Legal Environment of Business in India and

List of Different Indian Acts which affect

business
Legal environment of business means all factors relating to laws and legal
orders which affect business and its working.
Business must be operated under the rules and regulation of different laws
of India. The following is the list of main laws which affect business.
The government, in every country, regulates the business according to its defined priorities.
Legal system of a country is framed by the government. The laws which are passed by the
government for business operation is called legal environment. In every country, the
government regulates business activities. These regulations of government are considered
as legal environment. In practice legal and regulatory goes hand in hand. The limits for
business operations are decided by regulatory environment & this is also called legal
environment.

Legal environment in a country has a dominating position on all decisions of organization. As

all business policies are highly influenced by government, the organization should have
thorough knowledge of these policies because non-implementation of legal policies results in
heavy fines, penalties & punishment & therefore every organization must follow all these
regulations.

1. Indian contract act 1872

2. Indian sale of goods act 1930
3. Indian partnership act 1932
4. Industrial dispute Act 1947
5. Minimum wages act 1948
6. Indian companies act 1956
7. Foreign exchange regulation act (FERA ) 1973
8. Foreign exchange management act 1999
9. Monopolies and restrictive trade practice act 1969
10. Consumer protection act 1986
11. Indian income tax act 961
12. Central excise act 1944
13. Security exchange board of India act 1992
14. Banking regulation act 1949
15. Chartered accountant act 1949
16. Information technology act 2000
17. competition act 2002
18. right to information act 2005
19. Micro, Small and Medium Enterprises Development
 Act,2006
20. Commissions for Protection of Child Rights Act,2005
21. Income Tax Act, 1961.
22. The Weights & Measures Act, 1958.
23. Environment Protection Act, 1986.
24. Agricultural Policy.
25. Industrial Policy.
26. Foreign Investment Policy.
27. Monetary Policy.
28. The Factories Act, 1948.
.

https://www.slideshare.net/manumjoy/legal-environment-of-business-
50152984 for business law notes

National Competition Policy is formulated by the Government of India with a

view to achieve highest sustainable levels of economic growth, entrepreneurship, employment,
higher standards of living for citizens, protect economic rights for just, equitable, inclusive and
sustainable economic and social development, promote economic democracy and support good
governance by restricting rent-seeking practices.[1] Dhanendra Kumar was the Chairman of the
committee which was entrusted the task of formulating India's National Competition Policy.

Objectives[edit]
The policy is aimed at ushering in a second wave of financial reforms.[4] The salient features of
the policy are stated below:

1. To guarantee consumer welfare by encouraging optimal allocation of resources and

granting economic agents appropriate incentives to pursue productive efficiency, quality
and innovation
2. To remove anti-competition outcome of existing acts, harmonize laws and policies of
Centre and State and proactively promote competition principles
3. Strive for single national market.
4. Establish a level playing field by providing competitive neutrality'.

Competition Commission of India

Competition Commission of India is a statutory body of the Government of India responsible

for enforcing The Competition Act, 2002 throughout India and to prevent activities that have an
appreciable adverse effect on competition in India. It was established on 14 October 2003. It
became fully functional in May 2009 with Dhanendra Kumar as its first Chairman.

The Competition Act, 2002[edit]

Main article: The Competition Act, 2002
The idea of Competition Commission was conceived and introduced in the form of The
Competition Act, 2002 by the Vajpayee government. A need was felt to promote competition and
private enterprise especially in the light of 1991 Indian economic liberalisation.[5]
The Competition Act, 2002, as amended by the Competition (Amendment) Act, 2007, follows the
philosophy of modern competition laws. The Act prohibits anti-competitive agreements, abuse of
dominant position by enterprises and regulates combinations (acquisition, acquiring of control
and Merger and acquisition), which causes or likely to cause an appreciable adverse effect on
competition within India.[6]
The objectives of the Act are sought to be achieved through the Competition Commission of
India (CCI), which has been established by the Central Government with effect from 14 October
2003. CCI consists of a Chairperson and 6 Members appointed by the Central Government. It is
the duty of the Commission to eliminate practices having adverse effect on competition, promote
and sustain competition, protect the interests of consumers and ensure freedom of trade in the
markets of India.[6] The Commission is also required to give opinion on competition issues on a
reference received from a statutory authority established under any law and to undertake
competition advocacy, create public awareness and impart training on competition issues.

Objectives[edit]
"The main objective of competition law is to promote economic efficiency using competition as one of the means
of assisting the creation of market responsive to consumer preferences. The advantages of perfect competition
are three-fold: allocative efficiency, which ensures the effective allocation of resources, productive efficiency,
which ensures that costs of production are kept at a minimum and dynamic efficiency, which promotes innovative
practices."

Supreme Court of India Judgment in Civil Appeal No. 7999 of 2010 pronounced on 9 September 2010

Preamble to the Competition Act[edit]

An Act to provide, keeping in view of the economic development of the country, for the
establishment of a Commission to prevent practices having adverse effect on competition, to
promote and sustain competition in markets, to protect the interests of consumers and to ensure
freedom of trade carried on by other participants in markets, in India, and for matters connected
therewith or incidental thereto.[6]
To achieve its objectives, the Competition Commission of India endeavours to do the following:

 Make the markets work for the benefit and welfare of consumers.
 Ensure fair and healthy competition in economic activities in the country for faster and
inclusive growth and development of economy.
 Implement competition policies with an aim to effectuate the most efficient utilisation of
economic resources.
 Develop and nurture effective relations and interactions with sectoral regulators to ensure
smooth alignment of sectoral regulatory laws in tandem with the competition law.
 Effectively carry out competition advocacy and spread the information on benefits of
competition among all stakeholders to establish and nurture competition culture in Indian
economy.

Composition[edit]
The Commission comprises a Chairperson and six members. Devender Kumar Sikri is the
current Chairperson of the CCI.[7] The members of the Competition Commission of India are:
 1. M.L. Tayal
2. S.L. Bunker
3. Sudhir Mital
4. Augustine Peter
5. U. C. Nahta

Notable cases[edit]
 In December 2010, CCI instituted a probe to examine if there was any cartelisation among
traders when onion prices touched 80 rupees, but did not find sufficient evidence of market
manipulation.[8]
 In June 2012, CCI imposed a fine of ₹63.07 billion (US$970 million) 11 cement companies
for cartelisation. CCI claimed that cement companies met regularly to fix prices, control
market share and hold back supply which earned them illegal profits

 On 8 February 2013, CCI imposed a penalty of ₹522 million (US$8.0 million) on the Board of
Control for Cricket in India (BCCI) for misusing its dominant position. The CCI found that IPL
team ownership agreements were unfair and discriminatory, and that the terms of the IPL
franchise agreements were loaded in favour of BCCI and franchises had no say in the terms
of the contract. The CCI ordered BCCI to "cease and desist" from any practice in future
denying market access to potential competitors and not use its regulatory powers in deciding
matters relating to its commercial activities.[13][14]
 In 2014, CCI imposed a fine of ₹10 million upon Google for failure to comply with the
directions given by the Director General(DG) seeking information and documents.[15]
 On 17 November 2015, CCI imposed a fine of ₹258 crores upon Three Airlines. Competition
Commission of India (CCI) had penalised the three airlines for cartelisation in determining
the fuel surcharge on air cargo. A penalty of Rs 151.69 crores was imposed on Jet Airways,
while that on InterGlobe Aviation Limited (Indigo) and SpiceJet are Rs 63.74 crores and Rs
42.48 crores respectively.[16]
 In May 2017, CCI ordered a probe into the functioning of COAI(Cellular Operators
Association of India) following a complaint filed by Reliance Jio against the cartelisation by its
rivals Bharati Airtel, Vodafone India and Idea cellular.

 On 8 February 2018, it had fined Google's parent company, Alphabet Inc. for 135.86 cr
rupees for 'search bias'

The Competition Act, 2002

The Competition Act, 2002 was enacted by the Parliament of India and governs Indian
competition law. It replaced the archaic The Monopolies and Restrictive Trade Practices Act,
1969. Under this legislation, the Competition Commission of India was established to prevent the
activities that have an adverse effect on competition in India.[1][2] This act extends to whole of
India except the State of Jammu and Kashmir.
It is a tool to implement and enforce competition policy and to prevent and punish anti-
competitive business practices by firms and unnecessary Government interference in the market.
Competition laws is equally applicable on written as well as oral agreement, arrangements
between the enterprises or persons.
The Competition Act, 2002 was amended by the Competition (Amendment) Act, 2007 and again
by the Competition (Amendment) Act, 2009.
This is an act to establish a commission, protect the interest of the consumers and ensure
freedom of trade in markets in India-
 To prohibit the agreements or practices that restricts free trading and also the competition
between two business entities,
 To ban the abusive situation of the market monopoly,
 To provide the opportunity to the entrepreneur for the competition in the market,
 To have the international support and enforcement network across the world,
 To prevent from anti-competition practices and to promote a fair and healthy competition in
the market.

History[edit]
The Government of India in April 1964 appointed the Monopolies Inquiry Commission under the
Chairmanship of Justice K. C Das Gupta, a judge of the Supreme Court, to inquire into the extent
and effect of concentration of economic power in private hands and prevalence of monopolistic
and restrictive trade practices in important sectors of economic activity other than agriculture.[3]
To regulate advertising, in 1984, Parliament inserted a chapter on unfair trade practices in the
Monopolies and Restrictive Trade Practices Act, 1969.[4]
The Monopolies and Restrictive Trade Practices Commission was constituted in the year 1970.[5]
The Monopolies and Restrictive Trade Practices Act, 1969 had its genesis in the Directive
Principles of State Policy embodied in the Constitution of India.[6] It received the assent of the
President of India on 27 December, 1969.[7] The Monopolies and Restrictive Trade Practices Act
was intended to curb the rise of concentration of wealth in a few hands and of monopolistic
practices.[8] It was repealed on September 2009. The Act has been succeeded by The
Competition Act, 2002.[citation needed]
The Competition Bill, 2001 was introduced in Lok Sabha by Finance Minister Arun Jaitley on 6
August 2001

Definitions[edit]
 Acquisition: Acquisition means, directly or indirectly, acquiring or agreeing to acquire
shares, voting rights or assets of any enterprise or control over management or assets of any
enterprise.[10]
 Cartel: Cartel includes an association of producers, sellers, distributors, traders or service
providers who, by agreement among themselves, limit control or attempt to control the
production, distribution, sale or price of goods or provision of services.[11]
 Dominant position: It means a position of strength, enjoyed by an enterprise, in the relevant
market which enables it to operate independently of competitive forces prevailing in the
market or affect its competitors or consumers in its favour.[12]
 Predatory pricing: Predatory pricing means the sale of goods or provision of services, at a
price which is below the cost of production of the goods or provision of services, with a view
to reduce competition or eliminate the competitors.[13]
 Rule of reasons: It is the analysis of any activity under the challenge on the basis of
business justification, competitive intent, market impact, impact on competition and on
consumer. It is the logic behind the conclusion for any order.

Salient Features[edit]
Anti Agreements[edit]
Enterprises, persons or associations of enterprises or persons, including cartels, shall not enter
into agreements in respect of production, supply, distribution, storage, acquisition or control of
goods or provision of services, which cause or are likely to cause an "appreciable adverse
impact" on competition in India. Such agreements would consequently be considered void.
Agreements which would be considered to have an appreciable adverse impact would be those
agreements which-

 Directly or indirectly determine sale or purchase prices,

 Limit or control production, supply, markets, technical development, investment or provision
of services,
 Share the market or source of production or provision of services by allocation of inter alia
geographical area of market, nature of goods or number of customers or any other similar
way,
 Directly or indirectly result in bid rigging or collusive bidding.
Types of agreement[edit]
Competition law identifies two type of agreements. Horizontal agreements which are among the
enterprises who are or may compete within same business. Second is the vertical agreement
which are among independent enterprises. Horizontal agreement is presumed to be illegal
agreement but rule of reasons would be applicable for vertical agreements.

Abuse of dominant position[edit]

There shall be an abuse of dominant position if an enterprise imposes directly or indirectly unfair
or discriminatory conditions in purchase or sale of goods or services or restricts production or
technical development or create hindrance in entry of new operators to the prejudice of
consumers. The provisions relating to abuse of dominant position require determination of
dominance in the relevant market.[14]

Combinations[edit]
The Act is designed to regulate the operation and activities of combinations, a term, which
contemplates acquisition, mergers or amalgamations. Combination that exceeds the threshold
limits specified in the Act in terms of assets or turnover, which causes or is likely to cause
adverse impact on competition within the relevant market in India, can be scrutinized by the
Commission.

Competition Commission of India[edit]

Competition Commission of India[15] is a body corporate and independent entity possessing a
common seal with the power to enter into contracts and to sue in its name. It is to consist of a
chairperson, who is to be assisted by a minimum of two, and a maximum of six, other
members.[16][17] bhart ma It is the duty of the Commission to eliminate practices having adverse
effect on competition, promote and sustain competition, protect the interests of consumers and
ensure freedom of trade in the markets of India. The Commission is also required to give opinion
on competition issues on a reference received from a statutory authority established under any
law and to undertake competition advocacy, create public awareness and impart training on
competition issues.
Commission has the power to inquire into unfair agreements or abuse of dominant position or
combinations taking place outside India but having adverse effect on competition in India, if any
of the circumstances exists:

 An agreement has been executed outside India

 Any contracting party resides outside India
 Any enterprise abusing dominant position is outside India
 A combination has been established outside India
 A party to a combination is located abroad.
 Any other matter or practice or action arising out of such agreement or dominant position or
combination is outside India.
To deal with cross border issues, Commission is empowered to enter into any Memorandum of
Understanding or arrangement with any foreign agency of any foreign country with the prior
approval of Central Government.

Review of orders of Commission[edit]

Any person aggrieved by an order of the Commission can apply to the Commission for review of
its order within thirty days from the date of the order. Commission may entertain a review
application after the expiry of thirty days, if it is satisfied that the applicant was prevented by
sufficient cause from preferring the application in time. No order shall be modified or set aside
without giving an opportunity of being heard to the person in whose favour the order is given and
the Director General where he was a party to the proceedings.[18]

Appeal[edit]
Any person aggrieved by any decision or order of the Commission may file an appeal to the
Supreme Court within sixty days from the date of communication of the decision or order of the
Commission. No appeal shall lie against any decision or order of the Commission made with the
consent of the parties.[19]

Penalty[edit]
If any person fails to comply with the orders or directions of the Commission shall be punishable
with fine which may extend to ₹ 1 lakh for each day during which such non compliance occurs,
subject to a maximum of ₹ 10 crore.[20]
If any person does not comply with the orders or directions issued, or fails to pay the fine
imposed under this section, he shall be punishable with imprisonment for a term which will
extend to three years, or with fine which may extend to ₹ 25 crores or with both.
Section 44 provides that if any person, being a party to a combination makes a statement which
is false in any material particular or knowing it to be false or omits to state any material particular
knowing it to be material, such person shall be liable to a penalty which shall not be less than ₹
50 lakhs but which may extend to ₹ 1 crore.

 Competition Commission of India

 Competition Appellate Tribunal
 The Competition Bill, 2001
 The Competition (Amendment) Bill, 2006
 The Competition (Amendment) Bill, 2007
 The Competition (Amendment) Bill, 2009
 Competition Appellate Tribunal
 National Competition Council