Ques1 Formation of the company Steps to be taken to incorporate a new company

Select, in order of preference, at least one suitable name up to a maximum of six names, indicative of the main objects of the company. Ensure that the name does not resemble the name of any other already registered company and also does not violate the provisions of emblems and names (Prevention of Improper Use Act, 1950) by availing the services of checking name availability on the portal. Apply to the concerned ROC to ascertain the availability of name in eForm1 A by logging in to the portal. A fee of Rs. 500/- has to be paid alongside and the digital signature of the applicant proposing the company has to be attached in the form. If proposed name is not available, the user has apply for a fresh name on the same application. After the name approval the applicant can apply for registration of the new company by filing the required forms (that is Form 1, 18 and 32) within 60 days of name approval Arrange for the drafting of the memorandum and articles of association by the solicitors, vetting of the same by ROC and printing of the same. Arrange for stamping of the memorandum and articles with the appropriate stamp duty. Get the Memorandum and the Articles signed by at least two subscribers in his/her own hand, his/her father's name, occupation, address and the number of shares subscribed for and witnessed by at least one person. Ensure that the Memorandum and Article is dated on a date after the date of stamping. Login to the portal and fill the following forms and attach the mandatory documents listed in the e-Form Declaration of compliance - Form-1 Notice of situation of registered office of the company - Form-18. Particulars of the Director's, Manager or Secretary - Form-32.

Submit the following reforms after attaching the digital signature pay the requisite filing and registration fees and send the physical copy of Memorandum and Article of Association to the ROC

The company is required to file e-Form 1 first and then the company can file all the other e-Forms (18, 32, 37 and 39) simultaneously or separately After processing of the e-Form is complete and Corporate Identity is generated obtain Certificate of Incorporation from ROC.

To obtain Commencement of Business Certificate after incorporation of the company the public company has to make following compliance

File a declaration in e-Form 20 and attach the statement in lieu of the prospectus(schedule III) OR File a declaration in e-Form 19 and attach the prospectus (Schedule II) to it. Obtain the Certificate of Commencement of Business.

Additional steps to be taken for registration of a Part IX Company:

The Part IX Company is required to file e-Form 37 and e-Form 39 apart from filing e-Form 1, 18 and 32.

2 WHAT IS A CONTRACT? Contract In the words of Pollock, every agreement and promises enforceable by law is contract. Section 2(h) of the Indian Contract Act, 1872 states that an agreement enforceable by law is contract. This definition gives us two ingredientsan agreement and enforceable by law. It can summarize it as under. Agreement An agreement means a promise and a reciprocal set of promises forming consideration for each otherSection 2(e). This definition gives us three ingredientspromise and a consideration. We can summarize it as under. Promise As per Section 2(b) of the Contract Act, a proposal when accepted becomes a promise.

Proposal Section 2(a) states that when one person signifies another person his willingness to do or abstain from doing anything with a view to obtaining the assent of that other to such an act or abstinence, he is said to make a proposal. A Proposal is also known as an offer.

Parties to an Agreement/a Contract Promisor: A person making the proposal (offer) is known as a promisor. He is also known as an offeror. We can also recognize him as a proposer.

Promisee: A person accepting the proposal (offer) is known as a promisee. He is also known as an offeree. We can also recognize him as an acceptor. Enforceability of an Agreement It means an agreement which creates some legal obligation; if this agreement is not followed by any party to contract, he can be sued.

ESSENTIAL ELEMENTS OF VALID CONTRACTSSECTION 10 In order to determine whether an agreement is a contract or not, one has to see whether all the essentials, as required under the Indian Contract Act, are present in the agreement. The essentials required to be satisfied for a valid contract are as under.

Offer and Acceptance There must be an offer and its acceptance. An offer is a starting point for any contract. No valid contract can come into existence without an offer. The offer is considered as the first step in the contract. The offer should be accepted to form a valid contract. Intention to Create Legal Relation There must be an intention to create a legal relation. In all social, domestic, moral, religious or political agreements, the usual presumption is that the parties do not intend to create the legal obligations. However, in business agreements, the usual presumption is that the parties intend to create the legal obligations. Example:A invites B to a dinner and B accepts it. If A fails to serve the dinner, B cannot go to court. The invitation for dinner is a social agreement. Lawful Consideration The lawful consideration means something in return. As a contract contains the reciprocal set of promises, a consideration is necessary. The consideration must be lawful and should have a commercial value.

Example: A promises to pay Image 50,000 on a certain date to B without any promise in exchange. This is not a valid contract. Free Consent A contract is made when one person makes an offer while another person accepts the offer. This acceptance of the offer should be made without any force or threat. It means that a consent given should be free and genuine. Example: A has two carsone black and the other white. He offers to sell one of his cars to B. A intends to sell the black one while B accepts the offer believing that it is for the white car. Here, A and B are not thinking in the same sense of a particular thing. In this situation, there is a mistake, so it cannot be said to be a free consent. Lawful Object Every agreement has some objects or purposes. The object of an agreement should not be illegal, immoral or opposed to the public policy. In simple words, we can say that the object of an agreement must be lawful. Example: A promised to pay Image 1 lakh to B to kill C. The killing of a person is punishable under the IPC. Therefore, the promise is unlawful and void. Capacity of Parties Every person is not competent to enter into a contract. Person who has attained the age of majority with a sound mind and not disqualified under any act is competent to enter into a contract. Agreement Must Not Be Expressly Declared Void or Illegal If a certain agreement is expressly declared to be void by the law of country then such an agreement, if entered into, shall not be enforceable by the court. Certainty of Meaning An agreement contains terms as decided by the parties. The terms of agreement must be certain and unambiguous. If the terms of an agreement are uncertain, it is not a valid contract. Example: A agreed to pay Image 5 lakh to B for an ultra-modern decoration of his drawing room. The agreement is void because the meaning of the term ultra-modern is not certain.

Possibility to Perform Every agreement contains reciprocal promises. The promises under the contract must be possible to perform. If the parties have agreed on the contract which contains any promise not possible to perform in real life, the contract will not be considered as a valid contract. Example:A agrees to discover treasure by magic for B. The agreement is void because the act in itself is impossible to be performed from the very beginning. Legal Formalities In some cases, the document in which the contract is incorporated has to be stamped. In some other cases, a contract, besides being a written one, has to be registered. Thus, where there is a statutory requirement that the contract should either be made in writing or registered, the required formalities must be complied with. Therefore, we can say that an agreement will become a contract when it satisfies all the essentials of a valid contract. If any one of the elements of a valid contract is missing, it is treated as an invalid contract. All the agreements may or may not be a contract but all the contracts are basically agreements. All agreements are contracts if they are made by the free consent of the parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Nothing herein contained shall affect any law in force in India and not hereby expressly repealed, by which any contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of the document

TYPES OF CONTRACT On the basis of validity: 1. Valid contract: An agreement which has all the essential elements of a contract is called a valid contract. A valid contract can be enforced by law. 2. Void contract [Section 2(g)]: A void contract is a contract which ceases to be enforceable by law. A contract when originally entered into may be valid and binding on the parties. It may subsequently become void. There are many judgments which have stated that where any crime has been converted into a "Source of Profit" or if any act to be done under any contract is opposed to "Public Policy" under any contractthan that contract itself cannot be enforced under the law-

3. Voidable contract [Section 2(i)]: An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of other or others, is a voidable contract. If the essential element of free consent is missing in a contract, the law confers right on the aggrieved party either to reject the contract or to accept it. However, the contract continues to be good and enforceable unless it is repudiated by the aggrieved party. 4. Illegal contract: A contract is illegal if it is forbidden by law; or is of such nature that, if permitted, would defeat the provisions of any law or is fraudulent; or involves or implies injury to a person or property of another, or court regards it as immoral or opposed to public policy. These agreements are punishable by law. These are void-ab-initio. All illegal agreements are void agreements but all void agreements are not illegal. 5. Unenforceable contract: Where a contract is good in substance but because of some technical defect cannot be enforced by law is called unenforceable contract. These contracts are neither void nor voidable. On the basis of formation: 1. Express contract: Where the terms of the contract are expressly agreed upon in words (written or spoken) at the time of formation, the contract is said to be express contract. 2. Implied contract: An implied contract is one which is inferred from the acts or conduct of the parties or from the circumstances of the cases. Where a proposal or acceptance is made otherwise than in words, promise is said to be implied. 3. Quasi contract: A quasi contract is created by law. Thus, quasi contracts are strictly not contracts as there is no intention of parties to enter into a contract. It is legal obligation which is imposed on a party who is required to perform it. A quasi contract is based on the principle that a person shall not be allowed to enrich himself at the expense of another. Examples

claim for necessaries supplied to person incapable of contracting or on his account Reimbursement of person paying money due to another, in payment of which he is interested

obligation of person enjoying benefit of non-gratuitous act Responsibility of finder of goods Liability of person to whom money is paid or thing delivered

E-contract:An e-contract is a contract made through the electronic mode.

On the basis of performance: 1. Executed contract: An executed contract is one in which both the parties have performed their respective obligation. 2. Executory contract: An executory contract is one where one or both the parties to the contract have still to perform their obligations in future. Thus, a contract which is partially performed or wholly unperformed is termed as executory contract. 3. Unilateral contract: A unilateral contract is one in which only one party has to perform his obligation at the time of the formation of the contract, the other party having fulfilled his obligation at the time of the contract or before the contract comes into existence. 4. Bilateral contract: A bilateral contract is one in which the obligation on both the parties to the contract is outstanding at the time of the formation of the contract. Bilateral contracts are also known as contracts with executory consideration.

ISO 9000 and ISO 14000

What are ISO 9000 and ISO 14000? The International Organization of Standardization (ISO) is a worldwide federation consisting of member bodies from 91 countries, which promotes the development of international manufacturing, trade and communication standards. ISO 9000 refers to a generic series of standards published by the ISO that provide quality assurance requirements and quality management guidance. ISO 9000 is a quality system standard, not a technical product standard. The ISO 9000 series currently contains four standards

- ISO 9001, ISO 9002, ISO 9003 and ISO 9004. Firms select the standard that is most relevant to their business activities. However, these four standards will be revised in late 2000. More information is provided later in this paper under ISO 9000:2000. ISO 14000 refers to a series of standards on environmental management tools and systems. ISO 14000 deals with a company's system for managing its day-to-day operations and how they impact the environment. The Environmental Management System and Environmental Auditing address a wide range of issues to include the following: 1. Top management commitment to continuous improvement, compliance, and pollution prevention. 2. Creating and implementing environmental policies, including setting and meeting appropriate targets. 3. Integrating environmental considerations in operating procedures. 4. Training employees in regard to their environmental obligations. 5. Conducting audits of the environmental management system. ISO 9000 and ISO 14000 are tools to assist business and government to insure the quality of their products and services, and to manage the impact of their activities on the environment. Like all ISO standards, their use is voluntary unless a business sector makes them a market requirement or a government issues regulations making their use obligatory. Organizations that implement ISO 9000 and ISO 14000 voluntarily do so to improve operations and provide real benefits. Why Consider ISO 9000 Registration There are several benefits to implementing this series in your company. There is also a strong belief that having a documented quality procedure gives a firm a strong advantage over its competitors. For example, it will guide you to build quality into your product or service and avoid costly after-the-fact inspections, warranty costs, and rework. Most importantly, more contractors are working with ISO certified customers every year as the certifications are more widely used and accepted in the United States.

Becoming ISO Certified or Registered In order to become certified or registered (either term may be used) for three years, companies must be audited by a third-party registrar to make sure they comply with all of the elements of the standard. A registrar is a third-party company that is contracted to evaluate an organization's quality management system to the requirements of the ISO 9000/14000 Standards. For a list of accredited registrars contact: Registrar Accreditation Board (RAB) Phone: (888) 722-2440 or (414) 272-3937 Fax: (414) 765-8661, or Email: www.rabnet.com Typically, contracting firms apply for registration under 9001 if a contractor performs design work or 9002 if they just install work. In the case of the 9001 Standard, there are 20 elements covering such items as management responsibility, quality system, contract review, design control, document and data control and purchasing. The auditing process takes an average of 12-24 months if the firm currently uses a quality system. Consultants can be hired to assist a firm in preparing for the audit. Using a consultant to help a firm prepare for registration is not required; however, research on certification shows an initial ISO 9000 series failure rate of 60% for companies that try to prepare without outside consulting help. The cost of certification varies depending on the size and sophistication of a company. Some rough estimates are: Certification Consulting $25,000 - $80,000 Certification Registrar $10,000 - $30, 000 Registrars typically perform an initial visit, two-three day preliminary audit and then a four-day final audit. Once a firm is registered, there are also some costs involved for surveillance audits,

which occur every six months and the re-audit process every three years. Additionally, each firm must have an internal audit team for continuous improvement and auditing. Though the investment of time, money and staff resources are considerable in the ISO 9000/14000 certification process, most certified firms report returns on their investment through monetary savings, marketing advantages and better procedures and information to help them to continue to reduce costs and waste in their firms. Approval When a firm is approved, they receive a certificate of registration for the facility registered and ISO standard used. They can then use the certificate number and symbol on advertising and correspondence. The registrar lists them in its directory identifying facility locations; ISO standard used and certificate number. For continued certification, they should expect registrar surveillance audits about every six months and a re-audit every three years. Changes Planned to ISO 9000 in 2000 The International Standards Organization (ISO) periodically reviews the ISO 9000 Standards to ensure they are current and relative to the needs of industry. As a result from feedback of the 1994 version of the standard, a new draft standard called ISO 9000:2000 is currently under review and is expected to be released in the last 3 months of 2000. Key needs addressed in the new standard include: 1. A process or whole system approach 2. Compatibility with other management systems likes ISO 14000 3. Continuous improvement 4. Stakeholder needs 5. User friendly language What is expected to change when the new draft if approved can only be considered as tentative at this time.The following items are most likely to change when the ISO 9000 is finalized.

1. The current series has 20 published standards. The proposed new model will have a mere four, which are: a. ISO 9000 - Concepts and Terminology b. ISO 9001 - Model for Quality Assurance c. ISO 9004 - Model for Quality Management d. ISO 10011 - Guidelines for Auditing Quality Systems 2. Many elements of the 20 standards will be folded into the core set. Additionally, once ISO 9001:2000 Standard, the standard that applies to contracting firms is finalized, it will replace the need/use of ISO 9002 and ISO 9003 in this standard. This new standard will be flexible enough to incorporate all three previous standards into one. 3. The biggest change in the ISO 9001:2000 will be a new emphasis on the closed loop process. The revised standard is designed to place more emphasis upon "the processes" of a business, rather than being "system" based. This means emphasis is placed on the plan, do, check-act model already incorporated in ISO14001, the environmental standard.

THE PRIVATE SECTOR OF INDIAN ECONOMY In a private sector enterprise, the owner of assets and resources is an individual or a group of individuals. Market force (demand: supply) determine the price of articles. The main aim is PROFIT E.g.: Toyota The private sector of Indian economy is the past few years have delineated significant development in terms of investment and in terms of its share in the gross domestic product. The key areas in private sector of Indian economy that have surpassed the public sector are transport, financial services etc. Indian government has considered plans to take concrete steps to bring affect poverty alleviation through the creation of more job opportunities in the private sector of Indian economy, increase in the number of financial institutions in the private sector, to provide loans for purchase of houses, equipments, education, and for infrastructural development also. The private sector of Indian economy is recently showing its inclination to serve the society through women empowerment programs, aiding the people affected by natural calamities, extending help to the street children and so on. The government of India is being assisted by a number of agencies to identify the areas that are blocking the entry of the private sector of Indian economy in the arena of infrastructural development, like regulatory policies, legal procedures etc. The most interesting fact about the private sector of India economy is that though the overall pace of its development is comparatively slower than the public sector, still the investment of private sector in the recent past, i.e. in the first quarter of 1990 registered approximately 56 % which rose to nearly 71 % in the next quarter, accounting for an increase of 15 %. Certain steps taken by the Indian government are acting as the stepping stone of the private sector continued journey to success, include industrial deli censing, devaluation that was implemented previously. The private sector of Indian economy is also adversely affected by the huge number of permits and enormous time required for the processing of documents to initiate a firm; however the central government has decided to abolish MRTP Act and incorporate a Competition Commission of India to bring the public sector and the private sector at the same platform.

The participation of the private sector of Indian economy is desired by the government of India for infrastructural development including specific sectors like power, development of highways and so on. As the contribution of public sector, these sectors have been arrested due to the shift of the attention of the Indian government to issues like population increase, industrial growth.

The main reasons behind the low contribution of the private sector in infrastructural development activities are that: The small and medium scale companies in the private sector of Indian economy suffer from lack of finances to welcome the idea of extending their business to other states or diversify their product range. The private sector of Indian economy also suffers from the absence of appropriate regulatory structure, to guide the private sector and this speaks for its unorganized framework. The unorganized framework of the private sector is interrupting the proper management of this sector resulting in the slowdown of its development

PUBLIC SECTOR OF INDIAN ECONOMY In a public sector, the government owns the resources and determines the price, and the main aim is the welfare of the citizens e.g.: in India, BSNL, SAIL, and Indian Airlines

OBJECTIVES: The public sector aims at achieving the following objectives: i. To promote rapid economic development through creation and expansion of infrastructure ii. iii. iv. v. vi. vii. To generate financial resources for development To promote redistribution of income and wealth To create employment opportunities To promote balanced regional growth To encourage the development of small-scale and ancillary industries, and To promote exports on the one side and import substitution, on the other.

Role of Public Sector: The public sector has been playing a vital role in the economic development of the country. Public sector is considered a powerful engine of economic development and an important instrument of self-reliance. The main contributions of public enterprises to the country's economy may be described as follows:

1. Filling the Gaps in Capital Goods: At the time of independence, there existed serious gaps in the industrial structure of the country, particularly in the fields of heavy industries such as steel, heavy machine tools, exploration and refining of oil, heavy Electrical and equipment, chemicals and fertilizers, defense equipment, etc. Public sector has helped to fill up these gaps. The basic infrastructure required for rapid industrialization has been built up, through the production of strategic capital goods. In this way the public sector has considerably widened the industrial base of the country.

2. Employment: Public sector has created millions of jobs to tackle the unemployment problem in the country. Public sector accounts for about two-thirds of the total employment in the organized industrial sector in India. By taking over many sick units, the public sector has protected the employment of millions. Public sector has also contributed a lot towards the improvement of working and living conditions of workers by serving as a model employer.

3. Balanced Regional Development: Public sector undertakings have located their plants in backward and untrodden parts of the county. These areas lacked basic industrial and civic facilities like electricity, water supply, township and manpower. Public enterprises have developed these facilities thereby bringing about complete transformation in the socio-economic life of the people in these regions. Steel plants of Bhilai, Rourkela and Durgapur; fertilizer factory at Sindri, are few examples of the development of backward regions by the public sector.

4. Contribution to Public Exchequer: Apart from generation of internal resources and payment of dividend, public enterprises have been making substantial contribution to the Government exchequer through payment of corporate taxes, excise duty, custom duty etc. In this way they help in mobilizing funds for financing the needs for the planned development of the country. In recent years, the total contribution from the public enterprises has increased considerably, between the periods 2002-03 to 2004-05 the contribution increased by Rs 81,438 crores on the average. 5. Export Promotion and Foreign Exchange Earnings: Some public enterprises have done much to promote Indias export. The State Trading Corporation (STC), the Minerals and Metals Trading Corporation (MMTC), Hindustan Steel Ltd., the Bharat Electronics Ltd., the Hindustan Machine Tools, etc., have done very well in export promotion. The foreign exchange earnings of the public sector enterprises have been rising from Rs 35 crores in 1965-66 to Rs 42,264 crores in 2004-05. 6. Import Substitution: Some public sector enterprises were started specifically to produce goods which were formerly imported and thus to save foreign exchange. The Hindustan Antibiotics Ltd., the Indian Drugs and Pharmaceuticals Ltd. (IDPL), the Oil and Natural Gas

Commission (ONGC), the Indian Oil Corporation Ltd., the Bharat Electronics Ltd., etc., have saved foreign exchange by way of import substitution. 7. Research and Development: As most of the public enterprises are engaged in high technology and heavy industries, they have undertaken research and development programmes in a big way. Public sector has laid strong and wide base for self-reliance in the field of technical know-how, maintenance and repair of sophisticated industrial plants, machinery and equipment in the country. Through the development of technological skill, public enterprises have reduced dependence on foreign knowhow. With the help of the technological capability, public sector undertakings have successfully competed in the international market. In addition to the above, the public sector has played an important role in the achievement of constitutional goals like reducing concentration of economic power in private hands, increasing public control over the national economy, creating a socialistic pattern of society, etc. With all its linkages the public sector has made solid contributions to national self-reliance. Limitations: Despite their impressive role, Public enterprises in India suffer from several problems and shortcomings. Some of these are described below:

1. Poor Project Planning: Investment decisions in many public enterprises are not based upon proper evaluation of demand and supply, cost benefit analysis and technical feasibility. Lack of a precise criterion and flaws in planning have caused undue delays and inflated costs in the commissioning of projects. Many projects in the public sector have not been finished according to the time schedule. 2. Over-capitalization: Due to inefficient financial planning, lack of effective financial control and easy availability of money from the government, several public enterprises suffer from overcapitalization The Administrative Reforms Commission found that Hindustan Aeronautics, Heavy Engineering Corporation and Indian Drugs and Pharmaceuticals Ltd were overcapitalized. Such over-capitalization resulted in high capital-output ratio and wastage of scare capital resources.

3. Excessive Overheads: Public enterprises incur heavy expenditure on social overheads like townships, schools, hospitals, etc. In many cases such establishment expenditure amounted to 10 percent of the total project cost. Recurring expenditure is required for the maintenance of such overhead and welfare facilities. Hindustan Steel alone incurred an outlay of Rs. 78.2 crore on townships. Such amenities may be desirable but the expenditure on them should not be unreasonably high.

4. Overstaffing: Manpower planning is not effective due to which several public enterprises like Bhilai Steel have excess manpower. Recruitment is not based on sound labour projections. On the other hand, posts of Chief Executives remain unfilled for years despite the availability of required personnel. 5. Under-utilisation of Capacity: One serious problem of the public sector has been low utilisation of installed capacity. In the absence of definite targets of production, effective production planning and control and proper assessment of future needs many undertakings have failed to make full use of their fixed assets. There is considerable idle capacity. In some cases productivity is low on account of poor materials management or ineffective inventory control. 6. Lack of a Proper Price Policy: There is no clear-cut price policy for public enterprises and the Government has not laid down guidelines for the rate of return to be earned by different undertakings. Public enterprises are expected to achieve various socio-economic objectives and in the absence of a clear directive, pricing decisions are not always based on rational analysis. In addition to dogmatic price policy, there is lack of cost-consciousness, quality consciousness, and effective control on waste and efficiency. 7. Inefficient Management :The management of public enterprises in our country leaves much to be desired. Managerial efficiency and effectiveness have been low due to inept management, uninspiring leadership, too much centralisation, frequent transfers and lack of personal stake. Civil servants who are deputed to manage the enterprises often lack proper training and use bureaucratic practices. Political interference in day-to-day affairs, rigid bureaucratic control and ineffective delegation of authority hamper initiative, flexibility and quick decisions. Motivations and morale of both executives and workers are low due to the lack of appropriate incentives.

Causes for the expansion of public enterprise At the time of independence, India was backward and underdeveloped basically an agrarian economy with weak industrial base, high rate of unemployment, low level of savings and investment and near absence of infrastructural facilities. Indian economy needed a big push. This push could not come from the private sector because of the lack of funds and their inability to take risk with large long-gestation investments. As such, government intervention through public sector was necessary for self-reliant economic growth, to diversify the economy and to overcome economic and social backwardness. Let us discuss the rationale or causes for the expansion of public sector enterprises in India. 1. Rate of Economic Development and Public Enterprises: The justification for public enterprises in India was based on the fact that the targeted rate of economic growth planned by the government was much higher than could be achieved by the private sector alone. In other words, the public sector was essential to realize the target of high growth rate deliberately fixed by the government. 2. Pattern of Resource Allocation and Public Enterprises: Another reason for the expansion of the public sector lies in the pattern of resources allocation decided upon under the plans. In the Second Plan the emphasis was shifted to industries and mining, mainly basic capital goods industries to be developed under the aegis of the public sector. Thus more resources for industrialization were funneled through the public sector. 3. Removal of Regional Disparities through Public Enterprises: Another important reason for the expansion of the public sector was the need for balanced development in different parts of the country and to see that there were no serious regional disparities. Public enterprises were set up in those regions which were underdeveloped and where local resources were not adequate. Good examples are the setting up of the three steel plants of Bhillai, Rourkela and Durgapur and the Neyveli Project in Madras which were meant to help industrialise the regions surrounding the projects.

4. Sources of Funds for Economic Development: Initially, state was an important source of funds for development. The surplus of government enterprises could be re-invested in the same industries or used for the establishment and expansion of other industries. Profits of public sector industries can be directly used for capital formation which is necessary for the rapid development of the country. 5. Socialistic Pattern of Society: The socialistic pattern of society envisaged in the Constitution calls for expansion of public sector. For one thing, production will have to be centrally planned as regards the type of goods to be produced, the volume of output and the timing of their production. Besides, one of the objectives of the directive principles of the Indian Constitution is to bring about reduction of the inequalities of income and wealth and to establish an egalitarian society. The Five Year Plans have taken this up as a major objective of planning. The public enterprises were used as major instruments for the reduction of inequalities of income and to bring about a more equitable distribution of income in several ways. 6. Limitations and Abuses of the Private Sector: The behavior and attitude of the private sector itself was an important factor responsible for the expansion of the public sector in the country. In many cases the private sector could not take initiatives because of the lack of funds and their inability to take risk with large long-gestation investments. In a number of cases, the government was forced to take over a private sector industry or industrial units either in the interest of workers or to prevent excessive exploitation of consumers. Very often the private sector did not function as it should and did not carry out its social responsibilities. Accordingly, the government was forced to take over or nationalize the private sector units. To sum up, the expansion of the public sector was aimed at the fulfillment of our national goals, viz., the removal of poverty, the attainment of self-reliance, reduction in inequalities of income, expansion of employment opportunities, removal of regional imbalances, acceleration of the pace of agricultural and industrial development, to reduce concentration of ownership and prevent growth of monopolistic tendencies by acting as effective countervailing power to the private sector, to make the country self-reliant in modern technology and create professional, technological and managerial cadres so as to ultimately rid the country from dependence on foreign aid.

COOPERATIVE SECTOR when the same people produce the raw material of an industry and also process it into products for distribution, it is called cooperative sector. e.g. in india is Amul (Gujrat Cooperative Society Ltd.) and Lijjat. The beginning of the Co-operative movement in India dates back to about 1904 when official efforts were initiated to create a new type of institution based on the principles of co-operative ideology. Co-operative institutions considered to be solution for the problems particularly to the Indian conditions concerning to over-all rural development. Co-operatives are the vast and powerful instrument which engaged in the tasks of production, processing, marketing and distribution, servicing and banking in Indian economy. Co-operation has shown its effectiveness in various fields like removal of poverty by reducing members indebtedness, lowering interest rates, increasing productivity and thrift, lowering of the cost of necessary members, arranging disposal of their produce and discouraging unnecessary social expenditure. It has done something to raise the standard of living. It has increased countrys banking facilities. It has given the people hope. In all these directions and in others, co-operation has made more or less progress, although it has so far admittedly affected only border of the situation. In brief, it may be observed that- the co-operatives in different sectors function more or less in isolation and do not lend sufficient support to one another. Except in the sphere of credit, the principle of federalism has not been significant developed within the respective sectors themselves. There has been inadequate linking of credit with supplies, services, thrift and marketing, etc. the initiative still comes from the Government and not from the people. The dynamism that is associated with the term movement is still lacking to an appreciable degree. Primary Societies concern themselves only with credit. The area of operation is either too small or enable the society to be viable, or too big to ensure mutual knowledge and social cohesion. A rigid adherence to principles of unlimited liability had kept some of the solvent farmers from such societies. There has 166 been a lack of co-ordination on the part of the central banks with the societies on the one hand and apex bank on the other. The general lack of education and the inadequacy are the important causes of the unsatisfactory record of co-operation in India. In the context of economic reforms

introduced since 1991, sound, healthy and competitiveness have become very important for cooperatives. In the arouse of economic reforms quality is more important than quantity so emphasis on excellent quality management, technology up gradation, cost minimization measures which increases profitability, professionalism, and base of financial resource have utter importance. The co-operatives in the contest economic reform should make themselves viable and sustainable to accept challenges and to overcome on it effectively. Mutual Aided Cooperative Societies Act of 1995, by government of Andhra Pradesh, marked a significant step towards reform to govern and regulate mutually aided co-operatives, which promote democratic nature, self-reliant and member centric atmosphere without any State involvement or financial support from State. Similar legislation passed by other state too (viz. Bihar, Chhattisgarh, Jammu and Kashmir, Jharkhand, Karnataka, Madhya Pradesh, Orissa and Uttaranchal). The number of co-operatives registered under the new Act increasing slowly, and the conversion from old to new Act mostly takes place in commodity co-operatives. However, most of the existing cooperatives remain themselves attached with the old law.