Features of a Co.

(1) Separate Legal entity (independent corporate

existence) [Sec 34].
– Unlike partnership a Co. is distinct from the
persons who constitute it.
– On registration, the association of persons
becomes a body corporate by the name contained
in the MOA

– (Remember Salomon V Salomon & Co. Ltd)

Discussion (Separate Legal entity )
• Ajay along with his 2 sons started a Co. Ajay held 99% of
the share of the capital. The issued and subscribed capital
of the Co. was Rs.10000/-. The Co. further borrowed Rs
5000 from his friend by issuing secured debentures; and Rs
5000 from Ajay by issuing unsecured debentures. (there
were no other debt for the Co.)

• The company went into liquidation within an year of

incorporation, and the liquidator realized Rs . 50000/-

• How would the settlement be made?

• What if in the above case the liquidator realized Rs .

10000/-
• What if in the above case liquidator realized Rs . 8000/-
Discussion (Separate Legal entity )

• The plaintiff (Mrs Guzdar) received certain

amounts as dividend in respect of shares held by
her in a tea Co.
– Under Indian ITA, agricultural income is exempted
from payment of income tax.
– And as income for a tea Co is partly agricultural, 60%
of its income is treated as agricultural income.
• The plaintiff claimed that the dividend received
by her should be treated as agricultural income
up to 60%, as in the case of the tea Co.
• Discuss this context.
Features of a Co.

(2) Limited Liability

– As the Co. being a separate person, its members
are not as such liable for its debts.

– Hence, in case of a Co. limited by shares, the

liability of members is limited to the nominal
value of the shares held by them.
Further Discussion on limited liability

i) Where the members of the Co. are reduced

below the statutory minimum specifications
[Sec 45]

ii) Where in the course of winding up, it

appears that any business of the Co has been
carried on with intent to defraud creditors
[Sec 542]
Features of a Co.

(3) Perpetual Succession

– The membership of a Co. may keep changing from

time to time, but that does not affect the Co.’s
continuity.

– The death or insolvency of individual members

does not, in any way affect the corporate
existence of the company.
Further Discussion on Perpetual Succession

• The guarantors of a Co.’s loan could not claim to

be relieved of liability by reason of the fact that
the Co.’s management had totally changed
including the MD. Such changes do not affect the
continuity of the Co or its commercial and
contractual relations.*

• The liability of a Co. for electricity dues remained

the same, though the arrears belonged to a
period when the Co. was in the hands of some
other persons. *
Features of a Co.

(4) Transferability of shares [Sec 82]

– Since the business is separate from its members, it
facilitates the transfer of the members stake.
Features of a Co.

(5) Common Seal

– A Co. being an artificial person is not bestowed
with a body of natural being, and thus has to work
through its directors.

– However, a Co. can be held bound by only those

documents which bear its signature.

– Common seal is the official signature of a Co.

Features of a Co.

(6) separate Property

– Shareholder is not the part owner of the Co. or its
property, he is only given certain rights by the law.

– He has no insurable interest in the assets of the

Co.
Features of a Co.

(7) Co. may sue or be sued in its own name.

Lifting of the Corporate Veil

• The advantages of incorporation are allowed

to be enjoyed only by those who want to
make a genuine use of the “company”.

• In case of fraudulent use of the privileges

allowed to the Co., the law lifts the corporate
veil and identifies the persons (members) who
are behind.
Lifting of the Corporate Veil

• For Protection of revenue:

– Where the separate existence privilege is used for
tax evasion.
– Where Co acting as agent of share holders.
– Where the Co. has been formed by certain
persons to avoid their own valid contractual
obligations.
– Where the prospectus includes fraudulent
misrepresentations
Classifications of Cos

• A Co limited by shares
• A Co limited by guarantee
• An unlimited liability Co.
Classifications of Cos

• Public Co.
– A Co which is not private
• Private Co.
– min 2 members and Max 200members
– Prohibits invitation to public subscription
– Restricts the rights to transfer stake

Requirements of statutory meetings.

Classifications of Cos

• Holding or Subsidiary Cos.

– Where a Co. has control over another Co. it is
know as the Holding Co and the Co. over which
control is exercised is called Subsidiary Co.
Classifications of Cos

• A Co. is deemed to be under the control of another if:

– That other Co. controls the Board of Directors*, or
– The other Co holds more than half in nominal value of its
equity share capital.
– It is a subsidiary of a third Co which itself is a subsidiary of
the controlling Co.

*( the composition of BoD of a Co. shall be deemed to be

controlled if the latter has the power, without the consent
or concurrence of the other person, to appoint or remove
the holders of all or majority of the directorships.
Classifications of Cos

• Government Cos [Sec 617]

– A Co. in which not less thatn 51% of the paid up

share capital is held by the Central Govt. or by any
State Govt(s) or partly by the Central Govt. and
party by one more State Govts.

– And also includes any subsidiary Co of a Govt. Co.

Formation of a Co.
Classifications of Cos

• Listed
• Winding up of a Co.
– Compulsory Winding up under an order of the
Court
– Voluntary winding up
• Members voluntary winding up
• Crediotrs’ voluntary winding up
• Voluntary winding up under supervision of the court
• Grounds for compulsory winding up
– Special resolution
– Default in holding statutory meeting
– Failure to commence business
– Reduction in membership
– Inability to pay debts
– Just and equitable
• Indian Contract Act 1872.
– Contracts
– Discharge of contract
– Remedies on breach of contract
• Contract
– S 2(h) Contract is an agreement, enforceable by
law
• An agreement
• Enforceability by law
• Agreement
– S. 2(e) ‘every promise and every set of promises
forming consideration for each other’

– So what is a promise? – s. 2(b)

– So what is a consideration ? – s. 2()
• So what is a promise? – s. 2(b)
– In a contract …there are 2 parties – say A and B.
– Mr. A makes a proposal to Mr. B, to do something,
say – proposes to sell his bike to Mr. B for Rs
25000/.
– Now, when Mr. B signifies his assent thereto. The
proposal is said to be accepted.

– A proposal, when becomes accepted becomes a

promise.
• So what is a proposal (offer) s.2(a)
– The proposer expresses his willingness “to do” or
“not to do” something with a view to obtain the
acceptance of the other party to such act or
abstinence.

– Say earlier ..Mr. A offered to sell his bike to Mr. B

• Express Offer
• Implied offer
• Specific offer or general offer
• Offer and invitation to offer
Characteristics of a Valid offer and acceptance
– Offer must be communicated
– Terms of the offer must be definite and certain
– Offeree must have knowledge of the offer before
he can accept it
– An offer cannot contain a term the non
compliance of which may be assumed to amount
to acceptance
– Intention of creating a binding legal relation
– Offer can be conditional
– Offer must be made with an intent of obtaining
the consent of the offeree
‘When the person to whom the proposal is made
signifies his assent thereto, the proposal is said to
be accepted. A Proposal, when accepted becomes a
promise.’ 2b.
– Must be absolute and unqualified
– Must be communicated to the offeror
– Must be in accordance with the mode if any
– Must be within the specified time
– Must be given by the person to whom the offer is
made
• The communication of an offer is complete
when it comes to the knowledge of the person
whom it was made. S 4.
• Acceptance of an offer - s. 2(b)
– When the person to whom the offer is made
signifies his assent thereto, the offer is said to be
accepted.

– When 2 more persons agree upon the same thing

in the same sense they are said to consent.
• The consent must a free consent.
• What is free consent?
– Consent is said to be free when it is not caused by
• Coercion
• Undue influence
• Fraud
• Misrepresentation or
• mistake
• Coercion – s.15 and 72
– Committing or threatening to commit any act
forbidden by the IPC, or
– The unlawful detaining or threatening to detain
any property to the prejudice of any person
whatever with the intention of causing any person
to enter into an agreement.
• Undue Influence - s.16
– Undue influence consists in the improper exercise
of power over the mind of one of the contracting
parties by the other.

– This happens where the relations subsisting

between the parties are such that one of the
parties is in a position to dominate the will of the
other and uses that position to obtain an unfair
advantage over the other.
• Fraud - s.17 and 19
– means and includes any of the following acts
committed by a party to a contract with an intent to
deceive the other party thereto or to induce him to
enter into a contract:-
• The suggestion as a fact of that which is not true by one who
does not believe it to be true
• Active concealment of a fact by one having knowledge or
belief of the fact
• Promise made with out intention of performing it
• Any other act fitted to deceive or that law declares to be
fraudulent
• Misrepresentation – s 18-19
– Misrepresentation is an incorrect or false
statement by the falsity or inaccuracy and is not
due to any desire to deceive or defraud the other
party.
• The aggrieved party can avoid the performance of the
contract
• Can insist the contract shall be performed and that he
shall be put in the position in which he would have
been if the representation made had been true.
• Consideration [s 2(d)]
– When at the desire of the promisor, the promisee
or any other person has done or abstained from
doing, or does or abstains from doing, or promises
to do or abstain from doing, something, such act
or abstinence or promise is called a consideration
for the promise.’

No consideration, No contract [s 10 and 25]

• Exceptions
– Promise on account of natural love and affection.
– Promise to compensate wholly or in part a person
who has already voluntarily done something from
the promisor
– A promisor to pay wholly or in part a debt which is
barred by the Limitation Act.
– For agreement between a principal and an agent
[s 185]
• Rules regarding considerations
– Consideration must move at the desire of the
promisor
– Consideration may move either from the promisee
or any other person
– Consideration need not be adequate
– Consideration must be real
– Consideration must be legal
• Chinnayya v Ramayya
– Ms A by a deed of gift, transferred certain
property to her daughter with a direction that the
daughter should pay an annuity to Ms A’s brother.
Daughter agreed to this. Later, Ms A’s daughter
declined to fulfill her promise saying that no
consideration had moved from Ms A’s brother to
Ms A.
• Legality of Object and consideration
– If It is forbidden by law
– The consideration of such a nature that, if
permitted, it would defeat the provisions of any
law
– Consideration is fraudulent
– Injures to a persons or property of another
– Immoral
– Opposed to public policy
• Capacity to Contract – s.10-12
– Age of majority (minor is not bound by the
contract)
– Is of sound mind
– Not disqualified from contracting by any law to
which he is subject
• Possibility of performance
– An agreement to do an impossible act is void [s
56]
• Valid contracts
• Voidable contracts
• Void agreements
• Voidable Agreements
– Is a contract which may be repudiated at the will
of one or more of the parties (usually aggrieved
parties) , but not by others.
• It is valid and binding till it is avoided by the aggrieved
party
• The party repudiating the contract is entitled to get
damages
• Void agreements
• Mutual mistake
• Agreements without consideration
• Agreements in restraint of marriage
• Agreement in restraint of trade
• Wager
• In a unilateral, or one-sided, contract, one party,
known as the offeror, makes a promise in
exchange for an act (or abstention from acting)
by another party, known as the offeree. If the
offeree acts on the offeror's promise, the offeror
is legally obligated to fulfill the contract, but an
offeree cannot be forced to act (or not act),
because no return promise has been made to the
offeror. After an offeree has performed, only one
enforceable promise exists, that of the offeror.
Discharge of contracts
– By performance
– Tender
– Mutual consent
– Subsequent impossibility
– Operation of law
– Breach
• Discharge by Performance of Contract
– A contract creates obligations on the parties.
– ‘Performance’ of a contract means the carrying
out of the obligation.
– The parties to contract must either perform or
offer to perform their respective promises unless
such performance is dispensed with or excused
under the provision of the Indian Contract Act. Or
some other law.
• Who can perform the contract?
– The promisor
– Promisor through his agent
– The legal representative
– Third person
• What is an offer to perform (Tender)?
– Promisor offers performance of his promise, but
the promisee refuses to accept the performance.
• This is called as ‘tender’ of ‘attempted performance’
• If a valid tender is made and is not accepted by the
promisee, the promisor shall not be responsible for
non-performance nor shall lose his rights under the
contract.
(the promisee shall have a reasonable opportunity to see
that the thing offered is the thing contracted for)
• Essentials of a valid tender
– It must be unconditional
– It must be made at proper time and place
– It must be for the entire obligation
– The promisee must be given reasonable
opportunity to inspect the offered performance
– The performance should be made to the promisee
or his authorised agent
• Contracts which need not be performed.
– Parties may mutually agree to substitute the original
contract by a new one or to rescind it.

– The promisee may dispense with or remit wholly or in part

the performance by the promisor or extend the time for
such performance.

– Person at whose option the contract is voidable rescind it.

– Promisee neglects or refuses to afford the promisor

reasonable facilities for the performance of his promise.

(Time place and Manner of performance)

• Discharge through Mutual Consent
– Novation
– Rescission
– Alteration
– Remission
– Waiver or merger
• Novation
– Substitution of a new contract for the original one
• Rescission
• Cancellation of all or some of the terms of the contract
• Alteration
• Parties mutually change certain terms of the contract
• Remission
• It is accepted of a lesser sum that what was contracted for a lesser
fulfillment of the promise
• Waiver
• Where a party waives his rights under the contract, the other party is
released of his obligation.
• Merger
• Inferior right coincides with a superior right
• Discharge due to impossibility
– Inherent Impossibility
– Subsequent or supervening impossibility
• Destruction of the subject matter
• Death or disablement of parties
• Subsequent illegality
• Declaration of war
• Non existence or non occurrence of a particular stage
of things
• Discharge by operation of law
– By death
– By insolvency
– By merger
– Unauthorized alteration of terms of a written
document
– Operation of Limitation Act 1963
• Breach of contract
– Anticipatory breach
– Actual breach
• Remedies for Breach of Contracts
– Urge the breaching party to reconsider the
breach
– Claim for damages
– Specific performance
– Remedy of injunction
– Suit on Quantum Meruit*
• Bailment
– Delivery of goods by one to another person for
some purpose, upon a contract that they shall,
when the purpose is accomplished, be returned or
otherwise disposed off according to the directions
of person delivering them’ [s 148]
• Thus the following characteristics
– Delivery of goods (actual or constructive)
– For a definite purpose
– Bailment is based on a contract
– Return of specific goods
– Ownership of goods
• A bailment may be
– A gratuitous bailment
– Non gratuitous bailment
• Bailment could be in the form of
– Deposit – (use by bailor)
– Commodatum (lent on gratis)
– Hire
– Pledge
– Others – like for repairs transport etc
• Duties of Bailor
– Disclose known faults in the goods
– Liability to compensate for breach of warranty as
to title
– To bear expenses of the bailee
– In case of non gratuitous bailment, responsible to
bear extraordinary expenses.
– Duty to claim back the goods
• Rights of a bailor
– Right to enforce bailee’s performance
– Right to claim damages right to claim
compensation against unauthorized use of the
goods
– Right to terminate the contract
– Right to demand return of goods along with
accretion, if any
• Duties of a Bailee
– To take care of the goods bailed
– Not to make unauthorized use of goods
– Not to mix bailor’s goods with his own
– To return the goods bailed without demand
– To return any accretion to the goods bailed
• Rights of the bailee
– Claiming damages resulting from non-disclosure
of faults in the goods.
– Breach of warranty as to the title and resulting
damages
– Claims for extraordinary expenses
– Right to lien
– Right against wrongful deprivation of or injury of
goods.
• Lien is a right in one person to retail that
which is in his possession, belonging to
another, until some debt or claim is paid.
– General lien
• Right to retain goods not only for demands arising out
of the goods retained, but for a general balance of
account
– Particular Lien
• Right to retain a particular good in respect of which the
claim is due.
• The bailee’s right of lien is (usually) particular
in certain cases, whereas general in other
cases.
– [s 170] ‘where the bailee has, in accordance with
the purpose of the bailment, rendered any service
involving the exercise of labour or skill in respect
of the goods bailed, he has, in absence of a
contract to the contrary, a right to retain such
goods until he receives due remuneration for the
service he has rendered in respect of them’
• Rights of a bailor
– Enforce all duties or liabilities of the bailee
– In case of gratuitous bailment, the bailor can
demand their return whenever he wish to do so.
• Finder of lost goods

– A finder of lost goods is treated as the bailee and is

charged with the responsibilities of a bailee.
• “A person who find goods belonging to another, and takes
them into his custody, is subject to the same responsibility
as a bailee.”

– However he is entitled with the rights of

• Right retain the goods [s 168]
• Right to sell [s 169]
– When?
• Pledge [s 172]
– Is a bailment of goods as security for payment of a
debt or performance of a promise
• The person who delivers the goods as security is called
the pledgor and the person to whom the goods are so
delivered is called pledgee.
 Pledge Hypothecation Mortgage

Type of Security Movable Movable Immovable

Possession of the Remains with lender Remains with Usually Remains

security (pledgee) Borrower with Borrower

Gold Loan, Advance

against NSCs, Adv Car / Vehilce
Examples of Loan
against goods (also Loans, Adv against Housing Loans
where used
given under stock and debtors
hypothecation)
• Contract of Guarantee [s 126]
– Is a contract to perform the promise, or discharge the
liability, of a third person in case of his default”

– The person who gives the guarantee is called surety

– The person for whom the guarantee is given is called
principal debtor
– And the person to whom the guarantee is given is
called the creditor
• Rights of a surety
– Right against creditor
• Right to security
– Right against the principal debtor
• Right of subrogation
– On performing the guaranteed duty, he is entitled with all rights
which the creditor had against the debtor
• Right to be indemnified
– Recover the amounts from the principal debtor
– Right against Co-surities
• Right of contribution
• Kinds of Guarantee
– Specific guarantee
• A guarantee given to a single debt or a specific
transaction. The responsibility ceases as soon as the
guaranteed debt is paid or promised is duly performed.
– Continuing guarantee
• A guarantee that extends to a series of transactions.
Here the surety undertakes the responsibility for a
series of separable and distinct transactions over a
period of time.
• Revocation of continuing guarantee
– By notice of revocation
– By death of the surety
Discharge of Surety
• by notice of revocation
• By death
• By variance in terms of contract
• By discharge of the debtor
• By impairing surety’s remedy
• By loss of security
• By invalidation of the contract
• The liability of the surety is co-extensive with that
of the principal debtor [s.128]
– Thus, the surety Is liable for all those amounts the
principal debtor is liable for.
• As soon as the principal debtor defaults, the
liability of the surety begins.

• The liability of the surety is co-extensive with that

of the principal debtor, but it can be no more
than that of the principal debtor.
• Contract of indemnity
– [s 124] is a contract whereby one party promises
to save the other from loss caused to him (the
promisee) by the conduct of the promisor himself
or by the conduct of any other person.
• A contract of indemnity may arise either by
– An express promise
– Or by operation of law
• The liability of a promisor is primary and
independent in a contract of indemnity.

• In case of a contract of guarantee, after

discharging his obligation he can proceed
against the principal debtor (right of
subrogation)
• Assignment (No. 5)

– Bailment
• Meaning and examples
• Rights &Duties of Bailee and Bailor
• Finder of lost goods
– Contract of Guarantee
• Meaning and parties involved
• Rights of surety
• Lien
– Contract of Indemnity
• Meaning and parties
• Examples
• Negotiable Instruments Act 1881

• Instruments means any written document by

which a right is created in favour of one and
obligations are created on the part of another.
•
• Negotiable means the rights in an instrument can
be transferred by one person to another*.
• s.13 recognize promissory notes, bill of
exchange and cheque as NI.

• However, the Act does not prohibit any other

instrument being treated as a NI, provided the
instrument possess the character of
negotiability.
• Characteristics of NI
– Freely transferable
– Holders title is free from all defects
– A NI is subject to certain presumptions
• Consideration
• Date
• Time of acceptance
• Promissory Note
– P note is an instrument in writing, containing an
unconditional undertaking signed by the maker to pay
a certain sum of money to a person, on his demand.

– Say
• ‘I promise to pay B Rs.500/-’
– Certain
– Unconditional
– Unambiguous in relation to the maker, the amount and the
person to whom the money is to be paid.
• However if we look at a currency note, it also promises to pay the
bearer!
• Thus, a P note so drawn is nothing but a currency.

• The GOI, with an intention to control as to who can issue currency

notes, through the RBI Act, has imposed restriction on issuing the P
notes.

• No person in India, other than RBI or the GOI, can make or issue a p
note ‘payable to bearer’.

• Thus, every P note must be made ‘payable to order’.

• Subsequent parties, by endorsement, may convert it into a ‘payable
to bearer’ note.
• payable to bearer
– A NI is said to be payable to bearer when
• It is expressed to be so payable
• Or the last endorsement is a blank endorsement.
• ‘payable to order’
– A Ni is said to be payable to order when
• It is expressed to be so
• Expressed to be payable to a particular person with
restricting its transferability.
• Endorsement
– Endorsement means writing of a person’s name (other
than the maker) on the face or back of an instrument
or on a slip of paper attached thereto for the purpose
of negotiation.

– The person signing the instrument is known as

endoser and the person in whose favour it is endorsed
is known as endrosee.
• Bearer instruments - negotiable by delivery only
• Order instrument – negotiable by endorsement and delivery.
• Bill of Exchange
– A Bill of exchange is an instrument in writing,
containing an unconditional order, directing a
person to pay a certain sum of money to a person
or the bearer of the instrument.
– Say
• Mr. A signs an instrument directing B to pay C or order a
sum of Rs 1000

• BoE can be made only as payable as ‘pay to order’

• Cheque
– A cheque is a bill of exchange drawn on a specified
banker payable on demand.
– open cheque
– Crossed cheque
• Free Transferable
• Holder’s title free from defects
• The holder can sue in his own name
• Parties to NI
– The person who draws up a NI is called the drawer
of the instrument
– A person who is entitled to the possession of a NI
in his own name and to receive payment is called
the holder of the NI
• Example Y writes a SBI cheque for Rs 6000 and gives it
to B, for purchasing a DVD.
– Here, y is the drawer
– B is the holder
– SBI is the drawee bank
• Law makes a distinction between the cases where
a person has come to hold an instrument for a
consideration, and where he has not paid any
consideration.

• Law would give better protection to a person who

has come to hold an instrument as a
consideration for something.

• Such a person is said to be a ‘ holder in due

course’
• A holder in due course gets a better title than
the transferor.
– Mr. A steals a bearer cheque and transfers it to B
for a consideration.
– B in good faith takes the cheque without realizing
that it has been stolen.
– The party liable to pay cannot raise any defense
against B.
Discharge of an NI
– By payment in due course
– Party primarily liable on the bill becoming holder
of the same
– By express waiver by the holder
– By cancellation of the instrument by the holder or
his authorized agent
– By discharge as any other simple contract.
• Consumer Protection Act 1986
• Consumer:
– A person* who buys any goods for a consideration
which has been paid or promised or partly paid and
partly promised or under any system of deferred
payment.
– A person who hires or avails of any services for a
consideration which has been paid or promised or
partly paid and partly promised or under any system
of deferred payment.

* Consumer does not include a person who obtains such goods

for resale or for any commercial purpose#.
• Consumer dispute
– It means a dispute where the person against
whom a complaint has been made, denies or
disputes the allegations contained in the
complaint.
• Defect
– A defect is defined to mean any fault,
imperfection of shortcoming in the quality,
quantity, potency, purity or standard which is
required to be maintained by or under any law for
the time being in force or under any contract, or
as is claimed by the traded in whatsoever in
relation to any goods.
• Deficiency
– Similar to ‘defect’ in the context of goods,
deficiency is relevant in case of services.
• Goods
• ‘ Goods means every kind of movable property other than
actionable claims and money’
• Manufacture
• A person of makes or manufactures any good or parts
thereof.
• A person who does not manufacture, but assembles parts
manufactured by others
• A person who puts or causes to put his mark on goods
manufactured by others.
• Rights of a Consumer
– Right of safety
• hazardous to life and property
– Right to be informed
– Right to choose
– Right to be heard
– Right to seek redressal
– Right to consumer education
• Remedies available to consumers
– Who can file a complaint?
• Consumer
• Any recognized consumer association
• One or more consumers
• The Central or State Government
• Remedies available to consumers
– Where to file a complaint
• District Forum
– If value of goods/services and the compensation, if any,
claimed does not exceed Rs 20 lakhs
• State Commission
– If value of goods/services and the compensation, if any,
claimed exceed Rs 20 lakhs but does not exceed Rs 1crore
• National Commission
– If value of goods/services and the compensation, if any,
exceed Rs 1crore
• Remedies available to consumers
– How to file a complaint
• No fee is applicable
• Complainant of his authorized agent can present the
complaint in person.
• Complaint can also be send by post
• The Complaint should be addressed to the President of the
respective Forum/Commission.

– Identity of the complainant

– Identity of the opposite party
– Description of the complaint
– Documents if any applicable
– Relief the complaint Is seeking
• Reliefs available to consumers
– Remove the defect pointed out
– Replace the goods with new goods of similar
description
– Return to the complainant the price
– To pay such amount as may be awarded as
compensation
– To discontinue unfair trade practice
– Not to offer/withdraw hazardous goods for sale
• Sale of Goods Act 1930

– The sale of Goods Act contains the basic principles as

well as the legal framework of transactions of sale and
purchase.
– The provision of this Act are applicable to only
moveable goods other than actionable claims and
money.

– Provision relating to sale of immovable property and

actionable goods ar0e contained in ‘Transfer of
Property Act 1882’
Buyer
– Means a person, who buys or agrees to buy goods

Seller

– Means a person, who sells or agrees to sell goods

• Delivery
– Means voluntary transfer of possession from one person to
another

• Sale
– Means transfer or agrees to transfer of property in goods to the
buyer for a price

• Existing goods
– Such goods as are in existence at the time of the contract of sale

• Future goods
– Such goods as are to be manufactured or acquired by the seller
after making the contract of sale
• Essential of a contract of sale

– There must be at least 2 parties.

– There must be a transfer or agreement to transfer

the ownership of the goods from one person to
another. Mere transfer of possession is not sale.

– Subject matter must be a ‘good’ and movable.

– The consideration for sale is called price which should
be stated in terms of ‘money. Exchange of goods for
goods is barter is not sale. However, price may be
paid partly in terms of money and partly in kind.

– All essential elements of a valid contract must be

present in a contract of sale.

– A contract of sale may be absolute or conditional.

• Specified goods
– Means goods identified and agreed upon at the
time of contract of a sale has been made.
• Ascertained goods
– Goods identified in accordance with the
agreement after the contract has been made.
• Un ascertained goods
– Goods defined only be description and not
identified and agreed upon.
Sale
Executed contract
If goods are destroyed, the loss will
be borne by the buyer even though
they may be in possession of the
seller
A sale gives the right to the buyer to
enjoy the goods against the whole
world including the seller.
If the buyer becomes insolvent
before the payment is made, the
seller has to deliver the goods to the
official received unless he has a lien
Agreement to sell
Executory contract
The loss will be borne by the seller
even though the goods may be in
the possession of the buyer.
The buyer only can sue the seller for
damages, if the promise to sell is not
honoured.
Seller may refuse to deliver the
goods
• Rights of an unpaid seller
– Who is an unpaid seller
• When the whole of the price has not been paid or tendered.

• Where the seller has received a negotiable instrument, like a

bill of exchange, promissory note or cheque, for the price, he
is not an unpaid seller.

– But if, before he has delivered the goods, the negotiable

instrument is dishonoured, then he becomes an unpaid seller and
may exercise his rights.
1) Right against goods
– Right of Lien
– Right of stoppage in transit
– Right of Resale

2) Right against the Buyer

• Rights of an unpaid seller
– Right against goods
• Right of lien
– Where the goods have been sold without any stipulation as to
credit
– Where the goods have been sold on credit, but the term of
credit has expired
– Where the buyer becomes insolvent

The seller may exercise his right of lien notwithstanding that he

is in possession of goods as agent or bailee for the buyer.
• Rights of an unpaid seller
– Right against goods
• Termination Right of lien

– When he delivers the goods to a carrier or other bailee for the

purpose of transmission of the buyer without reserving the
right of disposal of goods.
– Where the buyer of his agent lawfully obtains possession of
the goods.
– By waiver thereof.
• Rights of an unpaid seller
– Right to stoppage in Transit
• When the buyer becomes insolvent, the unpaid seller
who has parted with the possession of goods has the
right of stopping them in transit.
•
– When is a good said to be in transit?

– How stoppage in transit is effected?

» Taking actual possession or by giving notice
» Expenses of re delivery?
• Rights of an unpaid seller
– Right of resale
• When goods are of perishable nature
• Exercised lien or stoppage and issues notice to the
buyer of his intention of resale
• If within a reasonable time pay or tender the price

• On resale the new buyer get a good title

•
• Rights of an unpaid seller – against the buyer
personally
– Sue for price
– Sue for damages
– Repudiation of contract
• Condition and Warranty

– A stipulation in a contract of sale with reference to

goods which are the subject thereof may be a
condition or a warranty.
• Condition and Warranty

– A condition is a stipulation essential to the main

purpose of the contract, the breach of which gives rise
to the right to treat the contract as repudiated.

– Warranty is a stipulation collateral to the main

purpose of the contract, the breach of which gives
raise to claim for damages buy not to a right to reject
the goods and treat the contract as repudiated
• Conditions and warranties may be expressed
or implied.

– When terms of contract expressly provide for

them, they are known as express conditions or
warranties.

– Implied conditions and warranties are

incorporated in every contract of sale unless the
circumstances show a different intention.
• Implied conditions are
– Conditions as to title
• An implied condition on the part of the seller that, in
the case of a sale, he has a right to sell the goods and
that, in the case of an agreement to sell, he will have
aright to sell the goods at the time when the property is
to pass.
• Implied conditions are
– Sale by description

– Where there is a contract for the sale of goods by

description, there is an implied condition that the
goods shall correspond with the description.
• Condition as to sample
– Corresponds of bulk with the sample in quality
– Reasonable opportunity of comparing the bulk
with the sample
– Merchantability of goods.
• Condition as to sample as well as description
– If the sale is based on sample as well as
description, the goods should correspond to
sample as well as description.
• Condition as to quality or fitness.
– caveat emptor …the principle that the buyer alone
is responsible for checking the quality and
suitability of goods before a purchase is made.
• Warranties
– Empress warranties
– Implied warranties
• Warranty as to quiet possession
• Warranty against encumbrances
• Warranty to disclose the dangerous nature of goods
Performance of the contract of sale
– Performance of a Contract of sale means as
regards the Seller – the delivery of goods to the
buyer.

– From the buyers side the performance means

acceptance of deliver of goods and payment for
them as per the terms and conditions of sale.
• Payment and deliver
– Unless other wise agreed
• Action Sale
– Action sale is another form of sale where number
of buyers come to purchase the goods and the
goods are ultimately sold to the person ready to
pay the highest price.
Nemo dat quod non habet’
(no one can give what he himself does not
have)
– Sale by a mercantile agent
– Sale by one of the joint owners
– Sale by estopple
• sale by official receiver
• Sale by pledgee in certain cases
• Sale by finder of lost goods.
The Nemo Dat Quod Non Habet Rule
• Usually the sale of goods takes place between the
buyer and either the owner of the goods or by his
authorized agent.
• However, there are some circumstances in which
a seller may purport to sell goods which he does
not have any right to sell.
• In these circumstances the law has to decide
which of two innocent parties to favour: the
buyer or the original owner.
Sale by estoppel
• when the owner of the goods, by this conduct, leads
the buyer to believe that the seller* has the authority
to sell and induces the buyer to buy the goods, he shall
be stopped from denying the fact that the seller had no
right to sell the goods
• Ajay tells Vijay in the presence of Raj (the actual owner
of the goods) that he (Ajay) is the owner of certain
goods. Later on Ajay sells these goods to Vijay. Vijay
will get a good title of the goods, as Raj will be stopped
from denying the position that he projected to Vijay by
his conduct of keeping silent.
Sale by Mercantile agent
• Mercantile agent is an agent who deals in the buying and selling of the
goods on behalf of his principal. In case of sale by mercantile agent, who
is in possession of either the goods or document of title to the goods, with
the consent of the owner, sells the goods in ordinary course of business
then the buyer gets the better title of goods, if the following conditions
are satisfied
– Agent must be mercantile
– He must be in possession of goods/documents
– The sale is made in ordinary course of business
– The buyer should have acted in good faith

Mr. X entrusted his mercantile agent to receive offers to sell his car and not to
sell. Mr. X gave signed documents to the agent regarding transferring the title.
On the basis of these documents, the agent pretended to the buyer as if he had
the right to sell. Will the buyer get a good title?
• Sale by joint owners
– In case of sale by joint and several owners, the
buyer shall get a better title if
• The joint owner, who makes the sale, is in possession of
the good with permission of the joint owners
• Buyer acted in good faith
• Foreign exchange Management Act 1999

– Countries are becoming economically inter-

dependent
– This leas to the foreign exchange markets
– A countries currency value and reserves of foreign
exchange - determines what it can buy in the
international market –vital issue
– Thus foreign exchange market needs to be
regulated and managed
• FEMA 1999 provides for management of
foreign exchange and foreign exchange
markets.

• It creates a broad framework and entrusts the

power to the Central Govt. and the RBI.
 FERA & FEMA
• Object to conserve and • To facilitate external
prevent misuse trade and payments

• Violation was Criminal • Violation is a civil

Offence and was non offence and is
compoundable compoundable

144
• The Act controls the foreign exchange transaction
by providing that only authorized persons can deal
in foreign exchange.

• The RBI has been given the power to appoint and

regulate the persons authorized to transact in
foreign exchange.

– The authorized persons are either banks or money

changers.

145
• The Act also constitutes the category of
‘persons resident in India’

– The provision of the Act are with reference to this

category only.
• Person resident in India
– A person residing in India for more that 182 days during the
course of the preceding financial year buy dose not include:
-
• A person who has gone out of India or who stays out side India, in either
case-
– For or on taking up employment outside India
– For carrying on outside India a business or vocation outside India.
– for any other purpose, in such circumstances as would
indicate his intention to stay outside India for an uncertain
period.
• A person who has come to or stays in India, in either case, other wise
than:-
– For taking up employment in India
– For carrying on in India a business or vocation
– f or any other purpose, in such circumstances as would
indicate his intention to stay in India for an uncertain
period.
The above definition is explained in simple terms for individuals
hereunder.

(1) The residential status of a person leaving India will be

determined us under:
• If a person leaves India for the purpose of employment,
business or for any other purpose that indicates his intention
to stay outside India for an uncertain period; then he
becomes a non resident from the day he leaves India for
such purpose.

(2) The residential status of a person returning to India will be

determined us under:
• If a person comes to India for the purpose of employment,
business or for any other purpose that indicates his intention
to stay in India for an uncertain period ; then he becomes a
resident from the day he comes to India for such purpose.
• Towards regulating foreign exchange
transactions, the Act makes a distinction
between a ‘capital account transaction’ and a
current account transaction’
• ‘capital account transaction’ means a
transaction which alters the assets or
liabilities, including contingent liabilities,
outside India of persons resident in India or
assets or liabilities in India of persons resident
outside India.
• ‘Current account transaction’ means
transaction other than a capital account
transaction.
• Current Account Transactions
– Any person may sell or draw foreign exchange to
or from an authorized person if such sale or
drawal is a current account transaction.

• However, Central Govt. may, in public interest and in

consultation with the RBI, impose such reasonable
restrictions for current account transaction as may be
prescribed.
• Capital Account Transactions
– RBI in consultation with the Central Govt. Specify-
• Any class/classes of capital account transaction which are
permissible
• The limit up to which foreign exchange shall be admissible
for such transactions.

• The difference between the provision on current account

and capital account transaction is that all current account
transactions are allowed without permission, unless
restricted, while a capital account transaction can be taken
up only if it is allowed under Section 6.
 Some Important Definitions
• "authorized person" means an authorized dealer, money
changer, off-shore banking unit or any other person for the
time being authorized under the Act to deal in foreign
exchange or foreign securities

154
 Some Important Definitions Contd.
• "foreign exchange" means foreign currency and includes,-

– deposits, credits and balances payable in any foreign currency,

– drafts, travelers cheques, letters of credit or bills of exchange,

expressed or drawn in Indian currency but payable in any foreign
currency,

– drafts, travelers cheques, letters of credit or bills of exchange drawn by

banks, institutions or persons outside India, but payable in Indian
currency;

155
 Some Important Definitions Contd.
• "person" includes-
– an individual,
– a Hindu undivided family,
– a company,

– a firm,

– an association of persons or a body of individuals, whether

incorporated or not,

– every artificial juridical person, not falling within any of the

preceding sub-clauses, and

– any agency, office or branch owned or controlled by such person;

156
 NRI & PIO

NRI is a person resident outside India who is a citizen of India

PIO means a citizen of any country other than Bangladesh or

Pakistan, if:
• held anytime an Indian Passport
• either of his parents or grand parents were citizen of India
• the person is a spouse of an Indian origin or of a person
referred above

157
 Facilities available to NRI & PIO
• Bank Accounts: NRE A/C, FCNR A/C, NRO A/C

158
 Acquisition of Immovable Property by
NRI & PIO in India
• Permitted to purchase Residential and Commercial Property without RBI’S
Permission

• No Limitation on the Number / size of the Property

• Purchase of Agricultural Land/ Plantation Property/ Farm Houses requires

RBI Permission

• PIO should not be a citizen of Pakistan , Bangladesh , Sri Lanka ,

Afghanistan , China , Iran , Nepal , Bhutan

• Citizen of above Countries not permitted to acquire Immovable Property

except by way of Lease for less than five years without permission of RBI

159
 Acquisition by NRI & PIO in India Contd.

Payment can be made by NRI / PIO out of

n Funds remitted to India through normal banking channel

or
n Funds held in NRE / FCNR / NRO account maintained in
India

No payment can be made either by traveler's

cheque or by foreign currency notes and also no
payment can be made outside India.

160
 Types of Accounts-
NRE (Non Resident External)
• It’s a Rupee Account
• All money that is brought in from abroad into the NRE account
can be freely repatriated back.

161
 Types of Accounts-
NRO (Non Resident Ordinary)
• It’s a Rupee Account

• Any balance in the NRO account can be repatriated to the

extent of USD 1 million per financial year provided you submit
a CA's certificate to the banker that shows that all taxes have
been paid.

162
• Choose NRE accounts if you:
– (Primary reason) want to park your overseas earnings
remitted to India converted to Indian Rupees;
– want to maintain savings in Rupee but keep them liquid;
– want to make a joint account with another NRI;
– want Rupee savings to be freely repatriable

• Choose NRO account if you:

– (Primary reason) want to park India based earnings in
Rupees in India;
– want account to deposit income earned in India such as
rent, dividends etc;
– want to open account with resident Indian (close relative)
 Foreign Currency Non Resident Account
• Maintained in Foreign Exchange

• All money that is brought in from abroad into FCNR account can be freely
repatriated back.

• NRI can open this account

• Residents of Pakistan and Bangladesh requires prior RBI approval

• Joint Account only with NRI is permissible

• Can be opened with funds remitted from outside India through normal
Banking Channels and those are of repatriable nature

• All current account incomes earned in India are freely repatriable,

irrespective of whether the income was credited to the NRE, FCNR or NRO
account. Current account incomes include interest, rental income,
dividends etc. So, as per FEMA, you can deposit rent, interest and
dividends into NRE, NRO or FCNR accounts and these can be freely 164
repatriated.
 FOREIGN EXCHANGE
FEMA prohibits:
• Dealing in or transfer of Foreign Exchange or Foreign Security
to any person other than Authorised Person

• Make any payment otherwise through an authorized person

to or for the credit of any person resident outside India in any
manner

• receive otherwise through an authorized person, any payment

by order or on behalf of any person resident outside India in
any manner.

• enter into any financial transaction in India as consideration

for or in association with acquisition or creation or transfer of
a right to acquire, any asset outside India by any person 165
 Exemptions
• possession of foreign currency or foreign coins by any person
up to such limit as the Reserve Bank may specify

• foreign currency account held or operated by such person or

class of persons and the limit up to which the Reserve Bank
may specify

• foreign exchange acquired or received before the 8th day of

July, 1947

• foreign exchange held by a person resident in India up to such

limit as the Reserve Bank may specify, if such foreign
exchange was acquired by way of gift or inheritance from a
person referred above

166
 Exemptions Contd.
• foreign exchange acquired from employment, business, trade,
vocation, services, honorarium, gifts, inheritance or any other
legitimate means up to such limit as the Reserve Bank may
specify

• such other receipts in foreign exchange as the Reserve Bank

may specify

167
 Repatriation
“Repatriate to India" means bringing into India the realized
foreign exchange and-

• the selling of such foreign exchange to an authorized person

in India in exchange for rupees, or

• the holding of realized amount in an account with an

authorized person in India to the extent notified by the
Reserve Bank,

• It includes use of the realized amount for discharge of a debt

or liability denominated in foreign exchange

168
 Manner of Repatriation
It can be done in the following manner:

• Sell it to Authorised Person in India in exchange for Rupees

• Retain in an account with an authorised dealer

• Use it for discharge of a debt or liability denominated in

foreign exchange in the manner specified by RBI

169
 Surrender
• Any Foreign Exchange earned by a person other than person
resident in India not used for permissible purposes should be
surrendered within 60 days of such acquisition / purchase

• However if acquired for Foreign Travel within 90 days if the

exchange is in currency and coins and 180 days if it is in
traveler’s cheque or if the same is acquired by person resident
in India

These provisions are not applicable to Foreign Currencies of

Nepal and Bhutan

170
Manner of receipt in Foreign Exchange
Payment for Export can be received :

• in form of Draft, cheque, foreign currency notes/traveler’s

cheque etc. provided the foreign currency so received is
surrendered within the specified time period

• by debit to FCNR /NRE Account

• In rupees from the credit card servicing bank in India where

payment is made via credit card

171
 Manner of receipt in Foreign Exchange
Contd.
• From a rupee account held in the name of exchange house with an
authorised dealer if the amount does not exceed Rs 2 lacs

• In the form of precious metals

• Payment can be received in cash from Foreign Travelers in India if the

same foreign exchange is duly surrendered

• RBI also permits offsetting of export proceeds against import payables etc.
after obtaining prescribed certificate from CA/Cost Accountant in this
regard

172
 Manner of payment in Foreign Exchange

• Payment shall be made in a currency appropriate to the

country of shipment of goods

• Drawal of Foreign Currency means drawal from an authorised

person and includes opening of letter of credit, use of
international credit card etc. which has an effect of creating
foreign exchange liability

173
 Current Account Transactions
• Any person may sell or draw foreign exchange to or from an
authorized person if such sale or drawal is a current account
transaction.

• The Central Government may, in public interest and in

consultation with the Reserve Bank, impose such reasonable
restrictions for current account transactions as may be
required from time to time.

174
 Current Account Transactions Contd.
The definition is inclusive and any expenditure which is not a capital
account transaction will be current account transaction. It includes:

• payments due in connection with foreign trade, other current business,

services, and short-term banking and credit facilities in the ordinary
course of business

• payments due as interest on loans and as net income from investments

• remittances for living expenses of parents, spouse and children residing

abroad, and

• expenses in connection with foreign travel, education and medical care of

parents, spouse and children

175
 Current Account Transactions
Few Examples
• Payment for imports of goods
• Remittance of interest on investment made and
funds borrowed from abroad after tax deductions
• Remittance of Dividend if the investment was
allowed without any condition
• Booking with Airlines/Shipping
• Salary/remuneration to Foreign Directors subject to
restrictions in any other law

176
 Release of Exchange for Travel
The following do not require any approval from RBI:

• Upto USD 10,000 or equivalent in one financial year for one or

more pvt visits abroad (nepal and Bhutan being exempted )

• Upto USD 25,000 for business visits

• Upto USD 1,00,000 for person going to abroad for

employment, education (yearly) and for medical Treatment

177
 Business and Commercial Remittance
Abroad
• Foreign Technology Agreements are permitted except in High
Priority Industries

• Payment can be made on lump sum or Royalty based on sales

or by issue of Equity Shares after deducting TDS

• There are no limitations on royalty payment and payment of

Technical Fees

• No collaboration permitted in Lottery, Gambling etc.

178
 Restrictions on Current Account
Transactions
The following requires prior approval of RBI:

• Gifts and Donations above USD 5000

• Corporate Donation above 1 % of Foreign Exchange Earning during 3 previous

years or USD 5 million, whichever is less

• Commission to Agents abroad for sale of residential/commercial plots in India

above 5 % of Inward Remittance or USD 25000 , whichever is higher

• Consultancy Charges paid abroad for more than USD 1 million

• Reimbursement of Pre-incorporation expenses above 5% of FDI or USD 1 lac

whichever is higher

179
 Prohibited Current Account Transactions
• Drawal of exchange for travel to or with residents of Nepal/Bhutan

• Commission on export to JV/WOS abroad

• Commission on Rupee Trade

• Call back Charges

• Remittance out of Lottery, racing etc.

• Bogus Prizes / Fictitious Schemes etc.

180
 Import of Goods & Services
Import of Goods and Services is also a Current Account Transaction and is
freely permitted however few procedures are required to be followed as

• Obtaining of Import License if required

• Opening of Letter of Credit

• CA Certificate for deduction of TDS for payment made outside

• Gold may be imported by nominated agencies/banks on consignment

basis

181
 Export of Goods & Services
• Exporter should make proper Declaration in prescribed forms
to Authorised Dealers

• Declaration is not required in case Trade Samples, Baggage,

Gifts less than 5 lacs etc.

• Export of Goods on following requires prior approval

– Lease/hire
– Counter Trade
– Export on Elongated Credit Terms

182
 Capital Account Transactions
• "capital account transaction" means a transaction which alters the assets
or liabilities, including contingent liabilities, outside India of persons
resident in India or assets or liabilities in India of persons resident outside
India, and includes transactions like:

– Changes in Assets/ Liabilities

– Transfer/ issue of security
– Borrowing/ Lending
– Export, import or holding of currency or currency notes
– Giving guarantee

• Capital Account Transaction are deemed to be prohibited unless permitted

and Current Account Transactions are deemed to be permitted unless
prohibited

183
Foreign Direct Investment
(FDI)

184
 Investing in India

Government Route
Automatic Route
(FIPB)

General Rule
No prior Permission Required
Only informing RBI within 30
Prior Permission Required
days
of issue and reciept of funds

MAHESHWARI & CO. Advocates & Legal

Consultants 185
 Who can make FDI?
• Person Resident outside India except of
Pakistan
• Entity incorporated outside except Pakistan &
Bangladesh
• Person Resident of Bangladesh & entities
incorporated there can make investment in
India in form of shares and conv. Debentures
with prior approval of RBI

186
 Industrial Policy towards Foreign
Investment

FDI in shares is permitted 100% in all industries except

the following:
• Proposals requiring Industrial License
• Investment exceeding 24% inn SSI reserved items
• Investment in Defense sector upto 26%
• Foreign collaborator having previous tie up
• Acquisition in shares of existing Company
• Prohibited Sectors

187
 Prohibited Sectors
• Retail Trading (except single brand retailing)
• Atomic Energy
• Lottery Business
• Gambling Betting etc.
• Business of chit fund
• Nidhi Company
• Trading in TDRs
• Activity /sector not opened for private sector investment
• Agriculture except few prescribed
• Plantation except tea plantation
• Real Estate Business except few prescribed
• Manufacture of Cigars, cigarettes etc.

188
 Activities requiring Government Approval
• Petroleum Sector
• Investing Companies in Infrastructure and Service Sector
• Defense & Strategic Industries
• Atomic Minerals
• Print Media
• Broadcasting
• Postal Services
• Courier Services
• Establishment & operation of Satellite
• Development of Integrated Township
• Tea Sector
• Asset Reconstruction Company

189
 Penalties for Contravention under FEMA

• The Penalty could be up to thrice the sum involved

where amount is quantifiable

• If the Amount is not quantifiable , penalty upto Rs 2

lacs can be imposed

• If contravention is of continuing nature, further

penalty up to Rs 5000 per day during which the
contravention continues can be imposed

190
• Every society needs a governing mechanism.
• Constitutions constitute the society and the
governing mechanism.
• India has had its Constitution since 1950.

• The constitution of India constitutes India as a

sovereign democratic republic.
• A constitution is a written document that
contains a set of rules for a government.
• It defines the fundamental political principles,
and establishing the structure, procedures,
powers and duties, of a government.
• By limiting the government's own reach, most
constitutions guarantee certain rights to the
people.
• The term constitution can be applied to any
overall law that defines the functioning of a
government.
• WE, THE PEOPLE OF INDIA, having solemnly resolved to
constitute India into a [SOVEREIGN SOCIALIST SECULAR
DEMOCRATIC REPUBLIC] and to secure to all its
citizens:
• JUSTICE, social, economic and political;
• LIBERTY of thought, expression, belief, faith and
worship;
• EQUALITY of status and of opportunity;
• and to promote among them all FRATERNITY assuring
the dignity of the individual and the unity and integrity
of the Nation;
• IN OUR CONSTITUENT ASSEMBLY this twenty-sixth day
of November, 1949, do HEREBY ADOPT, ENACT AND
GIVE TO OURSELVES THIS CONSTITUTION
Fundamental Rights
• Rights are rules of interaction between people. They place
constraints and obligations upon the actions of the state and
individuals or groups.

• These are legal, social, or ethical principles of freedom or

entitlement and are the fundamental normative rules about what is
allowed to people or owed to people, according to some legal
system, social convention, or ethical theory.

• Many such rights form fundamental to the civilization and

recognized by the society.

• And some of the most important rights as are recognized by the

State and enshrined in the Constitution. Such rights are called
fundamental rights.
• While these fundamental rights are universal,
the Constitution provides for some exceptions
and restrictions. (assignment)
Fundamental Rights
• Right to equality
• Right to freedom
• Right against exploitation
• Right to freedom of religion
• Right to cultural expression and education
• Right to constitutional remedies
• Right to equality (14 – 18)
– Equality Before Law
• that state shall not deny to any person equality before
the law or the equal protection of the laws within the
territory of India.
• Right to equality (14 – 18)
– Social Equality and Equal Access to Public Areas
• that the state shall not discriminate against only of
religion, race, sex, place of birth or any of them.
• government can make special provisions for women &
children and for group of citizens who are economically
and socially backward.
• Right to equality (14 – 18)
– Equality of opportunities in matters of public
employment
• that there shall be equality of opportunity for all
citizens in matters relating to employment or
appointment to any office under the state.
• Right to equality (14 – 18)
– Abolition of Untouchability
• that Untouchability is abolished and its practice in any
form is forbidden. the enforcement of any disability
arising out of untouchability shall be an offence
punishable in accordance with law
• Right to equality (14 – 18)
– Abolition of titles
• that no title, not being a military or academic
distinction, shall be conferred by the State. no citizen of
India shall accept any title from any foreign state.
• The awards, Bharat Ratna, Padma Vibhuhan, Padma
Bhusan and Padma Shri called as The national Awards
would not amount to title
• RIGHT TO FREEDOM (19-22)
Article 19 :- It guarantees the citizens of India the
following six fundamentals freedoms:-
• (a) to freedom of speech and expression;
• (b) to assemble peaceably and without arms;
• (c) to form associations or unions;
• (d) to move freely throughout the territory of India;
• (e) to reside and settle in any part of the territory of
India; and
• (g) to practise any profession, or to carry on any
occupation, trade or business.
 – Article 20 :- Protection in respect of conviction for offences
• No person shall be convicted of any offence except for violation of
the law in force at the time of the commission of the act charged
as an offence, nor be subjected to a penalty greater than that
which might have been inflicted under the law in force at the time
of the commission of the offence
• (2) No person shall be prosecuted and punished for the same
offence more than once
• (3) No person accused of any offence shall be compelled to be a
witness against himself
• Article 21 :- Protection of life and personal liberty
•Article 22 :- Protection against arrest and detention in
certain cases
• Right Against Exploitation (23-24)
– Article 23 :- Traffic in human beings prohibited
• Selling and buying of men, women and children like goods
• Immoral traffic in women and children, including prostitution
• Devadasis
• Slavery

– Article 24 :- No child below the age of 14 can be

employed
• Right to freedom of Religion (25 -28)
– Article 25 :- Freedom of conscience and free
profession, practice and propagation of religion
• Secular orgs, conversion
– Article 26 :- Freedom to manage religious affairs
• Own properties, Structured body, not for individuals
– Article 27 :- Prohibits taxes on religious grounds
– Article 28 :- Freedom as to attendance at religious
ceremonies in certain educational institutions
• Cultural and Educational Rights (29-30)
– protection of language, script and culture of
minorities.
• that the citizens have the right to preserve their
language, heritage and backgrounds and cannot be
stifled by major language groups.

• that ‘no minority groups will be denied admission into

any educational system or institution of their choice,
and will also not be deprived of any funds from the
state purely based on religion, caste or language’.
• Cultural and Educational Rights (29-30)
– Right to Establish Educational Institutions
• that religious and language minorities will have the
right to administer and start their own educational
institutions.
• Right to Constitutional Remedies
– Power to issue writs is primarily a provision made to make available
the Right to Constitutional Remedies to every citizen. The supreme
court, and High courts have power to issue writs in the nature of
habeas corpus , quo warranto , mandamus , certiorari ,prohibition etc.,
under Arts. 32 and 226 respectively
• A writ of Habeas corpus requires that a person under arrest should be brought
before a judge or court.
• The Writ of Mandamus is basically issued in the form of command to either
take a particular form of action or refrain from doing it, and is backed with
legal rights and reasoning.
• Prohibition is writ issued by the high court or the Supreme Court to the local
courts to prevent them from proceeding with a case which does not fall under
its jurisdiction.
• Certiorari is a writ issued to lower courts, when these courts have gone
beyong the scope of their jurisdictions.
• Quo Warranto writ is issued to a person who has been wrongly appointed in
the office of authority. This obligates the accused of presenting whatever
evidence he or she has to the court to support the reasons for occupying a
particular post.
• Public-Interest Litigation is a legal contest
fought judicially, to armor the public interest.
It is introduced in a court of law, not by the
aggrieved party but by the court itself or by
any other private party. It is not necessary, for
the exercise of the court’s jurisdiction, that
the person who is the victim of the violation
of his or her right should personally approach
the court.
• Actus reus and mens rea are the foundations for criminal law.
• A crime is a moral wrong, committed against the society as a whole. It
disturbs the peace, and some crimes may cause widespread panic and
disruption of normal activities in a community

• Mens rea and Actus Reus are two essentials of any crime and are the
principles used in most common law countries. Mens rea is the ‘guilty
mind’ or guilty intention to commit a crime, with the intention of causing
hurt to another person, animal, or with the express intention of disturbing
the peace. Actus Reus, however, is the “guilty act”, which is a necessity in
proving that a criminal act was committed.

• "Actus non facit reum nisi mens sit rea”, which literally means “an act
does not make a person guilty unless mind is also guilty”.
• Omission to act-legal causation-intention- recklessness
• In return for every right, the society expects the
citizens to do certain things which are collective.

• Therefore, ten Fundamental Duties were added in Part-

IV of the Constitution under Article 51-A in the year
1976 through the 42nd Constitutional Amendment.

• Fundamental Rights are justiciable, the Fundamental

Duties are non-justiciable. It means that the violation
of fundamental duties, i.e. the non-performance of
these duties by citizens is not punishable.
• 1. to abide by the Constitution and respect its ideals and institutions, the
National Flag, National Anthem;
• 2. to cherish and follow the noble ideals which inspired our national struggle
for freedom;
• 3. to uphold and protect the sovereignty, unity and integrity of India;
• 4. to defend the country and render national service when called upon to do;
• 5. to promote harmony and the spirit of common brotherhood amongst all the
• people of India and to renounce practices derogatory to the dignity of women;
• 6. to value and preserve the rich heritage of our composite culture;
• 7. to protect and improve the natural environments including forests, lakes,
rivers and wildlife;
• 8. to develop the scientific temper, humanism and the spirit of inquiry and
reform;
• 9. to safeguard public property and not to use violence; and
• 10. to serve towards excellence in all spheres of individual and collective
activity.
• Besides, a new duty has been added after the passage of Right to
Education Act, 2009. “A parent or guardian has to provide opportunities
for the education of his child/ward between the age of six and fourteen
years.
• Indian Legal System
– Sources of Law
• The primary source of law is in the enactments passed
by the Parliament

• legislature is a kind of deliberative assembly with the

power to pass, amend, and repeal laws. The law
created by a legislature is called legislation or statutory
law.
• Legislatures are known by many names, the most
common being parliament
• The process begins with a Member of Parliament, introducing a Bill.

• A Bill is a draft form of a law.

• The LokSabha, takes up the Bill for discussion.

• Thereafter, the Bill is accepted/rejected or sent to a ‘select

committee’ for necessary revision.
• If the Bill is accepted, it would be sent to the other House of
Parliament (Rajya Sabha).

• When the Bill is passed in both Houses, the Bill is sent for the
assent of the President, and on his assent the Bill becomes an Act.
• Another source of law is the tradition of common
law.
– On the basis of usage, customs and prevailing notions
of equity and justice , judges decided cases.
– Judges relied on prior judgments
– As similar cases were decided alike, the reasoning and
principles came to be formulated – ‘body of judge
made law’ developed and came to be known as
common law.
– Where there was no relevant legislation, common law
came to be was adopted.
Thus, Secondary source of law is the judgments
of the Supreme Court, High Courts and some
of the specialized Tribunals.

The Constitution provides that the law declared

by the Supreme Court shall be binding on all
courts within India.
• Civil and Criminal
• State took over the privilege of King as the
sovereign.
• Not abiding by the law of the sovereign
attracted punishment.
• Thus, any law which prescribes a punishment
can be termed as criminal law.
• During the British rule, the penal laws were
enacted as the Indian Penal Code.
• The code assimilated all activities which were
considered to be wrong.

• A criminal act is considered to be a public

wrong and the State would take up the
prosecution of the accused.
• Civil law is related to rights, duties and
obligation of individual towards each other.
• Court Structure
– The Supreme Court is the apex judicial body.
– The High Courts (within the state).
– Lower Courts
• Civil and criminal matters
• Criminal Procedure Code – Magistrate/Sessions Court
• Civil Procedure Code – Munsiffs’ Court /District Court
• The Constitution of India came into force on
January 26, 1950. The first general elections
under the new Constitution were held during
the year 1951-52 and the first elected
Parliament came into being in April, 1952
• Parliament is the supreme legislative body of a
country.
• Our Parliament comprises of
the President and the two Houses—
– Lok Sabha (House of the People) and
– Rajya Sabha (Council of States).
• Lok Sabha, as the name itself signifies, is the
body of representatives of the people. Its
members are directly elected, normally once
in every five years by the adult population
who are eligible to vote.

• The minimum qualifying age for membership

of the House is 25 years.
• 552 members
• Rajya Sabha is the Upper House of Parliament. It
has not more than 250 members.

• Members of Rajya Sabha are not elected by the

people directly but indirectly by the Legislative
Assemblies of the various States. Every State is
allotted a certain number of members.

• No member of Rajya Sabha can be under 30 years

of age.
• Twelve of Rajya Sabha members are
nominated by the President from persons who
have earned distinction in the fields of
literature, art, science and social service.
• Rajya Sabha is a permanent body. It is not
subject to dissolution but one-third of its
members retire every two years.
• Rajya Sabha was duly constituted for the first
time on April 3, 1952 and it held its first sitting
on May 13, that year.
• In India, the principles of natural justice are firmly
grounded in Article 14 & 21 of the Constitution.
• Two core points in the concept of principles of
natural justice
– Nemo judex in causa sua - No one should be made a
judge in his own case, or the rule against bias.

– Audi alteram partem - Hear the other party, or the

rule of fair hearing, or the rule that no one should be
condemned unheard.
• Notice – right to present evidence –rebut evidence
• Public law deals with issues that affect the general
public or state - society as a whole. Some of the laws
that its wide scope covers are:
– Administrative law - laws that govern government
agencies, like the Department of Education and the Equal
Employment Opportunity Commission
– Constitutional laws are laws that protect citizens' rights as
afforded in the Constitution
– Criminal laws are laws that relate to crime
– Municipal laws are ordinances, regulations and by-laws
that govern a city or town
– International laws are laws that oversee relations between
nations
Private law affects the rights and obligations of
individuals, families, businesses and small
groups and exists to assist citizens in disputes
that involve private matters.
Directive Principles
• Part IV of Indian Constitution deals with
Directive Principles of our State Policy
(DPSP). The provisions contained in this Part
cannot be enforced by any court, but these
principles are fundamental in the governance
of the country and it shall be the duty of the
State to apply these principles in making laws.
Article 37 : Application of the principles
contained in this Part
• The provisions contained in this Part shall not
be enforced by any court, but the principles
therein laid down are nevertheless
fundamental in the governance of the country
and it shall be the duty of the State to apply
these principles in making laws.
Article 38 : State to secure a social order for the promotion
of welfare of the people
• (1) The State shall strive to promote the welfare of the
people by securing and protecting as effectively as it may a
social order in which justice, social, economic and political,
shall inform all the institutions of the national life.
•
(2) The State shall, in particular, strive to minimise the
inequalities in income, and endeavour to eliminate
inequalities in status, facilities and opportunities, not only
amongst individuals but also amongst groups of people
residing in different areas or engaged in different vocations.
• Article 39 : Certain principles of policy to be followed by the State

• The State shall, in particular, direct its policy towards securing –

(a) that the citizen, men and women equally, have the right to an
adequate means of livelihood;
(b) that the ownership and control of the material resources of the
community are so distributed as best to subserve the common
good;
(c) that the operation of the economic system does not result in the
concentration of wealth and means of production to the common
detriment;
(d) that there is equal pay for equal work for both men and women;
(e) that the health and strength of workers, men and women, and
the tender age of children are not abused and that citizens are not
forced by economic necessity to enter avocations unsuited to their
age or strength;
(f) that children are given opportunities and facilities to develop in a
healthy manner and in conditions of freedom and dignity and that
childhood and youth are protected against exploitation and against
moral and material abandonment.
• Article 39A : Equal justice and free legal aid
– The State shall secure that the operation of the
legal system promotes justice, on a basis of equal
opportunity, and shall, in particular, provide free
legal aid, by suitable legislation or schemes or in
any other way, to ensure that opportunities for
securing justice are not denied to any citizen by
reason of economic or other disabilities.
• Article 40 : Organisation of village panchayats
– The State shall take steps to organise village
panchayats and endow them with such powers
and authority as may be necessary to enable them
to function as units of self-government.
Article 41 : Right to work, to education and to
public assistance in certain cases
• The State shall, within the limits of its
economic capacity and development, make
effective provision for securing the right to
work, to education and to public assistance in
cases of unemployment, old age, sickness and
disablement, and in other cases of
undeserved want.
Article 42 : Provision for just and humane
conditions of work and maternity relief
• The State shall make provision for securing
just and humane conditions of work and for
maternity relief.
Article 43 : Living wage, etc., for workers
• The State shall endeavor to secure, by suitable
legislation or economic organisation or in any other
way, to all workers agricultural, industrial or otherwise,
work, a living wage, conditions of work ensuring a
decent standard of life and full enjoyment of leisure
and social and cultural opportunities and, in particular,
the State shall endeavour to promote cottage
industries on an individual or co-operative basis in rural
areas.
Article 43A : Participation of workers in management of
industries
• Article 44 : Uniform civil code for the citizen
• Article 45 : Provision for free and compulsory education
for children
• Article 46 : Promotion of educational and economic
interests of Scheduled Castes, Scheduled Tribes and other
weaker sections
• Article 47 : Duty of the State to raise the level of nutrition
and the standard of living and to improve public health
• Article 48 : Organization of agriculture and animal
husbandry
• Article 48A : Protection and improvement of environment
and safeguarding of forests and wild life
• Article 49 : Protection of monuments and places and
objects of national importance
• Article 50 : Separation of judiciary from executive
• Article 51 : Promotion of international peace and security
• Public Law is a law which is made for the proper
conduct between individual in a society. It is a
relationship between state and an individual. For Ex-
Constitutional Law, Administrative Law, Criminal and
Civil law.

• Whereas Private law refers to alaw which is made for a

proper conduct between individuals. Example – law of
contract
• Essentially, the difference between public law and
private law is whether the act or acts affect society as a
whole or is an issue between two or more people.
• Partnership is defined as the relationship
between persons who have agreed to share
profits of a business carried on by all, or any of
them acting for all.
• Unlimited liability
• No separate legal entity
• Utmost good faith
• Partners who have entered into partnership
with one another are called individually
‘partners’ and collectively a ‘ firm’, and the
name under which their business is carried on
is called the ‘firm name’
• Rights of partners
– To take part in the conduct of the frim’s business
– To express his opinion on any matter, but in case of difference of
opinion regarding ordinary matters of the business, he is bound
by the majority decision.
– To have access to and inspect and copy any of the books of the
firm
– To share equally in the profits
– To do, in an emergency, all such acts as are reasonably
necessary to protect the firm from lossets
– To claim interest
– To be indemnified by the firm
– To continue in the partnership
– To resist the introduction of a new partner
• Partnership at will means a partnership in which
the partners have not agreed to remain partners
until the expiration of a definite term or the
completion of a particular undertaking. In other
words, it is a partnership that can be dissolved by
any partner at any time without any liability.

• PARTICULAR Partnership is a partnership formed

for a single transaction and it would last as long
as the business is not completed.
• Dissolution of a partnership merely involves a
change in the relation of partners; whereas
the dissolution of firm amounts to a complete
closure of the business. ... The dissolution of
partnership among all partners of a firm is
called dissolution of the firm.