A legal heir or a representative in the case of death of a consumer.
Types of complaints that may be filed
A consumer has the right to file a complaint concerning either of the following reasons.
Adopting unfair trade practice or a restrictive trade practice by a trader or service provider.
Goods that were bought suffer from defects.
Services that were hired or availed suffer from a deficiency in any aspect.
Goods or service which were hazardous or likely to be dangerous to health and safety when used.
When prices are charged more than the MRP/ price displayed on the price list/ agreed between the parties involved.
Places to file a complaint
A consumer complaint may be submitted in person or by an authorised agent or by post.
The claim may be written on a plain sheet of paper and supported by appropriate evidence verifying the allegation contained in the
complaint. The complaint should also clearly specify what sort of relief the consumer is demanding for the loss or injury caused.
The complaint should also contain the nature, description and the address of the complainant as well as the opposition party and
information regarding the claim in detail.
Time Limit
The time limit for a consumer to file a complaint is within two years from the date on which the cause of the action has taken started.
However, a complaint may be admitted even after two years if sufficient evidence and justification is presented for the delay.
The time limit for a complaint to be solved must be within three months from the date of the notice received by the opposite party and
extended to five months when the complaint requires a laboratory testing of goods.
Remedies available to consumers under Consumer Protection Act
Removal of defect of goods
Replacement of goods
Refund of price paid
Compensation of loss or injury suffered
Removal of deficiency in services
Stopping the sale of hazardous goods

Consumer Protection Councils are created to advise and assist the consumers in seeking and enforcing their rights -
Enumerate
Consumer Protection Councils have been created both at the (i) Centre level - that is one Central Council and (ii) State level - many
State Councils.
The objects of the Central Consumers Protection Council and State Consumers Protection Councils are to promote and protect the
rights of the consumers, such as:
The right to be protected against marketing of goods and services which are hazardous to life and property.
The right to be informed about the quality, quantity, potency, purity, standard and price of goods or services as the case may be so
as to protect the consumer against unfair trade practices.
The right to be assured wherever possible, access to a variety of goods and services at competitive prices.
The right to be heard and to be assured that consumers‘ interest will receive due consideration at appropriate forum.
The right to seek redressal against unfair trade practices or restrictive trade practices or unscrupulous exploitation of consumers,
 and
The right to consumer education.

These councils work towards the promotion and protection of consumers. They make investigations and give publicity to the matters
concerning consumer interests, take steps towards furthering consumer education and protecting consumer from exploitation, advice
the Government in the matter of policy formulation keeping consumer interest as pivotal concern, etc. Although their suggestions are
recommendatory in nature, they have significant impact in policy making.
Central Council (Sec. 4 of Consumer Protection Act, 1986) The Central Council will be composed of
the following members –
- The Minister in charge of Consumer Affairs of the Central government will be the Chairman of the Central Council.
- The Minister of State (where he is not holding independent charge) or Deputy Minister (in charge of Consumer Affairs in the
Central Government] will be the Vice-Chairman of the Central Council;
- Minister in-charge of Consumer Affairs in States;
- Eight Members of Parliament - five from the Lok Sabha and three from the Rajya Sabha;
- The Secretary of the National Commission for Scheduled Castes and Scheduled Tribes;
- Representatives of the Central Government Departments and autonomous organisations concerned with consumer interests-not
exceeding twenty;
- Representatives of the Consumer Organisations or consumers-not less than thirty-five;
- Representatives of women-not less than ten;
- Representatives of farmers, trade and industries-not exceeding twenty;
- Persons capable of representing consumer interest not specified above-not exceeding fifteen;
- The Secretary in-charge of Consumer Affairs in the Central Government will be the member-secretary of the Central Council.
 - Such members, official and non-official representing such interests as may be
prescribed.
The Central Council meets as and when necessary. At least one meeting shall be held every year. The time and place of the meeting
will be fixed by the Chairman. The procedure in regard to the transactions of the business shall also be determined by the Chairman.
(Sec 5) the term of the Council will be three years.
State Council (Sec. 7 Consumer Protection Act, 1986):
A State Council shall be composed of the following members, namely,
- The Minister in charge of Consumer Affairs of the state government will act as Chairman.
- Such members, official and non-official representing such interests as may be prescribed by the state government.
The State Council shall meet as and when necessary. The time and place of the meeting shall be fixed by the Chairman. The Council
shall observe such procedure regard to the transactions of its business as may be prescribed by the state government. At least two
meetings shall be held every year.

State the reasons responsible for enacting Consumer Protection Act, 1986 by the Government of India
Dissatisfaction among the consumers regarding unfair trade practices being indulged in by the producers or sellers.
No legal system available for the protection of consumers from exploitation in the market place
Rampart food shortages, hoarding, black-marketing and adulteration of food and edible oil posed a threat to consumers.

In what manner the consumer file a complaint before the district forum? What is the composition of the district Consumer
Disputes Redressal Commission, its jurisdiction and the procedure to be followed?
District Forum
The Consumer Disputes Redressal Forum, better known as District Forum is the first stage of courts at the bottom of the hierarchy of
the consumer redressal courts. The sections 10 to 15 of the Consumer Protection Act, 1986 deal with this forum.
Section 10(1) of the Act deals with the composition of the District Forum. The important aspects of this Act involve:
o There is a President with the qualification of a District judge.
o Apart from the President, there are two other members, one being a woman.
o These members are to be chosen based on three grounds.They must be at least 35 years of age, they must have a degree from a
recognized university and they must have at least 10 years of experience in law, economics, commerce and so on.
The above appointments have certain disqualifications:
o A convict sentenced to imprisonment which breaches moral conduct according to the State Government
o An insolvent
o A person of an unsound mind according to a competent court
o One removed from a government job or a government controlled corporate job
o A person with such financial interest that will create a prejudice in his functions as a member.
Section 10 1(A) of the Act prescribes that every appointment mentioned above will be made by a committee with is composed of:
o The President of the State Commission as the Chairman
o The Secretary of the Law Department of the State as a Member
o The Secretary dealing in consumer affairs in the State as a Member.
In the absence of the President, the Chief Justice of the High Court may nominate a sitting judge of the High Court in his place.
Every member of the District Forum need to have the following qualifications:
o The term is five years or 65 years, whichever is earlier
o Reappointment is possible through the Selection Committee’s recommendation
o Resignation can be done with a letter addressed to the State Government
o The State Government decides the salary structure of the Forum
Section 11 of the Consumer Protection Act, 1986 defines the jurisdiction of the District Forum, explained below:
o The value of goods and services and compensation should not exceed 20 lakh rupees.
o Jurisdiction in terms of place can be determined as:
a) The place of residence or carrying out of the business of the opposite party,
b) any party or each party
c) The place where the cause of action wholly or partly arises.
In accordance with Section 14 of the Act, the District Forum has the power to grant damages.This can be in the form of compensation,
removing defects or deficiencies, discontinuing unfair trade practice, withdrawal of hazardous good for sale and so on.
Section 15 of the Act grants an appeal against the decision of the District Forum within 30 days to the State Commission. Also, the
appellant must have paid 50 per cent of the compensation decided against him or ₹25000, whichever is less.
Section 13 of the Act pertains to the procedure for the admission of a consumer complaint. Procedure for the complaint against an
allegedly defective good which the Forum should implement is as follows:
a) Within 21 days of filing the complaint, the opposite party should receive a copy to explain his version. The version should be
submitted in 30 days, with a maximum extension of 15 days.
b) When the opposite party either disputes and denies or fails to take action to represent his case, clause (c) or (g) must be followed
c) If a complaint needs an analysis of the good, a sample can be taken by the District Forum to be sent to a certain laboratory for
testing for the defect. The report of the findings should be complete in 45 days unless an extension is granted by the Forum.
d) The complainant may have to pay a fee in order to carry out the process of sample testing at the said laboratory.
e) This fee will be given to the laboratory and the report with the appropriate remarks will be forwarded to the opposite party.
f) If one of the parties disputes the findings of the laboratory, the party’s objections should be submitted in writing.
g) Both parties will be given a reasonable opportunity to be heard by the District Forum.
Deficiency in services follows a similar procedure, focussing on the evidence brought to the District Forum.
If the complainant fails to appear on the date of the hearing, the Forum may either dismiss the complaint or act on its discretion

What is the composition of the State Consumer Disputes Redressal Commission? What is its jurisdiction and the procedure to
be followed by it
State Commission
The Consumer Disputes Redressal Commission, better known as State Commission is the second stage of courts from the bottom of
the hierarchy. It is the court that deals with the appeals against the grassroots level consumer protection agencies. The sections 16, 17,
18 and 19 of the Consumer Protection Act, 1986 deal with this Commission.
Section 16 of the Act deals with the composition of the State Commission. The important aspects of this Act involve:
o There is a President who is or was a judge of the High Court, appointed by the State Government
o Apart from the President, there are two other members, one being a woman.
o The number of members in the State Commission cannot be less than 2
o These members are to be chosen based on three grounds. They must be at least 35 years of age, they must have a bachelor’s
degree from a recognized university and they must have at least 10 years of experience in law, economics, commerce and so
on.
o Not more than fifty per cent of the members should have a judicial background.
o The State Government determines the remuneration of the members.
o The President can choose the size of the Commission as one or more
o Decisions are of the majority, with the President intervening in case of an equal division in opinion.
The above appointments have certain disqualifications:
o A convict sentenced to imprisonment which breaches moral conduct according to the State Government
o An undischarged insolvent
 o A person of an unsound mind as declared by a competent court
o One removed from a government job or a government controlled corporate job
o A person with such financial interest that will create a prejudice in his functions as a member.
Section 16 1(A) of the Act prescribes that every appointment mentioned above will be made by a committee with is composed of:
o The President of the State Commission as the Chairman
o The Secretary of the Law Department of the State as a Member
o The Secretary dealing in consumer affairs in the State as a Member.
In the absence of the President, the Chief Justice of the High Court may nominate a sitting judge of the High Court in his place.
Every member of the District Forum need to have the following qualifications:
o The term is five years or 67 years, whichever is earlier
o Reappointment is possible through the Selection Committee’s recommendation
o Resignation can be done with a letter addressed to the State Government
Section 17(1) of the Consumer Protection Act, 1986 defines the jurisdiction of the State Commission, explained below:
o The value of goods and services and compensation should be at least 20 lakhs but not exceed 1 crore rupees.
o Appeals against the orders of District Forum are settled here
o If the District Forum has seemingly acted beyond its power or has failed in its duty, then the National Commission can call for
records.
Jurisdiction in terms of place can be determined as (Section 17(2)):
a) The place of residence or carrying out of the business of the opposite party,
b) any party or each party
c) The place where the cause of action wholly or partly arises.
The State Commission may transfer a complaint to it from the District Forum at any stage of the proceeding. The State Commission
may also outside of its ordinary place of the capital. These are called Circuit Courts.
As according to Section 18, the State Commission observes the same procedure as the District Forum under Sections 12, 13 and 14.
Section 19 of the Act grants an appeal against the decision of the National Commission within 30 days to the State Commission. Also,
the appellant must have paid 50 per cent of the compensation decided against him or Rs. 35000, whichever is less.

Discuss the composition of the National Consumer Disputes Redressal Commission, its jurisdiction and what procedure does it follow
to settle any complaint?
National Commission
The National Consumer Disputes Redressal Commission, better known as National Commission is the highest structure of redressal
agencies, subordinate to the Supreme Court. It is the court that deals with the appeals against the State Commission. The sections of
the Consumer Protection Act, 1986 deal with this Commission.
Section 20 of the Act deals with the composition of the National Commission. The important aspects of this Act involve:
o There is a President who is or was a judge of the Supreme Court, appointed by the Central Government
o There must be 4 members at least, one being a woman.
o These members are to be chosen based on three grounds. They must be at least 35 years of age, they must have a bachelor’s
degree from a recognized university and they must have at least 10 years of experience in law, economics, commerce and so
on.
o Not more than fifty per cent of the members should have a judicial background.
o The Central Government determines the remuneration of the members.
o The President can choose the Bench of the Commission as one or more
o Decisions are of the majority, with the President intervening in case of an equal division in opinion.
The above appointments have certain disqualifications:
 o A convict sentenced to imprisonment which breaches moral conduct according to the Central Government
o An undischarged insolvent
o A person of an unsound mind as declared by a Central court
o One removed from a government job or a government controlled corporate job
o A person with such financial interest that will create a prejudice in his functions as a member.
Section 16 1(A) of the Act prescribes that every appointment mentioned above will be made by a committee with is composed of:
A judge of the Supreme Court nominated by Chief Justice of India as the Chairman
The Secretary in Department of Legal Affairs of the Government of India as a Member
The Secretary of the department dealing in consumer affairs in the Government of India as a Member.
Every member of the District Forum need to have the following qualifications:
o The term is five years or 70 years, whichever is earlier
o Reappointment is possible through the Selection Committee’s recommendation
o Resignation can be done with a letter addressed to the Central Government
Section 21 of the Consumer Protection Act, 1986 defines the jurisdiction of the National Commission, explained below:
o The value of goods and services and compensation should exceed 1 crore rupees
o Appeals against the orders of State Commission are settled here
o If the State Commission has seemingly acted beyond its power or has failed in its duty, then the National Commission can call
for records.
The National Commission may receive a transfer of a complaint from the State Commission at any stage of the proceeding in the
interest of justice. This can be on the application of the complainant or its own motion. The National Commission may also outside of
its ordinary place of the capital of India, New Delhi. These are called Circuit Benches.
The National Commission has the power to review any order made by itself when there seems to be an error on the record, as stated in
Section 22.
Section 19 of the Act grants an appeal against the decision of the National Commission within 30 days to the Supreme Court. Also,
the appellant must have paid 50 per cent of the compensation decided against him or Rs. 50000, whichever is less.