CS.

DEV SHARMA Om Maiyya Sharnam ECL-3

(Company Secretary, Cyber Lawyer, M.com)

(A Complete Law Solution)

(New Syllabus)

CS- EXECUTIVE (MODULE- I)

ECONOMIC & COMMERCIAL LAWS

(ECL)
Edition : 2016-2017

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
About the Author
CS. Dev Sharma, born in Amritsar- India spent his early age in
Trinidad (small island under the shelf of America) and started
his teaching career since he was appointed as a Commerce
Teacher in his own passed out “School of Marks”. In addition
to an Associate member of the Institute of Company
Secretaries Of India, he is also a Practicing Company
Secretary.

He has completed his B.com (H) & Cyber Law from Indian Law
Institute (ILI), New Delhi.

He was elected as a Committee Member of Northern India Regional Council (NIRC) of ICSI for
“Brand Building & Innovative Committee” for the Year 2013 & 2015 and “Research &
Publication Committee” for the year 2014.

As a regular speaker of SIP, EDP, MSOP and more than 72 other National Seminars of ICSI, he is
also famous amongst students and ICSI members for his leading philosophy, Motivating
lectures, creative ideas and well groomed personality and has more than 3000 followers on
Facebook and other social network channels.

He has made multiple efforts to flourish the CS profession by advising on Dress code, abolition
of E T writing system, Student Care cell in ICSI, Re-designing of ICSI portal, improvement of
‘Brand CS’ so he is considered to be a good advisor amongst the committee members.

As a very young age he has achieved a significant platform in the industry and amongst
members.

On corporate front, he was deputed as a Director in BV United (UK) in the year 2008. He has a
spotlight and working experience in the organizations like United Colors of Benetton, Stanley
Electric Co., Texplas India Pvt. Ltd., Merchant Banks, Raghunath Group of Companies, Nijjer
Agro Foods Ltd., HCL, Thomson & Reuters (Pangea 3).

Currently he is the owner of his Law Firm “Dev Sharma Associates” and Faculty at ‘Dev Sharma
Classes’

He is also the member of various NGO’s in India and Denmark and volunteer-leader at many
other social and Anti- Corruption involvements and protests initiated by various political parties
which indicates his unbiased and independence for the society and industry.

He also runs his Institute ‘Dev Sharma Classes’ for Online & Face to face law students pursuing
Company Secretary Course and he shares his expert knowledge and skill. The only institute
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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
where the students not only being educated but also groomed with technical knowledge for
training, new ideas, extra-curricular activities, group discussions, management games, online
lectures, personality development, 24x7 query solution service.

Find me Everywhere

Call or Whatsapp : (+91)75030-87-857 (24x7)

Telegram app : (+91) 75030-87-857

E- mail me : [email protected] | [email protected]

Join me on Facebook : [email protected]

Like me on Facebook : https://www.facebook.com/Dev-Sharma-526720880671580/timeline/

Talk me over Skype : dev.sharma539

Like me on Instagram : CS.dev_sharma

Follow me on Twitter : https://twitter.com/DEVDsc

Free Law Videos : https://www.youtube.com/channel/UCF_kL-A5mAbwnuM3aczyHcg

Paid Law Videos : www.Superprofs.com

BEST WISHES….

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)

Blessed from

Celestial Paradise

Dedicated to

________?

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)

PREFACE
I hereby feel gratification on issuing my book over the subject of “Economic & Commercial
Laws”. The book is exclusive coverage of Company Secretary’s (Executive Paper- New Syllabus).

The main features of the book are as follows:

 It covers the entire syllabus of CS - Executive as per the latest prescribed study materials of ICSI.

 It covers latest case laws and SC & HC Rulings

 The topics in the book have inserted in such a manner so as the students get a grip over
practical aspects of Legal Lessons including Analytical Knowledge with Practical examples.

 The language of the book is user friendly with easy legal language and can be used in the
examination in the same manner including Chart form presentation-easy to understand.

 The Book contains Business Newspaper & Magazine’s Articles, Pictures etc. which inspire the
spirit of learning & Moral Quotes to boost & Self Motivation

 The author has done it’s the best contribution to issue the book for the common benefit of its
readers.

(No Ratnaa… Sirf Samajhnaa…)

Keep In Mind…
- ―Your scarcest resource is your time.”
- ―The busy have no time for tears.”

- ―The person who never makes mistakes

is the person who never does anything.”

- ―Try, try, and try till you succeed.‖

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
CONTENTS

UNIT Page Marks Frequency

TOPIC
NO. No. Weightage

PART A ADVANCE KNOWLEDGE 70 ……

1 FOREIGN EXCHANGE MANAGEMENT ACT, 1999 8 10-12 High

2 FOREIGN CONTRIBUTION ACT, 2010 18 4-6 Medium

3 THE FOREIGN TRADE POLICY (2015-20) 22 2-4 Low

4 THE CONSUMER PROTECTION ACT, 1986 29 6-8 High

5 INTELLECTUAL PROPERTY RIGHT 52 6-8 Medium

6 ARBITRATION & CONCILIATION ACT, 1996 96 4-6 Medium

7 THE TRANSFER OF PROPERTY ACT, 1882 105 4-6 Low

8 THE INDIAN STAMPS ACT, 1899 112 2-4 V.High

9 118 4-6 High

THE INDIAN CONTRACT ACT, 1872

10 174 4-6 High

PREVENTION OF MONEY LAUNDERING ACT

PART B WORKING KNOWLEDGE 30 …….

11 ESSENTIALS COMMODITIES ACT, 1955 178 4-6 Medium

12 184 4-6 Medium

INDUSTRIAL (DEVELOPMENT & REGULATION) ACT, 1952

13 POLLUTION CONTROL & ENVIRONMENTAL PROTECTION 194 6-8 Medium

14 210 4-6 Low

REGISTRATION ACT, 1908

15 214 4-6 Medium

THE SOCIETIES REGISTRATION ACT, 1860

16 217 4-6 Medium

INDIAN TRUST ACT, 1882

17 COMPETITION ACT, 2002 222 2-4 Medium

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
18 LEGAL METROLOGY ACT, 2009 229 2-4 Low

19 SPECIFIC RELIEF ACT, 1963 232 2-4 Low

…. EXAMS PRESENTATION FORMAT & ICSI ECL Question 237 …. …

Papers proves that this book cover 100% marks

UPDATES, AMENDMENT BULLETIN & EXTRA TOPICS 246

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
FOREIGN EXCHANGE MANAGEMENT ACT, 1999 (FEMA)

INTRODUCTION

The Foreign Exchange Management Act (FEMA) is a 1999 Indian law "to consolidate
and amend the law relating to foreign exchange with the objective of facilitating
external trade and payments and for promoting the orderly development and
maintenance of foreign exchange market in India". It was passed in the winter session of
Parliament in 1999, replacing the Foreign Exchange Regulation Act (FERA). This act
seeks to make offenses related to foreign exchange civil offenses. It extends to the whole
of India., [1] replacing FERA, which had become incompatible with the pro-liberalisation
policies of the Government of India. It enabled a new foreign exchange management
regime consistent with the emerging framework of the World Trade
Organisation (WTO). It is another matter that the enactment of FEMA also brought with
it the Prevention of Money Laundering Act of 2002, which came into effect from 1 July
2005

Switch from FERA

FERA, in place since 1974, did not succeed in restricting activities such as the expansion
of transnational corporations (TNCs). The concessions made to FERA in 1991-1993
showed that FERA was on the verge of becoming redundant.[2] After the amendment of
FERA in 1993, it was decided that the act would become the FEMA. This was done in
order to relax the controls on foreign exchange in India, as a result of economic
liberalization. FEMA served to make transactions for external trade
(exports and imports) easier – transactions involving current account for external trade
no longer required RBI‘s permission. The deals in Foreign Exchange were to be
‗managed‘ instead of ‗regulated‘. The switch to FEMA shows the change on the part of
the government in terms of foreign capital

Need for its management

The buying and selling of foreign currency and other debt instruments by businesses,
individuals and governments happens in the foreign exchange market. Apart from
being very competitive, this market is also the largest and most liquid market in the
world as well as in India.[4] It constantly undergoes changes and innovations, which can
either be beneficial to a country or expose them to greater risks. The management of
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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
foreign exchange market becomes necessary in order to mitigate and avoid the
risks. Central banks would work towards an orderly functioning of the transactions
which can also develop their foreign exchange market.[5]
Whether under FERA or FEMA‘s control, the need for the management of foreign
exchange is important. It is necessary to keep adequate amount of foreign exchange
from Import Substitution to Export Promotion.[6]

DEFINITIONS (SECTION 2)

(c) ―Authorized person‖ means an authorized dealer, money changer, off-shore

banking unit or any other person for the time being authorized under sub-section (1) of
section 10 to deal in foreign exchange or foreign securities;

(e) ―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
referred to in subsection (3) of section 6;

(n) ―Foreign exchange‖ means foreign currency and includes,-

(i) Deposits, credits and balances payable in any foreign currency,

(ii) Drafts, traveler‘s cheques, letters of credit or bills of exchange, expressed or drawn
in Indian currency but payable in any foreign currency,

(iii) Drafts, traveler‘s cheques, letters of credit or bills of exchange drawn by banks,
institutions or persons outside India, but payable in Indian currency;

(o) ―Foreign security‖ means any security, in the form of shares, stocks, bonds,
debentures or any other instrument denominated or expressed in foreign currency and
includes securities expressed in foreign currency, but where redemption or any form of
return such as interest or dividends is payable in Indian currency;

(v) ―Person resident in India‖ means-

-A person residing in India for more than one hundred and eighty-two days during the
course of the preceding financial year but does not include;-

(A) A person who has gone out of India or who stays outside India, in either case-
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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
(a) For or on taking up employment outside India, or

(b) For carrying on outside India a business or vocation outside India, or

(c) For any other purpose, in such circumstances as would indicate his intention to stay
outside India for an uncertain period;

(B) A person who has come to or stays in India, in either case, otherwise than-

(a) For or on taking up employment in India, or

(b) For carrying on in India a business or vocation India, or

(c) For any other purpose, in such circumstances as would indicate his intention to stay
in India for an uncertain period;

(i) Any person or body corporate registered or incorporated in India,

(ii) An office, branch or agency in India owned or controlled by a person resident

outside India,

(iii) An office, branch or agency outside India owned or controlled by a person resident
in India;

(y) ―Repatriate to India‖ means bringing into India the realised foreign exchange and-

(i) The selling of such foreign exchange to an authorized person in India in

exchange for rupees; or

(ii) (ii) The holding of realised amount in an account with anauthorised person in
India to the extent notified by the Reserve Bank, and includes use of the realised
amount for discharge of a debt or liability denominated in foreign exchange and
the expression ―repatriation‖ shall be construed accordingly

4. Holding of foreign exchange, etc.

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
Save as otherwise provided in this Act, no person resident in India shall acquire, hold,
own, possess or transfer any foreign exchange, foreign security or any immovable
property situated outside India

RULES & REGULATIONS REGARDING SECTION 3 & 4

Possession and Retention of Foreign Currency

Under FEMA, restrictions prevail only for physical possessions and retention of foreign
currency and not in respect of the foreign currency kept in permissible account with
authorized dealers (banks).

Limits for possessions and retention of foreign currency or foreign Coins:

1. An authorized person can retain and possess foreign currency and coins within
the scope of his authority without any limit;
2. Any person can possess foreign coins without limit;
3. A person residing in India can retain foreign currency notes, bank notes and
foreign currency travelers‘ cheques not exceeding USD 2000/-
4. A person residing in India but not permanently resident therein may possess
without limit, foreign currency in the form of currency notes, bank notes and
travelers cheques if such foreign currency was acquired, held or owned by
him when he was resident outside India and has been brought into India in
accordance with the regulation made under the Act i.e. after making the
declaration when required.

Realisation and Repatriation of Foreign Exchange

A person residing in India to whom any account of foreign exchange is due or has
accrued, shall take all reasonable steps to realise and repatriate to India such foreign
exchange within such period and in such manner as may be specified by the RBI.

5. CURRENT ACCOUNT TRANSACTIONS -

Any person may sell or draw foreign exchange to or from an authorized person if such
sale or drawl is a current account transaction:
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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
Provided that 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 prescribed

Comments

Any person can sell or draw foreign exchange to or from an authorized person
provided that such sale or drawl is a current account transaction. The Central
Government can, in public interest and in consultation with the Reserve Bank, imposes
reasonable restrictions for such transactions.

Save as otherwise provided in this Act, rules or regulations made there under, or with
the general or special permission of the Reserve Bank, no person shall-

(a) Deal in or transfer any foreign exchange or foreign security to any person not being
an authorized person; (b) Make any payment to or for the credit of any person resident
outside India in any manner;

(c) Receive otherwise through an authorized person, any payment by order or on behalf
of any person resident outside India in any manner;

Explanation. - For the purpose of this clause, where any person in, or resident in, India
receives any payment by order or on behalf of any person resident outside India
through any other person (including an authorized person) without a corresponding
inward remittance from any place outside India, then, such person shall be deemed to
have received such payment otherwise than through an authorized person;
(d) 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.

Explanation. – For the purpose of this clause, ―financial transaction‖ means making
any payment to, or for the credit of any person, or receiving any payment for, by order
or on behalf of any person, or drawing, issuing or negotiating any bill of exchange or
promissory note, or transferring any security or acknowledging any debt.

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)

FOREIGN EXCHANGE MANAGEMENT (CURRENT ACCOUNT

TRANSACTIONS) RULES, 2000

3. Prohibition on drawl of Foreign Exchange---Drawl of foreign exchange by any

person for the following purpose is prohibited, namely:

a. a transaction specified in the Schedule I; or

b. a travel to Nepal and/or Bhutan; or

C. a transaction with a person resident in Nepal or Bhutan.

Provided that the prohibition in clause (c) may be exempted by RBI subject to such
terms and

conditions as it may consider necessary to stipulate by special or general order.

SCHEDULE I

TRANSACTIONS WHICH ARE PROHIBITED

(See rule 3)

1. Remittance out of lottery winnings.

2. Remittance of income from racing/riding etc. or any other hobby.

3. Remittance for purchase of lottery tickets, banned/proscribed magazines, football,

Pools, sweepstakes, etc.

4. Payment of commission on exports made towards equity investment in Joint

Ventures/ Wholly Owned Subsidiaries abroad of Indian companies.

5. Remittance of dividend by any company to which the requirement of dividend

balancing is applicable.

6. Payment of commission on exports under Rupee State Credit Route, except

Commission upto 10% of invoice value of exports of tea and tobacco.

7. Payment related to "Call Back Services" of telephones.

8. Remittance of interest income on funds held in Non-Resident Special Rupee

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
(Account) Scheme.

TRANSACTIONS WHICH REQUIRE PRIOR APPROVAL OF THE CENTRAL

GOVERNMENT

(SEE RULE 4)

Purpose of remittance ministry/department of govt. Of India whose

Approval is required

1. Cultural Tours Ministry of Human Resources Development, (Department of

Education and Culture)

2. Advertisement in foreign print media for the purposes other than promotion of
tourism, foreign investments and international bidding (exceeding USD 10,000) by a
State Government and its Public Sector Undertakings Ministry of Finance, (Department
of Economic Affairs)

3. Remittance of freight of vessel chartered by a PSU Ministry of Surface Transport,

(Chartering Wing)

4. Payment of import by a Govt. Department or a PSU on c.i.f. basis (i.e. other than f.o.b.
and f.a.s. basis) Ministry of Surface Transport, (Chartering Wing)

5. Multi-modal transport operators making remittance to their agents abroad

Registration Certificate from the Director General of Shipping

6. Remittance of hiring charges of transponders by

(a) TV Channels

(b) Internet Service providers Ministry of Information and Broadcasting Ministry of

Communication and Information Technology

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
7. Remittance of container detention charges exceeding the rate prescribed by Director
General of Shipping Ministry of Surface Transport (Director General of Shipping)

8. Remittances under technical collaboration agreements where payment of royalty

exceeds 5% on local sales and 8% on exports and lump sum payment exceeds USD 2
million Ministry of Commerce and Industry

9. Remittance of prize money/sponsorship of sports activity abroad by a person other

than International / National / State Level sports bodies, if the amount involved
exceeds USD 100,000. Ministry of Human Resources Development (Department of
Youth Affairs and Sports)

10. Omitted

11. Remittance for membership of P& I Club Ministry of Finance, (Insurance Division)

APPROVAL OF RBI

Schedule III

(See Rule 5)

1. Omitted

2. Release of exchange exceeding USD 10,000 or its equivalent in one calendar year, for
one or more private visits to any country (except Nepal and Bhutan).

3. Gift remittance exceeding USD 5,000 per remitter/donor per annum.

4. # Donation exceeding USD 5000 per remitter/donor per annum.

5. Exchange facilities exceeding USD 100,000 for persons going abroad for employment.

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)

6. Exchange facilities for emigration exceeding USD 100,000 or amount prescribed by

country of emigration.

7. Remittance for maintenance of close relatives abroad,

i. exceeding net salary (after deduction of taxes, contribution to provident fund and
other deductions) of a person who is resident but not permanently resident in India and
– (a) is a citizen of a foreign State other than Pakistan; or

(b) is a citizen of India, who is on deputation to the office or branch or subsidiary or

joint venture in India of such foreign company.

ii. exceeding USD 100,000 per year, per recipient, in all other cases.

Explanation: For the purpose of this item, a person resident in India on account of his

employment or deputation of a specified duration (irrespective of length thereof) or for a

specific job or assignment; the duration of which does not exceed three years, is a

resident but not permanently resident.

8. Release of foreign exchange, exceeding USD 25,000 to a person, irrespective of period

of stay, for business travel, or attending a conference or specialised training or for
maintenance expenses of a patient going abroad for medical treatment or check-up
abroad, or for accompanying as attendant to a patient going abroad for medical
treatment/check-up.

9. Release of exchange for meeting expenses for medical treatment abroad exceeding the
estimate from the doctor in India or hospital/doctor abroad.

10. Release of exchange for studies abroad exceeding the estimate from the institution,
abroad or USD 100,000, per academic year, whichever is higher.

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
11. Commission, per transaction, to agents abroad for sale of residential flats or
commercial plots in India exceeding USD 25,000 or 5% of the inward remittance
whichever is more.

12. Omitted

13. Omitted

14. Omitted

15. $ Remittance exceeding USD 1,000,000 per project, for any consultancy service
procured from outside India.

16. Omitted

17. * Remittance exceeding USD 100,000 by an entity in India by way of reimbursement

Of pre-incorporation expenses.

Every journey starts with a small step

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)

FOREIGN CONTRIBUTION (REGULATION) ACT, 2010

An Act to consolidate the law to regulate the acceptance and utilisation of foreign
contribution or foreign hospitality by certain individuals or associations or companies
and to prohibit acceptance and utilisation of foreign contribution or foreign hospitality
for any activities detrimental to the national interest and for matters connected
therewith or incidental thereto

FOREIGN CONTRIBUTION

Section 2 (h) "foreign contribution" means the donation, delivery or transfer made by
any foreign source,--

(i) of any article, not being an article given to a person as a gift for his personal use, if the
market value, in India, of such article, on the date of such gift, is not more than
Rs.25,000/- as per rules.

(ii) of any currency, whether Indian or foreign;

(iii) of any security

Section 2 (i) "FOREIGN HOSPITALITY" means any offer, not being a purely casual
one, made in cash or kind by a foreign source for providing a person with the costs of
travel to any foreign country or territory or with free boarding, lodging, transport or
medical treatment;

Section 2 (j) "FOREIGN SOURCE" includes,--

(i) the Government of any foreign country or territory and any agency of such
Government;

(ii) any international agency, not being the United Nations or any of its specialised
agencies, the World Bank, International Monetary Fund or such other agency as the
Central Government may, by notification, specify in this behalf;

(iii) a foreign company;

(iv) a corporation, not being a foreign company, incorporated in a foreign country or

territory;

(v) a multi-national corporation referred to in sub-clause (iv) of clause (g);

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
(vi) a company within the meaning of the Companies Act, 2013, and more than one-half
of the nominal value of its share capital is held, either singly or in the aggregate, by one
or more of the following, namely:--

(A) the Government of a foreign country or territory;

(B) the citizens of a foreign country or territory;

(C) corporations incorporated in a foreign country or territory;

(D) trusts, societies or other associations of individuals (whether incorporated or not),

formed or registered in a foreign country or territory;

(E) foreign company;

(vii) a trade union in any foreign country or territory, whether or not registered in such
foreign country or territory;

(viii) a foreign trust or a foreign foundation, by whatever name called, or such trust or
foundation mainly financed by a foreign country or territory;

(ix) a society, club or other association of individuals formed or registered outside India;

(x) a citizen of a foreign country;

PROHIBITION TO ACCEPT FOREIGN CONTRIBUTION. (Section 3)

(1) No foreign contribution shall be accepted by any--

(a) candidate for election;

(b) correspondent, columnist, cartoonist, editor, owner, printer or publisher of a

registered newspaper;

(c) Judge, Government servant or employee of any corporation or any other body
controlled or owned by the Government;

(d) member of any Legislature;

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)

(e) political party or office-bearer thereof;

(f) organisation of a political nature as may be specified under sub-section (1) of section
5 by
the Central Government;

(g) association or company engaged in the production or broadcast of audio news or

audio visual news or current affairs programmes through any electronic mode, or any
other electronic form as defined in clause (r) of sub-section (1) of section 2 of the
Information Technology Act, 2000 or any other mode of mass communication;

(h) correspondent or columnist, cartoonist, editor, owner of the association or company

referred to in clause (g).

Explanation.--In clause (c) and section 6, the expression "corporation" means a

corporation owned or controlled by the Government and includes a Government
company as defined in section 617 of the Companies Act, 1956.

(2) (a) No person, resident in India, and no citizen of India resident outside India, shall
accept any foreign contribution, or acquire or agree to acquire any currency from a
foreign source, on behalf of any political party, or any person referred to in sub-section
(1), or both.

(b) No person, resident in India, shall deliver any currency, whether Indian or foreign,
which has been accepted from any foreign source, to any person if he knows or has
reasonable cause to believe that such other person intends, or is likely, to deliver such
currency to any political party or any person referred to in sub-section (1), or both.

(c) No citizen of India resident outside India shall deliver any currency, whether Indian
or foreign, which has been accepted from any foreign source, to--

(i) any political party or any person referred to in sub-section (1), or both; or

(ii) any other person, if he knows or has reasonable cause to believe that such other
person intends, or is likely, to deliver such currency to a political party or to any person
referred to in sub-section (1), or both.

(3) No person receiving any currency, whether Indian or foreign, from a foreign source
on behalf of any person or class of persons, referred to in section 9, shall deliver such
currency--

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
(a) to any person other than a person for which it was received, or

(b) to any other person, if he knows or has reasonable cause to believe that such other
person intends, or is likely, to deliver such currency to a person other than the person
for which such currency was received

Be busy but take it easy

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
FOREIGN TRADE POLICY (2015-2020)*

INTRODUCTION & HISTORY OF FTP

The UPA Government has assumed office at a challenging time when the entire world
is facing an unprecedented economic slow-down. The year 2009 is witnessing one of the
most severe global recessions in the post-war period. Countries across the world have
been affected in varying degrees and all major economic indicators of industrial
production, trade, capital flows, unemployment, per capita investment and
consumption have taken a hit. The WTO estimates project a grim forecast that global
trade is likely to decline by 9% in volume terms and the IMF estimates project a decline
of over 11%. The recessionary trend has huge social implications. The World Bank
estimate suggests that 53 million more people would fall into the poverty net this year
and over a billion people would go chronically hungry.

Though India has not been affected to the same extent as other economies of the world,
yet our exports have suffered a decline in the last 10 months due to a contraction in
demand in the traditional markets of our exports. The protectionist measures being
adopted by some of these countries have aggravated the problem. After four clear
quarters of recession there is some sign of a turnaround and the emergence of ‗green
shoots‘, though I would be hesitant to hazard a guess on the nature and extent of this
recovery and the time the major economies will take to return to their pre-recession
growth levels. Announcing a Foreign Trade Policy in this economic climate is indeed a
daunting task. We cannot remain oblivious to declining demand in the developed
world and we need to set in motion strategies and policy measures which will catalyse
the growth of exports.

FOREIGN TRADE POLICY AND PROCEDURE 2015-20

India‘s Foreign Trade Policy (FTP) has, conventionally, been formulated for five years at
a time and reviewed annually. The focus of the FTP has been to provide a framework of
rules and procedures for exports and imports and a set of incentives for promoting
exports. The FTP for 2015-2020 seeks to achieve the following objectives:
(i) To provide a stable and sustainable policy environment for foreign trade in
merchandiseand services;
(ii) To link rules, procedures and incentives for exports and imports with other
initiativessuch as ―Make in India‖, ―Digital India‖ and ―Skills India‖ to create an
―Export PromotionMission‟ for India;
(iii) To promote the diversification of India‘s export basket by helping various sectors
of theIndian economy to gain global competitiveness with a view to promoting
exports;
(iv) To create an architecture for India‘s global trade engagement with a view to
expanding itsmarkets and better integrating with major regions, thereby

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
increasing the demand for India‘sproducts and contributing to the government‘s
flagship ―Make in India‖ initiative;
(v) To provide a mechanism for regular appraisal in order to rationalise imports and
reduce the trade imbalance. Exports should not merely be a function of
marketable surplus but should also reflect anenhancement of economic capacity
and development. Foreign Trade Policy envisages:
 Employment creation in both manufacturing and services through the generation
offoreign trade opportunities
 Zero defect products with a focus on quality and standards;
 A stable agricultural trade policy encouraging the import of raw material
whererequired and export of processed products;
 A focus on higher value addition and technology infusion;
 Investment in agriculture overseas to produce raw material for the Indian
industry;
 Lower tariffs on inputs and raw materials; and
 Development of trade infrastructure and provision of production and
exportincentives.

FOCUS OF THE FOREIGN TRADE POLICY (FTP)

The Foreign Trade Policy is primarily focused on accelerating exports. This is sought to
be implemented through various schemes intended to exempt and remit indirect taxes
on inputs physically incorporated in the export product, import capital goods at
concessional duty, stimulate services exports and focus on specific markets and
products. The Policy attempts to dovetail these schemes with the specific market access
openings that India has achieved through negotiations with its trading partners for
various bilateral and regional trading arrangements.

LEGAL BASIS OF FOREIGN TRADE POLICY (FTP)

The Foreign Trade Policy 2015-20, is notified by Central Government, in exercise of
powers conferred under Section 5 of the Foreign Trade (Development & Regulation)
Act, 1992, as amended. The Foreign Trade Policy, 2015-20 came into force with effect
from 01.04.2015

AMENDMENT TO FOREIGN TRADE POLICY (FTP)

Central Government, in exercise of powers conferred by Section 5 of FT (D&R) Act,
1992, as amended from time to time, reserves the right to make any amendment to the
FTP, by means of notification, in public interest.

DURATION OF FOREIGN TRADE POLICY (FTP)

The Foreign Trade Policy (FTP), 2015-2020, incorporating provisions relating to export
and import of goods and services, shall come into force with effect from the date of
notification and shall remain in force up to 31st March, 2020, unless otherwise specified.

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
All exports and imports made upto the date of notification shall, accordingly, be
governed by the relevant FTP, unless otherwise specified.

TRANSITIONAL ARRANGEMENTS
Any License / Authorisation / Certificate / Scrip / any instrument bestowing financial
or fiscal benefit issued before commencement of FTP 2015-20 shall continue to be valid
for the purpose and duration for which such License/Authorisation/ Certificate / Scrip
/ any instrument bestowing financial or fiscal benefit Authorisation was issued, unless
otherwise stipulated.

"Capital Goods" means any plant, machinery, equipment or accessories required for
manufacture or production, either directly or indirectly, of goods or for rendering
services, including those required for replacement, modernisation, technological up-
gradation or expansion. It includes packaging machinery and equipment, refrigeration
equipment, power generating sets, machine tools, equipment and instruments for
testing, research and development, quality and pollution control. Capital goods may be
for use in manufacturing, mining, agriculture, aquaculture, animal husbandry,
floriculture, horticulture, pisciculture, poultry, sericulture and viticulture as well as for
use in services sector.

"Counter Trade" means any arrangement under which exports/imports from /to India
are balanced either by direct imports/exports from importing/exporting country or
through a third country under a Trade Agreement or otherwise. Exports/ Imports
under Counter Trade may be carried out through Escrow Account, Buy Back
arrangements, Barter trade or any similar arrangement. Balancing of exports and
imports could wholly or partly be in cash, goods and/or services.

"Drawback on deemed export‖ in relation to any goods manufactured in India and

supplied as deemed exports, means the rebate of duty or tax, as the case may be,
chargeable on any imported materials or excisable materials used or taxable services
used as input services in the manufacture of such goods.

"Jobbing" means processing or working upon of raw materials or semi-finished goods

supplied to job worker, so as to complete a part of process resulting in manufacture
orfinishing of an article or any operation which is essential for aforesaid process.

"Licensing Year" means period beginning on the 1st April of a year and ending on the
31st
March of the following year.

"Managed Hotel" means hotels managed by a three star or above hotel/ hotel chain
under an operating management contract for a duration of at least three years between
operating hotel/ hotel chain and hotel being managed. Management contract must
necessarily cover the entire gamut of operations/ management of managed hotel.
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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
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"Manufacture" means to make, produce, fabricate, assemble, process or bring into

existence, by hand or by machine, a new product having a distinctive name, character
or use and shall include processes such as refrigeration, re-packing, polishing, labelling,
Re-conditioning repair, remaking, refurbishing, testing, calibration, re-engineering.
Manufacture, for the purpose of FTP, shall also include agriculture, aquaculture, animal
husbandry, floriculture, horticulture, pisciculture, poultry, sericulture, viticulture and
mining.

"Manufacturer Exporter" means a person who exports goods manufactured by him or

intends to export such goods.

―Merchant Exporter‖ means a person engaged in trading activity and exporting or

intending to export goods.

―NC‖ means the Norms Committee in the Directorate General of Foreign Trade for
approval of adhoc input –output norms in cases where SION does not exist and
recommend SION to be notified in DGFT.

"Notification" means a notification published in Official Gazette.

"Order" means an Order made by Central Government under the Act.

"Registration-Cum-Membership Certificate" (RCMC) means certificate of registration

and membership granted by an Export Promotion Council / Commodity Board /
Development Authority or other competent authority as prescribed in FTP or
Handbook of Procedures
―SCOMET‖ is the nomenclature for dual use items of Special Chemicals, Organisms,
Materials, Equipment and Technologies (SCOMET). Export of dual-use items and
technologies under India‘s Foreign Trade Policy is regulated. It is either prohibited or is
permitted under anauthorization.
"Services" include all tradable services covered under General Agreement on Trade in
Services (GATS) and earning free foreign exchange. "Service Provider" means a person
providing:
(i) Supply of a ‗service‘ from India to any other country; (Mode1- Cross border
trade)
(ii) Supply of a ‗service‘ from India to service consumer(s) of any other country;
(Mode 2-Consumption abroad)
(iii) Supply of a ‗service‘ from India through commercial presence in any other
country. (Mode3 – Commercial Presence.)
(iv) Supply of a ‗service‘ from India through the presence of natural persons in any
othercountry (Mode 4- Presence of natural persons.)

IMPORTER-EXPORTER CODE (IEC) NUMBER / E-IEC

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
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An IEC is a 10-digit number allotted to a person that is mandatory for undertaking any
export/import activities. Now the facility for IEC in electronic form or e-IEC has also
been operationalised.
(a) Application for obtaining IEC can be filed manually and submitting the form in
the office ofRegional Authority (RA) of DGFT. Alternatively, Exporters /
Importers shall file an applicationin ANF 2A format for grant of e-IEC. Those
who have digital signatures can sign and submitthe application online along
with the requisite documents. Others may take a printout of theapplication, sign
the undertaking/declaration, upload the same with other requisitedocuments
and thereafter submit the signed copy of the online application form to
concernedjurisdictional Regional Authorities (RA) either through post or by
hand.
(b) Deficiency in the application form has to be removed by re-loging onto ―Online
IEC application‖ on DGFT website and filling the form again by paying the
requisite applicationprocessing charges.
(i) Details of the entity seeking the IEC:
1. PAN of the business entity in whose name Import/Export would be done
(Applicantindividual in case of Proprietorship firms).
2. Address Proof of the applicant entity.
3. LLPIN /CIN/ Registration Certification Number (whichever is applicable).
4. Bank account details of the entity. Cancelled Cheque bearing entity‘s pre-printed
name orBank certificate in prescribed format ANF2A(I).
(ii) Details of the Proprietor/ Partners/ Directors/ Secretary or Chief Executive of
the Society/Managing Trustee of the entity:
1. PAN (for all categories)
2. DIN/DPIN (in case of Company /LLP firm)
(iii) Details of the signatory applicant:
1. Identity proof
2. PAN
3. Digital photograph

PRINCIPLES OF RESTRICTIONS
DGFT may, through a Notification, impose restrictions on export and import, necessary
for: -
(a) Protection of public morals;
(b) Protection of human, animal or plant life or health;
(c) Protection of patents, trademarks and copyrights, and the prevention of
deceptive practices;
(d) Prevention of use of prison labour;
(e) Protection of national treasures of artistic, historic or archaeological value;
(f) Conservation of exhaustible natural resources;
(g) Protection of trade of fissionable material or material from which they are
derived;
(h) Prevention of traffic in arms, ammunition and implements of war.
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STATUS HOLDER
(a) Status Holders are business leaders who have excelled in international trade and
havesuccessfully contributed to country‘s foreign trade. Status Holders are
expected to not onlycontribute towards India‘s exports but also provide
guidance and handholding to newentrepreneurs.
(b) All exporters of goods, services and technology having an import-export code
(IEC)number shall be eligible for recognition as a status holder. Status
recognition depends uponexport performance. An applicant shall be categorized
as status holder upon achieving exportperformance during current and previous
two financial years, as indicated in Foreign TradePolicy. The export performance
will be counted on the basis of FOB value of export earnings infree foreign
exchange.
(c) For deemed export, FOR value of exports in Indian Rupees shall be converted in
US$ at theexchange rate notified by CBEC, as applicable on 1st April of each
Financial Year.
(d) For granting status, export performance is necessary in at least two out of three
years.

STATUS CATEGORY
Status Category Export Performance
FOB / FOR (as converted) Value
(in US $ million)
One Star Export House 3
Two Star Export House 25
Three Star Export House 100
Four Star Export House 500
Five Star Export House 2000

DUTY FREE IMPORT AUTHORISATION SCHEME (DFIA)

(a) Duty Free Import Authorisation is issued to allow duty free import of inputs. In
addition,import of oil and catalyst which is consumed / utilised in the process of
production of exportproduct, may also be allowed.
(b) Provisions of Accounting Imputes, Importability / Exportability of items that
areProhibited/Restricted/ STE, Domestic Sourcing of Inputs, Currency for
Realisation of Export Proceeds and Re-import of exported goods under Duty
Exemption / Remission Scheme of FTPshall be applicable to DFIA also.

QUALITY COMPLAINTS/ TRADE DISPUTES

THE FOLLOWING TYPE OF COMPLAINTS MAY BE CONSIDERED:

(a) Complaints received from foreign buyers in respect of poor quality of the
productssupplied by exporters from India;

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
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(b) Complaints of importers against foreign suppliers in respect of quality of the
productssupplied; and
(c) Complaints of unethical commercial dealings categorized mainly as non-supply/
partialsupply of goods after confirmation of order; supplying goods other than
the ones as agreedupon; non-payment; non-adherence to delivery schedules, etc.

COMMITTEE ON QUALITY COMPLAINTS AND TRADE DISPUTES

COMPOSITION OF THE CQCTD

The CQCTD would be constituted under the Chairpersonship of the Head of Office.
The CQCTD may comprise of the following members:
1. Additional DGFT/Joint DGFT/ (H.O.O): Chairperson
2. Representative of Bureau of India Standard (BIS): Member
3. Representative of Agricultural and Processed Food Products Export
DevelopmentAuthority: Member
4. Representative of the Branch Manager of the concerned Bank: Member
5. Representative of Federation of Indian Exporter Organization / and OR Export
PromotionCouncil: Member
6. Representative of Export Inspection Agency: Member
7. Nominee of Director of Industries of State Government: Member
8. Nominee of Development Commissioner of MSME: Member
9. Officer as nominated by Chairperson: Member Secretary
10. Any other agency, as co-opted by Chairperson: Member.

Taste victory

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
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CONSUMER PROTECTION ACT, 1986

OBJECTIVE OF THE ACT/ WHY COPRA…??

The act is to provide for better protection of the interests of consumers
and for that purpose to make provision for the establishment of
consumer councils and other authorities for the settlement of
consumers‘ disputes and for matters connected therewith.

BASIC RIGHT OF CONSUMERS [SECTION 6]

The basic rights of consumers that are sought to be promoted and protected are:
a) The right to protected against marketing of goods and services which are
hazardous to life and property
b) The right to be informed about the quality, quantity, potency, purity, standard
and price of goods, or service so as to protect the consumer against unfair trade
practices
c) The right to be assured, wherever possible, access to variety of goods and
services at competitive prices;;
d) The right to be heard and to be assured that consumers‘ interest will receive due
consideration at appropriate forums;
e) The right to seek redressed against unfair trade practices or restrictive trade
practices or unscrupulous exploitation of consumers; and
f) The right to consumer education.

CONSUMER PROTECTION COUNCILS

Introduction
The interests of consumers are sought to be promoted and protected under the act inter-
alia by establishment of Consumer Protection Councils at the Central, State and District
levels.
Central Consumer Protection Council
Section 4 provides that the Central Government shall, by notification, establish to be
known as Central Consumer Protection Council, which shall consist of the following
members
(i) The Minister-in-charge of Consumer affairs in the Central Government, who
shall be its Chairman; and

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
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(ii) Such number of other official or non-official members representing such
interests as may be prescribed.
The Central Council shall of 150 members and the term of the Council shall be 3 years.
The Central Council shall meet as and when necessary, but at least one meeting shall be
held every year.

State Consumer Protection Council

Section 7 provides that the state Government shall, by notification, establish a Council
to be known as Consumer Protection Council for (name of state, which shall consist of
the following members;
(i) The minister-in-change of consumer affairs in the state Government, who shall
be its Chairman;
(ii) Such number of other official or non-official members representing such interests
as may be prescribed by the state Government and
(iii) Such number of other official or non-official members, not exceeding ten, as may
be nominated by the Central Government.
The state Council shall meet as and when necessary but not less than two meetings shall
be held every tear. The procedure to be observed in regard to the transaction of its
business at such meetings shall be prescribed by the state Government.

District Consumer Protection Council

Section 8A provides that the state Govt. shall establish for every district, by notification,
a council to be known as the District Consumer Protection Council, which shall consist
of the following members
(i) The Collector of the district (by whatever name called), who shall be its
Chairman; and
(ii) Such number of other of official and non-official members representing such
interests as may be prescribed by the state Govt.
The District Council shall meet as and when necessary but not less than two meetings
shall be held every year.

REDRESSAL MACHINERY UNDER THE ACT

Introduction
The Consumer Protection Act, 1986 provides for three-tier quasi-judicial redressed
machinery at the District, state and National levels for redressed of consumer disputes
and grievances. They are known as Consumer Disputes Redressed Agencies.

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
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District Consumer Disputes Redressed forum

The Act provides for the establishment of a district forum by the state Government in
each district of the state by notification. The state Government may establish more than
one District Forum in a district if it thinks for to do so.
Eligibility of members
Section 10 provides that each District Forum shall consist of
(i) A person who is, or who has been, or is qualified to be, a District Judge, who
shall be its President and
(ii) Two other members, one of whom shall be a woman.
The members of District Forum should be person of ability, integrity and standing; and
should have experience relating to economics, law, commerce, accountancy, industry,
public affairs or administration. They must be graduates and over 35 years of age.
Every member of the District Forum shall hold office for a term of 5 years or up the age
of 65 years, whichever is earlier, and shall be eligible for re-appointment.
Jurisdiction [sec. 11]; section 11 provides for the jurisdiction of the District forum under
the following two criteria;
1. Pecuniary limits: The District forum can entertain complaints where the value of
goods or services and the compensation, if any, claimed is up to Rs. 20 lakhs.
2. Territorial limits: The District Forum can entertain complaints if any of the
opposite party ordinarily resides or carries on business or personally works for
gain or has a branch office; or the cause of action arises within the local limits of
its jurisdiction.

State Consumer Disputes Redressed Commission

The Act provides for the establishment of the state Consumer Disputes Redressed
Commission by the state Government in the state by notification.
Eligibility of members
Section 16 provides that each state commission shall consist of:
(i) A person who is, or has been a justice of a High court appointed by the state
Government (in consultation with the Chief Justice of the High Court), who
shall be its President.
(ii) Not less than two, and not more than such number of members, as may be
prescribed, and one of whom shall be a woman.
The members of state commission should be person of ability, integrity and standing;
and should have experience relating to economics, law, commerce, accountancy,

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
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industry, public affairs or administration. They must be graduates and over 35 years of
age.
Every member of the State Commission shall hold office for a term of 5 years or up to
the age of 67 years whichever is earlier, and shall be eligible for re-appointment.
Jurisdiction [sec.17]: The jurisdiction of the State Commission is as follows:
1. Original jurisdiction: The state Commission can entertain complaints where the
value of the goods or services and the compensation, if any, claimed exceeds
Rs.20 lakhs but does not exceed Rs.1 crore [Pecuniary Limits]
2. The state Commission can entertain complaints if any of the opposite party
ordinarily resides r carries on business or personally works for gain or has a
branch office; or the cause of action arises within the local limits of its
jurisdiction. [Territorial Limits]
3. Appellate jurisdiction: The state Commission also has the jurisdiction to entertain
appeals against the orders of any District Forum within the state.
4. Reversionary jurisdiction; the state commission also has the power to call for the
records and pass appropriate order in any consumer dispute which is pending
before or has been decided by any District Forum of the same state.

National Consumer Disputes Redressed Commission

The Act provides for the establishment of the National Consumer Disputes Redressed
Commission by the Central Government by notification in the Official Gazette.
Eligibility of members
Section 20 provides that the National Commission shall consist of:
(i) A person who is or has been a judge of the Supreme Court, to be appointed
by the Central Govt. (in consultation with the Chief Justice of India) , who
shall be its President; and
(ii) Not less than four, and more than such number of members, as may be
prescribed, and one of whom shall be a woman.
The members of National Commission should be person of ability, integrity and
standing; and should have experience relating to economics, law, commerce,
accountancy, industry, public affairs or administration. They must be graduates and
over 35 years of age.
Every member of the National Commission shall hold office for a term of 5 year or up to
the age of 70 years, whichever is earlier and shall be eligible for re-appointment.

Jurisdiction [Sec. 21]

The jurisdiction of the National Commission is as following:
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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
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1. Original Jurisdiction the National Commission can entertain complaints where
the value of the goods or services and the compensation, if any, claimed exceeds
Rs.1 Crore.
2. Appellate Jurisdiction: The National Commission also has the jurisdiction to
entertain appeals against the original orders of any state Commission.
3. Reversionary Jurisdiction: The Nation Commission also has the power to call for
the records and pass appropriate orders in any consumer dispute which is
pending before or has been decided by any state Commission.
It may be noted that appeal against order of National Commission lies with Supreme
Court only in matters, where it exercises original jurisdiction i.e., when matter is over
Rs.1 Crore.

Time limit for filing the Complaint

A complaint must be filed within two years from the date on which the cause of action
arose. However, Commission may entertain complaint even after the expiry f two years,
if it is satisfied that there was sufficient cause for not filing the complaint within
prescribed period of two years.

Time limit for the Appeal

An appeal to the:
(i) State Commission against the orders of District Forum;
(ii) National Commission against the original orders of state Commission;
(iii) Supreme Court against the original orders of National Commission,
Must be filed within 30 days from the date of receiving the order of District Forum/
state Commission/ National Commission. However the state Commission, National
Commission, Supreme Court may entertain an appeal even after the expiry of said 30
days if it is satisfied that there was sufficient cause of not filing the appeal within the
prescribed period of 30 days.
Further, appellant shall also be required to deposit 50% of the amount required to be
paid as per the order of the District Forum/state Commission/National Commission or
Rs. 25,000/35,000/50,000, respectively, whichever is less.

DEFINITONS [SECTION 2]
Complainant [Sec. 2(1)(b)]
Complainant means----
(a) A consumer;

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
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(b) Any voluntary consumer association registered under any law;
(c) The Central or any state Government
(d) One or more consumers, where there are numerous consumers having the same
interest; or
(e) In case of death of a consumer, his legal heir or representative who or which
makes a complaint.
An association of person to have locus standi as consumer, it is necessary that all the
individuals forming the association must be the consumer having purchased the same
goods or hired the same services from the same party.
In case the affected consumer is unable to file the complaint due to ignorance, illiteracy
or poverty, any recognized consumer association may file the complaint as per the
above clause (b) thus, rule of ‗privity of contract‘ or ‗locus standi‘, which permits only
the aggrieved party to take action, has very rightly been set aside in the spirit of public
interest.

Complaint [Sec. 2(1) (c)]

Complaint means any allegation in writing made by a complainant that----------
(i) An unfair trade practice or a restrictive trade practice has been adopted by any
trader;
(ii) The goods bought by him or agreed to be bought by him suffer from one more
defects;
(iii) The services hired or availed of or agreed to be hired or availed of by him
suffer from deficiency in any respect;
(iv) The trader has charged a price in excess of the price: (a) fixed under any law;
(b) displayed on the goods or any package containing such goods; (c)
Displayed on the price list exhibited by him; or (d) Agreed between the parties;
(v) Goods which will be hazardous to life and property when used are being
offered for sale to the public;
(vi) Services which will be hazardous to life and safety of the public when used are
being offered by the service provider, With a view to obtain any relief provided
by law under this Act.

Consumer [Sec. 2 (1)(d)]

Consumer means-----
(i) In respect of goods, any person who purchases goods for a consideration but
does not include a person who has purchased goods for re-sale or commercial

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
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purpose. Such consideration may be paid or promised or partly paid and partly
promised or under the system of deferred payment;
(ii) Any person who is using the gods, with the permission of the buyer of such
goods as specified in clause (i);
(iii) In respect of service, any person who hires or avails service for a consideration
but does not include a person who has availed service for commercial purpose.
Such consideration may be paid or promised or partly paid and partly promised
or under the system of deferred payment;
(iv) Any person who is beneficiary under the service with the permission f the hirer
of such services as specified in clause (iii);
(v) A person who purchases goods or avails services exclusively for the purpose of
earning his livelihood by means of self employment.

Commercial Purpose: A person who buys goods for re-sale or commercial purposes or
avails services for commercial purpose is specifically excluded from the definition of
‗consumer‘. For example, a person buying one truck or tempo or sewing machine or ne
computer for the purpose of earning his livelihood by self-employment will be eligible
to qualify as consumer. However, if a person buys two typewriters, out of which one is
used by a person employed by him, he will not be eligible to file a complaint as a
consumer because a person buying goods for re-sale or commercial purpose is not a
consumer.
For instance, a lawyer purchased a computer and a printer for his office. The printer
started giving trouble from the day one. The lawyer lodges a complaint under the
Consumer Protection Act. In this case, the printer has not been purchased by the
advocate for any commercial purpose or for resale but for use in his office to improve
efficiency f his office. Therefore he will be treated as consumer and will succeed in his
complaint.
[Sanjay Krishna Kant v. M/s Groovy Communications & Others]

Who is a consumer: Following are some of the important decided cases in this regard:
1. Railway passengers travelling on payment of fare is consumer. [GM, South
Eastern Railways v. Anand Prasad Sinha]
2. Parents who bring the child to hospital and the child both are consumers. [Spring
Meadows Hospital v. Harjot Ahluwalia]
3. Allotters of house by Housing Board are consumers [UP Avas Gram Vikas
Parishad v. Garima Shukla]
4. A person obtaining water from a government agency and paying water bills for
the water supplied is a consumer. However only if the water tax is levied, the

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
person availing service will not be a consumer. [Nagrik Parshad v. Garhwal Jal
Sansthan]
Who is not a Consumer: Following are some of the important decided cases in this
regard:
1. A charitable trust is not a consumer if it has purchased machinery for its
diagnostic center, when only 10% patients are provided free services and charges
are levied on remaining patients. Thus, the use is for ‗commercial purpose‘ and
hence it is not a ‗consumer‘. [Kalpavruksha Charitable Trust v. Toshinwal
Brothers]
2. Person buying goods for manufacture of anther product is not consumer as the
goods were intended for commercial purpose. [Rajeev Metal Works v. MMTC]
3. A hospital will not be liable, if the hospital happens to be a government hospital
where no fee is charged for consultation and treatment, but only a token
registration fee is charged. [Indian Medical Assoc. v. V.P. Shanta & Others]

Goods [Sec. 2(1) (i)]

Goods mean goods as defined in the sale of Goods Act, 1930.
As per sale of Goods Act, goods means every kind of moveable property other than
actionable claims and money; and includes stock and shares, growing crops, grass or
things attached to or forming part of the land which are agreed t be severed before sale
under the contract of sale.
Therefore, most common products would come within the purview of this definition.
Shares have been specifically included in ‗goods‘. However, shares before allotment are
not goods, as they do not exist before the allotment is made. To constitute a consumer,
there must be transaction of goods. Hence, a prospective investor cannot be regarded as
a consumer within the meaning of this Act. [Morgan Stanley Mutual Fund v. Kartik
Das]

Services [Sec. 2 (o)]

Service means service of any description which is made available to potential users and
includes, but not limited to the provision of facilities in connection with banking
financing, insurance, transport, processing, supply of electrical or other energy, board
or lodging or both, housing construction, entertainment, amusement or the purveying
of news f there information, but does not include the rendering f any service any service
free of charge or under a contract personal service.
‗Potential Users‘ mean those who are capable of using the service. [Lucknow
Development Authority v. M.K. Gupta]

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
Contract of Personal Service and Contract for Personal Service:
In contract of personal service, the can over or require what is to be done and how it is
to be done. This is out of the purview of COPRA as the master can always dispense
with the service of the servant. However, in contract for personal service, the person
cannot order what is to done how it is to be done. Services rendered in professional
category could be treated as contract for personal service and hence covered under
CPRA.
Consumer Forums cannot decide disputes arising out of contract of appointment of
personal service. For instance, Civil Servants and Professors in Universities are
appointed under contract of personal service and hence are not covered under COPRA.
[Centre for Research & Industrial Development v. Madan Lal Sahni]
Professional Services like Doctors, Engineers, Chartered Accountants, Company
Secretaries, Advocates, etc. are covered under COPRA. [Ram Ralsh Pal v. Smt. Ranjana]

What is Service: Following are some of the important decided cases in this regard:
1. Passengers travelling by trains on payment of the stipulated fare charged for the
ticket are ‗consumers‘ ant the facility of transportation by rail provided by the
railway administration is a ‗service‘ rendered for consideration as defined in the
Act. [GM, South Eastern Railway v. Anand Prasad Sinha]
2. Similarly telephone services availed for consideration is a service. [District
Manager, Telephone Patna v. Lalit Kr. Baijla]
3. Service rendered to a patient by a medical practitioner (except where the doctor
renders service free of charge to every patient) by way of consultation, diagnosis
and treatment, both medical and surgical, would fall within the ambit of
‗service‘. –Indian Medical Association v. V.P. Shanta & Others]
4. Accepting deposits from public agreeing to pay interest is service. If interest and
principal is not paid on due dates, it is deficiency f service and consumer forums
can issue orders for payment of outstanding dues. [Kalawati v. United Vaish]
5. Education is an activity which comes within the ambit of ‗service‘ because
‗service‘ means service of any description which is made available t potential
users under this Act. [The CBSE v. Consumer Disputes Redressed Forum]

What is not Service: Following are some of the important decided cases in this regard:
1. Conducting examination is not service as a candidate for examination could not
be regard as a person who has hired or availed the service of the University or
Board for consideration. Thus, the University or Board in conducting
examination is not performing any service. [Chairman, Board f Examination v.
Mohideen Abdul Kader]

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
2. Registration of documents by government is not a service. A person presenting a
document for registration is not a consumer. There is no commercialization
involved. Officers who are doing the work of registration are doing the statutory
duty. [S.P. v. Collector of Stamps]
3. Payment of taxes is not hiring is not hiring of services. No complaint can be
lodged against Municipal Corporation for failure to carry out its statutory duty
of proper maintenance of drains, as payment of taxes is not hiring of services.
[Signet Corporation, MCD, New Delhi]
4. Promotional activities of state and its agencies are not services and complainants
are not consumer, as facilities are provided by state and its agencies without any
specific consideration. [T.N. Sethuraman v. Goa, Daman and Diu Industrial
Development Corporation]
5. Even if a litigant pays court fees, he is not hiring services of Court. The court is
exercising sovereign function of dispensation of justice. Thus, complaint against
court for delay in judgment is not maintainable under Consumer Forums.
6. Free Services are not covered under COPRA. The employer (Govt. In this case)
deducted insurance premium form salary of employee, but failed to make
payment to LIC. When the employee died, LIC refused t pay as premium was
not paid. It was held that the employer was giving free service and hence he is
not liable. [State of Orissa v. LIC]
7. However, if the employer is agent of LIC for the purpose of colleting premium,
then general principles of agency as contained in Contract Act shall apply.
Employee has to make payment of compensation if employer has deducted
premium from salary of employee. [Delhi Electric Supply v. Basanti Devi]

Consumer Dispute [Sec. 2 (1) (e)]

Consumer dispute means dispute where the person against whom a complaint has been
made, denies or disputes the allegation contained in the complaint.
The allegations referred to may relate to any unfair trade practice adopted by a trader,
or against any defect in goods or against any deficiency in services or against charging
an exorbitant price.

Defect [Sec. 2(1) (f)]

Defect means any fault, imperfection or shortcoming in the quality, quantity, potency,
purity or standard of any goods which is required to be maintained by or under any
law for the time being in force or under any contract, express or implied, or as is
claimed by the trader in any manner whatsoever in relation to any goods.
In the case of Abhaya Kumar Panda v. Bajaj Auto Ltd., where the motor vehicle sold to
the petitioner was found to have major manufacturing defects which could not be
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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
removed despite several repairs, it was held to be ‗defective‘ and the vehicle was
ordered to be replaced.

Deficiency [Sec. 2(1) (g)]

Deficiency means any fault, imperfection, shortcoming or inadequacy in the quality
nature and manner of performance of any service which is required to be maintained by
under any law for the time being in force or has been undertaken to be performed by a
person in pursuance of a contract or other or otherwise in relation to any service.
In order to get any loss compensated for deficiency in service, mere loss or injury is not
enough. Loss or injury must be coupled with negligence. The term ‗negligence‘ means
absence of reasonable care which a prudent person is expected to observe in a given set
f circumstances. Thus, no compensation can be claimed even in case of loss or damage,
if it was not caused due to negligence of the person. [Consumer Unity and Trust Society
v. Bank of Baroda]
For instance, the driver of a bus suddenly, applied the brake to avoid a collision with bullock
cart and with the result the bus met with an accident resulting in the death of a passenger. The
legal heir’s f the deceased lodged a complaint with Consumer Forum for compensation on the
ground of ‘deficiency in service’. In the present case, the accident that occurred had nothing to do
with service provided to the deceased because the injury sustained had nothing to do with the
service provided but due to the direct result f the accident. Further, there was an element of
negligence on the part of driver, as he had applied the brakes to avoid a collision .hence, the heirs
of the deceased will not succeed in their complaint against the transport company.
[Chairman, Thiruvallavar Transport Corporation v. Consumer Protection Council]
It may be noted that COPRA does not have any jurisdiction in respect of any matter, if
there is some special law dealing with that matter.

What is Deficiency in Service: Following are some of the important decided cases in
this regard:
1) Negligence in settlement of Insurance claim. [Div. Manager, LIC of India v.
Bhavanam Srinivas Reddy]
2) Ornaments kept in the locker were found lost though the certificate recorded by
the custodian of the bank stated all lockers operated during the day had been
checked and found properly locked. [Punjab National Bank v. K.B. Shetty]
3) Issuing drafts on foreign banks where the bank had no account causing
inconvenience to the customer. [Tarun Kumar Soni v. Punjab National Bank]
4) Honouring forged cheques [Corporation bank v. Himalaya (P) Ltd.]
5) Debiting cherubs to wrong accounts [Corporation Bank v. Himalaya (P) Ltd.]

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
6) Failure to give possession of the house after receiving the price and registering
the flat in favour of the allotted. [Lucknow development Authority v. Roop
Kishore Tandon]
7) Failure of the railways to check unauthorized person from entering and
occupying first Class compartments. [N. Prabhakaran v. General Manager,
Southern Railway, Madras]
8) Non delivery of letter by a courier company. [Skypack Couriers Pvt. Ltd. V.
Anupama Bagla]
9) Theft of car from parking of a hotel constitutes the deficiency in service. [Atul
Virmani v. Asian Hotels Limited]
10) Delay in issue of units by UTI of about 18 months is deficiency in service. In this
case, 15% interest was awarded as compensation. [UTI. V. Smt. Bandana Roy]
11) To run a boat club without having necessary equipment and personnel trained
for meeting an emergency constitutes gross negligence and serious deficiency in
service. [Sandhu v. Union of India]
12) Parking vehicle in parking lot on payment of parking charges is bailment.
Persons responsible for management of parking area is liable to make god the
loss due theft. [Mahesh Enterprises v. Arun Kumar Gumber]
13) The transportation of goods through carriers cannot be considered as for
commercial purposes and the transporter is liable for any deficiency in Service.
[Express Goods Service v. Standard Textile Mills]
What is not Deficiency in Service: Following are some of the important decided cases
in this regard:
1) Refusal to give credit t customers on grounds that the unit belonged to a sick
industry or was not economically viable on any other grounds would not fall
under ‗deficiency‘ of service as a bank is the judge of the credit worthiness of any
party. [Asha Sharma v. Union of India]
2) Failure to deliver goods carried by the railways is not covered clause ‗deficiency
in service rendered‘ of Consumer Protection Act. But it is covered under Railway
Claims Tribunal Act, 1987 and thus required to be compensated in that Act.
[Union of India v. M. Adaikalan]
3) Disconnection of electric supply for non-payment of charge by consumer is not
deficiency in service. Electricity Board has power to discontinue supply. It was
also held that electricity board can make supplementary bill for escaped bill.
[Swastic Industries. v. Maharashtra State Electricity Board]
4) Disconnecting power supply for tampering with electric meter is not deficiency
in service. [CESC Limited v. Sumitra Pal]
5) In Airline service, delays due to bad weather and poor visibility are unforeseen
circumstances and hence there is no deficiency in service. Compensation can be
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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
awarded only if there is negligence and loss is suffered by complainant on
account of negligence. [Indian Airlines Limited v. Dr. V. P. J. Philip]

IMPORTANT DECIDED CASES

Abhilash Jewellery v. New India Assurance Co. Ltd.
The complainant took a Jeweler‘s Block Policy worth Rs. 1.15 cr. During the currency of
the policy, the complainant lodged a claim for the loss of gold ornaments, which was
being carried by one of its employees. The claim was repudiated by the respondent
holding that the loss of gold occasioned as it was in the custody of an apprentice, he not
being an employee, it was not covered under the policy, and as such, the claim was
repudiated
The National Commission held that the apprentice is also very well covered the said
policy and the denial of a valid claim is a deficiency in service and hence the petitioner
was entitled to the value of the gold and the interest.

Super Teakwood Industries v. Oriental Insurance Co.

If the insurance company has not given a well-reasoned reply as to why the claim of the
insured was not acceptable to it, it would be a clear case of non-application of mind and
lack of good faith on the part of the insurance company. In such cases, the insurance
company would be liable for the deficiency in service in setting the claim.

LIC v. Mumtaji Begum

Where the date of birth of the insured was in dispute and not accepted by the insurance
company, the Forum under the COPRA had no jurisdiction to entertain any complaint
against the insurance company. This is for the reason that there is no concluded contract
in such cases and hence no question of payment of insurance amount arises.

Mohd. Zuber v. SBI

In this case, the complainant claimed a huge amount of compensation of Rs.
1,11,25,00,000/- for the irresponsible behavior of the bank. However, the National
Commission rejected the claim considering the large scale on which the complainant
carried on his business and hence not a consumer under COPRA.

C.P. Belliapa v. Indo American Hybrid Seeds

In this case, the complainant was engaged in cultivating cardamom and purchased
tissue culture plants from the opposite party. The plants, however, failed to yield the
output. The complainant filed a complaint for the deficiency in service. It was held that
the purchase of cardamom plants was for better cultivation and better profits and hence
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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
the complainant had bought these for commercial purpose and he cannot be considered
a consumer under the Act.

Kerala State Electricity board v. Reveendran

The National Commission considered a complaint regard fall in electricity voltage
damaging the machine in a plastic factory and affecting production. The National
Commission award compensation to the complainant.

J.K. Puri Engineers v. Mohan Breweries And Distilleries Ltd.

The company maintained a guesthouse for the use of its managing director and other
executives. It entered into a contract with the appellants for the installation of central air
conditioning system. The allegation was that the system installed did not function,
developed snags and there was leakage of water from dusting system. The appellant
foiled to make good the defect and took the plea that the air conditioning system was
purchased for the commercial purpose. However, the Supreme Court held that the
guesthouse was intended for the residence of the managing director and other
executives of the company during their visits to the city. The system was installed only
to provide comfort to these persons. It was not used for any commercial purpose and
hence awarded compensation.

ShashiKant Krishnaji Dole v. Shishtan Prasarak Mandli

In this case, a school onward a swimming pool offered swimming facility n the
payment of a fee and has engaged a coach for this purpose. The complainant had
enrolled their son for learning swimming under the guidance of the coach. It was
alleged that due to the negligence of the coach the boy was drowned and met with his
death. The school denied that it had engaged the services of the coach and denied any
responsibility on its part. However, the National Commission held that both the school
as well as the coach was responsible for the death of the boy. It was found that the
coach was negligent and he did not provide the necessary life saving mechanism to
save the lives of trainee students in case of accidents. Accordingly, a compensation of
the Rs. 1.5 lakh was granted.

Regional Provident Fund Commissioner, Faridabad v. Shiv Kumar Joshi

Failure to settle P.F. claim in time is a deficiency in service. It was held that settling the
P.F. claim is a kind of service on payment of administrative charges.

Indian Airlines v. Jiteshwar Ahir

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
When the complainant passenger occupied his seat in an aircraft, an announcement was
made that his luggage was lying on the ground and so he should collect it. When the
complainant was stepping out on to the staircase, the ladder was suddenly removed as
a result of which he fell down on the ground and sustained bodily injuries. It was held
that there was a dangerous deficiency in service and having regard to the expert
opinion and other medical reports a compensation of Rs. 4 lakh and Rs. 1 lakh for
mental agony and distress plus cost was ordered.
Poonam Verma v. Ashwin Patel
A doctor qualified to practice homeopathic system of medicines treated a patient with
allopathic medicines and the patient died. It was held the doctor was guilty of
negligence.

Union of India v. Nathmal Hansaria

Fall from a running train while passing through the vestibule passing is a case of
deficiency in service.

Jeetendra Kumar v. Oriental Insurance Co. Ltd.

The Supreme Court held that where fire had occurred due to mechanical failure and
due to any act or omission of the driver the insurance company cannot repudiate the
claim because of lack of valid driving license.

National Insurance Co. Ltd. V. Seema Malhotra

A cheque was issued under a contract of insurance of motorcar, which was dishonored.
Meanwhile the car met with an accident and was badly damaged also killing the
insured. The claim for the insured amount was repudiated by the insurance company.
The Supreme Court held that the insurer need not to perform his part of the promise
when the other party fails to perform and thus not liable to pay the insured amount.

Superintendent of Post Offices v. Upbhogta Suraksha Parishad

The respondent in this claim alleged that as a result of delayed delivery of a postal
article the consumer could not get admission to an educational institution.
It was contented on behalf of the postal department that it enjoyed immunity from any
action whatsoever for any loss, non-delivery, or damage to any postal article in the
course of transmission by post as per the provisions of Sec. 6 of the Post Offices Act. The
National Commission held that in this case, there was a willful delay on the part of the
postal authorities and hence it will not be covered under Post Offices Act but it is a case
of deficiency in services under the CPRA.

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
Sreedharan Nair v. Registrar, University of Kerala
Refusal to provide LLB Degree Certificate on completion of course on the ground that
the qualifying examination on the basis of which the student was admitted has not been
recognized by the Kerala Law College amounts to deficiency in service.
Isabella Thoburn College v. Ms. Fatima Effendi
It was held that non-refund of admission fee is not a deficiency of service on part of the
university because admission fee is consideration for admission and respondent herself
voluntarily withdrawing admission from one university to join another institute cannot
claim refund of admission fee.

National Insurance Co. Ltd. V. Shygems

Parcels of precious stones sent by insured to London lost in transit. Insured claiming
settlement of amount in pounds. Insurer claimed payment could only be made in
Indian rupees.
It was held that claim to be settled only in Indian Rupees as title of goods was not
passed to consignee in London and respondent continued to be owner having insurable
in goods.

Synoo Industries v. State Bank of Bikaner Jaipur

Appellants alleged that respondent is guilty of deficiency in service as they without any
good reason frozen the sanctioned working facilities without prior intimation and
sought direction to respondent together with compensation for loss suffered by it.
National Commission didn‘t find it a fit case under Consumer Protection Act and
dismissed original petition.
The complainant had prayed damages of Rs. 15 crores and other expenses of 60 lakhs. It
is obvious that detailed evidence would be required to prove the claim.
The Supreme Court, in appeal held that National Commission was right in referring the
matter to Civil Court.

Dr. J.J. Merchant v.Shrinath Chaturvedi

Young son of complainant died due to negligence of doctors. Appellants urged that case
involves question of law and fact which could best be judged by Civil Court and hence
complaint must be dismissed. Further proceedings should be stayed till criminal
proceedings filed are pending.
National Commission rejected the prayer holding that there is no universal rule that
during pendency of criminal proceedings, civil proceedings must invariably be stayed.

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
But in this case there was delay of 9 years between of filling of complaint and its
disposal by National Commission.
First question considered by Supreme Court was whether delay in disposal of case by
consumer forum would be a ground for directing complaint to civil court.
Apart from fact that it would be unjust to suggest complainants that was inordinate
delay of 9 years in disposal of complaint by consumer forum, whole object of enacting
Consumer Protection Act would stand frustrated mainly for the reason that one of main
object of the Act is to provide speedy and inexpensive redressed to consumer.er.
Merely because these forums are required to dispose complaints by summary trial
would hardly be a ground for directing complaints to go to civil court for redressed of
grievances as these forums are headed by retired judicial officers of long experience,
competent enough to decide complicated question of fact and law.

General Manager, Southern Railway v. Mrs. A. Shamim

Unauthorized passenger boarded reserved compartment and was not removed by TTE
despite the complaint of passengers. Personal belongings of passenger were robbed
during the night and alarm chain didn‘t work. Held, deficiency in service and
negligence on part of railway authorities.

CCI Chambers Corp. Hsg. Society Ltd v. Development Credit Bank Ltd.
National Commission returned the complaint find by complainant on ground that their
exist complicated questions of facts and law and directed complainant to civil court.
It was held that existence of complicated questions of facts and law is not a justifiable
ground for rejecting complaint.

Kerala State Co-operative Employees Pension Board v. Consumer Forum & Anr
Petitioner Board delayed grant of pension to respondent. Respondent filed complaint
before District Forum. Whether board renders service? Whether recipient of service is
consumer?
It was held that Board is providing service and recipient can be termed as consumer. As
the pension scheme empowers Board to recover amounts f arrears from societies
towards fund with interest, as arrears of public revenue. Clause 34 of pension scheme
provides that all expenses of administration of pension fund shall be met from that
fund, thus, the board is collecting charges from member societies, the petitioner‘s being
beneficiaries would, therefore, come within admit of section 2(1)(b)

United India Insurance Co. Ltd v. Pushpalaya Printers

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
Respondent had insured its building and machinery against damage caused by impact
of rail/road vehicle or animal. Insured property was damaged due to vibration from
operation of bull dozer driven very close to building. Insurer repudiated claim on
ground that damage so caused was not an incident of impact by any vehicle.
Clause 5 contained in insurance policy was also subject to exclusions contained in the
policy. A damage caused by vehicle on road close t building was no excluded, if
respondent company wanted to exclude any damage or destruction caused on account
of driving a vehicle on road close to building, it could have expressly excluded.
Further ‗impact‘ by road vehicle also includes damage caused by driving of vehicle
close to the road.
It is also settled position that when there is ambiguity in any term or such term is
capable of different interpretations it can be construed against the parties who prepared
the document. The above rule applied to contracts of insurance and clause 5 of
insurance policy. After reading entire policy in instant case, it should be construed
against insurer and hence insurer held liable.

Sumati Devi M. Dhanwatay v. Union of India

Appellant was traveling in a first class AC Compartment. On the course of journey,
thousands of persons forcibly entered the compartment ant looted the passengers.
Railway Authorities took an action even after complaint was made to them. Appellant
filed a compensation application before state Commission, which held railways liable
for deficiency in service. National commission reversed judgment of state Commission.
Appeal was preferred to Supreme Court.
The only contention of railway was that it was not responsible for loss of luggage and
injuries caused to appellant. The Supreme Court held railway Administration cannot
escape liability under facts and circumstance of the case and they are liable for
deficiency in service.

Pustak Mahal v. Rattan Lal Premi

Respondent consumer purchased books from publisher on which sticker with enhanced
price was affixed. Respondent filed a complaint before district forum and got an order
in his favor for excess price charged. Unsatisfied with quantum of compensation,
respondent approached state commission, which issued a direction to publisher that no
affixation of sticker with enhanced price should be made in future. Publisher
approached national commission against order of state commission with revision
petition.
Revision was allowed as it was held that it is not as unfair trade practice as there is no
question of misleading public concerning the price at which books are to be sold. There
is no restriction on publisher to increase price of the books. Both the parties knew about

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
price being charged. There was no misrepresentation and since it was an agreed and
voluntary contract, there is no question of unfair trade practice.

Oriental Insurance Co. Ltd. V. B. K. Sethi

Proposal was made for insurance of plant and machinery as well as residential
premises. Policy that issued covered only plant and machinery. Residential property
was damaged due to earthquake. Claim was made insurance company rejected the
claim. Whether the action on the part of insurance company in not issuing policy
covering residential premises could be considered deficiency in service?
It was held that is clear cut case deficiency in service as it was specifically mentioned in
that insurance policy to extent of 15 lakhs was to be in respect of residential building.
Ghaziabad Development Authority v. Balbir Singh
Appellant floated a housing scheme where plots were monies collected. Later scheme
was cancelled without assigning any valid reason. Appellant was directed to refund
monies together with interest @ 18%. Appellant challenged levy of interest.
It was held that commission is entitled to award compensation not only for value of
goods or service but also to compensate a consumer for injustice suffered by him.
However, amount of compensation must vary from case to depending upon nature and
circumstances of the case. In view of this commission is authorized to award interest in
accordance with current rate of interest..

H.N. Shankara Shastry v. Asst. Director f Agriculture

Defective paddy seeds were sold to appellant because of which his land left
uncultivated and fallow. District forum allowed complaint and ordered respondent to
pay cost of seed and damages. The appeal was for not paying the damages as the
claimant didn‘t take any alternate steps to mitigate loss.
It was decided that granting of relief doesn‘t depend upon the fact whether he has
made any alternative arrangements to mitigate loss.
Acme Fluoro Polymers Ltd. V. Central Warehousing Corporation
Complainant imported machinery and stored it in an open warehouse. During
warehousing due to fall of steel coil, extensive damage was caused to machinery.
Warehousing authorities didn‘t inform complainant. Complainant lodged complaint
with National Commission claiming damages and compensation on ground of
deficiency in service on part of warehousing authorities. Warehousing authorities took
plea of vis-major that is act of God and that it is not liable for damages.
Held deficiency in service as in the instant case damage caused was not due to act of
god. It was apparent that there was negligence in storing articles in warehouse and it
was duty of officers of warehouse to take appropriate precautions and acre for storage
of goods so that such event does not occur. No precautions were taken by them.
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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)

Ashok Leyland Ltd. Prabhulal Maru

Consumer purchased bus-chassis of wheel base 142‖ and engine and got vehicle
registered. Later mechanical problems arose. Purchaser didn‘t bring vehicle to
manufacturer for repairs, though alleged manufacturing defects and raised dispute as
to size chassis.
Whether manufacturing defect was proved on basis of facts.
Certificate of registration was issued by registering authority only after vehicle was
purchased and sent for inspection and all particulars including that of wheelbase were
verified. Registration Certificate stated that wheelbase was 142‖ and hence their was no
reason to disbelieve version of manufactures since their records and certificate of
registering authority showed wheelbase of vehicle was 142‖
Manufacturer further stated that complainant didn‘t made any complaint
manufacturing defect during subsistence of warranty and never brought vehicle to
workshop for carrying out mandatory free services. Manufacturer further supported his
claim by showing letters sent to complainant in which it was clearly stand that though
warranty had already expired, still as matter of goodwill, they were prepared to look
into alleged mechanical problems.
Manufacturer state that complaint has been filed only to get compensation for damaged
vehicle after it met with an accident. This contention of manufacturer was no
manufacturing defect or deficiency in service or unfair trade practice as alleged by
complainant.

Smt. Savita garg v. The Director, National Heart Institute

Husband of appellant died due to negligence of doctors. National commission
dismissed complaint on the ground that attending doctors and nurses were not made
party to complaint. It was held that summary dismissal of original petition on question
of non-jointer of necessary parties was not proper. In case complainant fails to
substantiate the allegation, then complaint would fail but not on ground of non-jointer
of parties.

N.K. Modi v. Fair Air Engineers Ltd.

Sec. 34 of the Arbitration and Conciliation Act, 1996 provides that if a contract contains
an arbitration clause, the legal proceedings before a judicial authority are liable to be
stayed.
In this context, the National Commission observed that the Forums under the
Consumer Protection Act, 1986 are not to be construed as judicial authorities and the
Forums have powers to adjudicate disputes, they do not have any trappings of a Court.

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Thus, the National Commission held that Sec. 34 of the Arbitration and Conciliation
Act, 1996 shall not be a bar on the jurisdiction of the Consumer Forum.

Secretary Thirumurugan Cooperative Agricultural Credit Society v. M Lalitha & ORS

Member of the society preferred claim against society before district forum. Appellant
challenged stating that only the arbitrator under the T.N Cooperative Society Act can
resolve the disputes and district forums doesn‘t have jurisdiction. District forum
granted relief, state commission set aside order of district forum. Appeal was preferred
to national commission.
National Commission held that as per section 3 of the Consumer Protection Act, this
Act is in addition and not in derogation of any other Act. Further purpose of the act is to
provide a redressed is made available to consumers. Forums are established under the
Act to provide additional remedies. Therefore, it was held that state Act doesn‘t oust
the jurisdiction of Consumer Protection Act.

Jangeer Singh v. Hospital And Research Center Pvt. Ltd.

Appellant was under treatment of a doctor for total period of 3 months. When he asked
for a medical certificate, doctor gave him certificate for 1 month only. The explanation
offered by doctor was that he was not authorized to issue certificate for more than one
month. From the records it was gathered that a doctor could issue certificate for a
period of more than 1 month after seeking permission from medical board to issue the
certificate. That may be an administrative instruction but that doesn‘t deprive a patient
of his right to get certificate from the doctor for the period during which he had been
treated by him. It was for the doctor to have obtained permission of higher authorities
for issuing a certificate to patient. It was held to be deficiency in service.

Assistant Provident Fund Commissioner v. Md. Umar

Payment of provident fund after a delay of 3 years was held to be deficiency in service.

Citicorp Maruti Finance Ltd v. Smt Vijaya Laxmi

Finance company financed car purchased by respondent. When respondent defaulted
in paying the installment due, through its employees, forcefully took possession of the
car and sold it at throw away price. Appellant raised demand of Rs. 60,000/- on
borrower and threatened to foreclose the entire loan advanced if payment not made.
It was held that taking forcible possession of vehicle and then raising further demand of
60000 after selling the vehicle throw away price and not as per market value shows
greed for money and propensity to become unjustly rich. Hire purchase agreement is a
civil contract and dispute arising from it has to be settled by way of civil remedy and
not through musclemen. People can‘t permit to settle their civil disputes through
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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
criminal force and in streets. Entire action of the appellant was held to be illegal,
arbitrary and criminal in nature and requires to be visited with punitive damages,
besides refunding market value of the vehicle with interest. Selling of seized car at
throw away price was held to be UTP.

Life Insurance Corporation of India v. Mani Ram

Respondent filed a complaint alleging that his son had been insured on august 21, 1995
and premium amount was paid on same day. According to complainant, next
installment of premium was due on August 21, 1996. Complainant in view of subsisting
policy, requested insurance company to pay the claim but insurance company didn‘t
pay the amount on the group that premium wasn‘t paid on the policy and policy
lapsed. Appellant company stated that policy was back dated at request insured with
effect from 28.4.95 and that one year came to an end on 28.4.96 further, appellant
contended that even that even after grace period of 1 month the premium wasn‘t paid
by 28.5.96 and policy has lapsed. In instant case, condition to expressly provided the
period during which the payment was to be made. It also in no uncertain terms state
that if premium was not paid before expiry of grace period would lapse. Hence, claim f
respondent was rejected.

Joseph Mathew Thomas & Co. v. Maruti Udhyog Ltd.

Defects in vehicle during warranty period were not by the company. Complaint was
dismissed by district forum on the ground that vehicle was purchased for commercial
purpose and hence provisions of consumer protection act are not applicable to it. Hence
appeal was made.
State Commission, relying n the judgment of National Commission in the case of Jay
Kay Puri Engineers & Another v. Mohan Breweries And Distilleries Ltd., held that
even if the vehicle is purchased for commercial purpose and if defect is developed
during warranty period, then opposite parties (i.e., manufacturer and authorized
dealer) are liable to rectify the defects.

Unit Trust of India v. Ravinder Kumar Shukla

Cherubs sent by UTI were lost en-route. Unit holder claimed compensation from
consumer forums for non-receipt of amounts on ground of deficiency in service.
Whether UTI is liable for compensation?
It was that the answer to the aforesaid question would depend on whether the post
office was acting as an agent to the unit holder or the appellant. The law is that in
absence of any contract/request from payee, mere posting wouldn‘t amount to
payment. In case, where there is no contract or request, either or implied, the post office
would continue to act as agent of drawer. There was proof from the appellants as to

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
existence of any contract or request from payee for sending amount by post. Hence UTI
was held liable.

Happiness depends upon us

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INTELLECTUAL PROPERTY RIGHTS

INTRODUCTION
The term ‗intellectual property‘ relates to the creation of human mind and human
intellect. In other words, intellectual property relates to pieces of information, which
can be incorporated in tangible object at the same time in an unlimited number of
copies at different locations anywhere in the world.
A trademark, copyright or a patent right are the important IPRs. They are known as
Incorporeal Assets. As patents, copyrights and trademarks represent title to property;
they can be sold or assigned by the owner or holder thereof another person in
accordance with law. The most important objective of IPR is to serve as a powerful
incentive for entrepreneurs to invest resources into creating ideas and inventions. This
way research and development is encouraged. Further, it encourages the dissemination
of useful information for further research for the benefit of society.

GATT

The General Agreement on Tariffs and Trade (GATT) was a multilateral agreement
regulating international trade. According to its preamble, its purpose was the
"substantial reduction of tariffs and other trade barriers and the elimination of
preferences, on a reciprocal and mutually advantageous basis." It was negotiated
during the United Nations Conference on Trade and Employment and was the outcome
of the failure of negotiating governments to create the International Trade
Organization (ITO). GATT was signed in 1947 and lasted until 1994, when it was
replaced by the World Trade Organization in 1995.

The original GATT text (GATT 1948) is still in effect under the WTO framework, subject
to the modifications of GATT 1994.

Rounds

GATT held a total of 9 rounds,

GATT and WTO trade rounds

Name Start Duration Countries Subjects covered Achievements

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Signing of GATT,
45,000 tariff
Geneva April 1946 7 months 23 Tariffs concessions
affecting $10
billion of trade

Countries
exchanged some
Annecy April 1949 5 months 13 Tariffs
5,000 tariff
concessions

Countries
exchanged some
8,700 tariff
Torqua September
8 months 38 Tariffs concessions,
y 1950
cutting the 1948
tariff levels by
25%

Tariffs,
Geneva January $2.5 billion in
5 months 26 admission of
II 1956 tariff reductions
Japan

Tariff concessions
September 11
Dillon 26 Tariffs worth $4.9 billion
1960 months
of world trade

Tariff concessions
Kenne 37 Tariffs, Anti-
May 1964 62 worth $40 billion
dy months dumping
of world trade

Tariffs, non-tariff Tariff reductions

September 74 measures, worth more than
Tokyo 102
1973 months "framework" $300 billion
agreements dollars achieved

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The round led to

the creation of
WTO, and
extended the
range of trade
Tariffs, non-tariff negotiations,
measures, rules, leading to major
services, reductions in
intellectual tariffs (about 40%)
Urugua September 87 property, dispute and agricultural
123
y 1986 months settlement, subsidies, an
textiles, agreement to
agriculture, allow full access
creation of WTO, for textiles and
etc clothing from
developing
countries, and an
extension of
intellectual
property rights.

Tariffs, non-tariff
measures,
agriculture, labor
standards,
November The round is not
Doha ? 159 environment,
2001 yet concluded
competition,
investment,
transparency,
patents etc

Annecy Round - 1949

The second round took place in 1949 in Annecy, France. 13 countries took part in the
round. The main focus of the talks was more tariff reductions, around 5000 in total.

Torquay Round - 1951

The third round occurred in Torquay, England in 1950. Thirty-eight countries took part
in the round. 8,700 tariff concessions were made totaling the remaining amount of
tariffs to ¾ of the tariffs which were in effect in 1948. The contemporaneous rejection by

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
the U.S. of the Havana Charter signified the establishment of the GATT as a governing
world body.
Geneva Round - 1955-1956
The fourth round returned to Geneva in 1955 and lasted until May 1956. Twenty-six
countries took part in the round. $2.5 billion in tariffs were eliminated or reduced.

Dillon Round - 1960-1962

The fifth round occurred once more in Geneva and lasted from 1960-1962. The talks
were named after U.S. Treasury Secretary and former Under Secretary of State, Douglas
Dillon, who first proposed the talks. Twenty-six countries took part in the round. Along
with reducing over $4.9 billion in tariffs, it also yielded discussion relating to the
creation of the European Economic Community (EEC).

Kennedy Round - 1962-1967

Kennedy Round took place from 1962-1967. $40 billion in tariffs were eliminated or
reduced.

Tokyo Round - 1973-1979

Reduced tariffs and established new regulations aimed at controlling the proliferation
of non-tariff barriers and voluntary export restrictions. 102 countries took part in the
round. Concessions were made on $190 billion worth.
The Uruguay Round began in 1986. It was the most ambitious round to date, hoping to
expand the competence of the GATT to important new areas such
as services, capital, property, textiles, and agriculture. 123 countries took part in the round.
The Uruguay Round was also the first set of multilateral trade negotiations in which
developing countries had played an active role.[4]
Agriculture was essentially exempted from previous agreements as it was given special
status in the areas of import quotas and export subsidies, with only mild caveats.
However, by the time of the Uruguay round, many countries considered the exception
of agriculture to be sufficiently glaring that they refused to sign a new deal without
some movement on agricultural products. These fourteen countries came to be known
as the "Cairns Group", and included mostly small and medium sized agricultural
exporters such as Australia, Brazil, Canada, Indonesia, and New Zealand.
The Agreement on Agriculture of the Uruguay Round continues to be the most
substantial trade liberalization agreement in agricultural products in the history of trade
negotiations. The goals of the agreement were to improve market access for agricultural
products, reduce domestic support of agriculture in the form of price-
distorting subsidies and quotas, and eliminate over time export subsidies on

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agricultural products and to harmonize to the extent possible sanitary and
phytosanitary measures between member countries.
GATT and the World Trade Organization

Main article: Uruguay Round

In 1993, the GATT was updated (GATT 1994) to include new obligations upon its
signatories. One of the most significant changes was the creation of the World Trade
Organization (WTO). The 75 existing GATT members and the European
Communities became the founding members of the WTO on 1 January 1995. The other
52 GATT members rejoined the WTO in the following two years (the last
being Congo in 1997). Since the founding of the WTO, 21 new non-GATT members
have joined and 29 are currently negotiating membership. There are a total of 157
member countries in the WTO, with Russia and Vanuatu being new members as of
2012.
Of the original GATT members, Syria and the SFR Yugoslavia have not rejoined the
WTO. Since FR Yugoslavia, (renamed to Serbia and Montenegro and with membership
negotiations later split in two), is not recognized as a direct SFRY successor state;
therefore, its application is considered a new (non-GATT) one. The General Council of
WTO, on 4 May 2010, agreed to establish a working party to examine the request
of Syria for WTO membership.[7] [8] The contracting parties who founded
the WTO ended official agreement of the "GATT 1947" terms on 31 December
1995. Serbia and Montenegro are in the decision stage of the negotiations and are
expected to become the newest members of the WTO in 2012 or in near future.
Whilst GATT was a set of rules agreed upon by nations, the WTO is an institutional
body. The WTO expanded its scope from traded goods to include trade within
the service sector and intellectual property rights. Although it was designed to serve
multilateral agreements, during several rounds of GATT negotiations (particularly
the Tokyo Round) plurilateral agreements created selective trading and caused
fragmentation among members. WTO arrangements are generally a multilateral
agreement settlement mechanism of GATT

GATS

The General Agreement on Trade in Services (GATS) is a treaty of the World Trade
Organization (WTO) that entered into force in January 1995 as a result of the Uruguay
Round negotiations. The treaty was created to extend the multilateral trading system
to service sector, in the same way the General Agreement on Tariffs and Trade (GATT)
provides such a system for merchandise trade.
All members of the WTO are signatories to the GATS. The basic WTO principle of most
favored nation (MFN) applies to GATS as well. However, upon accession, Members
may introduce temporary exemptions to this rule.

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Four Modes of Supply

The GATS agreement covers four modes of supply for the delivery of services in cross-
border trade:

Criteria Supplier Presence

Service delivered within the territory of

Mode 1: Cross-
the Member, from the territory of another
border supply
Member
Service supplier not
present within the
territory of the
Service delivered outside the territory of
Mode 2: member
the Member, in the territory of another
Consumption
Member, to a service consumer of the
abroad
Member

Mode 3: Service delivered within the territory of

Commercial the Member, through the commercial
presence presence of the supplier Service supplier
present within the
territory of the
Service delivered within the territory of Member
Mode 4: Presence of
the Member, with supplier present as
a natural person
a natural person

Criticisms

The GATS agreement has been criticized for tending to substitute the authority of
national legislation and judiciary with that of a GATS Disputes Panel conducting closed
hearings. WTO member-government spokespersons are obliged to dismiss such
criticism because of prior commitment to perceived benefits of prevailing commercial
principles of competition and 'liberalisation'.
While national governments have the option to exclude any specific service from
liberalisation under GATS, they are also under pressure from international business
interests to refrain from excluding any service "provided on a commercial basis".
Important public utilities such as water and electricity most commonly involve
purchase by consumers and are thus demonstrably "provided on a commercial basis".
The same may be said of many health and education services which are sought to be
'exported' by some countries as profitable industries.[3]
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This definition defines virtually any public service as being "provided on a commercial
basis" and is already extending into such areas as police, the military, prisons, the
justice system, public administration, and government. Over a fairly short time
perspective, this could open up for the privatisation or marketisation of large parts, and
possibly all, of what today are considered public services currently available for the
whole population of a country as a social entitlement, to be restructured, marketised,
contracted out to for-profit providers, and eventually fully privatized and available
only to those who can pay for them. This process is currently far advanced in most
countries, usually (and intentionally) without properly informing or consulting the
public as to whether or not this is what they desire.

WIPO

The World Intellectual Property Organization (WIPO) is one of the 17 specialized

agencies of the United Nations. WIPO was created in 1967 "to encourage creative
activity, to promote the protection of intellectual property throughout the world."
WIPO currently has 185 member states, administers 24 international treaties, and is
headquartered in Geneva, Switzerland. The current Director-General of WIPO is Francis
Gurry, who took office on October 1, 2008. 184 of the UN Members as well as the Holy
See are Members of WIPO. Non-members are the states of South Sudan, Cook
Islands, Kiribati, Marshall Islands, Federated States of
Micronesia, Nauru, Niue, Palau, Solomon Islands, Timor-Leste, Tuvalu, and the states
with limited recognition. Palestine has observer status.

WIPO was formally created by the Convention Establishing the World Intellectual
Property Organization, which entered into force on April 26, 1970. Under Article 3 of
this Convention, WIPO seeks to "promote the protection of intellectual property
throughout the world." WIPO became a specialized agency of the UN in 1974. The
Agreement between the United Nations and the World Intellectual Property
Organization notes in Article 1 that WIPO is responsible "for promoting creative
intellectual activity and for facilitating the transfer of technology related to industrial
property to the developing countries in order to accelerate economic, social and cultural
development, subject to the competence and responsibilities of the United Nations and
its organs, particularly the United Nations Conference on Trade and Development, the
United Nations Development Programme and the United Nations Industrial
Development Organization, as well as of the United Nations Educational, Scientific and
Cultural Organization and of other agencies within the United Nations system."

Unlike other branches of the United Nations, WIPO has significant financial resources
independent of the contributions from its Member States. In 2006, over 90% of its
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income of just over CHF 250 million was expected to be generated from the collection of
fees by the International Bureau (IB) under the intellectual property application and
registration systems which it administers (the Patent Cooperation Treaty, the Madrid
system for trade marks and the Hague system for industrial designs).
In October 2004, WIPO agreed to adopt a proposal offered by Argentina and Brazil, the
"Proposal for the Establishment of a Development Agenda for WIPO" - from the Geneva
Declaration on the Future of the World Intellectual Property Organization. This
proposal was well supported by developing countries. The agreed "WIPO Development
Agenda" (composed of over 45 recommendations) was the culmination of a long
process of transformation for the organization from one that had historically been
primarily aimed at protecting the interests of right holders, to one that has increasingly
incorporated the interests of other stakeholders in the international intellectual property
system as well as integrating into the broader corpus of international law on human
rights, environment and economic cooperation.
A number of civil society bodies have been working on a draft Access to
Knowledge (A2K) Treaty which they would like to see introduced.
In December 2011, WIPO published its first World Intellectual Property Report on the
Changing Face of Innovation, the first such report of the new Office of the Chief
Economist. World Intellectual Property Report.
In April 2012, Fox News first reported the shipment of computers by WIPO to North
Korea and Iran, in an alleged violation of U.S. and U.N. sanctions, triggering an
investigation by the U.S. State Department. WIPO reacted by stating that the shipment
did not violate the U.N. sanctions against North Korea, and that this was "part of
WIPO‘s standard technical assistance program to developing countries", later
announcing in July 2012 that it would discontinue the provision of computers to all
countries. After a preliminary assessment, the U.S. State Department announced on July
24, 2012 that WIPO didn't appear to have violated U.N. sanctions. In September 2012, an
independent investigative report commissioned by WIPO found that while the
shipments were legal, they were "unjustified" and states that WIPO violated American
export control legislation. The report also said that the violations were worse than was
previously known. In November 2012, a US Congressional investigation team arrives in
Geneva to facilitate questioning members of the WIPO staff.

INFORMATION NETWORK

WIPO has established WIPONET, a global information network. The project seeks to
link over 300 intellectual property offices (IP offices) in all WIPO Member States. In
addition to providing a means of secure communication among all connected parties,
WIPONET is the foundation for WIPO's intellectual property services.[

Org type Specialized Agency

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Acronyms WIPO, OMPI

Head Director-General of WIPO Francis

Gurry

Status Active

Established July 14, 1967

Headquarters Geneva, Switzerland

TRIPS

The Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) is

an international agreement administered by the World Trade Organization (WTO) that
sets down minimum standards for many forms of intellectual property (IP) regulation
as applied to nationals of other WTO Members. It was negotiated at the end of
the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) in 1994.
The TRIPS agreement introduced intellectual property law into the international trading
system for the first time and remains the most comprehensive international agreement
on intellectual property to date. In 2001, developing countries, concerned that
developed countries were insisting on an overly narrow reading of TRIPS, initiated a
round of talks that resulted in the Doha Declaration. The Doha declaration is a WTO
statement that clarifies the scope of TRIPS, stating for example that TRIPS can and
should be interpreted in light of the goal "to promote access to medicines for all."
Specifically, TRIPS requires WTO members to provide copyright rights, covering
content producers including performers, producers of sound recordings and
broadcasting organizations; geographical indications, including appellations of
origin; industrial designs; integrated circuit layout-designs; patents; new plant
varieties; trademarks; trade dress; and undisclosed or confidential information. TRIPS
also specify enforcement procedures, remedies, and dispute resolution procedures.
Protection and enforcement of all intellectual property rights shall meet the objectives to
contribute to the promotion of technological innovation and to the transfer and
dissemination of technology, to the mutual advantage of producers and users of
technological knowledge and in a manner conducive to social and economic welfare,
and to a balance of rights and obligations.
The requirements of TRIPS

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TRIPS require member states to provide strong protection for intellectual property
rights. For example, under TRIPS:

 Copyright terms must extend at least 50 years, unless based on the life of the author.
(Art. 12 and 14)
 Copyright must be granted automatically, and not based upon any "formality," such
as registrations, as specified in the Berne Convention. (Art. 9)
 Computer programs must be regarded as "literary works" under copyright law and
receive the same terms of protection.
 National exceptions to copyright (such as "fair use" in the United States) are
constrained by the Berne three-step test
 Patents must be granted for "inventions" in all "fields of technology" provided they
meet all other patentability requirements (although exceptions for certain public
interests are allowed (Art. 27.2 and 27.3) and must be enforceable for at least 20
years (Art 33).
 Exceptions to exclusive rights must be limited, provided that a normal exploitation
of the work (Art. 13) and normal exploitation of the patent (Art 30) is not in conflict.
 No unreasonable prejudice to the legitimate interests of the right holders of
computer programs and patents is allowed.
 Legitimate interests of third parties have to be taken into account by patent rights
(Art 30).
 In each state, intellectual property laws may not offer any benefits to local citizens
which are not available to citizens of other TRIPS signatories under the principle
of national treatment (with certain limited exceptions, Art. 3 and 5). TRIPS also have
a most favored nation clause.
Many of the TRIPS provisions on copyright were copied from the Berne Convention for
the Protection of Literary and Artistic Works and many of its trademark and patent
provisions were modeled on the Paris Convention for the Protection of Industrial
Property.

ACCESS TO ESSENTIAL MEDICINES

The most visible conflict has been over AIDS drugs in Africa. Despite the role that
patents have played in maintaining higher drug costs for public health programs across
Africa, this controversy has not led to a revision of TRIPs. Instead, an interpretive
statement, the Doha Declaration, was issued in November 2001, which indicated that
TRIPs should not prevent states from dealing with public health crises. After
Doha, Burma, the United States and to a lesser extent other developed nations began
working to minimize the effect of the declaration.
A 2003 agreement loosened the domestic market requirement, and allows developing
countries to export to other countries where there is a national health problem as long
as drugs exported are not part of a commercial or industrial policy. Drugs exported
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under such a regime may be packaged or colored differently to prevent them from
prejudicing markets in the developed world.
In 2003, the Bush administration also changed its position, concluding that generic
treatments might in fact be a component of an effective strategy to combat HIV. Bush
created the PEPFAR program, which received $15 billion from 2003–2007, and was
reauthorized in 2008 for $48 billion over the next five years. Despite wavering on the
issue of compulsory licensing, PEPFAR began to distribute generic drugs in 2004-5.

IMPLEMENTATION IN DEVELOPING COUNTRIES

The obligations under TRIPS apply equally to all member states, however developing
countries were allowed extra time to implement the applicable changes to their national
laws, in two tiers of transition according to their level of development. The transition
period for developing countries expired in 2005. The transition period for least
developed countries to implement TRIPS was extended to 2013, and until 1 January
2016 for pharmaceutical patents, with the possibility of further extension.
It has therefore been argued that the TRIPS standard of requiring all countries to create
strict intellectual property systems will be detrimental to poorer countries'
development. Many argue that it is, prima facie, in the strategic interest of most if not all
underdeveloped nations to use any flexibility available in TRIPS to legislate the weakest
IP laws possible.
This has not happened in most cases. A 2005 report by the WHO found that many
developing countries have not incorporated TRIPS flexibilities (compulsory licensing,
parallel importation, limits on data protection, use of broad research and other
exceptions to patentability, etc.) into their legislation to the extent authorized under
Doha.
This is likely caused by the lack of legal and technical expertise needed to draft
legislation that implements flexibilities, which has often led to developing countries
directly copying developed country IP legislation, or relying on technical assistance
from the World Intellectual Property Organization (WIPO), which, according to critics
such as Cory Doctorow, encourages them to implement stronger intellectual property
monopolies.

Criticism

Since TRIPS came into force it has received a growing level of criticism from developing
countries, academics, and non-governmental organizations. Some of this criticism is
against the WTO as a whole, but many advocates of trade liberalization also regard
TRIPS as bad policy (see, for example, Jagdish Bhagwati's In Defense of Globalization for a
discussion on the detrimental effect of TRIPS on access to medicines in developing
countries). TRIPS's wealth redistribution effects (moving money from people in
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developing countries to copyright and patent owners in developed countries) and its
imposition of artificial scarcity on the citizens of countries that would otherwise have
had weaker intellectual property laws are common bases for such criticisms.
Peter Drahos writes that "It was an accepted part of international commercial morality
that states would design domestic intellectual property law to suit their own economic
circumstances. States made sure that existing international intellectual property
agreements gave them plenty of latitude to do so."
Daniele Archibugi and Andrea Filippetti argue that the importance of TRIPS in the
process of generation and diffusion of knowledge and innovation has been
overestimated by both their supporters and their detractors. Claude Henry and Joseph
E. Stiglitz argue that the current intellectual property global regime may impede both
innovation and dissemination, and suggest reforms to foster the global dissemination of
innovation and sustainable development.

COPYRIGHT ACT, 1957

The Copyright Act, 1957(Act No. 14 of 1957) governs the laws & applicable rules related to the subject
of copyrights in India. Copyright Law in the country was governed by the Copyright Act of 1914, was
essentially the extension of the British Copyright Act, 1911 to India, and borrowed extensively from the
new Copyright Act of the United Kingdom of 1956. All copyright related laws are governed by
the Copyright Act, 1957.

The Copyright Act today is compliant with most international conventions and treaties in the field of
copyrights. India is a member of the Berne Convention of 1886 (as modified at Paris in 1971),the
Universal Copyright Convention of 1951 and the Agreement on Trade Related Aspects of Intellectual
Property Rights (TRIPS) Agreement of 1995.

Though India is not a member of the Rome Convention of 1961, WIPO Copyrights Treaty (WCT) and the
WIPO Performances and Phonograms Treaty (WPPT),the Copyright Act is compliant with it

Meaning of Copyright
Copyright is an exclusive right to reproduce or
authorize another to reproduce artistic, dramatic,
literary, or musical works. It also extends to sound
broadcasting and cinematographic films. Copyright
protection is limited to author‘s particular of idea,
process, and concept in a tangible medium.
However, law permits fair use.
To be copyright, a work must show certain minimum levels of creativity and
originality. Copyright protection is not granted for an abstract idea nor can facts be
copyright. Only author‘s manner of expressing the idea or compiling the facts can be
copyrighted.

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(Company Secretary, Cyber Lawyer, M.com)
Definition of Copyright [Sec. 14]
Section 14 of the Act defines the term ―Copyright‖ as to mean the exclusive right to do
or authorize the doing of the following acts in respect of a work or any substantial part
thereof, namely-
In the case of literary, dramatic, or musical work:
a. Reproducing the work in any material from which includes storing of it in any
medium by electronic means;
b. Issuing copies of the work to the public which are not already in circulation;
c. Performing the work in public or communicating it to the public;
d. Making any cinematographic film or sound recording in respect of the work;
e. Making any translation or adaptation of the work. Further, any of the above-
mentioned acts in relation to work can be done in the case of translation or
adaption of the work.
In the case of a computer program:
a. To do any acts specified in respect of a literary, dramatic or musical work; and
b. To sell or give on commercial rental or offer for sale or for commercial rental any
copy of the computer program. However, such commercial rental does not apply
in respect of the computer program where the program itself is not the essential
object of the rental.
In the case of artistic work:
a. Reproducing the work in any material including depiction in three dimensions of
a two dimensional work or in two dimensions of a three dimensional work;
b. Communicating the work to the public;
c. Issuing the copies of work to the public which are not already in existence;
d. Including work in any cinematographic film;
e. Making adaptation of the work, and to do any of the above acts in relation to an
adaptation of the work.
In the case of cinematographic film and sound recording:
a. Making a copy of the film including a photograph of any image or making any
other sound recording embodying it;
b. Selling or giving on hire or offer for sale or hire any copy of the film/sound
recording even if such copy has been sold or given on hire on earlier occasions;
and
c. Communicating the film/sound recording to public.

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
Works in which copyright subsists and works in which copyright does not subsist
[Sec. 13]
Copyright subsist throughout in India in following classes of works:
1) Original literary (including computer program), dramatic, musical and artistic
works;
2) Cinematographic films;
3) Sound recordings.
However, copyright shall not subsist in any work specified in above unless the
following conditions are satisfied:
1) In the case of published work, the work is first published in India or where the
work is first published outside India, the author is at the date of such publication,
or in case the author was dead on the date of publication, was at the time of his
death, citizen of India;;
2) In the of unpublished work other than work of architecture, the author is at the
date of making the work a citizen of India or domiciled in India;
3) In the case of a work of architecture, the work is located in India.
Copyright shall not subsist in the following works:
1) In any cinematographic film, if a substantial part of the film is an infringement of
copyright of any other work;
2) In any sound recording made in respect of a literary, dramatic or musical work,
if in making the record, copyright in such works has been infringed.

Term of Copyright [Sec. 22 to 29]

The normal term of copyright is throughout the lifetime of the author plus 60 years
from the beginning of calendar rear next following the year in which the author dies. In
case of joint authorship, author who dies last will considered.
In case of anonymous (without disclosing the name) and pseudonymous (under
assumed name) work, the term of copyright is 60 years from the calendar year in which
the work is published. However, if the name is disclosed, the term of copyright will be
60 years from the calendar year next following the year in which the author dies.
In case of posthumous work, copyrights shall subsist for 60 years from the beginning of
calendar year next to the year in which the work is first published.

No Pain No Gain
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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
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Registration of Copyright
Registration of copyright in case of any work is not obligatory. The provision is optional
and non-registration does not deprive the owner of his to bring both civil as criminal
action against an offence of infringement.
The author or publisher of, or the owner of or other person interested in the copyright
in any work may make an application in the prescribed form to the Registrar of
Copyrights. Every such application should be made in respect of one work only. The
application should be made in triplicate and accompanied by the prescribed fees. The
person applying for registration shall simultaneously sent the copy of every other
person interested in the copyright of the work.
If no objection to such registration is received by Registrar of Copyright within 30 days
of the date receipt of receipt of application by him, he shall, if satisfied about the
correctness of particulars given in the application, enter such particulars in the Register
of Copyrights. If Registrar of Copyright receives any objection for such registration, he
may, after holding such enquiry as he deems fit, enter such particulars of work in the
Register of Copyrights, as he considers proper. A copy of the entry made in the Register
of Copyright shall be sent to the parties concerned.

Assignment of Copyright [Sec. 18 &19]

The owner of a copyright in an existing work or a prospective owner of a future work
may assign to any person the copyright, either wholly or partly and either generally or
subject to limitations and either for the lifetime of the copyright or any part thereof.
However in the case of future work, the assignment shall take effect only when the
work comes into existence.
It may be noted that after assignment, the right of the assignor in the copyright shall be
diluted to the extent of the right so assigned to the assignee and in respect f the right so
assigned, the assignee shall be considered to owner during the period of assignment.
The assignment of copyright in any work shall be valid only when it is in writing and
signed by the assignor or his duly authorized agent. Further, the assignment shall
specify the rights assignment is not stated, and then it shall deem to be 5 years from the
date of assignment. In case territorial extent of the assignment of right is not specified,
then it shall be presumed to extend within India.
Where the assignee does not exercise the rights assigned to him within a period of 1
year from the date of assignment, the assignment in respect of such rights shall be
deemed to have been lapsed after the expiry of the said period, unless otherwise
specified in the assignment. Any dispute arising with respect to assignment of rights
shall be decided by Copyright Bard.

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
Licensing of Copyright
Voluntary Licensing by the Owner: owner of copyright can grant interest in his right
by license in writing to another person. License relating to future work can also be
given but the license will take effect only when the work comes into existence. Such
license is normally for republication, performance in public or communication to public
or translation thereof. License shall specify the right license, duration of license,
territorial extent of license and the amount of royalty payable. If the period of license is
not stated, then it shall be deemed to be 5 years from the date of license. In case
territorial extent of license of the right is not specified, then it shall be presumed to
extend within India. Any dispute arising with respect to license of copyright shall be
decided by the Copyright Board.

Compulsory License
1) In case of Published Work
A complaint may be made to Copyright Board, at any time during the term of copyright
in any Indian work which has been published or performed in public, that the owner of
copyright in the work has refused to grant permission for republication, performance in
public or communication to public and by reason of such refusal the work is withheld
from the public. Then the Copyright Board, after giving the owner of copyright an
opportunity of being heard and after holding such enquiry as it may consider
necessary, may, if it is satisfied that ground of such refusal are not reasonable, direct the
Registrar of Copyright to grant to the complainant a license to republish the work,
perform the work in public or communicate the work to public, as the case may be. The
license may contain such terms and conditions as the Copyright Board may decide and
the compensation payable to the owner of the copyright.

2) In Unpublished Work as translation in the case of sound recording,

cinematographic films, artistic and musical work
Where in the case of an Indian work, the author is dead or unknown or cannot be traced
or the owner of copyright in such work cannot be found, any person may apply to the
Copyright Board for a license to publish such work or translation thereof in any
language. Before making an application the applicant shall publish his proposal in one
issue of a daily newspaper in the English language having circulation in major parts of
the country. Where the application is for the publication of a translation in any
language other than English, the applicant shall also publish his proposal in one issue of
any daily newspaper in that language.
Where such an application is made to the Copyright Board, it may direct the Registrar
of Copyright to grant to the applicant the license to publish the work or a translation
thereof subject to the payment of such amount of royalty as may be determined by the
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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
Copyright Board. Thereupon the Registrar of Copyright shall grant the license to the
applicant

3) Compulsory license for translation in the case of literary or dramatic work

Any person can apply to Copyright Board for a license to produce and publish a
translation of a literary or dramatic work after a period of 7 years from the date of
publication. If applicant is unable to find the author, he has to give a copy of his request
to the publisher whose name appears on the work and license can be given only after 9
months after such notice was given to the publisher. copyright Board can grant non-
exclusive right on such terms and conditions and such royalty, as it deems fit.

Termination of License
The license can be terminated by Copyright Board, after giving 3 months notice, if
owner of copyright publisher the translation in same language at reasonable and of the
same standard. However, copies already printed before termination of license will be
allowed sold.

Infringement of Copyright
Meaning of Infringement of Copyright: Copyright protection gives exclusive right to
the owner of the work to reproduce the work enabling them to derive financial benefit
by exercising such rights. If any person without authorization from the owner these
rights in respect of the work, which has copyright protection, it constitutes of the
copyright Infringement. If the reproduction of the work is carried out after the expiry of
the copyright term, it will not amount to infringement.
Section 51the Act contemplates situation in which a copyright shall be deemed to be
infringed. This section states that a copyright is infringed when any person without a
license granted by the owner the copyright or the Registrar of Copyright or in
contravention of the conditions of a license so granted or of any condition imposed
authority—
a) Does anything for which the exclusive right is conferred upon the owner of the
copyright; or
b) Permits for profit any place to be used for the communication of the work to
public where such a communication constitutes an infringement of the copyright
in the work, unless he was not aware and no reasonable ground for believing
that such communication would be infringement of copyright or
c) Makes for sale or hire or lets for hire or by way of trade display or offers for sale
or hire; or
d) Distributes either for the purpose of trade or to such an extent as to affect
prejudicially the owner of the copyright.
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(Company Secretary, Cyber Lawyer, M.com)
e) By way of trade, exhibits in public; or
f) Imports into India any infringing copies of the work.
However, import of one copy of any work is allowed for private and domestic use of
the importer. It may be noted that reproduction of literary, dramatic, musical, or artistic
work in the form of cinematograph film shall be deemed to be an infringing copy.

Consequences of Infringement of Copyright: The owner of copyright can sue the

person who has infringed the copyright inn his work in the District Court having the
jurisdiction and shall be entitled to all such remedies by way of injunction, accounts,
and damages and otherwise as are conferred by law for the infringement of the right.
However, if the defendant proves that at the date of infringement, he was not aware or
had or no reasonable grounds for believing that copyright subsisted in the work, then
the plaintiff shall only be entitled to an injunction and account of profits made by the
defendant by sale of the infringing copies. In this case, plaintiff shall not be entitled to
any damages.

Copyright Society
An individual copyright owner is often not able to administer his rights effectively. If
such copyright owners from a society, the society can administer their rights effectively
and ensure that the owner of copyrights gets their due share.
A copyright Society is registered under the copyright Act, 1957. Here, the Certificate of
Registration shall be granted by the Central Government.
The society may accept exclusive rights of administration from owners of copyrights for
issue of licenses and collection of fees. Society will pay the fee collected to the owner of
the copyright after deducting its expenses. The owner of copyright can withdraw the
authorization granted to the Society.

PATENTS ACT, 1970

INTRODUCTION
The objective and purpose of patent law is to encourage
scientific research, new technology and industrial projects.
Grant of exclusive right to own, use or shall the method or the
product patented for a limited period stimulates new invention
of commercial utility.
The fundamental principle of Patents Act, 1970 is that the
patent is granted for that invention which is new and useful. It
must have the novelty and utility. It is essential for that it must
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be the inventor‘s own discovery as opposed to mere verification of what was already
known before the date of patent.
Patents Act, 1970 was made to protect Indian drugs, pharmaceuticals, chemical
industries and Indian agriculture from foreign competition. In some cases only process
can be patented but product cannot be patented i.e., in cases where only process is
patentable, manufacture of that product by different process by another person in not
an offence under the Patents Act, 1970.

Concept of patent
Patent means granted under the patent Act, 1970.
Patents, generally speaking, is a grant from government which confers on the grantee,
for limited period of time, the excusive privileges of making, selling and using the
indentation for which patent has been granted and also of author others to do so.
A patent is a contract between the societies as a whole and individual inventor. The
inventor gets the exclusive right to prevent others from making, using, selling a
patented invention for a fixed period of time, in return for the indentures disclosing the
details of invention to the public. In this way, inventor is rewarded for his endeavors
and he is encored to disclose the benefit arising out of his invention. Patent right are
granted only to new inventors capable of industries application. The documents in the
prescribed form duly signed by the concerned authorities and seal are called the patent.
A patent right is a properties which can be bought, sold, hired or licensed.

What can be patented?

Any ‗invention‘ may be patented.
‗Invention‘ means new product or product or process involved an ‗inventing step‘ and
‗capability of industries application‘.
‗Inventing step‘ means a future that makes the invention not obvious to a person skilled
in that art.
‗Capable of industrial application‘ in relation to invention means that the invention is
capable of being made or used in the industries.

What cannot be patented?

Anything, which is not an invention, cannot be patented.
Patents act, 1970 provides that the following shall not be covered under the concept of
invention:
1. If its use is contrary to law or moral
2. Mere discovery
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3. Aggregation of properties by mere mixture of 2 or more things
4. Re-arrangement or duplication
5. A method of agriculture or horticulture
6. Any process for the medical, surgery , diagnostic or other treatment of
human being or animals
7. Plants and animals other than micro- organisms but including seeds,
species, and other biological processes
8. Literate, dramatic, musical or artist work or cinematographic films or
any other aesthetic creation
9. A mathematical or business method or computer programs
10. Method of performing any mental act or method of playing any game
11. A presentation of information
12. Topography of integrated circuits
13. Invention based on atomic energy
14. Inventions relating to automatic energy
15. Mere new form or new property or new use of an existing drugs,
chemicals or other substance, until and unless it result in enhancement in
quality or efficacy.

Invention for which only process is patentable

In respect of the following inventions, no patent shall be granted in respect of claim for
the substances themselves but claims for the methods or processes of manufacture shall
be patentable:
 Claiming substances intended for use, or capable of being used, as food,
medicines or drugs;
 Relating to substances prepared or product by chemicals processes, including
alloys, optical glass, semi-conductors, and inter-metical‘s compounds

Exclusive marketing rights

India granted only process patent in respect of drugs and medicines i.e., product patent
is not granted in these substances. However, as per WTO agreement, India will have to
grant product patent to medicines and drug from the year 2005. Until then, India has to
offer pipeline protection (also known as mailbox facility). As per WTO agreement, India
has to accept patent application for invention of pharmaceuticals and agro-chemical
product from 1st January, 1995 and provide exclusive marketing right for a period of 5
year or until the grant of a product patent, whichever period is shorter.
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Request for grant of exclusive marketing rights shall be made in the prescribed from a
long with fees of Rs.25, 000. After submission of application for exclusive marketing
right, it will be examined by the examiner in the office of patents. Thereafter, the
controller of patents shall publish a notice in the official journal regarding this fact
whether the application has been accepted or rejected. The application can be opposed
by any person by giving notice of opposition.

Procedure for grant of patent

The procedure for grant of patent can be discussed under the following heads:
Who can make an application for grant of patent: An application for a patent for an
invention may be made by any of the following persons:
 Any person claimed to be the true and first inventor of invention;
 Any person, being the assign, of the person claiming to be the true and first inventor
of the invention:
 Legal representative of any deceased person who immediately before his death was
initiator to make such an application.
Contents of complete specification: Section 10 of the patent at ,1970 dealing with
contents of specification provides that every specification, whether provisional or
complete, shall described the invention and being with a total sufficiently indicating the
subject matter to which the invention relates.
Every complete specification is required to –
a) fully and particularly described invention and its operation or used and the
method by which it is to be performed;
b) Disclosed the method of performing the invention which is known to the
applicant and for which he is initialed to claimed protection;
c) End with a claim or claims defining the scope of for which protection is claimed;
and
d) Be accompanied by an abstract to provide technical information on the invention.
Publication of Application & Opposition: On receipt of application, the application for
Patent shall be published in the Official Journal. At this stage, the application can be
opposed & if required, an opportunity of being heard shall also be given to the person
making the opposition. Notice of opposition shall be filed within 3 months from the
date of publication of application in the Official Journal or before grant of Patent,
whichever is later.
Grant of patents: Thereafter, the Controller of Patents shall grant the patent,
provided either-
 The application has not been opposed and time for filing the opposition has
expired;
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 The application has been opposed but the opposition has been finally decided in
favour of the applicant; or
 The application has not been refused by the Controller of Patents by virtue of any
power vested in him.

The grant of patent shall be published in the official journal.

Opposition after grant of patent: After grant of patent, opposition can be made
within one year from the date of publication of Grant of Patent in official
Journal.
Following are the important grounds of Opposition;
1. Patent has been obtained by the Patentee in a wrongful manner.
2. Some other person has a claim in respect of that invention which is prior
to the claim of the patentee.
3. It is obvious & it is not an inventive step.
4. Invention not fully disclosed.

Working of Patents and Compulsory Licensing

The general principle behind granting the patents are to encourage inventions,
however, patent is for use and not for hoarding.
If patented invention is not made available to the public at reasonable price or that
reasonable requirements of public are not satisfied or if patented invention is not
worked in the territory of India, the Controller of Patents can order the patentee to
grant the license on such terms and conditions as may be fixed by the Controller of
Patents.
The application for such compulsory licensing can be made only after the expiry of 3
years from the date of grant of patents.
The Controller of Patents can terminate compulsory license if it is no more required.
He will give an opportunity of being heard to the concerned parties before issuing the
order of termination.

Surrender of Patents
A patentee can at any time surrender his patent by giving notice to the Controller of
Patents. The Controller of Patents will advertise the application for surrender of
patents, invite the objections and then after hearing the concerned parties, he can
accept the surrender of patent and then revoke the patent.

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Revocation of Patent
A patent can be revoked by High Court on any of the grounds specified under Sec.64
of the Patents Act, 1970.
Patent can also be revoked in the following cases:
1) If patentee fails to with the request of the Central Government to make, use or exercise
patented invention for the purposes of the Government;
2) If patent is not reasonably worked within 2 years after compulsory licensing;
3) Central Government can revoke a patent if it is exercised in mischievous mode to the
State or is generally prejudicial to the public interest.
4) Central Government can also revoke the patent in the interest of security of India.

Powers of the Central Government for the protection of security of India under the
Patents Act, 1970
Section 15A as inserted by the Patents (Amendment) Act, 2002 contains provisions
relating to protection of security of India. This section empowers the Central
Government, not to disclose any information relating to any patentable invention or
any application relating to the grant of patent, which it considers prejudicial to the
interest of the security of India. The Central Government has also been empowered to
take any action including the revocation of any patent, which it considers necessary in
the interest of security of India.
Explanation to Section 15A clarifies that the expression `Security of India‘ includes any
action necessary for the Security of India which –
i) Relates to fissionable materials or the materials from which they are derived; or
ii) Relates to the traffic in arms, ammunition and implements of war and to such traffic in
other goods and materials as is carried on directly or indirectly for the purpose of
supplying a military establishment; or
iii) Is taken in time of war or other emergency in international relation.

Infringement of Patents
The patentee, his agents and his licensee have the exclusive rights to make, use or
distribute the invention in India. Infringement means violating the statutory rights of
the patentee, his agents and his licensee. A suit for infringement can only be filed in the
District Court.
The reliefs that can be claimed for infringement are:
1) Damages and a share of profit to patentee; and
2) Injunction on infringe on such terms and conditions as the Court may deem fit

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The Court can also order that infringing goods shall be seized, forfeited, or destroyed
as the Court deems fit.
It may be noted that in case of innocent infringement i.e., infringement what
knowledge that a patent exists, damages and share of profit shall not be paid.

Acts which are not considered to be amounting to infringement under the Patents
Act
The Patents (Amendment) Act, 2002 inserted a new Section 10A dealing with acts not
to be considered as infringement. These are:
1) Any act of making, constructing, using or selling a patented invention solely for
uses reasonably related to development and submission of information required under
any law for the time being in force, in India or abroad, that regulates the manufacture,
construction, use or sale of any product.
2) Importation of patented products by any person from a person who is duly authorized
by the patentee to sell or distribute the product.
A person shall also be qualified to have his name entered in the register of patent agent
under Section 126, if he has for a total period of not less than ten years functioned ether
as an examiner or discharged the functions of the controller under Section 73 of the Act
or both, but ceased to hold any such capacity at the time of making the application for
registration.
In the light of above legal position, a company secretary who fulfils the requirement of
section 126 can have his name entered in the register of patent

TRADE MARKS ACT, 1999

INTRODUCTION
Customers identify a product by its trademark is a
valuable property of any business. Sometimes
trademarks like Coco-Cola, Pepsi, IBM, Philips, etc,
get worldwide recognition. It is necessary for a
business that a trademark is not used by an
unauthorized person. The Trade Marks Act, 1999
has been enacted with an intention to protect rights
of trademarks of business.
The foundation behind right to restrain the user of
a similar name is the principle that no one is
entitled to represent his business or goods as being
the business or goods of another.

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Meaning of Trademark
A trademark is nay word, symbol, phrase, or logo design adopted and placed on a
product offered for sale or on a container to identify its source. In this way, the
connection between the product and the manufacturer/ trader is brought to the notice
of the public at large. Trademarks are an integral part of a firm‘s strategy to
differentiate its products and services from other competitors and to establish
consumer brand loyalty.
A trademark belongs to the firm that first adopts and uses it. Its owner is protected
from infringement or use of trademark by someone else without permission.

Registration of Trademark
The procedure for registration of trademark can be discussed under the following
heads:
Administrative set up: Trademarks are to be registered with Controller General of
Patents, Designs, and Trademarks who will be the Registrar for the purposes of this
Act. Trademark Registry has been established under this Act and its office has been
established at different places. The Head Office of the Registrar of Trademarks is at
Mumbai and Register of Trademarks is maintained at the head office only.

Who can apply for registration of Trademark

Any person claiming to be the proprietor of trademark used or proposed to be used
can apply for registration of his trademark. It may be noted that a single application
may be made for different classes of goods and services but separate fees is payable for
each class. The application for registration of trademark shall be filed with the Office of
Registry of Trademark under whose territorial jurisdiction the principal place of
business of proprietor is situated.

GROUND FOR REFUSAL TO REGISTER TRADEMARK

Absolute Grounds
Following types of trademarks cannot be registered:
a) Trademark which are devoid of any distinctive character i.e., not capable of
distinguishing goods and services of one person from those of another person;
b) Trademark which consist exclusively of marks or indications which may serve in
trade to designate the kind, quality, quantity, intended purpose, value, geographical
origins, or the time of production of goods or rendering the service or other
characteristics of goods or services;

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c) Trademark which consists exclusively of marks which have become customary in the
current language or in the bona fide and established practices of the trade.
d) Trademark which is likely to deceive or cause confusion;
e) Trademark which comprises of scandalous or obscene matters;
f) Trademark which contains any matter likely to hurt religious sentiments;
g) Trademark use of which is prohibited under the Emblems and Names (prevention of
improper use) Act, 1950.
h) Trademarks regarding certain shapes: trademark following shapes cannot be
registered:
(a) Shapes of goods which result from nature of goods themselves;
(b) Shapes of goods which is necessary to obtain a technical result;
(c) Shapes which gives substantial value to the goods.

Relative grounds
(i) Trademark high are likely to create confusion in case of similar goods: a trademark
shall not be registered if there exists likelihood of confusion on the part of the
public because of the following factors:
It‘s Identity with the earlier trademark and similarity of goods or services
covered by trademark;
a) It‘s identity with the earlier trademark and similar of goods or services
covered by trademark;
b) It‘s similarity to an earlier trademark and the identity of goods or services
covered by trademark.
(ii) Dissimilar goods but trademark already register: trademark which is not
identical with or similar to an earlier trademark, but in respect of goods or
services which are not similar to those for which earlier trademark is already
registered with different proprietor, shall not be registered, If the extent of earlier
trademark is a well known trademark in India and the use of latter mark (which
is proposed to be registered) could take unfair advantage of the earlier
trademark.
Thus in case of dissimilar goods with identical or similar trademark will not be
registered if earlier trademark is well known trademark in India and use of mark
propose to be registered could be unfair or determined to the properties of well known
trademark.

Validity period of trademark: register of trademark is valid for 10 years. However, it

can be renewed from time to time.
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INFRINGEMENT OF TRADEMARK
Meaning of infringement of trademark: a registered trademark is infringed when a
person, other than a registered properties or a person using by way of permitted use,
uses in course of trade.
Instances of infringement of trademark: following are the instances of infringement of
trademark:
a) use of deceptively similar mark;
b) use of mark likely to cause confusion because of identity/ similarity;
c) use of identical or similar registrar trademark even on dissimilar goods, if
registered trademark has a reputation in India;
d) unauthorized use of trademark indented to be used for labeling or packing of
goods;
e) use of a registered trademark in an advertisement, taking unfair advantage in the
advertisement or showing a register trademark in a advertisement in bad light
which is against the reputation of that product;
f) where the distinctive elements of a registered trademark consists or includes
words, spoken use of words as well as its visual representation may be
infringement of trademark.

What is not Infringement of trademark/limits on effects of registered Trademark?

Following shall not be considered as infringement of trademark:
a) Honest practice in trade;
b) Use only to indicate quality, quantity, characteristics, price etc.;
c) Use as per limited and conditions in proprietor but subsequently allowed to
others by the properties for its use;
d) Use of trademark registered by the proprietor but subsequently allowed to
others by the propertied for its use.
e) Use of registered trademark for including services performed by the properties
of trademark;
f) Purchase of goods bearing the registered trademark and then displayed for
sale.

Assignment and Transmission

A registered trademark can be assigned by the proprietor of trademark to any other
person, in return of some consideration. Registered trademark can be assigned or
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transmitted with or without goodwill of business consider, in respect of all goods or
services or some of the goods or services. It may be noted that an unregistered
trademark can also be assigned with or without the good will of the business
concerned. It may further be noted that assigned or transmission is not permitted, if by
such assigned exclusive rights are created in more than one person in respect of same
goods or services or associated goods or services if after the assignment it may happen
that one person has exclusive rights in one part of India while another part of India in
respect of same goods or services goods associated goods or services.

Registered User
The registered proprietor of a trademark can grant permission to a person to use the
mark as a registered user. Such use will be deemed to be as used by the proprietor
himself for the purposes of the Act. The registered proprietor shall enter into an
agreement with the proposed registered user and such agreement shall contain
particulars of their relationship, degree of control by proprietor over the registered user,
conditions of proposed permission, period for which permission will be valid, etc.
A registered user can sue for infringement of trademark, if the proprietor does not do so
even after notice to him. However, the registered user cannot assign or transmit the
right of use of the registered trademark to a third party.

COLLECTIVE MARKS
A collective mark means a trademark distinguishing the goods or services of members
of an association of persons, which is the proprietor of the mark, from those of others.
The application for registration of collective mark should be accompanied with
Regulations for use of the collective mark, specifying persons authorized to use mark,
conditions of membership, conditions for use of mark including sanctions against
misuse and other prescribed matters.
The Registrar will register the trademark together with the Regulations, either
conditionally or unconditionally. The regulations will be open for public inspection.

Certification Trademark
Certification Trademark is a mark capable of distinguishing the goods or services in
connection with which it is used in the course of trade, which are certified by the
proprietor of the mark in respect of origin, material, mode of manufacture or
performance of services, quality, etc., from goods or services not so certified. It is
registrable in respect of those goods or services in the name of proprietor of certification
trademark certifying the goods. ISI, Agmark etc. are some of the examples of
certification trademark.

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The person applying for such registration should not be carrying trade in those goods
or provision of those services. Such certification trademark can be used by
manufacturer or service provider only with the permission of proprietor of trademark.

Removal of a Trademark for non-use

Section 47 of the Trade Marks act, 199 deals with removal of a trade mark from the
register on the ground of non-use and provides that a trade mark which is not used
within five years of its registration, becomes liable for removal, either completely or in
respect of those goods or services for which the mark has not been used.

Designs

An industrial design right is an intellectual property right that protects the visual
design of objects that are not purely utilitarian. An industrial design consists of the
creation of a shape, configuration or composition of pattern or color, or combination of
pattern and color in three dimensional forms containing aesthetic value. An industrial
design can be a two- or three-dimensional pattern used to produce a product, industrial
commodity or handicraft.
Under the Hague Agreement Concerning the International Deposit of Industrial
Designs, a WIPO-administered treaty, and a procedure for an international registration
exists. An applicant can file for a single international deposit with WIPO or with the
national office in a country party to the treaty. The design will then be protected in as
many member countries of the treaty as desired. Design rights started in the United
Kingdom in 1787 with the Designing and Printing of Linen Act and have expanded
from there.
An industrial design right can be viewed as a sui generis intellectual property right
similar to copyright.

Industrial designs refer to creative activity which result in the ornamental or formal
appearance of a product and design right refers to a novel or original design that is
accorded to the proprietor of a validly registered design. Industrial designs are an
element of intellectual property. Under the TRIPS Agreement, minimum standards of
protection of industrial designs have been provided for. As a developing country, India
has already amended its national legislation to provide for these minimal standards.

The essential purpose of design law it to promote and protect the design element of
industrial production. It is also intended to promote innovative activity in the field of
industries. The existing legislation on industrial designs in India is contained in the
New Designs Act, 2000 and this Act will serve its purpose well in the rapid changes in
technology and international developments. India has also achieved a mature status in
the field of industrial designs and in view of globalization of the economy, the present

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legislation is aligned with the changed technical and commercial scenario and made to
conform to international trends in design administration.

This replacement Act is also aimed to intact a more detailed classification of design to
conform to the international system and to take care of the proliferation of design
related activities in various fields.
India's Design Act, 2000 was enacted to consolidate and amend the law relating to
protection of design and to comply with the articles 25 and 26 of TRIPS agreement. The
new act, (earlier Patent and Design Act, 1911 was repealed by this act) now defines
"design" to mean only the features of shape, configuration, pattern, ornament, or
composition of lines or colors applied to any article, whether in two or three
dimensional, or in both forms, by any industrial process or means, whether manual or
mechanical or chemical, separate or combined, which in the finished article appeal to
and are judged solely by the eye; but does not include any mode or principle of
construction

A geographical indication (GI) is a name or sign used on certain products which

corresponds to a specific geographical location or origin (e.g. a town, region, or
country). India, as a member of the World Trade Organization (WTO), enacted
the Geographical Indications of Goods (Registration and Protection) Act, 1999 has come
into force with effect from 15 September 2003. GIs have been defined under Article 22(1)
of the WTO Agreement on Trade-Related Aspects of Intellectual Property
Rights(TRIPS) Agreement as: ―Indications which identify a good as originating in the
territory of a member, or a region or a locality in that territory, where a given quality,
reputation or characteristic of the good is essentially attributable to its geographic
origin.‖
The GI tag ensures that none other than those registered as authorised users (or at least
those residing inside the geographic territory) are allowed to use the popular product
name. Darjeeling tea became the first GI tagged product in India, in 2004-05, since then
by September 2010, 164 had been added to the list. These are listed below.

GEOGRAPHICAL INDICATIONS IN INDIA

No. Geographical Indication Type State

1 Darjeeling Tea (word & logo) Agricultural West Bengal

2 Aranmula Kannadi Handicraft Kerala

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No. Geographical Indication Type State

3 Pochampalli Ikat Handicraft Andhra Pradesh

4 Kuthampully Saree Handicraft Kerala

5 Chanderi Fabric Handicraft Madhya Pradesh

6 Solapur Chaddar Handicraft Maharashtra

7 Solapur Terry Towel Handicraft Maharashtra

8 Kotpad Handloom fabric Handicraft Orissa

9 Mysore silk Handicraft Karnataka

10 Kota Doria Handicraft Rajasthan

11 Mysore Agarbathi Manufactured Karnataka

12 Kancheepuram Silk Handicraft Tamil Nadu

13 Bhavani Jamakkalam Handicraft Tamil Nadu

14 Kullu Shawl Handicraft Himachal Pradesh

15 Bidriware Handicraft Karnataka

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No. Geographical Indication Type State

16 Madurai Sungudi Handicraft Tamil Nadu

17 Orissa Ikat Handicraft Orissa

18 Channapatna Toys & Dolls Handicraft Karnataka

19 Mysore Rosewood Inlay Handicraft Karnataka

20 Kangra Tea Agricultural Himachal Pradesh

21 Coimbatore Wet Grinder Manufactured Tamil Nadu

22 Srikalahasthi Kalamkari Handicraft Andhra Pradesh

23 Mysore Sandalwood Oil Manufactured Karnataka

24 Mysore Sandal Soap Manufactured Karnataka

25 Kasuti Embroidery Handicraft Karnataka

26 Mysore Traditional Paintings Handicraft Karnataka

27 Coorg Orange Agricultural Karnataka

28 Mysore Betel leaf Agricultural Karnataka

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No. Geographical Indication Type State

29 Nanjanagud Banana Agricultural Karnataka

30 Madhubani paintings Handicraft Bihar

31 Kondapalli Bommallu Handicraft Andhra Pradesh

32 Thanjavur Paintings Handicraft Tamil Nadu

33 Silver Filigree of Karimnagar Handicraft Andhra Pradesh

34 Alleppey Coir Handicraft Kerala

35 Muga Silk Handicraft Assam

36 Temple Jewellery of Nagercoil Handicraft Tamil Nadu

37 Mysore Jasmine Agricultural Karnataka

38 Udupi Jasmine Agricultural Karnataka

39 Hadagali Jasmine Agricultural Karnataka

40 Navara rice Agricultural Kerala

41 Palakkadan Matta Rice Agricultural Kerala

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No. Geographical Indication Type State

42 Thanjavur Art Plate Handicraft Tamil Nadu

43 Ilkal Sarees Handicraft Karnataka

44 Applique – Khatwa Patch Work of Bihar Handicraft Bihar

45 Sujini Embroidery Work of Bihar Handicraft Bihar

46 Sikki Grass Work of Bihar Handicraft Bihar

47 Malabar Pepper Agricultural Kerala

48 Allahabad Surkha Agricultural Uttar Pradesh

49 Nakshi Kantha Handicraft West Bengal

50 Ganjifa cards of Mysore (Karnataka) Handicraft Karnataka

51 Navalgund Durries Handicraft Karnataka

52 Karnataka Bronze Ware Handicraft Karnataka

53 Molakalmuru Sarees Handicraft Karnataka

54 Monsooned Malabar Arabica Coffee Agricultural Karnataka

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No. Geographical Indication Type State

55 Monsooned Malabar Robusta Coffee Agricultural Karnataka

56 Alleppey Green Cardamom Agricultural Kerala

57 Coorg Green Cardamom Agricultural Karnataka

58 E. I. Leather Manufactured Tamil Nadu

59 Salem Silk (Salem Venpattu) Handicraft Tamil Nadu

60 Kovai Cora Cotton Handicraft Tamil Nadu

61 Arani Silk Handicraft Tamil Nadu

62 Bastar Dhokra Handicraft Chhattisgarh

63 Bastar Wooden Craft Handicraft Chhattisgarh

64 Nirmal Toys and Craft Handicraft Andhra Pradesh

65 Maddalam of Palakkad Handicraft Kerala

66 Screw Pine Craft of Kerala Handicraft Kerala

67 Swamimalai Bronze Icons Handicraft Tamil Nadu

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No. Geographical Indication Type State

68 Bastar Iron Craft Handicraft Chhattisgarh

69 Konark Stone carving Handicraft Orissa

70 Pattachitra Handicraft Orissa

71 Machilipatnam Kalamkari Handicraft Andhra Pradesh

72 Eathomozhy Tall Coconut Agricultural Tamil Nadu

Brass Broidered Coconut Shell Crafts of

73 Handicraft Kerala
Kerala

74 Blue Pottery of Jaipur Handicraft Rajasthan

75 Molela Clay Work Handicraft Rajasthan

76 Kathputlis of Rajasthan Handicraft Rajasthan

77 Leather Toys of Indore Handicraft Madhya Pradesh

78 Bagh Prints of Madhya Pradesh Handicraft Madhya Pradesh

79 Sankheda Furniture Handicraft Gujarat

80 Agates of Cambay Handicraft Gujarat

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No. Geographical Indication Type State

81 Bell Metal Ware of Datia and Tikamgarh Handicraft Madhya Pradesh

82 Kutch Embroidery Handicraft Gujarat

83 Kani Shawl Handicraft Jammu & Kashmir

84 Chamba Rumal Handicraft Himachal Pradesh

85 Dharwad Pedha Foodstuff Karnataka

86 Pokkali Rice Agricultural Kerala

87 Pipli Applique Work Handicraft Orissa

88 Budiiti Bell & Brass Craft Handicraft Andhra Pradesh

89 Thanjavur Doll Handicraft Tamil Nadu

90 Santiniketan Leather Goods Handicraft West Bengal

91 Nirmal Furniture Handicraft Andhra Pradesh

92 Nirmal Paintings Handicraft Andhra Pradesh

93 Andhra Pradesh Leather Puppetry Handicraft Andhra Pradesh

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No. Geographical Indication Type State

94 Laxman Bhog Mango Agricultural West Bengal

95 Khirsapati (Himsagar) Mango Agricultural West Bengal

96 Fazli Mango Agricultural West Bengal

97 Kashmir Pashmina Handicraft Jammu & Kashmir

98 Kashmir Sozani Craft Handicraft Jammu & Kashmir

99 Naga Mircha Agricultural Nagaland

100 Nilgiri(Orthodox) Logo Agricultural Tamil Nadu

101 Assam (Orthodox) Logo Agricultural Assam

102 Lucknow Chikan Craft Handicraft Uttar Pradesh

103 Virupakshi Hill Banana Agricultural Tamil Nadu

104 Sirumalai Hill Banana Agricultural Tamil Nadu

105 Feni Manufactured Goa

106 Uppada Jamdani Sarees Handicraft Andhra Pradesh

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No. Geographical Indication Type State

107 Tirupathi Laddu Foodstuff Andhra Pradesh

108 Mango Malihabadi Dusseheri Agricultural Uttar Pradesh

109 Puneri Pagadi Handicraft Maharashtra

110 Banaras Brocades and Sarees Handicraft Uttar Pradesh

111 Tangaliya Shawl Handicraft Gujarat

112 Vazhakulam Pineapple Agricultural Kerala

113 Devanahalli Pomello Agricultural Karnataka

114 Appemidi Mango Agricultural Karnataka

115 Kamalapur Red Banana Agricultural Karnataka

116 Santipore Saree Handicraft West Bengal

117 Cannanore Home Furnishings Handicraft Kerala

118 Sanganeri Hand Block Printing Handicraft Rajasthan

Balaramapuram Sarees and Fine Cotton

119 Handicraft Kerala
Fabrics

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No. Geographical Indication Type State

120 Bikaneri Bhujia Agricultural Rajasthan

121 Guntur Sannam Chilli Agricultural Andhra Pradesh

122 Nashik Valley Wine Manufactured Maharashtra

123 Gadwal Sarees Handicraft Andhra Pradesh

124 Kinnauri Shawl Handicraft Himachal Pradesh

125 Kasaragod Sarees Handicraft Kerala

126 Salem Fabric Handicraft Tamil Nadu

127 Sandur Lambani Embroidery Handicraft Karnataka

128 Hand made Carpet of Bhadohi Handicraft Uttar Pradesh

129 Paithani Sarees and Fabrics Handicraft Maharashtra

130 Mahabaleshwar Strawberry Agricultural Maharashtra

131 Hyderabadi Haleem Foodstuff Andhra Pradesh

132 Central Travancore Jaggery Agricultural Kerala

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No. Geographical Indication Type State

133 Champa Silk Saree and Fabrics Handicraft Chhattisgarh

134 Wayanad Jeerakasala Rice Agricultural Kerala

135 Wayanad Gandhakasala Rice Agricultural Kerala

136 Kota Doria (Logo) Handicraft Rajasthan

137 Nashik Grapes Agricultural Maharashtra

138 Surat Zari Craft Handicraft Gujarat

139 Cheriyal Paintings Handicraft Andhra Pradesh

140 Pembarthi Metal Craft Handicraft Andhra Pradesh

141 Payyannur Pavithra Ring Handicraft Kerala

Punjab, Haryana &

142 Phulkari Handicraft
Rajasthan

143 Khandua Saree and Fabrics Handicraft Orissa

144 Byadgi chilli Agricultural Karnataka

145 Bagru Hand Block Print Handicraft Rajasthan

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No. Geographical Indication Type State

146 Venkatagiri Sarees Handicraft Andhra Pradesh

147 Gir Kesar Mango Agricultural Gujarat

148 Bhalia Wheat Agricultural Gujarat

149 Villianur Terracotta Works Handicraft Puducherry

150 Tirukanur Papier Mache Craft Handicraft Puducherry

151 Kachchh Shawls Handicraft Gujarat

152 Udupi Mattu Gulla Brinjal Agricultural Karnataka

153 Baluchari Saree Handicraft West Bengal

154 Dhaniakhali Saree Handicraft West Bengal

155 Kashmir Paper Machie Handicraft Jammu & Kashmir

156 Kashmir Walnut Wood Carving Handicraft Jammu & Kashmir

157 Bobbile Veena Handicraft Andhra Pradesh

158 Khatamband Handicraft Jammu & Kashmir

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No. Geographical Indication Type State

159 Kinnal Craft[citation needed] Handicraft Karnataka

160 Chendamangalam Dhoties & Set Mundu Handicraft Kerala

161 Gopalpur Tussar Fabrics Handicraft Orissa

162 Siddipet Gollabama Handicraft Andhra Pradesh

163 Ganjam Kewda Rooh Agricultural Orissa

164 Ganjam Kewda Flower Agricultural Orissa

165 Meerut scissors Handicraft Uttar Pradesh[3]

166 Madurai Malli Agricultural Tamil Nadu[4]

167 Pattamadai pai Handicraft Tamil Nadu[5]

168 Nachiarkoil kuthuvilakku Handicraft Tamil Nadu[6]

169 Toda embroidery Handicraft Tamil Nadu[7]

170 Thanjavur veena Handicraft Tamil Nadu[8]

171 Chettinad kottan Handicraft Tamil Nadu[9]

The Venkateswara temple in Tirupati,Andhra Pradesh, scored a sweet legal victory: the
Geographical Indications Registry upheld its claim of a GI registration over the famous
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Tirupati laddu. The Registry‘s order granting the GI tag was, earlier, challenged by R S
Praveen Raj, a scientist with CSIR-NIIST.The registry issued the verdict, upholding
TTD‘s claim and fined Praveen Raj Rs 10,000

Set Goals

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ARBITRATION AND CONCILIATION ACT, 1996

IMPORTANT SECTIONS TO BE READ IN THIS CHAPTER

Sections Topics

Sec.10 NUMBER OF ARBITRATOR

Sec.11 APPOINTMENT OF ARBITRATOR

Sec.12 CHALLENGE OF ARBITRATOR

Sec.13 PROCEDURE OF ARBITRATION

Sec.14 FAILURE OR IMPOSSIBILITY TO ACT

Sec.15 SUBSTITUTE OF ARBITRATOR

Sec.23-27 ARBITRAL PROCEEDINGS- PROCEDURE

Sec.30 SETTLEMENT

Sec.31 AWARD & ITS CONTENTS

Sec.33 CORRECTION IN AWARD

Sec.33(4) ADDITIONAL AWARD

Sec.34 SETTING ASIDE ARBITRAL AWARD

Sec.64 APPOINTMENT OF CONCILIATOR

No great man ever complains of want of opportunities

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INTRODUCTION

ALTERNATIVE DISPUTE RESOLUTION

Alternative dispute resolution (ADR) (also known as external dispute resolution in

some countries, such as Australia[1]) includes dispute resolution processes and
techniques that act as a means for disagreeing parties to come to an agreement short
of litigation. It is a collective term for the ways that parties can settle disputes, with (or
without) the help of a third party. Despite historic resistance to ADR by many popular
parties and their advocates, ADR has gained widespread acceptance among both the
general public and the legal profession in recent years. In fact, some courts now require
some parties to resort to ADR of some type, usually mediation, before permitting the
parties' cases to be tried (indeed the European Mediation Directive (2008) expressly
contemplates so-called "compulsory" mediation; attendance that is, not settlement at
mediation). The rising popularity of ADR can be explained by the increasing caseload of
traditional courts, the perception that ADR imposes fewer costs than litigation, a
preference for confidentiality, and the desire of some parties to have greater control
over the selection of the individual or individuals who will decide their dispute. Some
of the senior judiciary in certain jurisdictions (of which England and Wales is one) are
strongly in favour of the use of mediation to settle disputes.

Alternative dispute resolution in India is not new and it was in existence even under the
previous Arbitration Act, 1940. The Arbitration and Conciliation Act, 1996 has been
enacted to accommodate the harmonisation mandates of UNCITRAL Model. To
streamline the Indian legal system the traditional civil law known as Code of Civil
Procedure, (CPC) 1908 has also been amended and section 89 has been introduced.
Section 89 (1) of CPC provides an option for the settlement of disputes outside the
court. It provides that where it appears to the court that there exist elements, which may
be acceptable to the parties, the court may formulate the terms of a possible settlement
and refer the same for arbitration, conciliation, mediation or judicial settlement.
Due to extremely slow judicial process, there has been a big thrust on Alternate Dispute
Resolution mechanisms in India. While Arbitration and Conciliation Act, 1996 is a fairly
standard western approach towards ADR, the Lok Adalat system constituted under
National Legal Services Authority Act, 1987 is a uniquely Indian approach.

UNCITRAL MODEL LAW

The UNCITRAL Model Law on International Commercial Arbitration was prepared

by UNCITRAL, and adopted by the United Nations Commission on International Trade
Law on 21 June 1985. In 2006 the model law was amended, it now includes more
detailed provisions on interim measures.
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The model law is not binding, but individual states may adopt the model law by
incorporating it into their domestic law (as, for example, Australia did, in the
International Arbitration Act 1974, as amended).
The model law was published in English and in French. Translations in all six United
Nations languages now exist.

Note that there is a distinct difference between the UNCITRAL Model Law on
International Commercial Arbitration (1985) and the UNCITRAL Arbitration Rules [3].
On its website, UNCITRAL explains the difference as follows: "The UNCITRAL Model
Law provides a pattern that law-makers in national governments can adopt as part of
their domestic legislation on arbitration. The UNCITRAL Arbitration Rules, on the
other hand, are selected by parties either as part of their contract, or after a dispute
arises, to govern the conduct of an arbitration intended to resolve a dispute or disputes
between themselves. Put simply, the Model Law is directed at States, while the
Arbitration Rules are directed at potential (or actual) parties to a dispute.

Meaning and Importance of Arbitration

Arbitration is one of the methods of settling civil disputes between two or more persons
but reference of the dispute to an independent and impartial third person, called
arbitrator, instead of litigating the matter in the usual way through Courts. It saves time
and expenses. It also avoids unnecessary technicalities and at the same time ensures
―substantial justice within limits of the law‖.

Essential of Arbitration Agreement

An arbitration agreement, to be valid and binding, must have the following essential
elements:

1. It must be in writing and includes an exchange of letters, telex, telegrams or other

means of communication, which provides a record of such arbitration agreement.

2. It must have all the essential elements of a valid contract.

An arbitration agreement is not required to be in any particular form. What is required

to be ascertained is whether the parties have agreed that if disputes arise between them
in respect of subject-matter of the contract, such disputes shall be referred to arbitration,
and then such an agreement would spell out an arbitration agreement. [Rukmanibai v.
Collector]

3. It must be refer a dispute, present or future, between the parties to arbitration.

4. It may be in the form an arbitration clause in a contract or in the form of a separate

agreement.
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But... Some Matters CAN/ CANNOT Be Referred to Arbitration Agreement (section 9
of Civil Procedure Code. 1908)

All mattes in dispute between parties relating to private rights or obligations, which
Civil Courts may take cognizance of, may be referred to arbitration. However, a matter
shall not be referred to arbitration it is forbidden by a Statute or is opposed to public
policy.

I. Matters which MAY be referred to Arbitration

Following are some of the matters which may be referred to Arbitration:

1. Determination of damages in case of breach of contract.

2. Question of validity of marriage.
3. Matters of right to office.
4. Time barred claims.

II. Mattes which CANNOT be referred to Arbitration

Following are the matters which cannot be referred to Arbitration:

1. Matters relating to divorce.

2. Testamentary matters like the validity of a will.
3. Insolvency matters.
4. Matters relating to public charities and charitable trusts.
5. Matters relating to guardianship of a minor.
6. Lunacy proceedings.
7. Matters of criminal nature.

ARBITRAL TRIBUNAL

1. Introduction

The person who is appointed to determine differences and disputes is called the
Arbitrator or Arbitral Tribunal (which may consist of a sole arbitrator or panel of
arbitrators), the proceedings before whom are called arbitration proceedings, and his
decision is called an Award.

2. Number of Arbitrators [Sec. 10]

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The parties are free to determine the number of arbitrators provided that such number
shall not be an even number. It the parties fail to make the determination, arbitral
tribunal shall consist of a sole arbitrator.

3. Appointment of Arbitrators [Sec. 11]

A person of any nationality may be appointed as an arbitrator, unless otherwise agreed

by the parties.

Section 11 further provides that where a party fails to appoint an arbitrator within 30
days from the date or the receipt of a request to do so from the other party or where the
two appointed arbitrators fail to agree on the third arbitrator within 30 days from the
date of their appointment, then a party may request the Chief Justice of High Court of
the State concerned or any person or institution designated by the Chief Justice, to take
necessary measures. The decision on the matter entrusted to the Chief Justice or any
person or institution designated by the Chief Justice shall be final.

It may be noted that in an international commercial arbitration, the power to appoint an

arbitrator or arbitrators is vested with the Chief Justice of India or a person or
institution designated by the Chief Justice of India. An international commercial
arbitration is an arbitration relating to disputes considered commercial in nature, where
at least one of the parties belongs to a foreign country.

4. Challenges of appointment of Arbitrator

Law [Sec. 12]: The appointment of arbitrator may be challenged on any of the following
grounds:
1) Circumstances exist that give rise to justifiable doubts as to his independence or
impartiality; or
2) He does not possess the qualification agreed to by the parties.

It may be noted that a party may challenge an arbitrator appointed by him only on
those grounds which came to his knowledge after the appointment has been made.

Procedure [Sec. 13]: The parties are free to agree on a procedure for challenging an
arbitrator. If there is no agreement on this point or the parties have failed to agree, then
the procedure to be followed is that the party wishing to present the challenge has to
inform the Arbitral Tribunal of the matter. This should be done within 15 days after
becoming aware of the constitution of the Arbitral Tribunal or after becoming aware of
any circumstances of challenge, whichever is later. The Tribunal or after becoming
aware of any circumstances of challenge, whichever is later. The tribunal shall decide on
the challenge unless the arbitrator withdraws from his office or the other party to the
arbitration agrees to the challenge.

If the challenge is not successful, the Tribunal shall continue with the proceedings and
shall make an award. But at that stage, the party who challenged arbitrator may
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challenge the award and make an application for setting aside the award in accordance
with Section 34 of the Act.

5. Failure or Impossibility to act [Sec. 14]

Section 14 deals with then a mandate given to an arbitrator shall be terminated.
―Mandate‖ means an authorization to act given to an arbitrator.
The mandate of an arbitrator shall terminate if—
a) He becomes de jure (by right) or de facto (in fact) unable to perform his functions or for
other reasons fails to act without undue delay; and
b) He withdraws from his office or the parties agree to the termination of hi mandate.

The mandate of an arbitrator shall also be terminated in the following cases:

a) Where he withdraws from office for any reason; or

b) By virtue of an agreement between the parties.

6. Substitution of Arbitrator [Sec. 15]

Where the mandate of an arbitrator terminates, a substitute arbitrator shall be
appointed according to the rules that were applicable to the appointment of the
arbitrator being replaced.

7. Procedure for Arbitral/Arbitration Proceedings

Section 23 to 27 of the Arbitration Act, 1996, lays down the procedure to be followed in
arbitral/arbitration proceedings. The procedure involves the following steps:

1) Statements of claim and defence: The claimant has to submit his claim, consisting of
facts supporting the claim, points at issue and the relief or remedy sought –within the
period agreed by the parties, or determined by the arbitral tribunal. Likewise, the
respondent has to sate the defence in respect of the claims of the claimant.

2) Hearing and written proceedings: If it is open to parties to agree for holding oral
hearings for presentation of evidence and for oral arguments, or, alternatively, for
conduction proceedings of the basis of documents such as affidavits. In the absence of
any such agreement, a decision in this regard may be taken by the arbitral tribunal.

3) Default of a party: It is open to the parties to agree to what constitutes a default in the
proceedings. In the absence of any such agreement, certain situations as stipulated
under the Act are regarded as defaults, leading to certain consequences.

4) Expert appointment by arbitral tribunal: The arbitral tribunal may appoint one or
more experts to report to it, on specific issues to be determined by the arbitral tribunal.

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5) Court assistance in taking evidence: The arbitral tribunal as well as any party, with the
approval of the arbitral tribunal, can apply to the court for assistance in taking evidence.

6) Decision: The decision of the Tribunal is generally by a majority of all its members.

8. Settlement [Sec. 30]

This section declares that, in spite of an arbitration agreement, the arbitral tribunal may
encourage the settlement of disputes by using meditation, conciliation or other
proceedings, with the agreement of the parties.
If the parties reach to a settlement, the arbitral award will be given by the arbitral
tribunal. The arbitral award, on agreed terms, will have the same status and effect as
any other arbitral award on the merits of the dispute.

AWARD
Meaning of Award
Award means an arbitral award. It is a final judgment of the arbitral tribunal on all
matters referred to it. It is in fact a final adjudication by a tribunal of the parties‘ own
choice. It is binding in the same manner as the decision of a Court.
It may be noted that an arbitral award includes an interim award.

Essentials of a valid award

Following are the essentials of a valid award:

1. It must be made in writing. It may be in such language as agreed upon.

2. It must follow the agreement and not purport to decide matters not within the
agreement.
3. It must be final and give a decision on all matters referred.
4. It must be certain i.e., it should be clear and possible to perform.
5. It must be dated and signed by the arbitrators and in the presence of parties.
6. It must be legal and must be in conformity with the powers contained in the reference.

Form and contents of Arbitral Award

Section 31 provides that the following are the important provisions pertaining to form
and contents of arbitral award:

1. Arbitral award must be in writing.

2. It must state the reasons unless otherwise agreed by the parties or the award is on
agreed terms under Section 30.
3. It must be dated and signed by the arbitrators.
4. It must state the place of arbitration.
5. A signed copy of the arbitral award must be-delivered to each of the parties to the
reference.

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Correction and Interpretation of Award [Sec. 33(1)]

Within 30 days from the receipt of arbitral award:

a) A party, with notice to the other party, may request the arbitral tribunal to correct any
computation errors, any clerical or typographical errors or any other errors of a similar
nature occurring in the award.

b) If so agreed by the parties, any party, with notice to the other party, may request the
arbitral tribunal to give an interpretation of a specific point or part of the award.

It may be noted that the arbitral tribunal may correct any error of the type referred to in
clause (a) above, on its own initiative, within 30 days from the date of the arbitral
award.

Additional Award [Sec. 33(4)]

Unless otherwise agreed by the parties, a party with notice to the other party may
request, within 30 days from the receipt of arbitral award, the arbitral tribunal to make
an additional arbitral award as to claims presented in the arbitral proceedings but
omitted from the arbitral award. If the arbitral tribunal considers the request made to be
justified, it shall make the additional arbitral award within 60 days from the receipt of
such request.

Setting aside of an Arbitral Award [Sec. 34]

Section 34 provides that an arbitral award may be challenged before the Competent
Court and can be set aside on the following grounds:

1. A party to arbitration suffered from want of competency.

2. The arbitration agreement is illegal and void.
3. The concerned party (i.e., party applying for setting aside the award) was not given
proper notice of appointment of an arbitrator.
4. The arbitral tribunal was not properly constituted or the procedure adopted not in
accordance with the agreement.
5. The arbitral tribunal acted without jurisdiction.
6. Award dealing with a dispute not contemplated or not falling within the terms of
submission to arbitration.
7. The subject matter of dispute is not capable of settlement by arbitration under the law.
8. Award is in conflict with the public policy.

An application for setting aside an arbitral tribunal may be made within 3 months from
the date on which the party making the application had received the award. If a request
had been made under Section 33 for the correction or interpretation of the award,
application for setting aside of award may be made within 3 months from the date on
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which that request had been disposed of by the arbitral tribunal, however if the Court is
satisfied that the applicant was prevented by sufficient cause from making the
application within the prescribed period of 3 months, it may entertain the application
within a further period of 30 days, but not thereafter.

CONCILIATION

Meaning of conciliation

Conciliation is an alternative dispute resolution (ADR) process whereby the parties to a

dispute use a conciliator, who meets with the parties separately in an attempt to resolve
their differences. They do this by lowering tensions, improving communications,
interpreting issues, providing technical assistance, exploring potential solutions and
bringing about a negotiated settlement.
Conciliation differs from arbitration in that the conciliation process, in and of itself, has
no legal standing, and the conciliator usually has no authority to seek evidence or call
witnesses, usually writes no decision, and makes no award.
Conciliation differs from mediation in that the main goal is to conciliate, most of the
time by seeking concessions. In mediation, the mediator tries to guide the discussion in
a way that optimizes party‘s needs, takes feelings into account and reframes
representations.
In conciliation the parties seldom, if ever, actually face each other across the table in the
presence of the conciliator.

Conciliation is an informal process in which the conciliator (the third party) tries to
bring the disputants to an agreement. He does this by lowering tensions, improving
communication, interpreting issues, providing technical assistance, exploring potential
solutions and bringing about a negotiated settlement.

Appointment of Conciliator

Section 64 of the Arbitration and Conciliation Act, 1996 provides that the conciliator is
appointed in the following manner:

 If there is one conciliator in conciliation proceedings, there should be an agreement on

his name.
 If there are two conciliators, each party should appoint one conciliator each.
 If there are three conciliators in conciliation proceedings, each party should appoint one
conciliator each and the third conciliator will be an agreed person, who will act as
Presiding Conciliator.

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TRANSFER OF PROPERTY ACT, 1882

IMPORTANT SECTIONS TO BE READ IN THIS CHAPTER

Sections Topics

Sec.3 MEANING OF IMMOVABLE PROPERTY

Sec.6 TRANSFERABLE PROPERTY

Sec.10,11,12,25 ILLEGAL RESTRAINT ON ALIENATION

Sec.13,14,16 TRANSFER FOR THE BENEFIT OF UNBORN PERSON

Sec.19 VESTED INTEREST

Sec.21 CONTNGENT INTEREST

Sec.35 DOCTRINE OF ELECTION

Sec.41 OSTENSIBLE OWNER

Sec.43 GRANT BY ESTOPPEL

Sec.52 LIS PENDENS

INTRODUCTION

Transfer of Property Act, 1882 is the general law relating to transfer of immovable
property. The principal objectives of the Act are:-

 To lay down uniform rules for transfer of property; and

 To complete the code of contract law so far as it relates to immovable property.

Section 3 only states that the Immovable property doesn‘t include standing timber,
growing crops and grass.

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Immovable Property includes land, benefit to arise out of land, things attached to the
earth, or permanently fastened to anything attached to the earth.

TRANSFERABLE PROPERTY [6]

In general, every kind of property can be transferred from one person to another

However the following are the exceptions to this general rule i.e., in the following cases,
property can‘t be transferred from one person to another:

1. Chance of an Heir Apparent/ Spes Successionis

The technical expression for the chance of an heir apparent succeeding to an estate is
called Spes Successionis. It means succeeding to a property.
Such a chance is not property and as such cannot be transferred. If it is transferred, the
transfer is wholly void.

2. Right of Re-Entry
The transferor reserves this right to himself after having parted with the possession of
the property. This right is for his personal benefit and cannot, therefore, be transferred.

3. Transfer of Easement
Easement means an interest in land. Owned by another, that entitles his holder to a
specific limited use or enjoyment.
For example, the right of certain villagers to bath in another‘s tank cannot be
transferred.

4. Interest Restricted in its Enjoyment

The cases which fall under this head include the following:
a. The right of ―Pujari‖ in a temple to receive offerings.
b. The right of a ―Widow‖ under Hindu law to residence and maintenance.

5. Right to Future Maintenance

A right to future maintenance manner arising can‘t be transferred. It is solely for the
personal benefits of the person to whom it is granted. However, the arrears of the past
maintenance can be transferred.

6. Right to Sue
Mere rights to sue can‘t be transferred. However, if it is incidental to transfer of another
right, it can be transferred.

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ILLEGAL RESTRAINTS ON CERTAIN ALIENATIONS [SECTIONS 10, 11, 12 & 25]

1. Condition Restraining Alienation [Sec. 10]

Where property is transferred, subject to a condition, absolutely restraining the

transferee from parting with or disposing of his interest in the property, the condition is
void.

It may be noted that absolute restraint is void but partial restraint qualified as to place
or person may be valid and binding. For e.g. A transfer property B on the condition that
he should not alienate it in favor of C, who is A‘s competitor. This is only a partial
restraint and is valid.

2. Restraint on Enjoyment [Sec. 11]

When a property is transferred absolutely, the transferee should be free to enjoy the
property in any manner he likes. If the transferor imposes any restraint on the
enjoyment of the property by the transferee, the restraint is treated as clog in the
enjoyment of the property by the transferee and the restraint is treated as void.
For e.g. A sales his house to B he adds the condition that only B shall reside in the
house. The condition is invalid.

3. Condition Making Interest Determinable On Insolvency Or Attempted Alienation

[Sec. 12]
If a person transfers property to anyone subject to a condition that if the transferee
becomes insolvent, the property should revert to the transferor, and such condition is
void.

4. Transfer subject to illegal, impracticable condition, etc. [Sec. 25]

Any interest created in a property under transfer, which depends on a condition the
performance or satisfaction of which is either impracticable or disallowed under law or
fraudulent or harmful to the person or property of another, is invalid.

TRANSFER FOR THE BENEFIT OF UNBORN PERSON AND PEOPLE

(SECTIONS 13, 14 & 16)

Transfer for benefit of unborn person [Sec. 13]

Sec 13 deals with the transfer of property for the benefits of unborn person. Following
are the important provision of Sec. 13:

a) No transfer can be directly made to an unborn person;

b) The interest in favour of unborn person must be preceded by a prior interest;
c) The prior interest must also be created by the same transfer; and
d) The unborn person must be given the whole of the remaining interest of the transferor
in the property.
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Thus if a property is given to an unborn person, two conditions should be satisfied:

 It should be preceded by a life in favour of a living person; and

 It should comprise the whole of the remaining interest of the transferor so that there can
be no further interest in favour of other.

For example, A transfer property of which he is the owner to B in trust for A and his
intended wife successively for their lives, and after the death of the survivor, for the
eldest son of the intended marriage for life, and after his death for A‘s second son. The
interest so created for the benefit of the eldest son does not take effect, because it does
not extend to the whole of A‘s remaining interest in the property.

Rule against Perpetuity [Sec. 14]

The rule against perpetuity prohibits the vesting of interest beyond a certain reasonable
period. It prescribes the maximum period within which a future interest must vest, and
if the vesting is postponed beyond such period, the vesting is void for remoteness. Such
maximum period is called the perpetuity period.

The perpetuity period consists of the life time of one or more persons say A, B and C, all
living at the date of transfer of property and the further period of minority of a person,
say the eldest son of C, (who shall be existence at the expiration of that period) to whom
the interest is to belong. In simple words, ‗perpetuity period‘ is the life or lives in being
and the further period after minority of a person.

Transfer to Take Effect or Not on Failure of Prior Interest [Sec. 16]

Sometimes an interest is intended to take effect after or upon the failure of a prior
interest by reason of rules contained in Sections 13 & 14. In such a case when the prior
interest fails, the subsequent interest also fails.

For e.g. A transfers his property to B and his intended wife successively for their lives
and then to their eldest son for his life and then to C. The prior interest in favor of the
son of B fails u/s 13 & therefore the subsequent interest in favor of C also fails.

VESTED AND CONTINGENT INTEREST

Vested Interest [Sec. 19]

An interest is said to be vested when it is not subject to the happening of an event or if

subject to the happening of an event, then the event is such that it is bound to happen.
For instance, movement of a property from ‗A‘ to ‗B‘ on the death of C. Here, B has the
vested interest because interest is subject to the happening of an event i.e., death of C
and which is bound to happen.

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Contingent Interest [Sec. 21]

Where on a transfer of property, an interest therein in created in favor of a person to

take effect only on the happening or non-happening of a specified uncertain event, such
person thereby acquires a contingent interest in the property. Such interest becomes a
vested interest on the happening or non-happening of the specified uncertain event.

For instance: A promise to gift a car to B, if he marries C. here B acquires a contingent

interest in the car because C may or may not marry B. If C marries B, the contingent
interest of B in the car becomes a vested interest.

IMPORTANT DOCTRINES

Doctrine of Election [Section 35]

Doctrine of Election provides that where a property is transferred to a person, then the
transferee can make a choice between whether to accept the transfer or reject it. If he is
accepting the transfer, then the transferee shall, along with the benefits of transfer, also
accept the burden of transfer.

A man taking a benefit under an instrument must also bear the burden.

Doctrine of Holding Out ‗OR‘ Transfer by Ostensible Owner [Section 41]

Doctrine of Holding Out makes an exception to the rule that a person cannot confer a
better title than he himself has. An ostensible owner is one who has all the indicia of
ownership without being the real owner.

Doctrine of Feeding the Grant by Estoppel [Section 43]

Doctrine of Feeding the Grant by Estoppel provides that where a person fraudulently or
erroneously represent that he is authorized to transfer certain immovable property and
professes to transfer such property for consideration, such transfer shall, at the option of
the transferee, operate on any interest which the transferor may acquire in such
property at any time during which the contract of transfer subsists.

Doctrine of Lis Pendens ‗OR‘ Lite Pendente [Section 52]

The expression lis pendens means a pending litigation. The doctrine of lis pendens is
expressed in the maxim ‗ut lite pendent nihil innovateur’ which means nothing new
should be introduced during the pendency of a suit.
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Take a risk

Doctrine of lis pendens provides that where a suit or proceeding is pending in any
Court between two persons with respect to any immovable property, the property
cannot be transferred or otherwise dealt with by any party, except under the authority
of the Court. If any party transfers or otherwise deals with that property, the transferee
will be bound by the result of the suit or proceeding, whether or not he had notice of the
suit or proceeding.

LEASE AND LICENCE

Meaning of Lease
As per this, lease is a transaction whereby one person (i.e., lesser) transfers the right to
enjoy in an immovable property to another person (i.e., lessee) either for a certain time
or in perpetuity, in return of a consideration.

Following are the essential elements of a lease transaction:

1. There must be a transferor (lesser) and a transferee (lessee), both of whom have agreed
for the construction.
2. The lease must be for a certain time or in perpetuity.
3. There must be transfer of the right to enjoy immovable property.
4. The transaction must be in consideration of a price paid or promised.
5. The transaction must be in consideration of money.

Meaning of License
Where one person grants to another, or to a definite number of other persons, a right to
do, or continue to do, in or upto the immovable property of the grantor, something
which would, in the absence of such right, be unlawful, and such right does not amount
to an easement or an interest in the property, the right does not amount to an easement
or an interest in the property, the right is called a license.

A license is a personal right between the licensor and the licensee, and therefore, a
transferee from the licensor is not bound by the license.

Difference between Lease and License

Following are the important points of distinction between lease and license:

1) In a lease, there is a transfer of interest in land while in the case of a licence, there is no
such transfer, although the licensee acquires a right to occupy the land.
2) Leases are generally heritable while the licences are not so.
3) Death and the licensor terminate the licence whereas the death of the lesser does note
terminate the lease.
4) Leases are generally transferable while the licences are not so.
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5) Generally the leases are not revocable at the will of the lesser but bare licences can be
revoked at the will of the licenser.
6) The transferee of the lesser is bound by the lease but the transferee of the licensor is not
bound by the licence.
7) In the case of breach of lease deed, the aggrieved party can only claim for the specific
performance whereas in the case of breach of licence deed, the aggrieved party can only
claim the compensation.

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INDIAN STAMPS ACT, 1899

IMPORTANT SECTIONS TO BE READ IN THIS CHAPTER

Sections Topics

Sec.3 INSTRUMENTS CHARGEABLE WITH DUTY

Sec.4 SINGLE TRANSACTIONS- SEVERAL INSTRUMENTS

Sec.5 INSTRUMENTS OF DISTINCT MATTERS

Sec.6 INTRUMENTS ITHIN SEVERAL DESCRIPTIONS

Sec.12 CANCELLATION OF ADHESIVE STAMP

Sec.29 WHO SHOULD PAY STAMP DUTY?

Sec.35/ 36 UNSTAMPED INSTRUMENT- NO EVIDENCE

Sec.41 INSTRUMENT UNDULY STAMP BY ACCIDENT

INTRODUCTION

The term ―INSTRUMENT‖ includes every document by

which any right or liability is, or purports to be created,
transferred, limited, extended, extinguished or recorded.

In general, levy of stamp duty is a State subject.

INSTRUMENTS CHARGEABLE WITH DUTY [SEC. 3]

Section 3 provides that the following instruments shall be chargeable with duty of the
amount indicated in Schedule I:

a) Instrument executed in India, whether it relates to property situated or to any matter or

thing to be done in or out of India, is chargeable to stamp duty.
b) Bills of Exchange and Promissory Notes are chargeable to stamp duty. However, the
bills of exchange which are payable on demand are not subject to stamp duty.
c) Instrument executed out of India are chargeable to duty if they relate to some property
situated in India or to some matter or thing done or to be done in India.

However NO duty is chargeable in respect of the following instruments (Exemptions):

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a) Instruments executed by or on behalf of or in favour of, the Government.
b) Instruments for the sale, transfer or other disposition of any ship or vessel.
c) Bills of Exchange and Promissory Notes executed outside India and acted upon outside
India.

SINGLE TRANSACTION EFFECTED BY SEVERAL INSTRUMENTS [SEC. 4]

Where, in the case of any sale, mortgage or settlement, several instruments are
employed for completing the transaction, the principal instrument only shall be
chargeable with the duty prescribed in Schedule I. The other instruments called
subsidiary instruments; they shall be chargeable with a duty of Re. 1 instead of the duty
prescribed for it in that Schedule.

INSTRUMENTS RELATING TO SEVERAL DISTINCT MATTERS (SEC. 5)

Any instrument, comprising or relating to several distinct matters, shall be chargeable

with the aggregate amount of duties with which separate instrument, each comprising
or relating to one of such matters, would be chargeable under Indian Stamp Act.

Where several distinct matters and transaction are embodied in a single instrument, the
instrument is called the multifarious instrument.

INSTRUMENTS COMING WITHIN SEVERAL DESCRIPTIONS [SEC. 6]

When an instrument falls within the provisions of two or more Articles in Schedule I,
and the instrument does not distinct matters, it is to be charged with the highest of the
duties, when the duties chargeable are different.

MODE OF PAYMENT OF STAMP DUTY / MODE OF STAMPING

There are 2 mode of payment of stamp

duty:

1. Adhesive Stamps; and

2. Impressed Stamps.

The following instruments may be

stamped with adhesive stamps:

a. Instruments chargeable with the duty not exceeding 10

paisa, except bills of exchange payable otherwise than
on demand.
b. The bills of exchange and promissory notes drawn or
made out of India.
c. Instruments relating to entry as an advocate.
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d. Notarial Acts.
e. Instruments relating to transfer of shares of a company.

Cancellation of adhesive stamp [Sec. 12]: Adhesive stamps shall be cancelled either at
the time when the stamp is affixed, if the instrument has already been executed or at the
time of executing. The object of cancellation is to prevent the same stamps from being
used again.

The person required to cancel an adhesive stamp may cancel it in any of the following
manner:

1. By writing on or across the stamp his name or initials of his firm along with the date.
2. In any other effectual manner.
3. Drawing a solitary line (single line) across the stamp.
4. Drawing of diagonal lines across the stamp with ends extending on the paper of the
document.

Every instrument written upon paper is stamped with an impressed stamp shall be
written in such manner that the stamp may appear on the face of the instrument and
cannot be used for or applied to any other instrument.

Where a single sheet of paper is sufficient, the Indian Stamp Act provides the following:

1. Where two or more stamp papers are used, a portion of such instrument shall be
written on each sheet so used.
2. Where one stamp paper is insufficient in space, plain paper may be added but the
substantial part of the instrument must appear on the stamp paper.

A document required stamps of a certain amount. The treasury supplied the stamps in
ten sheets, 7 sheets were used up in writing the contents of the document; the last, i.e.,
the 7th sheet mentioned the fact that 10 sheets from part of the document. The
remaining 3 sheets were cancelled by the defacing the stamp with a cross. It was held
the remaining three sheets were also being used and hence the document was duly
stamped. [Narayan Singh v. Smt. Bahadur Kanwar]

TIME OF STAMPING

Instruments executed outside India can be stamped within 3 months after it is first
received in India (Section 18). However in case of bills of exchange or promissory notes
made out of India, it should be stamped by first holder in India before he presents for
payment or endorses or negotiates in India. (Section 19).

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WHO SHOULD PAY THE STAMP DUTY (SEC. 29)

Following persons are liable to pay the stamp duty:

1. In case of promissory notes and bills of exchange, the maker or the drawer.
2. In the case of mortgage deed, the person executing the instrument i.e., the mortgagor.
3. In the case of insurance, the insurer.
4. In the case of conveyance, the transferee.
5. In the case of lease, the lessee.
6. In the case or partition deed, parties to partition have to pay stamp duty in proportion
to their respective shares in the property.

DENOTING DUTY

Where the duty with which an instrument is chargeable, or its exemption from duty,
depends in any manner upon the duty actually paid in respect of another instrument,
the payment of such last mentioned duty, shall, if application is made in writing to the
Collector for that purpose, and on production of both the instruments, be noted upon
such first mentioned instrument, by endorsement under the hand of the Collector of
Stamps. This is called denoting of duty.

INSTRUMENTS NOT DULY STAMPED, INADMISSIBLE IN EVIDENCE ETC,

[SECTION 35 & 36]

If an instrument is not duly stamped, it is not a void instrument. It is only inadmissible

in evidence. It is the duty of court to refuse to admit an instrument not duly stamped,
whether or not the parties object to its admission.

Following are the exceptions to Section 35:

1. A document can be accepted as evidence in criminal court.

2. A receipt which is not duly stamped can be accepted as evidence on payment of penalty
of Rs. 10 on Re.1.
3. An instrument not duly stamped can be accepted as evidence on payment of 10 times of
the difference on duty.
4. If contract is affected by more than one letters, the contract will be admissible as
evidence if any one of the letters bears the proper stamps.
5. Non-admissibility of evidence is not applicable on instruments executed by or on behalf
of the Govt.
6. A document certified by collector as properly stamped cannot be disallowed as
evidence.

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The admissibility of instrument cannot be challenged on the ground that it is not duly
stamped, once it has been admitted in evidence.

Where an instrument has been admitted in evidence, such an admission shall not be
called in question at any stage of the same suit or proceeding on the ground that the
instrument has not been duly stamped. [Guni Ram vs. Kodar].

Instruments unduly stamped by accident [Section 41]

Deficiency in duty or even the total failure of duty may be made good by payment of
the proper duty to the Collector within one year, provided that the collector is satisfied
that such a lapse is due to accident, mistake or urgent necessity.

IMPOUNDING OF INSTRUMENTS

Examination and impounding of instruments (Section 33)

(1) Every person having by law or consent of parties authority to receive evidence, and
every person in charge of a public office, except an officer of police, before whom any
instrument, chargeable, in his opinion, with duty, is produced or comes in the
performance in his functions shall, if it appears to him that such instrument is not duly
stamped, impound the same.

(2) For that purpose every such person shall examine every instrument so chargeable
and so produced or coming before him, in order to ascertain whether it is stamped with
a stamp of the value and description required by the law in force in 3[India] when such
instrument was executed or first executed:

PROVIDED that-

(a) Nothing herein contained shall be deemed to require any Magistrate or Judge of a
criminal court to examine or impound, if he does not think fit so to do, any instrument
coming before him in the course of any proceeding.

(b) In the case of a Judge of a High Court, the duty of examining and impounding any
instrument under this section may be delegated to such officer as the court appoints in
this behalf.

(3) For the purposes of this section, in cases of doubt,-

(a) [The [State Government]] may determine what offices shall be deemed to be
public offices; and

(b) [The [State Government]] may determine who shall be deemed to be persons
in charge of public offices.

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CONCEPT OF E- STAMPING

E-Stamping is a computer based application and a secured way of paying Non-Judicial

stamp duty to the Government. e-Stamping is currently operational in the states
of Gujarat, Karnataka,NCR Delhi, Maharashtra, Assam, Tamil
Nadu, Rajasthan, Himachal Pradesh, Uttarakhand, and the union territories of Dadra &
Nagar Haveli, Daman & Diu and Puducherry. The prevailing system of physical stamp
paper/franking is being replaced by E-stamping system. Stock Holding Corporation of
India Limited (SHCIL) has been promoted by All India Public Financial Institutions and
Insurance Majors. SHCIL is known for its security, integrity, wide network and focus
on technology. SHCIL is the only Central Record Keeping Agency (CRA) appointed by
the Government of India. The CRA is responsible for User Registration, Impress Balance
Administration and overall E-Stamping application operations and maintenance. CRA
will appoint ACC's who will issue certificates to the clients at their counters.
Benefits

 e-Stamp Certificate can be generated within minutes

 e-Stamp Certificate generated is tamper proof
 Authenticity of the e-Stamp certificate can be checked through the inquiry module
 e-Stamp Certificate generated has a Unique Identification Number
 Specific denomination is not required.

Spend like an investment

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THE INDIAN CONTRACT ACT, 1872

Everything is legal here…!!

IMPORTANT SECTIONS TO BE READ IN THIS CHAPTER

Sections Topics

Sec.2 Definitions

Sec.2 + 10 Meaning Of Contract

Sec.7 Legal Rules Of Valid Acceptance

Sec.12 Person Of Unsound Mind (Lunatic)

Sec.15 Free Consent

Sec.16 Undue Influence

Sec.17 Fraud

Sec.18 Misrepresentation

Sec.20 + 22 Mistake

Sec.23 Unlawful Consideration

Sec.26 Agreement In Restraint Of Marriage

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Sec.27 Agreement In Restraint Of Trade

Sec.30 Wagering Agreements

Sec.31 Contingent Contracts

Sec.56 Impossible Acts

Sec.68 – 72 Quasi Contracts

Sec.124 Meaning Of Indemnity

Sec.126 Meaning Of Guarantee

Sec.148 – 162 Bailment

Sec. 172- 177 Pledge

Sec.182- 210 Agency

Sec. 25 Exceptions Of No Consideration- No Contract

PROPOSAL/OFFER
When one person signifies his willingness to another to do or to abstain from doing
anything, with a view to obtaining the assent of such person. It is known as proposal.
The person who makes an offer is known as offeror.

CONTRACT
In simple words, an agreement enforceable by law is a contract.
It is a combination of:

OFFER + ACCEPTANCE + CONSIDERATION = AGREEMENT + ENFORCEABLE BY

LAW ( LEGAL DOCUMENTATION) = CONTRACT

CONSIDERATION
When, at the desire of the promisor, the promisee or any other person, do or agrees to do or
done such act or abstinence is known as consideration.

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In simple words consideration is known as ‘Something for Something’

- The person making the proposal is called as ‗promisor‘, and

- The person accepting the proposal is called as ‗promisee‘.
Thus, Such act/abstinence/promise is called a consideration for the promise.

VOID AGREEMENT
An agreement not enforceable by law is said to be void. It doesn‘t have any validity in
the eyes of law and if of nullity on its conclusion.

VOIDABLE CONTRACT
- It is enforceable by law but only at an option of one or more of the parties.
- It is not enforceable by law at the option of the other or others.
- Such party may be an aggrieved party.

VOID CONTRACT
A contract which ceases to be enforceable by law. It is without any legal effect in the
eyes of law.

ESSENTIALS OF A CONTRACT
An agreement enforceable by law is a contract [sec.2 (h)]
The two basic elements of a contract are :
(1) There must be an Agreement
(2) The agreement must be Enforceable by Law.
In other words, Contract = agreement + enforceability of agreement.

AGREEMENTS WHICH CAN BECOME CONTRACTS

(1) There must be an agreement between the parties.
(2) The parties must have an intention to create legal relationship.
(3) The parties must freely consent to enter into the agreement
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(4) The parties must be competent to enter into contract.
(5) There must be consideration.
(6) The consideration must be lawful.
(7) The object of the agreement must be lawful.
(8) The legal formalities for entering into such a contract are completed.
(9) It is possible to perform the agreement (See.56).
(10) The terms of the agreement are certain (Sec.29).

AGREEMENT TO DO IMPOSSIBLE ACT

If parties agreed to enter into any:
(1) Agreement to do an Impossible Act
Then - Such agreement is void.
(2) Agreement to do an act which subsequently becomes impossible
Then - The contract has become void.
(3) Agreement to do an act known to be impossible or unlawful causing some injury
to promisee.
Then - The promisor must make compensation for any loss caused to
promisee due to non-performance of the promise.

CLASSIFICATION OF CONTRACT
(1) On The Basis Of Creation
Express contract - A contract made by words spoken or written.
Implied contract - A contract which is entered into by the conduct of a person.

(2) On The Basis Of Execution

Executed contract - A contract in which both the parties have fulfilled their
obligations under the contract. (Past Tense)
Executory contract - A contract in which both the parties have still to fulfil their
obligations. (Future Tense)

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Partially Executed And Partly Executory - A contract in which one of the parties has
fulfilled his obligation but the other party is yet to fulfill his obligation.

(3) On The Basis Of Enforceability

Valid Contract - An agreement which satisfies all the requirements of a prescribed by
law.

Void Contract - A contract Which ceases to be enforceable by law becomes void when
it ceases to be enforceable.

Voidable Contract - An agreement is a voidable contract if-

- It is enforceable by law at the option of one party,
- It is not enforceable by law at the option of the other party.

Illegal Agreement - An agreement the object of which have unlawful object or against
the law.
E- CONTRACT

OFFER / PROPOSAL

HOW TO MAKE AN OFFER? /MODE OF MAKING AN OFFER

(1) Express offer - It means an offer made by words spoken or written.

(2) Implied offer - It means an offer made by conduct of parties.

LEGAL RULES AS TO VALID OFFER

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(1) Offer must be Communicated: It is compulsory that the offer must be
communicated to the party. Any act done by party which may be mentioned in the offer
but was not communicated to the party, cannot be accepted by him.

Lalmen Shukla v Gauri Dutt

(a) G‘s nephew was missing.
(b) L, who was munim of G, went in search of the missing boy.
(c) Meanwhile G issue handbills offering reward of Rs. 501 to anyone who would trace
the boy.
(d) L found the boy and brought him home.
(e) Since L had no knowledge of the offer made by G, he could not accept such offer.
(f) Since there was no acceptance, there could be no contract, and therefore, it was held
that L was not eligible to receive the reward.

(2) Communication of Complete Offer : An offer must be completely transferred to an

offeree (transferee) at the time of entering into contract.

(3) An offer must not thrust the burden of Acceptance on the Transferee.
An offer must not contain any term which if not complied/fulfilled presumes that the
offer is accepted. It means an offeror must not create a burden on transferee that he has
to expressly give his assent or dissent.

Felthouse v Bindley
(a) A wrote to B‖I will sell you my horse for Rs. 500. If I do not receive a reply by you
upto Sunday next week, I will assume that you have accepted the offer.‖
(b) B did not replied.
(c) It was held that an offer cannot impose the burden on the offeree to reply.
Acceptance of B shall be valid only if it is communicated to the offeror, A.
(d) Since B had not communicated his acceptance to A, there was no contract between A
and B, and therefore A cannot sue B.
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(4) Cross Offer do not conclude a contract

Two offers which are similar in all respects made by two parties to each other, in
ignorance of each other‘s offer are known as ‗cross offers‘. Cross offers do not conclude
a contract.
Avoid pointless discussions, they achieve nothing

(5) Counter Offer

A counter offer amounts to rejection of the original offer.

(6) Offer must be distinguished from invitation to offer

Pharmaceutical society of Great Britain v boots cash chemists’ ltd.

(a) Goods were displayed in the shop for sale with price tags attached on each article
and self-service system was there.
(b) One customer selected the goods, but the shop owner refused to sell.
(c) It was held that the display of goods was only an invitation to offer.
(d) Selection of goods by the customer amounted to an offer.
(e) The shop owner had the discretion whether to accept such offer or not, i.e., whether
to sell such goods or not. Thus, in this case customer is offeror and shopkeeper is
offeree.
(f) Refusal by shop owner amounted to rejection of the offer, and therefore, no contract
concluded between the parties.
(g) Therefore, the customer had no right to sue the shop-owner.

ACCEPTANCE

(1) MEANING OF ACCEPTANCE

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When the person to whom the proposal is made signifies his assent thereto the proposal
is said to be accepted.

(2) WHO CAN ACCEPT?

In Case Of Specific Offer - Acceptance can be made only by that
particular person/group of persons to whom the specific offer has been made and
nobody else.
In Case Of General Offer - Acceptance can be made any person who:
o has the knowledge of the offer, and
o Fulfils the terms and conditions of the offer.

(3) MODE OF ACCEPTANCE

(a) Express acceptance
(b) Implied acceptance

COMMUNICATION WHEN COMPLETE

Communication when complete?

Communication of Offer When the offer comes to the knowledge of the
offeree, i.e., when the letter of offer is received by the
offeree.

Communication of
Acceptance… ….. …. ….. When acceptance is put in a course of
transit so as to be out of control of an offeree to
withdraw it (i.e., when letter of acceptance is duly
posted by the offeree).

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TIME LIMIT FOR REVOCATION

Revocation Of: Time Limit For Revocation

Offer Any time but before letter of Acceptance is posted by
acceptor (offeree).

Acceptance Any time but before the letter of acceptance reaches to

Offeror.

MEANING OF CONSIDERATION

When, at the desire of the promisor, the promisee or any other person has
done/abstained from doing, or does/abstains from doing, or promises to do/to abstain
from doing, something, such act/abstinence promise is called a Consideration.

ESSENTIALS & LEGAL RULES OF A VALID CONSIDERATION

(1) Consideration must move at the desire of the promisor

An act or abstinence shall constitute a good consideration only if it is done at the desire
of the promisor

Durga Prasad vs. Baldeo

(a) D spent some money for renovation of a market on the request of the collector.
(b) After such renovation, a shopkeeper of the market promised to pay commission to D
on the sales affected by him.
(c) On non-performance of such promise by the shopkeeper, D sued him for recovery of
money.
(d) The court held that there was no consideration for the shopkeeper since there was
no desire by the shopkeeper to renovate the market.

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(e) Therefore, the promise by the shopkeeper was without any consideration, and was
therefore void.

(2) Consideration May Be Performed From Promisor Or Any Other Person

(a) So long as there is consideration for promise, it is immaterial as to who has
furnished it.
(b) If a party receives consideration, the contract is valid, even though the person
furnishing the consideration is not a party to the contract.
(c) Where a third party furnishes the consideration, it is valid consideration.
(d) As long as there is consideration in a contract, it is immaterial as to who has given
this consideration. This rule is generally stated as ‘Privity of consideration is NOT
required’.

(3) No Adequacy Of Consideration Required.

(a) The law requires that there must be consideration in every contract.
(b) However, adequacy of consideration is not required. Even if it is proved that such
consideration is inadequate, the contract is not void.

(4) It must be different from promise‘s existing obligation

Consideration received by a party‘s contractual and legal obligation shall not be
considered as a valid consideration.

Collins vs. Godfrey

(a) My. A s summoned by the court to appear in a suit.
(b) Mr. B agrees to pay Mr. A Rs. 500 for appearing in the court so as to compensate Mr.
A for the inconvenience caused to him.
(c) The promise of Mr. B is not consideration, since it was the legal duty of Mr. A to
appear in the court.

(5) Consideration must be lawful

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An agreement is void if the consideration furnished by any of the parties is unlawful.

(6) It Must Be Real, And Not Illusory

Consideration received by a party must be of some value.
Consideration must not be illusionary (i.e., existing only in name).

EXCEPTIONS TO THE RULE: NO CONSIDERATION-NO CONTRACT

(1) Agreements Made On Account Of Natural Love and Affection

(a) The agreement is made in writing.
(b) The agreement must be registered.
(c) The agreement is made between the parties standing in immediate relation to each
other.
(d) There must be natural love and affection between the parties. However, mere
nearness of relationship does not imply natural love and affection.

Rajlukhy Devi v Bhoothnath

(I) There were frequent quarrels between a husband and wife.
(II) One day the husband got fed up with his wife and agreed to pay a certain sum of
money to his wife for maintenance.
(III) This agreement was made in writing and registered.
(IV) It was held that the agreement was made without consideration.
(V) Also, the agreement did not fall under the exception stated u/s 25(1), since the
agreement was not made on account of natural love and affection.

(2) Compensation for past voluntary services-conditions

(a) A party renders some services to the other party or performs the legal obligation of
the other party
(b) The services are rendered without any desire of the other party, i.e., the services are
rendered voluntarily.

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(c) The other party afterwards promises to compensate the former party for the services
rendered to him.

(3) Promise to pay a time-barred debt

Meaning of time barred debt
A creditor can sue the debtor for recovery of his money by going to the court of law.
However, if the creditor fails to file a suit within 3 years of the date when debt
becoming due for payment, the debt is said to be time barred debt, i.e., the creditor
cannot file a suit after the expiry of said period of 3 years.

PRIVITY OF CONTRACT

MEANING
(1) The general rule is that only the parties to a contract can sue.
(2) In other words, if a person is not a party to the contract (i.e., a stranger to
contract), he cannot sue.
Dunlop pneumatic Tyre Co. v Selfridge and Co.

PRIVITY OF CONTRACT: EXCEPTIONS

There are some cases where an outsider can become a party to the contract.

Creation Of A (a) Beneficiary is not a party to the agreement creating a trust.

Trust (b) However, the beneficiary is allowed to sue the trustee for
enforcement of trustee‘s duties.
Marriage/Family Where a marriage or family settlement is made, the person who
Arrangements is a beneficiary under such settlement is entitled to sue even
though he may not be a party to such settlement.
Assignment Of A An assignee is entitled to exercised all the rights which could
Contract have been exercised by the assignor previously, even though
the assignee was not a party to the contract as originally made

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CAPACITY OF PARTIES

I. EFFECTS OF MINOR’S AGREEMENTS

(1) Agreement is void ab initio, i.e., without any legal effect.
A minor is incompetent to enter into any contract. Therefore, any agreement made by a
minor is void ab initio, i.e., it is without any legal effect.
Mohiri Bibi v Dharamodas Ghose

(2) An agreement for the benefit of minor is enforceable by minor only.

(a) The principal laid down in Mohiri Bibi v Dharamodas Ghose applies only if the
agreement creates an obligation/liability on a minor.
(b) Where, an agreement is for the benefit of a minor, the agreement is not void and
therefore the minor can enforce such agreement.
(c) If the other party to the agreement fails to perform his part of obligation, then minor
can claim compensation.

(3) Restitution
Khan Gul vs. Lakha Singh
Following principals were laid down in the above case
(a) The court may grant relief to the other party if the other party had entered into a
contract with the minor on the basis of a misrepresentation made by the minor.
(b) If the minor had received some consideration under the agreement, the court may
grant restitution to the other party.
(c) However, the minor shall not be personally liable. In other words, restitution shall
be made to such an extent as the estate of minor has been benefited.
(d) The court shall not grant relief if the other party had the knowledge of the fact that
it was entering into an agreement with a minor.

(4) No Estoppels Against A Minor

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(a) If the rule of estoppels is applied against a minor, it would amount to an indirect
way of enforcing a void agreement.
(b) Therefore, the rule of estoppels does not apply against a minor.

(5) No Specific Performance

The other party cannot demand that minor should perform the obligation which he had
agreed to perform under the agreement.

(6) No Ratification By A Minor

(a) Ratification means acceptance of a transaction already done.
(b) An agreement entered into by a minor cannot be ratified by him after he has
attained majority.
(c) Where on attaining majority, a minor agree to pay for the goods supplied by a third
party. Such agreement is void for want of consideration.

(7) No liability of guardian

The guardian of a minor shall not be liable for acts of a minor.

(8) Contracts by Guardian –Valid

The contract by a guardian on behalf of a minor shall be valid if -
(a) The contract is for the benefit of minor, or
(b) The guardian has the authority to enter into such a contract.

(9) Minor‘s liability for necessities

Nature of liability
As per sec.68, a minor is liable for necessities supplied to-
(a) Him, or
(b) Any other person who is dependent on the minor.
Conditions

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(a) The liability is only for ‘necessities of life’. The term ‗necessity‘ means necessities of
life as per the social status and conditions of life of the minor.
(b) The minor is not already in possession of such necessities.
(c) The minor shall not be personally liable.

(10) Position of minor

(a) Minor cannot be a guarantor.
(b) Minor may be a shareholder/member of a company but only for fully paid up
shares.
(c) Minor can be an apprentice provided he is of at least 14 years of age.
(d) Minor cannot be a partner in a firm. However, he may be admitted to the benefits of
partnership.

II. PERSONS OF UNSOUND MIND

(1) Meaning of ‗Sound Mind‘
Persons said to be of Sound Mind if he is able to-
(a) Understand the contract, and
(b) Make a rational & meaningful judgment.
(2) Presumption
The law presumes that Every Person is of sound mind.
(3) Requirements of law
At the time of Entering into a contract, a person must be of sound mind. A person can
enter into a contract in accordance with the following principles-

NATURE OF PERSON WHEN CAN HE ENTER INTO A

CONTRACT?
A person of sound mind (a) He can enter into a contract at All
The Times.
(b) He cannot enter into a contract only
at such intervals of time, when he is of
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unsound mind.
A person of unsound mind He can enter into a contract only at such
intervals of time, when he is of sound
mind.

III. PERSONS DISQUALIFIED UNDER LAW

(1) Company
(a) In general, a Company is a legal person and therefore it can enter into a contract in
its own name
(b) However, a company is disqualified to enter into any contract which falls outside
the object clause of memorandum.

(2) Alien Enemy

(a) Existing contract - Is suspended until the war is over.
(b) Fresh contract - Cannot be entered into until the war is over
However, An existing contract can be enforced and a fresh contract can be entered into
but only with the Permission of CG.

FREE CONSENT

It is important to note that whenever any person enters into contract, it is necessary that
he has accepted all rules and regulations mentioned in the contract on his own will/
desire and gives his consent. Thus, there should not be any pressure on him to enter
into the contract.
For this thing, law presumes that if following factors are involved then it will not be
called as ‘free consent’.
They are as follows:

I. ‗COERCION‘

CONDITIONS: This is an act which is:

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(1) Forbidden by IPC
- Actually committing an offence forbidden by IPC, or
- Threatening to commit an offence forbidden by IPC
Unlawful detention of property
- Actually detaining the property, or
- Threatening to detain the property
(2) Intention
- Causing any person to enter into an agreement.

II. ‗UNDUE INFLUENCE‘

CONDITIONS: This is an act in which:

(1) Relations between the parties.
One party is in a position of dominating the will of the other.

(2) Use the dominant position

The dominant party uses his dominant position

(3) Dominant party obtains an unfair advantage

The dominant obtains an unfair advantage by way of entering into a contract.

III. FRAUD
CONDITIONS: This is an act in which:
(1) By a party to the contract
It must be proved that fraud was committed by-
(a) A party to the contract, or
(b) Anyone with the connivance of a party to the contract.

(2) The party makes a representation

(a) The party has made a representation of a fact.

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(b) An opinion, a statement of expression, or a statement of intention does not
constitute a fraud.

IV. MISREPRESENTATION
CONDITIONS: This is an act in which:

When a representation considered as false?

(1) Suggestion of a false fact
Where the person makes a representation of fact knowing that such fact is not true.
(2) Concealment of a fact.
Where the person conceals a fact even though he has knowledge of such ac fact.
(3) Promise
Where a person makes a promise without any intention of performing it.
(4) An act/omission
Any act or omission declared by law as fraud also amounts to fraud.
(5) Any other act
Any other act fitted to deceive also amounts to fraud.
(6) Silence as fraud
General rule: Mere silence, which is likely to affect the willingness of the other party, is
not a fraud.
Exceptions: Where the parties stand in fiduciary relationship (i.e., relationship of faith
and trust).
(a) When silence is equivalent to speech.
(b) Partial disclosure of truth which deceives the other party is a fraud.

V. MISTAKE
(1) Mistake of Indian law

(2) Bilateral mistake

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The agreement is void if -
(a) The mistake relates to a fact,
(b) Such fact is material to the agreement, and
(c) Both the parties are at mistake
Bilateral mistake may be-
(a) Mistake as to the subject matter,
(b) Mistake as to the possibility of performance
(3) Unilateral mistake
______________________________________________________________________________
______________________________________________________________________________

LEGALITY OF OBJECT AND CONSIDERATION

I. UNLAWFUL OBJECT OR CONSIDERATION

A. Circumstances In Which Object Or Consideration Unlawful

(1) An agreement to do something forbidden by law

An agreement is unlawful if it involves doing of an act which is forbidden by any law
for the time being in force.
(2) Defeating the provisions of any law
An agreement is unlawful if it would defeat the provisions of any law even though it is
not directly prohibited by any law.
(3) Fraudulent
An agreement is unlawful if it is made to fraud on any person.
(4) Involves injury to any person or his property
An agreement is unlawful it is made for the purpose of causing injury to-
- Any other person, or
- Property of another person
(5) Immoral or opposed to public policy

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An agreement is unlawful if the court regards that object or consideration of such
agreement is: -
- Immoral, or
- Opposed to public policy. (read with Heading II)

B. Legal effect
Every agreement of which the object or consideration is unlawful is Void.

II. OBJECTS OR CONSIDERATION AGAINST PUBLIC POLICY

(1) Agreement for improper promotion of litigation.
(2) Agreement to create monopolies or to eliminate or reduce competition.
(3) Marriage brokerage agreement.
(4) Maintenance agreement.
(5) Champerty agreement .
(6) Agreement interference with parental duties.
(7) Agreement not to bid.
(8) Agreement interfering with course of justice.
(9) Agreement for stifling prosecution.
(10) Agreement for trading with enemy.
(11) Agreement interfering with personal liberty.
(12) Agreement to do an act against the duty of a person.
(13) Agreement interfering with marital duties.
(14) Agreement for sale of public offices and titles.

III. AGREEMENT UNLAWFUL IN PART

An agreement containing legal and illegal Whether unlawful part can be separated
parts from unlawful part-
 If ‗yes‘
- Lawful part can be enforced, or
- Unlawful part cannot be enforced

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 If ‗no‘
- The whole agreement is Void
A Reciprocal Agreement containing legal The reciprocal promise to do-
and illegal parts  Legal things : Can be enforced
 Illegal things : Cannot be enforced
An agreement containing legal and illegal The alternate promise to do-
parts  Legal things : Can be enforced
 Illegal things : Cannot be enforced

VOID AGREEMENTS
I. AGREEMENTS IN RESTRAINT OF MARRIAGE
Every agreement in restraint of the marriage of any person is void.
II. AGREEMENT IN RESTRAINT OF TRADE
A. Agreement in restraint of trade is void
Every agreement by which anyone is restrained from exercising a lawful profession,
trade or business of any kind is Void to that extent.
B. Burden of proof
(1) Party supporting the contract (party wants restraint)
- Must show that the restraint is reasonably necessary to protect his interest.
(2) Party challenging the contract (party don‘t want restraint)
- Must show that the restraint is injurious to the public.

EXCEPTIONS TO RESTRAINT OF TRADE

In general any contract which restraint from doing any trade is void. But there are some
cases where restraint of trade is allowed. These cases are:
(1) Sale Of Goodwill
(a) Such restriction must relate to a similar business.
(b) Such restriction must be within specified local limits.

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(c) Such restriction must be for the time so long as the buyer or any person deriving
title to the goodwill from him carries on a LIKE business in the specified local limits.
(d) Such specified local limits should be reasonable having regard to the nature of the
business.

(2) Restriction on existing partner

An agreement by a partner not to carry on any business other than that of the firm is
valid.

(3) Restrictions On Outgoing Partner

(a) An agreement may provide that an outgoing partner will not carry on a similar
business after dissolution of the firm.
(b) Such restriction must be within specified local limits or within a specified period.
(c) The restriction should be reasonable having regard to the nature of the business.

(4) Restrictions on Partners Upon or in Anticipation of the Dissolution of the Firm.

(a) An agreement may provide that some or all of the partners will not carry on a
similar business.
(b) Such restriction must be within specified local limits or within a specified period.
(c) The restriction should be reasonable having regard to the nature of the business.

III. AGREEMENT IN RESTRAINT OF LEGAL PROCEEDINGS

(1) Agreement restricting enforcement of rights
(a) An agreement by which any party is restricted absolutely from enforcing his legal
rights under any contract is void.
(b) A partial restraint is not void, e.g., a clause in a contract that any dispute arising
between the parties shall be subject to jurisdiction of a court at a particular place only, is
valid.
(2) Agreements limiting period of limitation
An agreement which limits the time within which an action may be brought is

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Void.

WAGERING AGREEMENTS
(1) Meaning
(a) An agreement between two persons under which money or money‘s worth is
payable, by one person to another on the happening or non-happening of a future
Uncertain Event is called a wagering agreement.

(2) Effects of wagering agreements

(a) The agreement is void.
(b) The agreement is illegal in the state of Maharashtra and Gujarat.
(c) No suit can be filed to recover the amount won on any wager.

(3) Agreement Not Held As Wagering Agreements

(a) Agreement to pay prize money upto Rs.1000
(b) An agreement to pay a prize exceeding Rs.500 to the winner of a horse race is not a
wager.

CONTINGENT CONTRACT

It is a contract to do or not to do something. This contract is dependent on happening or

non-happening of an event. Such an event is a collateral event, i.e., the event must not
depend upon the mere will of a party. The event is Uncertain.

QUASI CONTRACTS
MEANING
It means contract which lacks one or more of the essentials of a contract.

BASIS OF QUASI CONTRACT

Quasi contract are declared by law as valid contracts on the basis of principals of
equity, i.e., No person shall be allowed to enrich himself at the expense of another.
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LEGAL EFFECT OF A QUASI CONTRACT

The legal obligation of parties remains same in case of a quasi contract also, i.e., the
parties will have same obligations and rights as if such quasi contract fulfills all the
essentials of a contract.

CASES OF QUASI CONTRACTS

(1) SUPPLY OF NECESSARIES TO PERSON INCOMPETENT TO CONTRACT

Who is made liable u/s 68?

A person who is incompetent to contract is made liable u/s 68.

Conditions of sec. 68
The liability of an incompetent person arises if necessities are supplied to-
Such person (i.e., incompetent person), or
Any other person who is dependent on such incompetent person.

Liability of Incompetent Person

The incompetent person is liable to all the necessities which were provided to him by
any other person. However, the incompetent person is not personally liable.

(2) PAYMENT BY A PERSON WHO IS INTERESTED IN A TRANSACTION

Conditions of Sec. 69
(1) Where a person is legally bound to make a payment, but
(2) Some other person makes such payment.
(3) The person making such payment is not legally bound to make such payment.
(4) The person making such payment is interested in paying such amount.

Legal effect of Sec.69

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If all the conditions of Sec. 69 are satisfied, the person who is interested in paying such
amount shall be entitled to recover the payment made by him.

(3) OBLIGATION OF PERSON ENJOYING BENEFIT OF NON-GRATUITOUS ACT

Conditions of Sec.70
(1) A person has lawfully done or delivered something for another person, and
(2) Such person has acted-
(a) Voluntarily,
(b) Non-gratuitously, and
(3) The other person has enjoyed the benefit of-
(a) The act done for him,
(b) The thing delivered to him.

Legal effect of Sec.70

(1) Then there will be a quasi contract between the parties, and
(2) Consequently, the party who has done something or delivered a thing shall be
entitled to recover its value from the person who obtained the benefit of the same.

(4) FINDER OF GOODS

A finder of goods has same rights and duties as that of a bailee. (Sec. 151-157)

(5) MONEY PAID UNDER A MISTAKE OR COERCION

Conditions of Sec.72
(1) A person has-
(a) Paid money to another person, or
(b) Delivered something to another person.
(2) Under a mistake, or
(3) Under coercion.

Legal effect of Sec.72

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If the above conditions are satisfied, there will be a quasi contract between the parties.
Consequently, the party who has paid money or delivered a thing shall be entitled to
recover its value from the person who obtained the benefit of the same.

PERSON LIABLE FOR, & ENTITLED TO, PERFORMANCE

PERSONS LIABLE FOR PERSONS ENTITLED TO
PERFORMANCE PERFORMANCE
(a) Promisor (a) Promisee
(b) Agent of promisor (b) Agent of promisee
(c) Any of the several joint promisor (c) Joint promises
(d) Legal representative of a promisor (d) Legal representative of a promise

PERFORMANCE OF JOINT PROMISORS

(1) All the joint promisors are jointly and severally liable. However, the contract
between the joint promisors may provide otherwise.
(2) A joint promisor may claim contribution from other joint promisors, if he is
compelled to perform the whole promise.
(3) A joint promisor may claim contribution from other joint promisors, if any other
joint promisor makes a default in performance of his promise.
(4) Where one of the joint promisors is released, other joint promisors shall continue to
be liable.

DISCHARGE OF CONTRACT
Discharge of contract means termination of contractual relations between the parties to
a contract.

MODES OF DISCHARGE OF A CONTRACT

I. Discharge by performance,
II. Discharge by impossibility of performance,
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III. Discharge by mutual agreement,
IV. Discharge by lapse of time,
V. Discharge by operation of law,
VI. Discharge by breach of contract.

(1) DISCHARGE BY PERFORMANCE

When both the parties perform their respective obligations in accordance with the terms
of the contract, the contract is discharged.

(2) DISCHARGE BY IMPOSSIBILITY OF PERFORMANCE

(A) Meaning of supervening impossibility
(a) No impossibility existed at the time of making of the contract.
(b) The impossibility arises subsequently to the formation of the contract.
(c) The impossibility arises because of-
(i) Change in circumstances beyond the contemplation of parties, or
(ii) Change in law
(d) The impossibility is of such a nature that it makes the performance of a contract
impossible or illegal.
(e) If particular state of things, which forms the basis of a contract, ceases to exist or
occur, the contract is discharged.
(Krill V Henry)
(i) X hired a room form Y for viewing the coronation process of King Edward.
(ii) The procession was cancelled because of King‘s illness.
(iii) Since the ultimate and only purpose of the contract was defeated, the contract was
discharged.
(iv) Partial failure of objects or partial impossibility does not discharge a contract.
(B) Effects of supervening impossibility
(a) The contract becomes void. All the parties are discharged from their respective
obligations.
(b) Restitution is allowed.
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(3) DISCHARGE BY MUTUAL AGREEMENT

I. Novation
(a) Novation means substitution of a new contract in place of the original contract
(b) The new contract may be-
(i) Between the same parties, or
(ii) Between different parties.
(c) A new contract is entered into in consideration of discharge of the old contract. In
other words, the consideration for the new contract is the discharge of the original
contract.

II. Alteration
(a) Alteration means a change in one or more of the terms of a contract with mutual
consent of parties.
(b) An alteration discharges the original contract and creates new contract between the
parties,
(c) However, the parties to the new contract remain the same.

III. Remission
 Remission means acceptance of a lesser consideration than agreed to in the contract.
 A promisee may-
 Dispense with (wholly or in part) the performance of a promise made to him, or
 Extend the time for performance due by the promisor, or
 Accept a lesser sum instead of the sum due under the contract, or
 Accept any other consideration than agreed to in the contract.
 No consideration is necessary for remission.

IV. Rescission
It means cancellation of a contract by one or all the parties to the contract.

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(a) A party whose consent was not free mat avoid the contract
(b) A party to the contract may rescind a contract if breach of contract is made by the
other party to the contract.
(c) All the parties may mutually agree to bring the contract to an end.

V. Waiver
Waiver means international relinquishment of a right under a contract.

(4) DISCHARGE BY LAPSE OF TIME

Where the time of performance by a party is due but the party fails to perform within
the time specified, the contract is discharged by non-performance.

(5) DISCHARGE BY OPERATION OF LAW

(a) Death
Contracts involving personal skill, knowledge or ability of the deceased party and
discharged automatically on the death of the promisor.
(b) Insolvency
The insolvent is discharged from liability on all contracts entered into up to the date of
insolvency.

(c) Unauthorized
An alteration which charges the substance (i.e., legal effect or basic character) of a
contract is called as material alteration. Unauthorized material alteration results in
discharge of a contract.

(6) DISCHARGE BY BREACH OF CONTRACT

Meaning of breach
Failure of a party to perform his part of contract is called as breach.
Consequences of breach
(a) The other party is relieved from performing its part of obligation.
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(b) The other party is entitled to proceed against the party at fault.

KINDS OF BREACH

(1) Actual breach Time when breach (a) On the due date of performance
takes place (b) During performance
Manner in which (a) Where a party to perform
actual breach may (b) Where a party refuses to perform
take place (c) Where a party acts in such a manner
that it becomes impossible for him to
perform.
(2) Anticipatory
Meaning of Where a party declares his intention of
anticipatory not performing the contract before the
breach performance of control is due.
Modes of (a) Express repudiation: where a party
anticipatory refuses to perform his obligation before
breach the performance has become due.
(b) Party disables himself: Where a party
acts in such a manner that it is impossible
for him to perform, i.e., the party has
disabled him from performance that he
had promised.

REMEDIES FOR BREACH OF A CONTRACT

(1) RESCISSION
(a) Meaning of rescission
Rescission means a right available to an aggrieved party to terminate a contract.
(b) Effects of rescission

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(i) The aggrieved party is not required to perform his part of obligation.
(ii) The aggrieved party can claim compensation for any loss caused to him.

(2) SUIT FOR DAMAGES

(a) Meaning
Monetary compensation allowed for loss suffered by the aggrieved party due to breach
of a contract.
(b) Object of awarding manages
(i) Not to punish the party at fault.
(ii) To make good the financial loss suffered by the aggrieved party due to breach of
contract.

Kinds of Damages
(a) Ordinary damages
(i) These damages are awarded for such loss suffered by a party which is a proximate
consequence of breach.
(ii) Damages are not awarded if they have resulted because of an indirect consequence.
(b) Special damages
(i) Special damages are awarded to cover such loss which though does not arise
naturally, but was in the contemplation of both the parties at the time when the contract
was made.
(ii) These damages can be recovered only if the special circumstances which would
result in a special loss in case of breach of contract are communicated to the other party.
(c) Exemplary of punitive or vindictive damages
These damages are awarded only in the following 2 cases:
Breach of a contract to marry: The damages shall be calculated on the basis of mental
injury sustained by the aggrieved party.
Unjustified dishonour of a cheque: The damages shall be calculated on the basis ‗lower
the amount of cheque, greater will be the damages‘.

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(d) Nominal damages
Where no loss is suffered by the aggrieved party, the court generally awards nominal
damages.

(e) Damages for inconvenience

Where a party has suffered physical inconvenience, discomfort or mental agony as a
result of breach, the court may award damages for the same.

(f) Liquidated damages and penalty

(i) Where the a parties to a contract specify a certain sum in the contract which will
become payable as a result of breach, such specified sum is called as ‗liquidated
damages‘ or ‗penalty‘
(ii) In India, damages shall be restricted to a reasonable compensation not exceeding the
sum specified in the contract (whether by way of liquidated damages or penalty)

(g) Forfeiture of security deposit

(i) If any loss is suffered by a party as a result of breach, the damages awarded to him
shall be limited to the loss suffered by him.
(ii) Any clause in the contract entitling the aggrieved party to forfeit the security deposit
is not valid.
(h) Payment of interest
(i) Payment of interest is permissible.
(ii) If no rate of interest is mentioned in the contract, the party shall be liable to pay
interest
(a) As per any law for the time being in force.
(b) As per the custom or usage of trade.
(iii) However, if the interest is in the nature of penalty, the court may grant relief.

(3) SUIT FOR SPECIFIC PERFORMANCE

(a) Meaning

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Specific performance means demanding an order from the court that the promise
specified in the contract shall be carried out.
(b) When is specific performance allowed?
(i) Actual damages arising from breach are not measurable.
(ii) Monetary compensation is not an adequate remedy.
(c) When is specific performance not allowed?
(i) Where damages are an adequate remedy.
(ii) Where the performance of contract involves numerous or minute details, and
therefore it is not possible for the court to supervise the performance of the contract.

(4) SUIT FOR INJUNCTION

(a) Meaning
Injunction means an order of the court restraining the other party from carrying out a
particular act.

(5) SUIT FOR QUANTUM MERIUT

(a) One party preventing the other from completion of contract
If a party prevents the other party from completing his obligation under the contract,
the aggrieved party may claim payment on ‗Quantum Meriut‘ for the part of contract
already performance by him.
(b) Divisible contract partly performed
A party at fault may sue on quantum meriut if-
(i) The contract is divisible,
(ii) The contract is party performed, and
(iii) The party not at fault has enjoyed the benefits of the part performance.

******

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CONTRACT OF INDEMNITY

(1) ‗INDEMNITY‘ MEANING

(a) To make good of the loss incurred by another person.
(b) To compensate the party who has suffered some loss.
(c) To protect a party from incurring a loss.
(2) ‗CONTRACT OF INDEMNITY‘ DEFINITION
A contract is called a ‗contract of indemnity‘ if-
One party promised to save the other from loss caused to him by the conduct of the
promisor himself, or by the conduct of any other person.

(3) MODES OF CONTRACT OF INDEMNITY

Expressed: When a person expressly promises to compensate the other from loss.
Implied: When the contract is to be inferred from the conduct of the parties or from the
circumstances of the case.

(4) ESSENTIALS ELEMENTS OF A CONTRACT OF INDEMNITY

(a) Contract
All the essentials of a valid contract must also be present in the contract of indemnity.
Example: X asks Y to beat Z and promises to indemnify Y against the consequences. Y
beats Z and is fined Rs. 1,000. Y cannot claim this amount from X because the object of
the agreement was unlawful
(b) Loss to one party
A person can indemnify another person only if such other person incurs some loss or is
about to incur some loss.
(c) Indemnity by the promisor
The purpose of contract of indemnity is to protect the indemnity holder from any loss
that may be caused to the indemnity holder in future.
(d) Reason for loss

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The contract of indemnity must specify that indemnity holder shall be protected from
the loss caused due to-
(a) Action of the promisor, or
(b) Action of any other person, or
(c) Any act, event or accident which is not in the control of parties.

RIGHTS OF INDEMNITY HOLDER

(1) Right To Recover Damages

The indemnity holder has the right to recover all the damages which he is compelled to
pay in any suit in respect of any matter covered by the contract of indemnity
(2) Right To Recover Costs
The indemnity holder has the right to recover all the costs which he is compelled to pay,
in bringing/defending such suit
Conditions:
(a) The promisor authorized him to bring or defend the suit, or
(b) The indemnity holder did not contravene the orders of the indemnifier, and
The indemnity holder acted as it would have been prudent for him to act in the absence
of any contract of indemnity.
(3) Right To Recover Sums Paid
The indemnity holder has the right to recover all the sums which he has paid under the
terms of a compromise of such suit.
Condition:
(a) The promisor authorized him to compromise the suit, or
(b) The indemnity holder did not contravene the orders of the indemnifier, and
The indemnity holder acted as it would have been prudent for him to act in the absence
of any contract of indemnity.

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CONTRACT OF GUARANTEE

(1) MEANING OF CONTRACT OF GUARANTEE

A ‗contract of guarantee‘ is a contract to-
(a) Perform the promise, or
(b) Discharge the liability,
Of third person in case of his default
(2) MEANING OF ‗SURETY‘
The person who gives the guarantee is called ‗surety‘
(3) MEANING OF ‗PRINCIPAL DEBTOR‘
The person in respect of whose default the guarantee is given is called as ‗principal
Debtor‘.

(4) MEANING OF ‗CREDITOR‘

The person to whom the guarantee is given is called as ‗creditor‘.

ESSENTIAL OF ‗CONTRACT OF GUARANTEE‘

(1) VALID CONTRACT

(a) All Essentials Of Contract
All essentials of contract must be present in the contract of guarantee
(b) Exceptions
(i) Consideration
Even if surety does not receive any consideration, guarantee is valid.
(ii) Capacity to contract
If principal debtor is incompetent to contract, guarantee is valid.
If surety is incompetent to contract, the guarantee is void.

(2) PRIMARY LIABILITY OF SOME PERSON

(a) The principal debtor must be primarily liable.
(b) The debt must be legally enforceable.

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(c) The debt must not be a time barred debt.

(3) THE CONTRACT MUST BE CONDITIONAL

(a) The liability of surety is secondary and conditional.
(b) Surety is liable only if the principal debtor makes a default.

(4) NO MISREPRESENTATION
The creditor should disclose all the facts which are likely to affect the surety‘s liability.
There must not be any concealment of facts.

(5) FORM OF CONTRACT

A contract of guarantee may be either oral or written.

NATURE AND EXTENT OF SURETY‘S LIABILITY

(1) SURETY‘S LIABILITY IS COEXTENSIVE WITH LIABILITY OF PRINCIPAL

DEBTOR
General Rule
(a) Surety is liable for All debts payable by the principal debtor to the creditor.
(b) Accordingly, interest, damages, costs etc. may also be recovered from the surety.
Exception
The contract of guarantee may provide otherwise.

(2) COMMENCEMENT OF SURETY‘S LIABILITY

(a) The liability of surety arises immediately on default by the principal debtor.
(b) The creditor is not required to-
(i) First sue the principal debtor, Or
(ii) First give a notice to the principal debtor.

(3) SURETY‘S LIABILITY MAY BE LIMITED

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A surety may fix a ceiling limit on his liability up to which the guarantee shall remain
effective.

(4) SURETY‘S LIABILITY MAY BE CONTINUOUS

The surety may agree to become liable for a series of transactions of continuous nature.
However, the surety may fix-
(a) A ceiling limit on his liability up to which the guarantee shall remain effective,
(b) A time period during which the guarantee shall remain effective.

RIGHTS OF SURETY

(1) RIGHTS AGAINST PRINCIPAL DEBTOR

(a) Right Of Indemnity
(i) There is an implied promise by the principal debtor to indemnify the surety.
(ii) The surety is entitled to claim from principal debtor all sums which he has rightfully
paid.
(iii) The surety cannot recover such sums, which he has paid wrongfully.
(b) Right Of Subrogation
On payment of a debt, the surety shall be entitled to all the rights which the creditor
could claim against the principal debtor.

(2) RIGHTS AGAINST THE CREDITOR

(a) Right To Claim Securities
(i) Surety can claim all securities which the creditor had at the time of giving of
guarantee
(ii) It is immaterial as to whether the surety had knowledge of such securities or not.
(iii) If securities are returned by the creditor to the principal debtor, surety is
discharged to the extent of value of securities so returned.

(b) Rights Of Set Off

(i) Amount recoverable by the principal debtor may be claimed as deduction.

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(ii) Amount recoverable by the surety may be claimed as deduction.

DISCHARGE OF SURETY FROM LIABILITY

(1) NOTICE OF REVOCATION BY SURETY
(a) Specific guarantee
A specific guarantee can be revoked only if liability of surety has not arisen.
(b) Continuing guarantee
A continuing guarantee can be revoked only in respect of future transactions.
(2) DEATH OF SURETY
In case of death of surety, a continuing guarantee is automatically revoked in respect of
future transactions.

(3) VARIANCE IN TERMS

If-
(a) A variation is made subsequent to formation of contract of guarantee, and
(b) Such variation is made without the consent of surety.
Then - Surety shall be released for such transactions as take place after such variation.

(4) RELEASE OR DISCHARGE OF PRINCIPAL DEBTOR

If-
(a) The creditor makes a fresh contract with principal debtor whereby the principal
debtor is relieved from his liability, or
(b) The creditor dies any act or omission resulting in discharge of principal debtor.
Then - Surety is discharged.

(5) COMPOSITION WITH PRINCIPAL DEBTOR

Surety is discharged if the creditor makes a composition with the principal debtor
without obtaining the consent of surety.

(6) GIVING EXTENSION OF TIME TO PRINCIPAL DEBTOR

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Surety is discharged if the creditor extends the time for repayment of the debt by the
principal debtor without obtaining the consent of the surety.

BAILMENT

MEANING OF BAILMENT
A ‗bailment‘ is the delivery of goods by one person to another for some purpose, upon a
contract that they shall, when the purpose is accomplished, be returned or otherwise
disposed of according to the directions of the person delivering them.

ESSENTIALS OF CONTRACT OF BAILMENT

(1) CONTRACT
(a) There must be a contract.
(b) The contract may be expressed or implied.
(2) GOODS
Bailment can be made of goods only.

(3) DELIVERY
There must be delivery of goods by one person to another person.
(4) PURPOSE OF DELIVERY
(a) The goods must be delivered for some purpose.
(b) The purpose may be expressed or implied.
(5) RETURN OF GOODS
The condition shall be that the goods shall be-
- Returned (either in original form or in altered form), or
- Disposed of according to the directions of the bailor, when the purpose is
accomplished.

Set high goals. Set realistic deadlines

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MODES OF DELIVERY

(1) ACTUAL DELIVERY

Transfer of physical possession of goods from one person to another.

(2) SYMBOLIC DELIVERY

(a) Physical possession of goods is not actually transferred.
(b) A person does act resulting in transfer of possession to any other person.
Examples:
(a) Delivery of keys of a motor bike to a friend.
(b) Delivery of a railway receipt.

CLASSIFICATION OF BAILMENT

(A) GRATUITOUS BAILMENT

Bailment without any charges or reward, i.e.-
(a) No hire charges are paid by bailee, and
(b) No custody charges are paid by bailor.

(B) NON-GRATUITOUS BAILMENT

Bailment for some charges or reward i.e.-
(a) Hire charges are paid by bailee, or
(b) Custody charges are paid by bailer.

DUTIES OF A BAILOR

(1) DUTY TO DISCLOSE FAULTS IN THE GOODS

(a) Gratuitous Bailment
(i) Disclosure
The bailer is liable to disclose all the faults known to him, which
(a) Are material for use of the goods, or
(b) May put the bailee to extraordinary risks.
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(ii) Effects of non-discloser
The bailor shall be liable for damages for any loss caused to the bailee.

(b) Non-Gratuitous Bailment (i.e., good bailed for hire or reward)

(i) Discloser
The bailor is liable to disclose all the faults known to him.
(ii) Effects of non-discloser
The bailor shall be liable for damages for any loss caused to the bailee whether or not
he was aware of faults.

(2) PAY EXPENSES

(a) Extra Ordinary Expense
(i) The bailor is liable to pay the extraordinary expenses.
(ii) The bailee may recover the extraordinary expenses paid to him.
(iii) It is immaterial as to whether the bailment is gratuitous or non-gratuitous.
(b) Ordinary Expenses
(i) The bailee is liable to pay ordinary necessary expenses.
(ii) However, if the bailment is gratuitous, the bailor is liable to pay the ordinary
necessary expenses.

(3) Indemnify The Bailee For Defective Title

The bailor shall indemnify the bailee for any loss caused to bailee due to defective title
of bailor.

(4) Indemnify The Bailee For Pre-Mature Termination

If -
- Bailment is made gratuitously,
- For a specific period.
Then –
(a) The bailor may compel the bailee to return the goods before expiry of period of
bailment, but

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(b) The bailor shall indemnify the bailee for any loss incurred by the bailee.

(5) Receive Back The Goods

(a) It is the duty of the bailor to receive back the goods, when returned by bailee.
(b) If the bailor wrongfully refuses to receive back the goods, he shall be liable to pay
necessary expenses of custody of goods incurred by the bailee.

DUTIES OF BAILEE

(1) Take Reasonable Care

(a) The bailee must take such care of goods as a man of ordinary prudence would take
care of his own goods.
(b) The bailee shall not be liable for any loss or destruction of goods, if-
(i) He is not negligent, or
(ii) The loss was caused due to an act of god or other unavoidable reasons.
(2) Not To Make Unauthorized Use Of Goods
(a) The bailee must not make any unauthorized use of the goods.
(b) If the bailee makes any unauthorized use of goods, then-
(i) Bailment become voidable at the option of the bailor, and
(ii) Bailee shall be liable for any loss or damage,
Even if loss was caused due to act of god or other unavoidable reasons.

(3) Not To Mix Goods

Situation
(a) If goods are mixed with bailor‘s consent
(b) If goods are mixed without bailor‘s consent, but the goods are separable
(c) If goods are mixed without bailor‘s consent, and goods are not separable
Consequences
The parties shall have a proportionate interest in such mixture.
(a) The bailee shall pay the expense of separation.

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(b) The bailee shall pay manages caused to the bailor.
The bailee shall compensate the bailor for any loss caused to him.

(4) Return The Goods

(a) The bailee must return the goods without waiting for damages from bailor, if-
(i) Time specified in the contract has expired, or
(ii) Purpose specified in the contract is achieved
(b) Otherwise if the goods are not so returned, then-
(i) The goods shall be at the risk of the bailee,
(ii) The bailee shall be liable for loss of goods,
Even if loss was caused due to act of god or other unavoidable reasons.

(5) Return Accretion To Goods

The bailee must return to the bailor any accretion (i.e. addition) to the goods bailed.

(6) Not To Set Up An Adverse Title

Bailee has no right to allege that the bailor had no authority to bail the goods.

RIGHTS OF BAILOR
(1) Terminate the bailment
Conditions - Bailee does any act inconsistent with the terms and conditions of the
contract of bailment.
Effect - Bailment becomes voidable at the option of bailor.

(2) Demand Back The Goods

If - the bailment is made gratuitously
- for a specific period
Then -
(a) The bailor may compel the bailee to return the goods before expiry of period of
bailment, but
(b) The bailor shall indemnify the bailee for any loss incurred by the bailee.
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(3) File Suit Against Wrongdoer

The bailor has the right to sue-
(a) A third party who makes some damages to the goods, or
(b) A third party who deprives the bailee from using the goods.

(4) Sue The Bailee

The bailor may sue the bailee to enforce his duties.

RIGHTS OF BAILEE

(1) Right To Compensation

The bailee has the right to be indemnified by the bailor, if-
(a) Bailor has no title to the goods, and
(b) As a consequence, bailee suffers some loss.

(2) Recover Charges Incurred

Extraordinary expenses
(a) The bailee may recover the extraordinary expenses from Bailor.
Ordinary expense
If the Bailment Is Gratuitous, the bailor is liable to pay the ordinary necessary
expenses, i.e., the bailee has the right to recover the ordinary necessary expenses
incurred by him.

(3) Suit For Deciding The Title

Bailee may apply to court for deciding the title to goods, if a person other than the
bailor claims that the goods belongs to him.

(4) Right Of Lien

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The bailee has the right to retain the goods delivered to him until the charges due to
bailee are paid by the bailor.

TERMINATION OF BAILMENT
(1) Expiry Of Fixed Period
If the period of bailment is fixed by the parties, the bailment terminates on expiry of
such fixed period.

(2) Achievement Of The Object

If the bailment is made for a particular object, the bailment terminates on achievement
of such object.

(3) Before Expiry Of Fixed Period

The bailor may compel the bailee to return the goods before expiry of period of
bailment if-
(a) The bailment was made gratuitously, and
(b) The bailor indemnifies the bailee for loss incurred by bailee.

(4) Inconsistent Use Of Goods

If the bailee makes an inconsistent use of the goods the bailment becomes voidable at
the option of the bailor,

(5) Death Of Bailor Or Bailee

In case of gratuitous bailment, the bailment terminates if the bailor or the bailee dies.

(6) Destruction of goods

The bailment is terminated if the goods bailed are destroyed.

FINDER OF GOODS

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PLEDGE

‘PLEDGE’
The bailment of goods as security for payment of a debt or performance of a promise is
called ‗pledge‘.
‗PAWNOR’
The bailor in case of a pledge is called as ‗pawnor‘.

‘PAWNEE’
The bailee in case of pledge is called as ‗pawnee‘

ESSENTIALS OF PLEDGE

(1) CONTRACT
(a) There must be a contract.
(b) The contract may be expressed or implied.
(2) GOODS
Pledge can be made of movable goods only.
(3) DELIVERY
There must be delivery of goods by one person to another person.
(4) PURPOSE OF DELIVERY
(a) The goods must be delivered for some purpose.
(b) The purpose must be-
(i) Repayment of a loan, or
(ii) Fulfillment of an obligation.

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(5) RETURN OF GOODS
(a) The delivery of goods must be conditional.
(b) The condition shall be that the goods shall be-
(i) Returned (either in original form or in altered form), or
(ii) Disposed of according to the directions of the Pawner when the purpose is
accomplished.

RIGHTS OF PAWNEE

(1) To Retain The Pledged Goods

The Pawnee has the right to retain the goods pledged with him until he is paid-
(a) Money due under the pledge (or until the promise is performed),
(b) Interest on debt not paid, and
(c) Necessary expenses for preservation of goods.

(2) Receive Extraordinary

(a) The Pawnee has the right to recover extraordinary expenses incurred by him for
preservation of goods pledged with him.
(b) However, he has no right to retain the goods in case of non-payment.

(3) Rights To Sell The Goods

Conditions for sale of goods:
(a) The Pawner has failed to repay the loan or perform his promise.
(b) The Pawnee has given a reasonable notice to the Pawner, of his intention to sell the
goods.

Effects of sale of goods

If proceed of sale < Amount due
The Pawnee may recover the deficit from Pawner.

If proceeds of sale > Amount due

The Pawnee shall pay the surplus to the Pawner.
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(4) Right To Sue The Pawner

If the Pawner fails to repay the loan or perform his promise, the Pawnee has the right to
sue the Pawner.

DUTIES OF A PAWNOR
(1) Repay The Loan
The Pawner is liable to repay the loan taken from Pawnee, or perform his promise, as
the case may be.

(2) Pay Deficit On Sale

If the Pawnee sells the goods due to default by the Pawner, the Pawner must pay the
deficit (i.e., the difference between amount due and amount recovered by Pawnee by
way of sale) to the Pawnee.

(3) Pay Extra-Ordinary Expense

The Pawner is liable to pay to the Pawnee any extraordinary expenses incurred by the
Pawnee for preservation of goods.

(4) Disclose Faults In Goods

The Pawner is liable to disclose all the faults which-
(a) Are material for use of the goods, or
(b) May put the bailee to extraordinary risks.

(5) Indemnify The Pawnee

If loss is caused to the Pawnee due to defect in pawnor‘s title to the goods, the Pawner
must indemnify the Pawnee.

DUTIES OF PAWNEE
(1) Not To Use The Goods

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(a) The Pawnee has No right to use the goods.
(b) However, he may use the goods, if he has been so authorized by the Pawner.

(2) Return The Goods

The Pawnee must return the goods if the Pawner repays the loan or performs his
promise.

(3) Take Reasonable Care

The pawnee must take such care of goods pledged as a man or ordinary prudence
would take care of his own goods.

(4) Not To Mix Goods

The Pawnee must not mix his own goods with the goods pledged.
(5) Return Increase In Goods
The Pawnee must return to the Pawner any accretion to the goods pledged with him.

RIGHTS OF A PAWNOR

(1) Enforce Pawnee’s Duties

The power has the right to enforce the duties by Pawnee, if the Pawnee fails to fulfil his
duties.

(2) Receive Increase In Goods

The Pawner has the right to recover from Pawnee any increase in goods pledged.

(3) Right To Receive Notice Of Sale

In case of default by the Pawner to repay the debt or perform his promise, the Pawnee
has the right to sell the goods, after giving a reasonable notice to the Pawner. If the
Pawnee fails to give notice, the Pawner has the right to recover the loss incurred by him.

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LAW OF AGENCY

(1) MEANING OF ‗AGENT‘

An ‗Agent‘ is a person employed to-
(a) Do any act for another, or
(b) Represent another in dealings with third persons.

(2) MEANING OF ‗PRINCIPAL‘

‗Principal‘ is the person-
(a) For whom an act is done by the agent, or
(b) Who is represented by the agent in respect of dealing with third persons.
(3) TEST OF AGENCY
Where a person has the capacity to-
(a) Create contractual relations between the principal and a third party,
(b) Bind the principal by his own acts, there exist a relationship of agency.

FEATURE AND ESSENTIALS OF AGENCY

(1) Whether agent is responsible to his principal?

(a) Generally, an agent is liable to the principal,
(b) An agent is not responsible to principal if he is minor or of unsound mind.

(2) Principal is liable for the acts of agent

(a) The principal is liable for all the acts of an agent which are lawful and within the
scope of agent‘s authority.
(b) The contracts entered into by the agent on behalf of the principal have the same legal
consequences as if these contracts were made by the principal himself.

(3) Who Can Be An Agent?

(a) Any person may become an agent.
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(b) Even a minor or a person of unsound mind can become an agent.

(4) Who can be a Principal?

Any person may become an agent.
(a) He is of the age of majority, and
(b) He is of sound mind.

(5) Consideration Required?

No consideration is necessary for creating an agency.

KINDS OF AGENT

(1) SPECIAL AGENT

(a) An agent who is appointed to perform a particular act.
(b) Special agent has limited authority.
(c) He cannot bind the principal in any matter other than that for which he is employed.
(d) The authority of the special agent comes to an end as soon as the act for which he is
appointed is completed.

(2) GENERAL AGENT

(a) An agent who is employed to do all acts connected with a particular business of the
principal.
(b) A general agent has the authority to bind his principal with all the acts connected
with the business for which he is employed.

(3) MERCANTILE OR COMMERCIAL AGENT

‗Mercantile agent‘ means an agent having the authority to-
(a) Sell goods,
(b) Consign goods for the purpose or sale,
(c) Buy goods,

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(d) Raise money on the security of goods,

(4) NON MERCANTILE AGENT

An agent who does not deal in mercantile transactions. These include attorneys,
solicitors, guardian, promoters, wife etc.
(5) DEL CREDRE AGENT
(a) He is a mercantile agent, who in consideration of an extra commission guarantees
his principal that person with whom he enters into contract on behalf of the principal
shall perform his obligation.

(6) SUB AGENT

A sub agent is a person employed by and acting under the control of the original agent.

DUTIES OF AN AGENT
(1) To conduct the business in accordance with the directions given by the principal.
(2) Not to use information obtained in the course of the agency against the principal.
(3) To work with reasonable diligence, care and skill.
(4) To protect and preserve the interest on behalf of the principal‘s representative after
his death of insolvency of the principal.
(5) To render proper accounts to the principal on demand.
(6) Not to delegate authority or appoint sub-agent without consent of Principal.
(7) To communicate his principal in case of difficulty and seek his instructions.
(8) To remit to the principal all the sums received in the principal‘s accounts in
accordance with the terms and conditions of contract of agency.
(9) Not to deal on his own account.
(10) Not to make any secret profit out of the agency business other than the agreed
remuneration.

RIGHTS OF AN AGENT

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(1) To retain money out of the sums received in agency business for advances made or
expenses incurred and remuneration due to him.
(2) To receive the agreed remuneration.
(3) Right of lien on principal‘s goods, papers and other property until the amount due
to him in respect of the same is paid.
(4) An agent has the right to be indemnified by the principal against the consequences
of all lawful acts done in exercise of the authority conferred on him.

WHEN AN AGENT IS PERSONALLY LIABLE?

(1) General rule
(a) Only the principal can enforce and can be held liable on a contract entered into by
the agent.
(b) The agent is not personally liable of a contract entered into by him on behalf of the
principal.
But there are some cases where agent is liable. These cases are:
(2) Exceptions
(a) When agent acts for sale or purchase of goods for a principal resident abroad, i.e.,
foreign principal.
(b) Where agent does not disclose the name (identity) of his principal.
(c) Where it is expressly provided in the contract that the agent shall be personally
liable.
(d) When the principal is not in existence at the time when the act was done, i.e., he
acted for a non-existent principal.
(e) When the agent exceeds his authority or commits a breach of warranty of authority.
(f) When he receives or pays money by mistake or fraud.
(g) Where the trade usage or custom makes an agent personally liable.

DELEGATION OF AUTHORITY BY AGENT

(1) General rule

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The general rule is that an agent cannot lawfully employ another to perform acts, which
he has expressly or impliedly undertaken to perform personally.
(2) Exceptions
(a) There is a custom or usage of trade to that effect.
(b) Where power of the agent to delegate can be inferred from the conduct of both the
principal.
(c) Where the principal is aware of the intention of the agent to appoint sub agent but
he does not object to it.
(d) When principal permits appointment of a sub-agent.
(e) If the nature of the agency is such that the sub-agent is necessary.
(f) Where the acts to be done is purely ministerial not involving confidence or use of
discretion.
(g) Where unforeseen emergencies arise rendering appointment of a sub-agent
necessary.

LEGAL RELATIONSHIP BETWEEN THE PRINCIPAL - AGENT - SUB-AGENT

(1) If Sub-Agent Is Properly Appointed

(a) Principal is bound to the third parties for the acts of sub-agent.
(b) The agent is responsible to the principal for the acts of sub-agent.
(c) The sub-agent is not responsible to the principal except in case of fraud of wilful
wrong.
(2) If sub-agent is Not properly appointed
(a) Principal is not bound to the third parties for the acts of sub-agent.
(b) The agent is responsible to the principal and third parties for the acts of sub-agent.
(c) The sub-agent is not responsible to the principal.

PRINCIPAL‘S LIABILITIES TO THIRD PARTIES FOR ACTS OF AGENT

(A) Principal Is Liable For The Acts Of Agent

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(a) The principal is liable for ALL the acts of an agent which are lawful and within the
scope of agent‘s authority.
(b) The contracts entered into by the agent on behalf of the principal have the sale legal
consequences as if these contracts were made by the principal himself.

(B) But If Agent Exceeds His Authority

Whether the acts done within the authority are separable from the acts done beyond
authority?
If yes - The principal is not bound for excess acts done by the agent.
If no - The principal is not bound by the transaction and the principal can repudiate the
whole transaction.

TERMINATION OF AGENCY
(A) BY THE ACTS OF PARTIES

(1) By Agreement
The principal and the agent may mutually agree to terminate the agency, at anytime.
(2) By The Agent Renouncing The Business Of Agency
(a) Renunciation may be expressed or implied from the conduct of the agent.
(b) When agency is for fixed period, the agent must make compensation to the
principal, for premature renunciation of agency without sufficient cause.

(B) BY OPERATION OF LAW

(1) Completion of business of agency.
(2) Death or insanity of the principal or agent.
(3) Where the principal or the agent, is a company and is dissolved.
(4) Destruction of subject matter of agency.
(5) Principal becoming insolvent.
(6) Expiration of period where agency was for a fixed period.
A good listener is a silent flatterer

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PREVENTION OF MONEY LAUNDERING ACT, 2002

Let’s try this chapter in Questions & Answers format for Examination Practice

Q.1. what is black money/ Marketing?

Q.2 what is Money Laundering?
Q.3 who launders Money & why?
Q.4 How money is laundered & what‘s its process?
Q.5 Which countries have problems of laundering?
Q.6 What are the control measures our country has taken to curb Money Laundering?
Q.7 What are the obligations of PFI‘s and other banking & financial institutions
regarding KYC norms?

Answers

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ESSENTIAL COMMODITIES ACT, 1955

INTRODUCTION
The object of this Act is to control the Production, supply and distribution of certain
commodities in the interest of the general public so as to secure equitable distribution of
essential commodities and their availability at fair prices.

DEFINITIONS
Collector [section 2(a)] : ―Collector‖ includes an Additional Collector, and such other
officer not below the rank of sub – divisional Officer as may be authorized to perform
the function and exercise the powers of the Collector under the Act.
Essential commodities [section 2A]: ―Essential commodities‖ means any of the
following commodities:
1. Drugs;
2. Fertilizers, whether inorganic, organic or mixed;
3. Foodstuffs, including edible oilseeds and oils;
4. Hank yarn made wholly from cotton;
5. Petroleum and petroleum products;
6. Raw jute and jute textile;
7. seeds of food-crops and seeds of fruits and vegetables;
8. Seeds of cattle fodder; and
9. Jute seeds.
10. Any other article within the scope of Entry 33 in last III in Seventh Schedule to
the constitution, which may be notified by the Central Govt. to be an essential
commodity.

Sugar [section 2(e)] : ―Sugar means:

(i) Any form of sugar containing more than 90% of sucrose, including sugar
candy;
(ii) Khandsari sugar or bur sugar or crushed sugar, or any sugar in crystalline or
powered form; or
(iii) Sugar in process in vacuum pan sugar factory, or raw sugar.

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POWERS OF CENTRAL GOVERNMENT TO CONTROL PRODUCTION, SUPPLY
AND DISTRIBUTION ETC., OF ESSENTIAL COMMDITIES [SECTION 3]
Issue of Order [Section 3(1)]
The Central Government can issue orders in the following situations for regulating or
prohibiting the production, supply and distribution of essential commodities and trade
and commerce therein:
(i) To maintain or to increase supplies of any essential commodity;
(ii) To secure the equitable distribution of essential commodities;
(iii) To secure the availability of essential commodities at fair price; or
(iv) To secure any essential commodity for the defence of India or for the efficient
conduct of military operations.

Matters that can be included in the Order [section 3(2)]

Central Government may issue an order which may provide for all or any of the
following matters:
(a) Regulating the production or manufacture of any essential commodity by
licenses, permits etc;
(b) Regulating the storage, transport, distribution, disposal, acquisition, use or
consumption of any essential commodity by licenses, permits etc;
(c) Bringing under cultivation any waste land for growing thereon of food crops or
for otherwise maintaining or increasing the cultivation of food crops;
(d) Con trolling the price at which any essential commodity may be bought or sold;
(e) Prohibiting the withholding from sale of any essential commodity ordinarily kept
for sale;
(f) Requiring any person holding in stock, or engaged in the production, or in the
business of buying or selling, of any essential commodity-
(i) To sell the whole or a specified part of the quantity held in stock or produced
or received by him ; or
(ii) In the case of any such commodity which is likely to be produced or received
by him, to sell the whole or a specified part of such commodity when
produced or received by him
To the central Government or a State Government or to an officer or agent of such other
person or class of persons and in such circumstances as may be specified in the order;
(g) Regulating or prohibiting any class of commercial or financial transactions
relating to foodstuffs which are likely to be detrimental to the public interest;

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(h) Collecting any information or statistics from persons engaged in the production
of, or trade and commerce in, any essential commodity by requiring them to
produce for inspection such books, accounts and records relating to their business
and to finish such information relating thereto as may be specified in the order;
(i) For the issue of licenses or permits, the charging of fees there for, deposit of sum,
or security as may be specified for the due performance of the condition of license
or permit, the forfeiture by specified authority;
(j) For the entry, search or examination of premises, aircraft, vessels, vehicles, or
other conveyances and animals;
(k) For the seizure of any articles, premises, aircraft, vessels, vehicles or other
conveyances and animals by a person authorized to make such entry, search or
examination.
In Amboina Prasad Raj wade v. State of Chhattisgarh, it was held that the
classification in the Chhattisgarh Public Distribution System (Control) Order, 2004
excluding private persons altogether from running fair price shops while allowing other
agencies specified to run the fair price shops, so not unreasonable and does not attracts
Article 14 of Constitution

Pricing of Essential Commodities [Section 3(3)]

When the commodities are being sold of Central/State Government in compliance of
order under section 3(2)(f), the price shall be paid as provided hereunder:
(a) The agreed price, where the price can be agreed upon consistently with the
controlled price fixed under this section;
(b) Where no such agreement can be reached, the price calculated with reference to
controlled price;
(c) The market price on the date of sale, where none of the above clauses applies.

Pricing during Emergency [section 3(3A)]

If Central Government is of the opinion that fixing the price of a particular foodstuff in
a particular locality is necessary for controlling price rise or preventing the hoarding of
such foodstuff in such locality, it may direct, by way of a notification, the price at which
the foodstuffs in such locality will be sold to general public. Such a notification is valid
for a maximum period of 3 months. For selling specified foodstuffs in the specified
locality, the seller shall be paid price in the same manner as provided under Section
3(2)(f).

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Procurement Price for Food grains, Edible oil and Oil Seeds [Section 3(3B)]
In relation to sale under Section 3(2)(f),where no notification has been issued under
section 3(3A),or if issued, it has ceased to be in force, the procurement price as specified
by State Government with the prior approval of Central Government shall be paid
having regard to the following facts:
(a) Controlled price;
(b) General crop prospects;
(c) Need for making availability at reasonable prices to the consumers; and
(d) Recommendations, if any, of the Agricultural Price Commission.

Pricing for Sugar [Section 3(3C)]

In relations to sale of sugar, where no notification has been issued under Section 3(3A) ,
or if issued, it has ceased to be in force, the producer shall be paid such price for sugar
as determined by the Central Government after considering the following factors:
(a) Minimum price, if any fixed for sugar cane by the Central Government;
(b) Manufacturing cost of sugar;
(c) Duty or tax, if any, paid or payable thereon; and
(d) Reasonable return on the capital employed in the business of manufacturing sugar.
The Central Government may determine different prices for different areas from time to
time or for different factories or for different kinds of sugar.

CONFICATION OF ESSENTIAL COMMODITIES

Seizure and confiscation of essential commodities [section 6A]
The expression‘ seize‘ means to take possession contrary to the wishes of the owner of
the property. ‗Confiscation‘ is a mode by which courts can dispose of the property
which is seized. Confiscation is an action posterior to the seizure of an essential
commodity. A commodity which has been seized could be confiscated.
Where an essential commodity is seized, a report of such seizure shall be made, and
sent to the collector of the district in which such essential commodity is seized. The
collector may direct for the production of the seized commodity before him and if he is
satisfied that there has been contravention of the order u/s 3 he may pass order for
confiscation of the essential commodity so seized along with any package or covering in
which such essential commodity is found, and animal, vehicle, vessel or other
conveyance used in carrying such essential commodity.
If any food grains or edible oilseeds have been seized, an order for confiscation of such
food grains or edible oilseeds cannot be made by the collector. Also, the owner of any

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animal, vehicle, vessel or other conveyance shall be given an option to pay fine not
exceeding the market price at the date of seizure, in lieu of its confiscation.

Issue of Show Cause Notice Before Confiscation of Essential Commodity [section 6B]
Before passing an order for confiscation, the owner of the essential commodity,
package, covering, animal, vehicle, vessel or other conveyance is required to be given a
notice in writing informing him of the grounds on which it is proposed to confiscate the
above goods to provide him an opportunity of making a representation in writing
within a reasonable, time and give him a reasonable opportunity of being heard in the
matter.
It may be noted that no order of confiscation can be made if the owner proves to the
satisfaction of the collector that the said modes of transport owned by him were used in
carrying the essential commodity without his knowledge or without the knowledge of
the person in charge of the vehicle, if any, and each of them had taken the necessary
precautions against such use.

Appeal Against Confiscation Order [Section 6C]

Any person aggrieved by an order of confiscation may appeal to the State Government
within one month from the date of passing the order. The State Government shall give
an opportunity to the appellant to be heard and pass such order as it may think fit,
confirming, modifying or annulling the order appealed against. If the appeal has been
decided in favor of appellant, he is entitled to the possession of the confiscated goods
and if it is not possible for any reason to return the essential commodity seized from
him, such person shall be paid the price therefore computed in accordance with the
provisions of Sec 3(3C) or Sec 3(3), as the case may be along with the reasonable interest
calculated from the day of seizure.

Sale of the Seized Commodity [Section6A (2)]

Where the collector, on receiving a report of seizure or on inspection of any essential
commodity, is of the opinion that the essential commodity is subject to speedy and
natural decay or it is otherwise expedient in the public interest to do so, he may make
an order for the sale of the essential commodity:
(i) At the controlled price, or
(ii) By public auction, or
(iii) Through fair price shops at the price fixed by the Central Government or by the State
Government, for the retail sale of such food grains to the public.
Disposal of Sale proceeds of Confiscated good‘s [section 6A (3)]

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The sale proceeds of the essential commodity sold, after deduction of the expenses of
sale shall be paid to the owner in the following circumstances:
(a) Where no order of confiscation is ultimately passed by the collector;
(b) Where an order passed on appeal under Sub- section (1) of section 6C so
requires,or
(c) Where in a prosecution for the contravention of the order the person concerned
is acquitted.

OFFENCES AND PENALTIES

Every offence punishable under the act shall be cognizable and non-bailable. Before a
court can take cognizance of any offence punishable under the act, the following three
conditions must be satisfied:
(i) There must be a report in writing,
(ii) The report must be made by a public servant,
(iii) Presence of Men‘s Rea or guilty mind is a must.
Where an offence is committed by a company, if it is proved that the offence had been
committed with consent or connivance of or is attributable to any neglect on the part of
any Director, Manager, Secretary or other officer of the company, such a person shall be
deemed to be guilty of that offence and is liable to be proceeds against and punished
accordingly.

SPECIAL COURTS UNDER THE ACT [Section 12]

The State Government may, by notification constitute one or more Special Courts for
different areas for the purpose of providing speedy trial of offences under the Act. A
Special Court shall consist of a single judge who shall be appointed by the High Court.
Where any offence is committed by a company, if it is proved that the offence has been
committed with the consent or connivance of or is attributable to any neglect the part of
any Director, Manager, Secretary or other officer of the company, such a person shall be
deemed to be guilty of that offence and is liable to be proceeded against and punished
accordingly.
All offences under this Act shall be tribal only by the Special Court constituted for the
area in which the offence was committed.
The Special Court may exercise the same powers as a Magistrate having jurisdiction
under the Code of Criminal Procedure. All offences under this Act shall be tried in a
summary way and in case of any conviction; the Special Court may pass a sentence of
imprisonment for a term not exceeding 2 years.
As long as i have a want, i have a reason for living. Satisfaction is death

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INDUSTRIES (DEVELOPMENT AND REGULATION) ACT, 1952

INTRODUCTION
Act to provide for the development and regulation of certain industries. These
industries are specified in the First Schedule to the Act. The scope of the Act is therefore
limited to the industries mentioned in the First Schedule known as `Scheduled
Industries‘.

ADMINISTRATION OF THE ACT

The principle authority for administration of the Act is Ministry of Commerce and
Industry. Under the said Ministry, there is a department called Department of
Industrial Policy and Promotion to which a secretariat called Secretariat called
Secretariat of Industrial Assistance (SIA) is attached.

DEFINITIONS [SECTION 3]
Existing Industrial Undertaking [Sec. 3(bb)
Existing Industrial Undertaking means:
(i) An industrial undertaking which was in existence at the time of
commencement of the Act and which belongs to any of the industries listed in
First Schedule (as originally enacted at the time of commencement of the Act);
(ii) An industrial undertaking for the establishment of which effective steps were
taken before the commencement of the Act and which belongs to any of the
industries listed in First Schedule (as originally enacted at the time of
commencement of the Act);
(iii) An industrial undertaking which belongs to any of the industries added to the
First Schedule by an amendment to the Act and which was in existence at the
time of coming into force of such amendment; and
(iv) An industrial undertaking which belongs to any of the industries added to the
First Schedule by an amendment to the Act and for the establishment of which
effective steps were taken before the coming into force of such amendment.
Here ``Effective Steps‖ mean one or more of the following:
(i) That 60% or more of the capital issued by a public company has been paid up;
(ii) That a substantial part of the factory building has been constructed;
(iii) That a firm order has been placed for a substantial part of the plant and
machinery required for the undertaking.
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Factory [Sec.3(C)
Factory means any premises including the precincts thereof in any part of which a
manufacturing process is being carried on---
(i) With the aid of power provided that 50or more workers are working or were
working thereon any day of the preceding 12 months ; or
(ii) Without the aid of power provided that 100 or more workers are working or were
working thereon on any of the preceding 12 months.

Industrial Undertaking [Sec. 3 (d)]

Industrial undertaking means any undertaking pertaining to a scheduled industry
carried on in one or more factories by any person or authority including Government.

New Article [Sec. 3(did)]

New Article means---
(i) Any article which falls under an item in the First Schedule other than the item
under which articles ordinarily manufactured or produced in the industrial
undertaking at the date of registration or issue of the license or permission, as the
case may be, fall;
(ii) Any article which bears a mark as defined in the Trade Marks Act or which is
subject of a patent, if at the date of registration or issue of the license or
permission, as the case may be, the industrial undertaking was not manufacturing
or producing such article bearing that mark or which is the subject of that patent.

Owner [Sec. 3(f)]

Owner in relation to an industrial undertaking means the person who, or the authority
which, has the ultimate control over the affairs of the undertaking and where the said
affairs are entrusted to a manager of managing director, such manager or managing
director shall be deemed to be the owner of the undertaking.
The term `person‘ employed in the definition would include both natural and artificial
persons. Bodies corporate owning industrial undertaking would also be covered within
the above definition.

Schedule Industry [Sec. 3 (i)

Scheduled Industry means any of the industries specified in the First Schedule of the
Act.

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DEVELOPMENT OF SCHEDULED INDUSTRIES

Central Advisory Council [Sec. 5]
The Central Government may, by notified order, establish a council to be called the
Central Advisory Council. It shall consist of a Chairman and such other members not
exceeding 30 in number, all of whom shall be appointed by the Central Government.
The members so appointed shall represent the interest of:
a) Owners;
b) Employees;
c) Consumers;
d) Such other class of persons including primary producers, as in the opinion of the
Central Government ought to be represented on the Advisory Council.
e) The term of office and the procedure to be followed in the discharge of their
function and the manner of filling casual vacancies among members of the
Advisory Council shall be such as May prescribed.
The function of Central Advisory Council is to advise the Central Government on
matters concerning the development and regulation of scheduled industries. The
Central Government shall consult the Advisory Council in regard to ---
a) The making of any rules,
b) Any other matter connected with the administration of the Act.

Development Council [Sec. 6]

The Central Government may, by notified order, establish for any scheduled industry
or group of scheduled industries a body of persons to be called a Development Council.
It shall consist of members who, in the opinion of the Central Government, are:
a) Persons capable of representing the interests of owners;
b) Persons having special knowledge of matter relating to the technical or other
aspects;
c) Persons capable of representing the interests of employees;
d) Persons capable of representing the interests of consumers.
The number and the term of office of, and the procedure to be followed in the discharge
of their functions by, and the manner of filling casual vacancies among members of a
Development Council, shall be such as may be prescribed.

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The Central Government may assign to a Development Council, any of the functions
specified in the Second Schedule. Following are some of the important functions of a
Development Council:
(i) Recommending target for production.
(ii) Suggesting norms for improving quality and reducing costs.
(iii) Undertaking scientific industrial research.
(iv) Promoting standardisation of products.
(v) Promoting the training of persons engaged.
(vi) Promoting standardisation of accounting method.

Registration of Existing Industrial Undertaking [Sec.10]

Section 10 requires the owner of every existing industrial undertaking (not being the
Central Government) to register the undertaking in the prescribed manner within the
prescribed period. The Central Government shall cause to register its own existing
industrial undertakings. On such a registration. The owners of the undertaking shall be
issued with a certificate of registration containing the productive capacity of the
industrial undertaking and other prescribed particulars.

The registration of an undertaking will not be necessary if the undertaking:

(i) Is a small scale industrial undertaking;
(ii) Is otherwise exempt from the licensing/ registration provisions of the Act; or
(iii) Is not satisfying the definition of the term `factory‘ under the Act.
The owner of an industrial undertaking, which is registrable but has not been
registered, is liable to be punished with imprisonment up to 6 months or fine, which
may extend to Rs. 500/- for every day shall also imposed.
The Central Government has the power to revoke the registration in the following
cases:
(i) If registration has been obtained by misrepresentation of essential facts;
(ii) The industrial undertaking has been exempted from registration; and
(iii) If the registration has become useless or ineffective.

INDUSTRIAL LICENSE
An Industrial Licensee is a written permission from the Central Government to an
industrial undertaking to manufacture specified Articles listed in First Schedule. The
prescribed form for Industrial Licensee is Form F to the Registration and Licensing of

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Industrial Undertaking Rules, 1952. An Industrial Licensee shall contain particulars of
the industrial undertaking, its location, articles to be manufactured, the capacity on the
basis of maximum utilization of plant and machinery, etc.
The Industrial License is subject to a validity period within which the licensed capacity
of the undertaking should be established. The license is usually valid for 2 years which
can be extended. It lapses if effective steps are not taken within that period or extended
period.

Cases where Industrial License is required

An Industrial License is required in the following cases:
1) Licensing for establishing new industrial undertaking [Sec. 11]: No person or
authority, other than Central Government, shall establish any new industrial
undertaking without a license from the Central Government. Where a State
Government wants to do so, previous permission of the Central Government will
be required.
2) License for producing or manufacturing new article [Sec. 11 A]: The term `new
article‘ has been defined under section 3 (dd) of Industries (Development and
Regulation) Act, 1951. As per this, new article means –
a) Any article which falls under an item in the First Schedule other than the item
under which articles ordinarily manufactured or produced in the industrial
undertaking at the date of registration or issue of the license or permission, as the
case may be, fall ;
b) Any article which bears a mark as defined in the Trademarks Act, 1999 or which
is subject of a patent, if at the date of registration or issue of license or
permission, as the case may be, the industrial undertaking was not
manufacturing or producing such article bearing that mark or which is the
subject of that patent.
The owner of an industrial undertaking, not being the Central Government, shall not
produce or manufacture any new article, unless:
a) In the case of an industrial undertaking registered under section 10, he has
obtained a license for producing or manufacturing such new article; and
b) In the case of an industrial undertaking in respect of which a license or
permission has been issued under section 11, he or it has got the existing license
or permission amended.
3) License for carrying on business without registration (sec. 13(1)(a)) : no person,
other than the central government, shall carry on business after the lapse of time
in which registration should have been obtained, a license from the central
government. Where a state government wants to do so, previous permission of
the central government will be required.
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4) License for carrying on business after revocation of certification of registration
(sec. 13(1) (b)): no person, other then he Central Government, shall carry on
business after the revocation of certain of registration, without obtain a license
from the certain government. Where a state government wants to do so, previous
permission of the central government will be required.
5) License for carrying on business by an industrial undertaking to which the act
became subsequently applicable (COB license) sec. 13 (1)(c) : if the IDRA, 1951
becomes applicable to an industry undertaking, which was earlier exempted,
then the owner of such industrial undertaking must obtain applicable, in order to
carry on its business. This is known as COB licenses. Where the owner of the
industrial undertook is state governor, and then previous permission of the
central government will be required.
Further, COB licenses is also required when a small scale unit exceeds the
prescribed limit (rs.1crore) of investment in plant and machinery by way of
nature growth and continues to manufacture small scale reserved item.
6) license for effecting substance expansion (sec. 13(10(d)): ―substantial
expansion‖ means the expansion of an existing industrial undertook which
substance increases the productive capable of the undertaking, or which is of
such a nature as to amount virtually to a new industrial undertaking; but does
not include any such expansion as is normal to the undertaking having regard to
its nature and circumstances relating to such expansion.
It may be noted that industrial undertaking can increase production of articles for
which they were licensed or registered, up to 25% of the capacity so licensed or
registered, without obtain a substantial expansion license, subject to the fulfilment of
following conditions:
a) No additional plant and machinery is installed except minor balancing equipment
procured indigenously;
b) No additional expenditure of foreign exchange is involved; and
c) The extra production does not occasion any additional demand for scare new
materials.
7) License for change in location [Sec. 13(1) (e)]: No person or authority, other than
Central Government, shall change the location of its industrial undertaking without a
license from the Central Government will be required.

Procedure for getting an Industrial License

The application for getting an Industrial License shall be submitted in prescribed form
to Secretariat of Industrial Assistance, Department of Industrial Policy & Promotion.
Ministry of Commerce & Industry. In general, the prescribed form for making the
application is Form FC-IL. However, application for COB License shall be made in
Form EE and for that change in location in Form E. The application shall be
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accompanied with a crossed demand draft of Rs. 2500 drawn up favour of `Pay &
Accounts Officer‘, Secretariat of Industrial Assistance. Department of Industrial Policy
& Promotion, Ministry of Commerce & Industry, and payable at State Bank of India,
Nirman Bhawan, New Delhi. Approvals are normally granted within 4 to 6 weeks of
filling the application.

Letter of Intent [LOI]

Where an application for industrial License is made, first usually Letter of Intent is
granted and then Industrial License is granted after required initial steps like
acquisition of land, commencement of civil works, placement of order for plant &
machinery, foreign collaboration, financial arrangement, etc, are taken as per the
requirements of LOI. In the LOI, 12 months‘ time is given for taking initial steps.
Extension of 6 months can be granted two times. After necessary clearance regarding
environmental pollution, foreign collaboration (if required), etc are obtained, LOI is
converted into an Industrial License, for which application shall be made after
completing initial steps as specified in the LOI.

Exemption from Licensing

Under Section 29 B of the Industries (Development & Regulation) Act, 1951, the Central
Government is empowered to grant exemption from licensing requirement.
Accordingly, exemption from licensing is available to all non-SSI undertakings, subject
to the satisfaction of following conditions:
1) The article of manufacture is not reserved for public sector, presently, only 2 articles
i.e., railway transport & atomic energy are reserved for public sector.)
2) The article of manufacture does not figure in compulsory licensing list. (Presently,
compulsory licensing list contains only 6 articles which are:
a) Distillation and brewing of alcoholic drinks;
b) Cigars & cigarettes of tobacco and manufactured tobacco substitutes;
c) Electronic Aerospace and defence equipment;
d) Industrial explosives;
e) Hazardous chemicals;
f) Drugs & pharmaceuticals.
3) The project is not located within 25 kms. From the urban areas limit of the city
having the population of more than 10 lakhs. (It may be noted that this condition is
not applicable for non-polluting industries like computer software, electronics, etc.)
Small scale and Ancillary Industrial Undertakings are exempted from licensing for
all articles of manufacture, if the articles are not reserved for public sector and do
not figure in the compulsory licensing list.
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INDUSTRIAL ENTREPRENEURS MEMORANDUM (IEM)

All industrial undertakings exempt from the requirements of industrial licensing are
required to file the prescribed IEM with the Government. The IEM shall be
submitted by new units as well as the existing units undertaking substantial
expansion.
IEM is filed in Part `A‘ of the prescribed format with the Entrepreneurial Assistance
Unit (EAU) of the Secretariat of Industrial Assistance, Department of Industrial
Policy & Promotion. Ministry of Commerce & Industry and then an
acknowledgment is obtained. The IEM should be submitted along with a crossed
demand draft of Rs. 1000/- drawn in favor of `Pay & Accounts Officer‘, Secretariat
of Industrial Assistance, Department of Industrial Policy & Promotion, Ministry of
Commerce & Industry and payable at State Bank of India, Nirman Bhawan, New 10
items, an additional fee of Rs. 250 up to 10 additional items needs to be paid through
crossed demand draft.
No further approval is required. Immediately after commencement of commercial
production, Part `B‘ of the IEM is to be filed in the prescribed form. The facility for
amendment of existing IEMs has also been introduced.
It may be noted that small scale industrial undertaking and ancillary industrial
undertakings are not required to file IEM.

ENVIRONMENTAL CLEARANCES
An entrepreneur, proposing to set up an industrial undertaking, is required to
comply with the following procedures, in order to obtain environmental clearances:
1) The State Director of Industries confirms that the project has been approved from
the environmental angle by the competent State authority.
2) The entrepreneur commits to both the State Government and the Central
Government that he would install equipments and implement prescribed
measures for prevention and control of pollution;
3) The concerned State Pollution Control Board certifies that the proposal by the
entrepreneur meets with the environmental requirements and that the
equipments installed or proposed to be installed are adequate and appropriate to
the requirements.
It may be noted that in the case of hazardous industries, an entrepreneur is also
required to obtain a certificate from the Chief Inspector of Factories, certifying that
the entrepreneur has taken adequate steps for ensuring safety in the plant and those
steps have been established before going into trial production. At present such an
additional condition is mentioned in the Letter of Intent issued to hazardous
industries. Therefore, in such industries, letter of intent is converted into Industrial
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License only after submitting aforesaid certificate of Chief Inspector of Factories to
Secretariat of Industrial Assistance.

CONTROL OVER SCHEDULED INDUSTRIES

Investigation
Investigation into Scheduled Industries/Industrial Undertakings [Sec.15]: Section
15 empowers the Central Government to make an investigation into scheduled
industries or industrial undertakings.
Under this section, the Central Government may make a complete investigation into
any scheduled industry or industrial undertaking if it is satisfied that in respect of
that scheduled industry or industrial undertaking:
(i) There has been or is likely to be a substantial fall in the volume of production;
(ii) There has been or is likely to be market deterioration in the quality of articles;
(iii) There has been or is likely to be, an undue rise in the price of articles; or
(iv) It is necessary to take any such action for the purpose of conserving any
resources of national importance.
Secondly, such investigation is also possible when the Central Government is satisfied
that the industrial undertaking is being managed in a manner highly detrimental to the
scheduled industry or to public interest.
Investigation into the affairs of a Company in liquidation [Sec. 15A]: contains
provisions for conducting an investigation into the affairs of a company owning an
industrial undertaking.
The pre-requisites for conducting such an investigation are:
(i) The company is either being wound up by or under the supervision of a High
Court;
(ii) The business of such company is not being continues;
(iii) The Central Government must be satisfied that it is necessary in the interests of
general public and in particular in the interests of production, supply or
distribution of articles, to investigate into the possibility of running for re-
starting the industrial undertaking.
If the abovementioned conditions are satisfied, the Central Govt. may make an
application to the High Court for permission for investigation. On such application, the
High Court shall grant the permission for investigation.
In Union of India v. Anglo French Textiles Ltd., the Madras High Court held that if a
petition is pending before the Court for the purpose of winding up, then the condition
of Sec [15A that the Company is being wound up by the Court shall be deemed to be
have been complied with. In Union of India v. Shalimar Works Ltd., the Calcutta High
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Court held that the aforesaid conditions under Section 15 A shall be deemed to have
been complied with only if the winding up order has been passed by the Court.
In my opinion, the Calcutta High Court judgment seems to be correct because the Court
may or may not pass the order of winding up and hence there is no certainty at the
petition stage that whether the Company will go into the winding up or not.

Directions after investigation [Section 16]

After investigation under Section 15, if the Central Government is satisfied that action
under section 16 is desirable, it may issue such directions to the industrial undertaking
or undertakings as may be appropriate in the circumstances.

Know your strength

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POLLUTION CONTROL & ENVIROMENTAL PROTECTION

INTRODUCTION
Rapid industrialization and uncontrolled
increases in pollution with little control
over its adverse aspects is degrading
environment at an alarming rate. This is
becoming a big health hazard. If the
pollution is unchecked, quality of life will
deteriorate and earth may soon become
uninhabitable. This has been
internationally recognized and decision to
protect and improve environmental were
untaken at no of international forum.
Thus, number of environmental
legislation relating to pollution control
and environmental protection:
1. Water (prevention and control of pollution) Act, 1974
2. Air (Prevention and control of pollution) Act, 1981
3. Environment (protection) Act, 1986
4. Public liability insurance Act, 1991
5. National Environmental Tribunal Act, 1995
All these laws are administered by the ministry of environmental and forests. The
Pollution Control Board at the Centre and State levels functions under the said ministry.

WATER (PREVENTION AND CONTROL OF POLLUTION) ACT, 1974

Objective/ Purpose of the Act

The water (prevention and control of pollution) act, 1974 provides for the following:
1. Prevention and control of water pollution.
2. Maintaining or restoring the wholesomeness of water; and
3. Establishment of boards for prevention and control of water pollution.

Never ever give up

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Important Definitions
Pollution [Sec. 2 (e)]: Pollution means such contamination of water or such alteration of
physical, chemical, or biological properties of water or such discharge of any sewage
effluent or trade effluent or of any other liquid or solid substance into water as may
render such water harmful to public health or to domestic, commercial, industrial,
agricultural or other legitimate uses or to the life of animals and plants or of aquatic
organism.
Sewage effluent [sec. 2 (g)]: Sewage effluent means effluent from any sewer system or
disposal works and includes silage from open drains.
Trade Effluent [Sec 2 (k)]: Trade effluent includes any liquid, solids or gaseous
substance which is discharge from any premises used for carrying on any industry,
operations or process or treatment and disposal system, other than domestic sewage.

Provision for Prevention of water Pollution/ Measures to Prevent and Control Water
Pollution
Prohibition on use of stream or well for disposal of polluting matter and obstruction
there to [Sec.24]: A person is prohibited from knowingly using any stream or well for
disposal of any poisonous, noxious, or polluting matter.
Further, a person is also prohibited from knowingly putting any matter in stream,
which may obstruct its flow due to which pollution may be aggravated. This restriction
is not applicable in the following cases:
1. Constructing across or on the bank of the river any building, bridge, dam etc. which
he has right to construct;
2. Depositing any material on the land for reclaiming the land for supporting the bed of
stream, if such materials do not pollute the stream;
3. Putting into any stream or natural deposit which has flown from such current of
stream;
4. Deposit material in stream with the consent of the State Board.

Consent for new outlet and discharges [Sec.25]: Without the previous consent of the
State board, no person can do of the following:
1. Establish or take any steps establish any industry, operation or process which is likely
to discharge sewage or trade effluent into stream or well;
2. Bring into use any new or altered outlet for discharge of sewage;
3. Begin to make new discharge of sewage.

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In M.C Mehta v. Union of India, the Supreme Court held that unless adequate
provision is made for treatment of trade effluent flowing out of factories, application of
new industries could be refused. Action can be taken against industries if they are
found responsible for pollution of water.
In the aforesaid case, tanneries were polluting the river Ganga. They were asked to put
up treatment plants and the units, which did not comply, were asked to be closed.

Existing Industries should also apply for consent [Sec. 25]: Existing Industries
discharging any trade effluent in a well or river shall also apply for consent of State
Board. The State Board can give its consent subject to certain conditions.

Samples of effluent by State Board [Sec. 27]: State Board shall grant its consent for
establishment of any industry, disposal system, process, operations etc. with a condition
that the Board shall be able to take samples of the effluent.

Furnishing information about accidents to State Board [Sec. 31]: If at any place where
any industry, operation or process is being carried on, there is discharge of any
poisonous, noxious or pollution, matter due to accident or an unforeseen event, the
person responsible for the discharge/emission and the person in charge of the place at
which such discharge/emission occurs is required to take the following steps:
1. Prevents or mitigate the water pollution caused as a result of such
discharge/emission;
2. Intimate immediately the effect of such discharge/emission to the State Board.
Upon receipts of such information, the State Board shall take such remedial measure as
are necessary to prevent or mitigate the water pollution. If the State Board requires the
person in charge of the place and the third person responsible for such
discharge/emission to render assistance in taking the remedial measures, he shall be
bound to provide the same.

Power of State Board under the Act

State Boards have been given the following powers so that they can effectively exercise
control over pollution:

Power to take samples [Sec. 21&22]: State Board or any of its officers can take samples
of stream or sewage effluent or trade effluent for analysis. When such samples is
proposed to be taken, a notice should be served or the person in charge of the place.
Such samples should be taken in his presence. It should be singed both by the person
taking the samples and by the person and by the person in-charge of the place. The
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samples should be sent to an approved established or recognized by the Central Board
or State Board. Copy of the analysis report should be given to the person in-charge of
the premises. It may be noted that the report of such analysis is admissible as evidence
in any legal proceedings.

Power of entry and inspection [Sec. 23]: Any person empowered by the State Board
shall have the right to enter any places at any time for the following purposes:
1. To perform any of the function entrusted to him:
2. To determine whether the conditions prescribed by the State Board While Granting
the consent are being complied with; and
3. To examine any plant, record, register, document etc.

Power of search and seizure [Sec. 23]: An authorized officer of the State Board Can
search any premises, plant, record etc. where he has reason to believe that offence under
water (Prevention and Control of Pollution ) Act, 10974 has been committed or is about
to be committed. He can also seize any plant, document, register etc. to produce the
same as evidence in the court of law.

Emergency measures in case of pollution of stream or well [Sec. 32]: If the State Board
finds that any poisonous, noxious or polluting matter is present in any stream, well, or
land or has entered into any stream, well, or land by any accident it can take immediate
action following purpose:
1. Too remove or dispose off that matter;
2. To mitigate the pollution;
3. to issue order prohibiting the concerned person discharging any such matter into the
stream or well.

Offence by Companies
If the offender is a company, every person in charge of the company responsible for the
conduct of operation of the company as well as the company shall be deemed to be
guilty of offence and liable for punishment. However, the person-in-charge of the
operation of the company will not be liable if he proves that the offence was committed
without his knowledge or he took every step to prevent the offence.
Further, the director, manager, company secretary of the company shall also be liable
for an offence by the company. However, they shall not be able if they are able to prove
that the offence was committed without their consent or connivance or negligence.

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Normally company must be impeded along with the directors of the company.
However, in the case of UP Pollution Control Board v. Modi Distilleries, it was held
that the defects like not impeded the concerned company is curable. Such defects
cannot vitiate the complaint. Thus, if prosecution is lodge against directors individually
but not against the company, as such it is a curable defect and the prosecution cannot be
quashed merely on this ground.

Appeal against the orders of State Board [Sec. 28]: Any person aggrieved by any order
made by the state under Sec. 25,26 or 27 may, within 30 days from the date on which the
order is communicated to him, prefer an appeal to the Appellate Authority, constituted
by the State Government.
It may be noted that the civil courts cannot entertain any suit or proceeding in respect of
matters falling under the jurisdiction of Appellate Authority and Court cannot grant
any injunction in these matters.

AIR (PREVENTION AND CONTROL OF POLLUTION) ACT, 1981

INTRODUCTION
This Act provides for the following:
1. Prevention, control and abatement of pollution and
2. Establishment of Boards for carrying out of aforesaid purpose.

Definitions
Air Pollutant [Sec.2 (a)]: Air pollutant means any solid, liquid, or gaseous substance
including noise, present in atmosphere in such concentration as may tend to be
injurious to human beings, living creatures, plants properties or environment.

Air Pollutant [Sec. 2 (b)]: Air pollution means presence of air pollutant in atmosphere.

Control Equipment [Sec. 2 (i)]: Control equipment means any apparatus, device,
equipment or system to control the quality and manner of emission of any air pollutant.
It includes any device used for securing the efficient operation of any industrial plant.

Measures to Control Air Pollution

Air Pollution Control Area [Sec. 19]: State Government, after consultation with the
state Board, by a notification, can declare any area as the Air Pollution Control Area.
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Such area can be added, deleted, or altered by notification. State Government can
prohibit burning of any material of any material other than fuel in such area if it is
likely to cause air pollution.

Instruction to Vehicle Registration Authorities [Sec. 20]: State Government, after

consultation with the state Board, may give necessary instruction to the Registering
Authorities under motor Vehicles Act in connection with maintenance of standards for
emission of air pollutants. Such authorities are bound to act on such instructions.

Restriction on establishment of industrial plants [Sec. 21]: No person can establish

any industry in Air Pollution Control Area without previous consent of State Board. A
person already operating industry in Air Pollution Control Area has to apply for the
permission with the State Board within 3 months of declaration of that area as the Air
Pollution Control Area. After making the necessary enquires, the State Board may grant
consent, subject to certain conditions, within 4 months of the date of applications.
Generally, the following conditions are imposed while granting the consent:
1. The control equipment of specific specification, as the State Board may approve, shall
be installed and operated in premises;
2. Existing equipment shall be replaced as per the directions of the State Board;
3. Equipment shall for all the times in good running conditions;
4. Chimney shall be erected as per the approved specification;
5. Such other conditions as may be prescribed.

Restraining person from causing air pollution [Sec. 22]: Person operating any
industrial plant shall not allow emission of the air pollutants in excess of standards laid
down by State Board. The State Board can apply to courts for restraining person from
causing air pollution.

Furnishing information about excess pollution [Sec. 23]: Where in any area, the
emission of air pollutants is in excess of, or likely to increase, the standards laid down
the State Boards, the person responsible for the discharge/emission and 6the person in
charge of the place at which such discharge/emission occurs is required to take the
following steps:
1. Prevent or mitigate the air pollution caused as a result of such discharge/emission.
2. Intimate immediately the effect of such discharge/emission to the State Board.
Upon receipt of such information, the State Board shall take such remedial measure as
are necessary to prevent or mitigate the air pollution. If the State Board requires the
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person in charge of the place and the person responsible for such discharge/emission to
render assistance the remedial measures, he shall be bound to provide the same.

POWER OF THE STATE BOARD UNDER THE ACT

Power of entry and inspections [Sec. 24]: Any person authorized by State Board can
enter any premises for inspection, testing , examination or search in order to determine
whether any offence under the Act has been committed and to see whether directions
given being complied with. Resistance to such inspection in an offence.
Power to obtain information [Sec. 25]: The State Board can ask for any information
from the occupier for the purposes of the Act. The State Board can authorize any person
to inspect the premises to verify the correctness of the information supplied to the State
Board.
Power to take samples of air or emission [Sec. 26]: The State Board can take samples of
air or emission for analysis. When a sample is taken, the person taking the samples shall
server a notice on the occupier or his agent of his attention to analyze the sample. The
person shall take the sealed container and signed by the person taking the sample and
the occupier. Sample shall be sent to the approved laboratory for analysis. Copy of the
analysis is admissible as evidence in any legal proceedings.
Power to issue directions [Sec. 31A]: The State Board can issue direction to any person,
officers, or authority in exercise of its powers and functions under the Act. The
directions may include the following:
1. Closure, prohibition or regulations of industry: and
2. Stoppage or regulation of supply of electricity, water or any other services.
In Suma Traders v. Chairman, Karnataka State Pollution Boards, it was held that only
State Board could give/issue the aforesaid directions. Chairman of the Board in his
individual‘s capacity has no authority to issue such directions.

ENVIROMENT (PROTECTION) ACT, 1986

OBJECT OF THE ACT

After the enactment of water (Prevention and Control of Pollution) Act, 1974 and Air
(Prevention and Control of Pollution) Act, 1981, it was thought that there should be a
general legislation for environmental protection as well as for coordinating the activities
of various regulatory agencies. Need was felt to create authority with adequate power
for environment protection, regulation of discharge, handling of hazardous substance,

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speedy response to accidents threatening environment and deterrent to those who
endanger human environment, safety and health.
The Environment (protection) Act, 1986 aims at protecting and improving the
environment and prevention of hazards to human beings, other living creature, plants
and property.
The main provisions of this Act envisage the following:
1. Laying down standards for the quality of environment in its various aspects;
2. Laying down standards for emission or discharge of environment pollutants;
3. Restriction of areas in which any industry shall not be carried out subject to certain
conditions;
4. Laying down the procedure and safeguards for the handling of hazardous
substances.
5. Establishing or recognized environmental laboratories.

IMPORTANT DEFINITIONS

Environment [ Section 2(a)]: Environment includes water, air and land and the inter
relationship which existences among between water, air and land and human beings,
other living creatures, plants, microorganisms and property.

Environmental Pollutants [Section 2 (b)]: Environmental Pollutants means any solid,

liquid, or gaseous substance present in such concentration as may be, or tend to be,
injurious or environmental.

Environmental Pollution [Section 2(c)]: Environmental pollution means the presence in

the environmental of any environmental pollutant.

Handling [Section 2(d)]: Handling, in relation to any substance, means the

manufacture, process, treatment, destruction, conversion, offering for scale, transfer, or
the like of such substance.

Hazardous Substance [Section 2(e)]: hazardous substance means any substance or a

preparation which, by reasons of its chemical or physicochemical properties or
handling, is likely to cause harm to human beings, other living creatures,
microorganism, property, or the environment.

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Occupier {Section 2(f)]: Occupier in relation to any factory premises means a person
who has control over the affairs of the factory or premises and including , in relation to
any substance, the person in possession of the substance.

Measures to Control Environmental Pollution/ Responsibilities of the under the Act

Not to exceed standards of Pollution [Sec. 7]: Any person carrying on any industry,
operations or process shall not discharge or emit any environmental pollutants in excess
of standards prescribe by the central.
Safeguards in handling hazards substance [Sec. 8]: Any handling person hazardous
substances will do so only as per the prescribed procedure and after following
safeguards prescribed by the Central Government.

Furnishing information about an accident [Sec. 9]: Where there are

discharge/emission o0f environmental pollutants in excess of the prescribed standards
due to any accidents or other unforeseen act or event, the person responsible for the
discharge/emission and the person i9n charge of the place at which such
discharge/emission occurs is required to take the following steps:
1. Prevent or mitigate the environmental pollution caused as a result of such
discharge/emission.
2. ………

Powers of Central Government under the Act

Power to issue directions [Sec. 5]: Central Government has got the powers to issue
directions and guidelines to any person, officers, or any authority such officers or
authority shall be bound to comply with such directions.
The directions issued by the Central government may include the following:
1. Directions for closure, prohibition or regulation of any industry, operation or process.
2. Stoppage or regulation of supply of electricity or water or any other services.

Power to make rules [Sec. 6]: The Central Government can make Rules pertaining to
the following aspects:
1. Standards of qualities of air, water or soil of various areas and purpose;
2. Maximum allowable concentration of various environmental pollutants for different
areas;
3. Procedure and safeguard for handling of hazardous substances;
4. Prohibition and restrictions on handling the hazardous substances in different areas;

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5. Prohibition and restriction on location of industries and carrying on operations or
process in different areas;
6. Procedures and safeguards for prevention of accidents which may cause
environmental pollution and for providing remedial measures.

Power of search and seizures [Sec. 10]: The Central Government can authorize any
person fo9r the following purposes:
1. To perform the various function entrusted to him under the Act;
2. To determine whether directions given or conditions imposed in any notice or order
have been complied with:
3. To examine and test any equipment, industrial plants, documents, registers, etc.

Power to search and seizure [Sec. 10]: The Central Government can authorize any
person for the following purposes:
1. Conducting search of any building where he has reason to believe that van offence
under the Act has been or is about to be committed;
2. Seizure of any such equipment, document, register or other material, which may be
as evidence of commission of the offence.

Power to take samples and analyze the same [Sec. 11]: The Central Government can
authorize any person or officer to take samples of air, water, soil or other substance
from any factory, premises, or other places. Before taking the samples, a notice has to be
served on the occupier of the place. Sample shall be sealed in a container and shall be
signed both by the person taking the samples as well as the occupier. Sample shall be
taken in sufficient quality and it will be divided in two parts. Both the parts shall be
sealed and marked separately. One part shall be handed over to the occupier and other
part shall be sent to the environmental laboratories for analysis. Such analysis report is
admissible as evidence in the Court of law.

ENVIRONMENTAL LABORATORY
Section 12 of the Act empowers the central government to establish by the notification
in the official gazette, one or more environmental laborites or recognized one or more
laboratories or institutions as environmental laboratories to carry out certain function
under the Act.
Following are the important functions of environmental laboratories:
a. To evolve standardized methods for sampling and analysis of various types of
environment pollutants.

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b. To analyze samples sent by the Central Government or the officers empowered
under section 11.
c. To carry out such investigations as may be directed by the Central Government to
lay down standards for quality of environment and discharge the environmental
pollutants, to monitor and to enforce the standard laid down.
d. To send periodical reports regarding its activities to the Central Government.
e. To carry out such other functions as may be entrusted to it by Central
Government from time to time.

ENVIRONMENTAL AUDIT
Rule 14 of the environment protection rules, 1986 provides for the submission of
environmental audit report. Accordingly, every person carrying on an industry,
operation, or process requiring consent under section 25 of the water (Prevention and
Control of Pollution) Act or Section 21 of the Air (Prevention and Control of Pollution)
Act, for every financial year ending on 31st march every year or on the before the 15th
may, to the concerned State Pollution Control Board.

ENVIRONMENTAL IMPACT ASSESSMENT NOTIFICATION [EIAN]

Central Government has issued EIAN in1994 for environmental Impact Assessment of
development projects. Under this notification 29 highly polluting industry have been
identified where clearance from Central Government is required for setting up or
expanding the unit. An impact Assessment Agency‘ will assess the project report and
the environmental impact of that project.
Project like nuclear power etc. requires Central Government only if the investment is
more than Rs.50 crore. However in project like mining etc. Central Government
clearance is always requiring irrespective amount of the investment.

Clearance of projects from Environmental Angle

The requirements and procedures for seeking environmental clearance of projects are as
follows:
1. any person, who desires to undertake any project in any part of India or the
expansion or modernization of any existing project listed in schedule I to the
Environment Protection Act1986 shall submit an application in the form prescribed
under Schedule II to the Act, to the Secretary, Ministry of Environment and forests,
New Delhi.
2. The application shall be accompanied by a detailed project report, which shall, inter
alia, include an Environment Impact Statement and environmental Plan.

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3. The summary feasibility report submit with the application shall be evaluated and
assessed by the Impact Assessment Agency. The Impact Assessment Agency will
prepare a set of recommendation based on technical assessment of documents and
data.
4. If no comments are received from the Impact Assessment Agency, the Project would
be deemed to have been approved.

Offences and Penalties

Offence by Companies: Sec. 16 deals with offences by the companies and provides that
where any offence has been committed by a company, every person who, at the time
the offence was committed, was directly in charge of, and was the responsible, the
company for the conduct of business of the company for the conduct of business of the
company, and the company itself, shall be deemed to be guilty of the offences and shall
be liable to be proceeded against. When the offences has been committed by a company
and it is proved that the offence was committed with the consent or connivance of any
director, manager, secretary or other officer of the company, such director, manager,
secretary or other officer shall also be deemed to be guilty of that offence and shall be
liable to be proceeded against and punished accordingly.

Offences by government Departments: In case of an offence committed by any

Department of the Government, the Head of the Department shall be deemed to be
guilty of the offence was committed without his knowledge or that he exercised all due
diligence to prevent the commission of such offence.
Where it is proved that the offence committed by a Government Department has been
committed with the consent or connivance of, or is attributable to any neglect on the
part of any officer other than the Head of the Department, such officer shall also be
deemed to be guilty of the offence and shall also be liable to be proceeded against and
punished accordingly.
Penalties: Section 15 makes contravention of any the provisions of the Act or any rules
made, or orders, Directors issued there under, punishable with imprisonment up to 5
years or with fine up to Rs. 1 lakh or with both. An additional fine of Rs. 5,000/- would
also be liable for every day of continuing default. Sec. 15(2) further provides that where
such contravention continues beyond a period of one year from the date of conviction,
the offender be punishable imprisonment up to 7 years.

PUBLIC LIABILITY INSURANCE ACT, 1991

Public Liability Insurance Act, 1991 has been passed in the background of Bhopal gas
tragedy in the factory of union Carbide in the year 1984 and Caustic Chloride plant in
Delhi. Growth harbors industry and processes accompany risk of accident not only to
workers but also to innocent member of the public. Thus, mandatory public liability
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insurance was felt necessary to provide for liability of hazards to the Victim of such
accidents.
Thus, the purpose of the Public Liability Insurance Act, 1991 is to be providing
immediate relief to the person affected by accidents occurring while handling any
hazardous substance and for other incidental and connected matters. Further, it will
help not only the workmen but also the member of the public vicinity.

IMPORTANT DEFINITIONS [SECTION 2]

Accident [Section 2(a)] : The term ‗ accident ‗ means an accident involving a fortuitous
or sudden or unintentional occurrence while handing any hazardous substance
resulting in continuous, intermittent or repeated exposure to death of, injury to, any
person or damage to any property but does not an accident by reason only of war or
radio activity.

Hazardous Substance [Section 2 (b)] : Hazardous substance means any substance or

preparation which, by reason of its chemical or physicochemical properties or handling,
is likely to cause harm to human beings, other living creature, plants microorganism,
property, or the environment and exceeding such qualities as may be Specified , by
notification.

Handling [Section 2(c) : Handling in relation to hazardous substance ,means the

manufacture, processing, treatment, package, storage, by vehicle, use, collection,
destruction, conversion, offering for sale, transfer, or the like of such hazardous
substance.

Owner [Section 2 (g)]: Owner means a person who owns or has control over handing
any hazardous substance at the time of accident and includes partners of a firm,
members of an association and in the case of a company, its directors, managers,
secretaries, or other officers who is directly in charge of and is responsible to, the
company for the conduct of its business.

GREEN ENVIRONMENTAL TRIBUNAL ACT, 2010

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An Act to provide for the establishment of a National Green Tribunal for the effective
and expeditious disposal of cases relating to environmental protection and conservation
of forests and other natural resources including enforcement of any legal right relating
to environment and giving relief and compensation for damages to persons and
property and for matters connected therewith or incidental thereto.

The National Green Tribunal (NGT) was officially passed by the legislature on 18
October 2010 with its Chairperson Justice Lokeshwar Singh Patna taking charge of his
office here. Currently it is chaired by Justice Swatanter Kumar since 20 Dec 2012.
The Tribunal's dedicated jurisdiction in environmental matters shall provide speedy
environmental justice and help reduce the burden of litigation in the higher courts. The
Tribunal shall not be bound by the procedure laid down under the Code of Civil
Procedure, 1908, but shall be guided by principles of natural justice. The Tribunal is
mandated to make and Endeavour for disposal of applications or appeals finally within
6 months of filing of the same. Initially, the NGT is proposed to be set up at five places
of sittings and will follow circuit procedure for making itself more accessible. New
Delhi is the Principal Place of Sitting of the Tribunal and Bhopal, Pune, Kolkata and
Chennai shall be the other 4 place of sitting of the Tribunal

NATIONAL ENVIRONMENT TRIBUNNAL ACT, 1995

National Environment Tribunal Act, 1995 was enacted to establish a Tribunal to be
known as National Environmental Tribunal. The purpose of the setting of the Tribunal
is to decide the cases regarding compensation in case of accidents due to hazardous
substance. The Tribunal can also grant compensation as provided under Public Liability
Insurance Act, 1991.

Important Definitions [Section 2]

Accident[Section 2(a)]: The term ‗accident‘ means an accident involving a fortuitous or
sudden unintentional occurrence while handling any hazardous substance resulting in
continuous, intermittent or repeated exposure to death of, injury to, any person or
damage to any property or environmental but does not includes an accident by reason
only war or radio activity.

Environmental [Section 3(d)]: Environmental includes water, air and land and their
inter relationship which exists among and between water, air and land and human
beings.

Handling [Section 2 (e)]: Handling in relation to any hazardous substance means, the
manufacture, processing, treatment, package and storage, transportation by vehicle,
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use, collection, destruction, conversion, offering for sale, transfer, or there like of such
hazardous substance.

Hazardous Substance [Section 2(f)]: Hazardous substance means any substance or

preparation which, by reason of its chemical or physicochemical properties or handling,
is likely to cause harm to human beings, other living creature, plants microorganism,
property, or the environment and exceeding such qualities as may be Specified by the
Central Government under the Public Liability Insurance Act,1991.

Compensation for Death, injury to a person and Damage to Property and

Environmental
Where death of any person or damage to any property or environment has resulted
from an accident, any of the following persons can make an application to the National
Environment Tribunal for compensation:
I) The person who has sustained the injury:
ii) All or any of the legal representatives of the deceased person, in case of death;
iii) The owner of the property to which the damage has been caused;
iv) An agent duly authorized by any of the aforesaid persons;
v) An organization functioning in the field of environment and recognized in this
behalf by the Central Government;
vi) The Central Government or a State Government or any local authority.
The owner shall be liable to pay compensation for such death, injury or damage under
all or any of the heads specified in the Schedule to this Act. The Schedule to the Act
lists out the following heads under which compensation for damages may be claimed:
a) Death;
b) Permanent, temporary, total or partial disability or other injury or sickness;
c) Loss of wages due to total or partial disability or permanent or temporary disability:
d) Medical expenses incurred for treatment of injuries or sickness;
e) Damage to private property;
a) Expenses incurred by the Government or any local authority in providing relief,
aid and rehabilitation to the affected persons;
b) Expenses incurred by the Government for any administrative or legal action or
to cope with any harm or damage, including compensation for environmental
degradation and restoration of the quality of environment;
c) Loss to Government or local authority arising out of, or connected with, the
activity causing any damage;
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d) Claim on account of any harm, damage or destruction to the fauna including
mulch and draught animals and aquatic fauna;
e) Claims on account of any harm, damage or destruction to the flora including
aquatic flora, crops, vegetables, trees and orchards;
f) Claim including cost of restoration on account of any harm or damage to
environment including pollution of soil, air, water, land and eco- system;
g) Loss of destruction of any property other than private property;
h) Any other claim arising out of or connected with, any activity or handling of
hazardous substance;
i) Loss of business or employment or both.
j) Here, the owner shall be liable on ―no-fault basis‖ i.e., liability to pay arises
without considering whether there was any fault of the owner.
k) It may be noted that where a person liable to pay compensation under this Act
is also liable to pay any compensation under Public Liability Insurance Act, 1991
or under any law, then the amount of compensation payable under this Act
shall be reduced by the amount of compensation under the aforesaid laws.

Sustainable Development
The concept of sustainable development has been accepted in Rio-Declaration in Earth
Summit, 1992. It is a policy or strategy, which approaches and guarantees that economic
growth should not proceed in a way that it reduces the ability of future generations to
live well. Thus the concept of sustainable development requires us to integrate
conservation and development, conservation to keep our actions within the earth‘s
capacity and development to enable people everywhere to enjoy long, healthy and
fulfilling lives. Hence it is essential for the people who live now to use the resources of
the earth sustainably and prudently so that they do not deny certain benefits to future
generations
In Vellore Citizen’ Welfare Forum v. Union of India, the Supreme Court held the
following:
―The traditional concept that development and ecology are opposed to each other is no
longer acceptable. Sustainable development means development that meets the needs
of the present generations without compromising the ability of the future generations to
meet their own needs. Sustainable development as a balancing concept between ecology
and development has been accepted as a part of the Customary International Law.‖

Discuss things not argue

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REGISTRATION ACT, 1908

IMPORTANT SECTIONS TO BE READ IN THIS CHAPTER

Sections Topics

Sec.17 COMPULSORY REGISTRABLE DOCUMENTS

Sec.18 OPTIONAL REGISTRABLE DOCUMENTS

Sec.23-26 TIME LIMIT FOR REGISTRATION

Sec.28 & 29 PLACE OF REGISTRATION

Sec.32 WHO CAN REGISTER THE DOCUMENT

Sec.23A RE- REGISTRATION

Sec.47/ 48 EFFECT OF REGISTRATION OF DOCUMENT

Sec.49 EFFECT OF NON- REGISTRATION OF DOCUMENT

INTRODUCTION

Following are the purposes or objectives of registration of documents:

1. To give notice to the world that such a document has been registered and to serve as a
source of information regarding the execution of the document and its existence;

2. To prevent fraud and forgery with the purpose of providing good evidence of the
genuiness of the written document; and

3. To secure the interest of person dealing with any immovable property where such
dealing requires registration.

DOCUMENTS FOR WHICH REGISTRATION IS COMPULSORY AND OPTIONAL

[SECTION 17 & 18]

I. Document for which Registration is COMPULSORY [Sec. 17]

Section 17 provides that the following documents require compulsory registration:

1. Instruments of gift of immovable property.

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2. Other non-testamentary instruments which create, declare, assign, limit or extinguish
any right, title or interest of the value of Rs. 100/- and above in immovable property.

3. Non-testamentary instruments which acknowledge the receipt or payment of any

consideration on account of creation, declaration, assignment, limitation or extinction,
of any right, title or interest of the value of Rs. 100/- and above in immovable property.

4. Non-testamentary instruments transferring or assigning any decree of a court or any

award of an arbitrator when such decree or award declares, assigns, limits or
extinguishes, of any right title or interest of the value or Rs. 100/- and above in
immovable property.

5. Lease Deeds of following leases of immovable property:

a. Lease from year to year basis;
b. Lease for the term exceeding 1 year; and
c. Lease which reserves a yearly rent.

6. A document, other than a will, through which one person authorizes another person to
adopt his son.

Documents for which Registration is OPTIONAL [Section 18]

Section 18 provides that in respect of the following documents, registration is optional:

1. Wills

2. Other non-testamentary instruments which create, declare, assign, limit or extinguish

any right, title or interest of the value less than Rs. 100 /- in immovable property.

3. Non-testamentary instrument which acknowledge the receipt or payment of any

consideration on account of creation, declaration, assignment, limitation or extinction,
of any right, title or interest of the values less than Rs. 100/- in immovable property.

4. Non-testamentary instrument transferring or assigning any decree of a court or any

award of an arbitrator when such decree or award creates, declares, assigns, limits or
extinguishes, of any right, title or interest of the value less than Rs. 100/-in immovable
property.

5. Lease of immovable property for any term not exceeding one year and other leases not
covered under section 17.
6. Instruments which create, declare, assign, limit or extinguish any right, title or interest
in movable property.

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TIME LIMIT FOR REGISTRATION

Documents executed in India [Section 23, 24 & 25]

The document must be presented before the Registrar for registration within 4 months
of its execution.

Where there are several persons executing a document at different times, such
document may be presented for registration and re-registration within 4 months from
the date of each execution.

Document executed outside India [Section 26]

Where the Registrar is satisfied that the document was executed outside India and it has
been presented for registration within four months after its arrival in India, he may
accept such documents for registration on payment of proper registration fees.

A document execute outside India and which requires compulsory registration, is not
valid unless it is registered in India [Nain Sukhdas v. Gowardhandas]

Time limit for presentation of Will [Section 27]

A will may be presented at any time for the purpose of registration.

PLACE OF REGISTRATION OF DOCUMENTS

1. Documents pertaining to Immovable Property [Section 28]

Document relating to immovable property shall be presented for registration in the
office of Sub-Registrar within whose sub-district the whole or some portion of the
relevant property is situated.

2. Documents pertaining to Other Property [Section 29]

Document pertaining to any property, other than immovable property, may be
presented for registration in the office of Sub-Registrar in whose sub-district the
document was executed or in the office of any other Sub-Registrar under State Govt, at
which all persons execution and claiming under the document desired the same to be
registered.

Live your Dreams

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WHO CAN PRESENT THE DOCUMENTS TO REGISTRAR [SECTION 32]

Every document to be registered under the Registration Act shall be presented before
the Registrar by any of the following persons:

1. Some persons executing or claiming under the document;

2. The representation or assign of such person;
3. The agent of the aforesaid persons, duly authorized by special power of attorney.

If it is presented for registration by a person other than a party not mentioned in Section
32, such presentation is wholly inoperative and the registration of such a document is
void. [Kishore Chandra Singh v. Ganesh Prashad Singh]

RE-REGISTRATION OF CERTAIN DOCUMENTS [SECTION 23A]

Sometimes, a document requiring registration may be accepted for registration by
Registrar from a person not duly empowered to present the same and may be
registered. In such a case, any person claiming under such document may present such
document, for registration in the office of the Registrar of the district in which the
document was originally registered. He can, however, do so within four months for his
first becoming aware that registration of such document is invalid.

Effect of Registration of Documents [Section 47 & 48]

A registered document operates form the time from which it was intended to operate
and not from the date of registration. [Sec. 47]

As between two registered documents, the date of execution determines the priority. Of
the two registered documents, executed by same persons in respect of the same
property or two different persons at two different times, the one which is executed first
gets priority over the other, although the former deed is registered subsequently to the
later one. [K. J. Nathan v. S. V. Maruthi Rai].

Effect of Non-Registration of Documents [Section 49]

A document which is compulsorily registrable but is not registered, fails to take effect
and is void as regards immovable property. It cannot take effect any immovable
property comprised therein. Further it cannot confer any power to adopt.
An unregistered document cannot be received as evidence or any transaction affecting
such property or conferring such power. However such a document may be received as
evidence of:
1. A contract in a suit for specific performance; or
2. Part performance of a contract as per section 53A of Transfer of Property Act.

Believe in GOD
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THE SOCIETIES REGISTRATION ACT, 1860

INTRODUCTION
There are many ventures in the world which a person or group of persons would like to
undertake but which usually according to their families or friends are not worth
pursuing. Sometimes these ventures benefit the society too but due to lack of funds,
external pressures etc. the groups break up and the dream of doing something is lost in
the mist. It is with this view to promote such social welfare activities the Societies
Registration Act was brought into effect in 1860 so that people could form a society,
have a well defined purpose, have enough resources, funds etc. and are also immune
from external pressures, tensions etc. so that their purposes are fulfilled.

Registration and fees (Section 3)

Upon such memorandum and certified copy being filed, the Registrar shall
certify under his hand that the society is registered under this Act. There shall be paid
to the Registrar for every such registration a fee of fifty rupees, or such smaller fees as
the state Government may, from time to time, direct; and all fees so paid shall be
accounted for to the state Government.

Property of society how vested - (Section 5)

The property, movable and immovable, belonging to a society registered under this Act,
if no vested in trustees, shall be deemed to be vested, for the time being, in the
governing body of such society, and in all proceedings, civil and criminal, may be
described as the property of the governing body of such society for their proper title.

Suits by and against societies.- (Section 6)

Every society registered under this Act may sue or be sued in the name of President,
Chairman, or Principal Secretary, or trustees, as shall be determined by the rules and
regulations of the society and, in default of such determination, in the name of such
person as shall be appointed by the governing body for the occasion:

Member - (Section 15)

For the purposes of this Act a member of a society shall be a person who, having been
admitted therein according to the rules and regulations thereof, shall have paid a
subscription, or shall have signed the roll or list of members thereof, and shall not have
resigned in accordance with such rules and regulations;
Disqualified members - but in all proceedings under this Act no person shall be
entitled to vote or be counted as a member whose subscription at the time shall have
been in arrears for a period exceeding three months.
Provided that it shall be competent for any person having a claim, or demand against
the society, to sue the President, Chairman, or Principal Secretary or the trustees
thereof, if on application to the governing body some other officer or person be not
nominated to be the defendant.
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Members liable to be sued as strangers. (Section 10)

Any member who may be in arrear of a subscription which according to the rules of the
society he is bound to pay, or who shall possess himself of or detain any property of the
society in a manner or for a time contrary to such rules, or shall injure or destroy any
property of the society, may be sued for such arrear or for the damage accruing from
such detention, injury, or destruction of the property in the manner hereinbefore
provided.
Recovery by successful defendant of costs adjudged. But if the defendant shall be
successful in any suit or other proceedings brought against him at the instance of the
society, and shall be adjudged to recover his costs, he may elect to proceed to recover
the same from the officer in whose name the suit shall be brought, or from the society,
and in the latter case shall have process against the property of the said society in the
manner above described.

Members guilty of offences punishable as strangers. (Section 11)

Any member of the society who shall steal, purloin, or embezzle any money or other
property, or willfully and maliciously destroy or injure any property of such society, or
shall forge and deed, bond, security for money, receipt, or other instrument, whereby
the funds of the society may be exposed to loss, shall be subject to the same prosecution,
and, if convicted, shall be liable to be punished in like manner, as any person not a
member would be subject and liable to in respect of the like offence.

Societies enabled to alter, extend or abridge their purposes- (Section 12)

Whenever it shall appear to the governing body of any society registered under this
Act, which has been established for any particular purpose or purposes, that it is
advisable to alter, extend, or abridge such purpose to or for other purposes within in
the meaning of this Act, or to amalgamate such society either wholly or partially with
any other society, such governing body may submit the proposition to the members of
the society in a written or printed report, any may convene a special meeting for the
consideration thereof according to the regulations of the society; but no such
proposition shall be carried into effect unless such report shall have been delivered or
sent by post to every member of the society ten days previous to the special meeting
converted by the governing body for the consideration thereof, no unless such
proposition shall have been agreed to by the votes of three-fifths of the members
delivered in person or by proxy, and confirmed by the votes of three-fifths of the
members present at a second special meeting convened by the governing body at an
interval of one month after the former meeting.

Provision for dissolution of societies and adjustment of their affairs. - (Section 13)
Any number not less than three-fifths of the members of any society may determine that
it shall be dissolved, and thereupon it shall be dissolved forthwith, or at the time then
agreed upon, and all necessary steps shall be taken for the disposal and settlement of
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the property of the society, its claims and liabilities, according to the rules of the said
society applicable thereto, if any, and if not, then as the governing body shall find
expedient provided that, in the event of any dispute arising among the said governing
body or the members of the society, the adjustment of its affairs shall be referred to the
principal Court of original civil jurisdiction of the district in which the chief building of
the society is situated; and the Court shall make such order in the matter as it shall
deem requisite.
Assent required.- Provided that no society shall be dissolved unless three-fifths of the
members shall have expressed a wish for dissolution by their votes delivered in person
by their votes delivered in person, or by proxy, at a general meeting convened for the
purpose:
Government consent. - Provided that whenever any government is a member of, or a
contributor to, or otherwise interested in any society registered under this Act, such
society shall not be dissolved without the consent of the Government of the State or
registration.

Upon a dissolution no member to receive profit.- (Section 14)

If upon the dissolution of any society registered under this Act there shall remain, after
the satisfaction of all its debts and liabilities, any property whatsoever, the same shall
not be paid to or distributed among the members of the said society or any of them, but
shall be given to some other society, to be determined by the votes of not less than
three-fifths of the members present personally or by proxy at the time of the
dissolution, or, in default thereof, by such court as aforesaid:
Clause not to apply to Joint-stock companies.- Provided, however, that this clause shall
not apply to any society which has been founded or established by the contributions of
share-holders in the nature of a Joint-stock Company.

To what societies Act applies - (Section 20)

The following societies may be registered under this Act:-
Charitable societies, the military orphans funds or societies established at the several
presidencies of India, societies established for the promotion of science, literature, or the
fine arts for instruction, the diffusion of useful knowledge, the diffusion of political
education the foundation or maintenance of libraries or reading-rooms for general use
among the members or open to the public or public museums and galleries or paintings
and other works of art, collections of natural history, mechanical and philosophical
inventions, instruments, or designs.

Success & opportunity never see your age

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THE INDIAN TRUSTS ACT, 1882

This Act may be called the Indian Trusts Act, 1882, and it shall come into force on the
first day of March, 1882.
Local extent, savings. -It extends to the whole of India 1[except the State of Jammu and
Kashmir and the Andaman and Nicobar Islands]

A ―trust‖ is an obligation annexed to the ownership of property, and arising out of a

confidence reposed in and accepted by the owner, or declared and accepted by him, for
the benefit of another, or of another and the owner;
The person who reposes or declares the confidence is called the ―author of the trust‖;
the person who accepts the confidence is called the ―trustee‖; the person for whose
benefit the confidence is accepted is called the ―beneficiary‖; the subject-matter of the
trust is called ―trust-property‖ or ―trust-money‖; the ―beneficial interest‖ or ―interest‖
of the beneficiary is his right against the trustee as owner of the trust-property; and the
instrument, if any, by which the trust is declared is called the ―instrument of trust‖;

Lawful purpose (Section 4)

A trust may be created for any lawful purpose. The purpose of trust is lawful unless it is
(a) forbidden by law, or (b) is of such a nature that, if permitted, it would defeat the
provisions of any law, or (c) is fraudulent, or (d) involves or implies injury to the person
or property of another, or (e) the Court regards it as immoral or opposed to public
policy. Every trust of which the purpose is unlawful is void. In addition, where a. trust
is created for two purposes, of which one is lawful and the other unlawful and the two
purposes cannot be separated, the whole trust is void.

Illustrations
(A) A conveys property to B in trust to apply the profits to tile nurture of female
fondling to be trained up as prostitutes. The trust is void.
(b) A bequeaths property to B, in trust to employ it in carrying on a smuggling business,
and out of the profits thereof to support A‘s children. The trust is void:
(c) A, while in insolvent circumstances transfers‘ property to B in trust for A during his
life, and after his death for B. A is declared an insolvent. The trust for A is invalid as
against his creditors.

Who may create trusts (Section 7)

A trust may be created-
(a) By every person competent to contract, and
(b) With the permission of a principal Civil Court of original jurisdiction, by or on
behalf of a minor;
But subject in each case to the law for the time being in force as to the circumstances and
extent in and to which the author of the trust may dispose of the trust-property.
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Who may be trustee (Section 10?)

Every Person capable of holding property may be a trustee; but, where the trust
involves the exercise of discretion, he cannot execute it unless he is competent to
contract.
No one bound to accept trust. -No one is bound to accept a trust.
Acceptance of trust. -A trust is accepted by any words or acts of the trustee indicating
with reasonable certainly such acceptance.
Disclaimer of trust. -Instead of accepting a trust, the intended trustee may, within a
reasonable period, disclaim it and such disclaimer shall prevent the trust-property from
vesting in him.
A disclaimer by one of two or others, and makes him or them sole trustee or trustees
from the date of the creation of the trust.

Illustration
(a) A bequeaths certain property to B and C, his executors, as trustees for D, B and C
prove A‘s will. Ibis is in itself an acceptance of the trust, B and C hold the property in
trust for D.
(b) A transfers certain Property to B in trust to sell it and to pay out of the Proceeds A‘s
debts. B accepts the trust and sells the property. So far as regards B, a trust of the
proceeds is created for A‘s creditors.
(C) A bequeaths a lakh of rupees to B upon certain trusts and appoints him his executor.
B severs the lakh from the general assets and appropriates it to the specific purpose.
This is an acceptance of the trust.

Trustee not to set up title adverse to beneficiary (Section 14)

The trustee must not for himself or another set up or aids any title to the trust-property
adverse to the interest of the beneficiary.

Conversion of perishable property (Section 16)

Where the trust is created for the benefit of several persons in succession and the trust-
property is of a wasting nature or a future or reversionary interest, the trustee is bound
unless all intention to the contrary may be inferred from the instrument of trust, to
convert the property into property of a permanent and immediately profitable
character. –

Illustration
(a) A bequeaths to B all his property in trust for C during his life, and on his death for
D, and oil D‘s death for E. A‘s property consists of three leasehold houses and there is
nothing in A‘s will to show that he intended the houses to be enjoyed in specie. B
should sell the houses, and invest the proceeds in accordance with Section 20.

(b) A bequeaths to B his three leasehold houses in Calcutta and all the furniture therein
in trust for C during his life, and on his death for D, and on D‘s death for E. Here an
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intention that the houses and furniture should be enjoyed in specie appears clearly, and
B should not sell them
Trustee to be impartial (Section 17)
Where there are more beneficiaries than one, the trustee is bound to be impartial, and
trusts not execute the trust for the advantage of one at the expense of another.
Where the trustee has a discretionary power, nothing in this section shall be deemed to
authorize the Court to control the exercise reasonably and in good faith of such
discretion.

Illustration
A, a trustee for B, C and D is empowered to choose between several specified anodes of
investing the trust-property A in good faith chooses one of these modes. The Court will
not interfere, although the result of tile choice may be to vary the relative rights of B. C
and D.

Accounts and information (Section 19)

A trustee is bound (a) to keep clear and accurate accounts of the trust-property, and (b)
at all reasonable times, at the request of the beneficiary, to furnish him with fill and
accurate information as to the amount and state of the trust-property.

Right to reimbursement of expenses (Section 32)

Every trustee may reimburse himself, or pay or discharge out of the trust-property, all
expenses properly incurred in or about the execution of the trust, or the realization,
preservation or benefit of the trust-property, or the protection or support of the
beneficiary.
If he pays such expenses out of his own pocket he has a first charge upon the trust-
property for such expenses and interest thereon; but such charge (unless the expenses
have been incurred with the sanction of a principal Civil Court of original Jurisdiction)
shall be enforced only by prohibiting any disposition of the trust-property without
previous payment of such expenses and interest.
If the trust-property fails, the trustee is entitled to recover from the beneficiary
personally on whose behalf he acted, and at whose request, expressed or implied, he
made the payment, the amount of such expenses.
Right to be recouped for erroneous over-payment. -Where a trustee has by mistake
made an over-payment to the beneficiary, he may reimburse the trust-property out of
the beneficiary‘s interest. If such interest fails, the trustee is entitled to recover from the
beneficiary personally the amount of such over-payment.

Trustee cannot delegate (Section 47)

A trustee cannot delegate his office or any of his duties either to a co-trustee or to a
stranger, unless (a) the instrument of trust so provides, or (b) the delegation is in the
regular course of business, or (c) the delegation is necessary, or (d) the beneficiary,
being competent to contract, consents to the delegation.

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Explanation
The appointment of an attorney or proxy to do an act merely ministerial and involving no
independent discretion is not a delegation within the meaning of this section.
Illustrations
(a) A bequeaths certain property to B and C on certain trusts to be executed by them or
the survivor of them or the assigns of such survivor, B dies, C may bequeath the trust-
property to D and E upon the trusts of A‘s will.
(b) A is a trustee of certain property with power to sell the same A may employ an
auctioneer to effect the sale.

Right to inspect and take copies of instrument of trust accounts, etc (Section 57)
The beneficiary has a right, as against the trustee and all persons claiming under him
with notice of the trust, to inspect and take copies of the instrument of trust, the
documents of title relating solely to the trust-property, the accounts of the trust-
property and the vouchers (if any) by which they are supported, and the cases
submitted and opinions taken by the trustee for his guidance in the discharge of his
duty.

Right to transfer beneficial interest (Section 58)

The beneficiary, if competent to contract, may transfer his interest, but subject to the law
for the time being in force as to the circumstances and extent in an to which he may
dispose of such interest;
Provided that when property is transferred or bequeathed for the benefit of a married
woman, so that she shall not have power to deprive herself of her beneficial interest,
nothing in this section shall authorize her to transfer such interest during her marriage.

Discharge of trustee (Section 71)

The trustee may be discharged from his office only as follows:
(a) By the extinction of the trust;
(b) By the completion of his duties under the trust;
(c) By such means as may be prescribed by the instrument of trust;
(d) By appointment under this Act of a new trustee in his place;
(e) By consent of himself and the beneficiary, or, where there are more beneficiaries
than one, all the beneficiaries being competent to contract; or
(f) By the Court to which a petition for his discharge is presented under this Act.

Trust how extinguished (Section 77)

A trust is extinguished-
(a) When its purpose is completely fulfilled; or
(b) When its purpose becomes unlawful; or
(c) When the fulfillment of its purpose becomes impossible by destruction of the trust-
property or otherwise; or
(d) When the trust, being revocable, is expressly revoked.

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Revocation of trust (Section 78)
A trust created by will any be revoked at the pleasure of the testator.
A trust otherwise created can be revoked only -
(a) Where all the beneficiaries are competent to contract by their consents
(b) Where the trust has been declared by non-testamentary instrument or by word of
mouth- in exercise of a power of revocation expressly reserved to the author of the trust;
or
(c) Where the trust is for the payment of the debts of the author of the trust, and has not
been communicated to the creditors at the pleasure of the author of the trust.

Illustration
A conveys property to B in trust to sell the same and pay out of the proceeds the claims
of A‘s creditors. A reserves no power of revocation. If no communication has been
made to the creditors, A may revoke the trust. But if the creditors are parties to the
arrangement, the trust cannot be revoked without their consent.

DOCTRINE OF CYPRESS
The cy-près doctrine (pron.: /ˌsiːˈpreɪ/ SEE-PRAY) is a legal doctrine that first arose
in courts of equity. The term can be translated (from old Norman French to English) as
"as near as possible" or "as near as may be." The doctrine originated in the law of
charitable trusts, but has been applied in the context of class action settlements in the
United States.
When the original objective of the settler or the testator became impossible,
impracticable, or illegal to perform, the cy-près doctrine allows the court to amend the
terms of the charitable trust as closely as possible to the original intention of
the testator or settlor to prevent the trust from failing.

For example, in Jackson v. Phillips,[3] the testator bequeathed to trustees money to be used
to "create a public sentiment that will put an end to negro slavery in this
country."[4] After slavery was abolished by the Thirteenth Amendment to the United
States Constitution, the funds were applied cy-près to the "use of necessitous persons of
African descent in the city of Boston and its vicinity

Beat your fears

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COMPETITION ACT, 2002

INTRODUCTION/ REASONS FOR REPEAL OF MRTP ACT, 1969

MRTP Act, 1969 has become obsolete in certain areas in the light of international
economic developments relating to competition laws. So the need was felt to shift the
focus from curbing monopolies to promoting competition. Hence, the Competition Act,
2002 was enacted, which aims at doing away from the rigidly structured MRTP Act,
1969.
The Competition Act, 2002 is flexible, behavior oriented and also explicitly indicates the
parameters which shall be kept in view while deciding the adverse effect on
competition, abuse of dominance and prejudicial combinations. The main purpose of
the Act is to ensure free and fair competition in the market.

SALIENT / IMPORTANT FEATURES OF THE ACT

1) The Competition Act, 2002 has been enacted to prevent practices having an
appreciable adverse effect on competition, to promote and sustain competition in
the market and to protect the interest of consumers and to ensure freedom of
trade.
2) With the enforcement of the Competition Act, 2002 the MRTP Act, 1969 shall
stand repealed and the MRTP Commission shall be dissolved.
3) The Competition Act, 2002 seeks to achieve its objectives by prohibiting anti-
competitive trade agreements, preventing abuse of dominance, regulating
combinations, and formulating a policy on competition, creating awareness by
imparting training on competition issues.
4) The Competition Act, 2002 provides for the establishment of Competition
Commission of India and prescribes its duties, functions and powers.

DEFINITIONS [SECTION 2]

Agreement
Agreement includes any agreement or understanding or action in concert –
a) Whether or not, such agreement, understanding or action is formal or in
writing; or
b) Whether or not, such agreement, understanding or action is intended to be
enforceable by legal proceedings.

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Cartel
Cartel includes an association of producers, sellers or distributors, traders or service
providers who by agreement amongst themselves, limit, control, or attempt to control
the production, distribution, sale or price of goods or services or, trade in goods or
provision of services.
The Competition Act, 2002 prohibits formation of certain cartels.

Consumer
Consumer means any person who –
(i) 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 and
includes any person who uses those goods with the approval of the person
buying those goods, whether such purchase of goods is for resale or for any
commercial purpose or for personal use;

(ii) 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 and includes any person who is the beneficiary of those services with
the approval of hirer of those services, whether such hiring or availing of services
is for any commercial purpose or for personal use.

It may be noted that under the Competition Act, 2002 even if a person purchases goods
or avails of services for commercial purpose, he'll be a consumer, whereas for the
purposes of Consumer Protection Act, 1986 a person purchasing goods or availing
services for commercial purposes is not a consumer and cannot seek relief under that
Act.

Enterprise
Enterprise means a person or department of the Government, who or which is , or has
been, engaged in any activity, relating to the production, storage, supply, distribution,
acquisition or control of articles or goods or the provision of services of any kind.

Goods
Goods mean goods as defined in the Sale of Goods Act, 1930 and include the following:
(i) Products manufactured, processed or mined;
(ii) Debentures, shares and stocks after allotment;
(iii) In relation to "goods supplied", goods imported in India
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Services
Service means service of any description which is made available to potential users and
includes the provision of services in connection with business of any industrial or
commercial matters such as banking, communication, education, financing, insurance,
chit funds, real estate, transport, storage, medical treatment, processing, supply of
electrical or other energy, boarding, lodging, entertainment, amusement, constructions,
repair, conveying of news or information and advertising.
It may be noted that under the Competition Act, 2002 the services of industrial or
commercial nature also fall within the scope of the Act, whereas under the Consumer
Protection Act, 1986 the services of commercial nature or for business or industrial
purposes are excluded for interpreting deficiency in the supply of any service.

RELEVANT MARKET
The terms Relevant Market, Relevant Geographic Market, and Relevant Product Market
have relevance in determination of the agreements being anti-competitive within the
meaning of Section 3 of the Competition Act, 2002.
Relevant Market means the market, which may be determined by the Competition
Commission of India with reference to both the markets [Section 2(r)].

Relevant Geographic Market means a market comprising the area in which the
conditions of competition for supply of goods or provision of services or demand of
goods or services are distinctly homogeneous, can be distinguished from conditions
prevailing in neighboring areas [Section 2(s)].

Relevant Product Market means a market comprising of all those products or services,
which are regarded as interchangeable or substitutable by the consumer, by reasons of
characteristics of products or services, their prices and intended use [Section 2(t)].

IMPORTANT PROVISIONS
Anti-competitive Agreements
Section 3(1) of the Competition Act, 2002 provides that no enterprise or association of
persons shall enter into any agreement in respect of production, supply, distribution,
storage, acquisition or control of goods or provision of services, which causes or is
likely to cause an appreciable adverse effect on competition. Section 3(2) further
provides that any anti competitive agreement within the meaning of section 3(1) shall
be void.

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Prohibition on Agreements having Appreciable Adverse Effect on Competition
The following agreements shall be deemed to be prohibited under section 3(1), if such
agreements cause or are likely to cause an appreciable adverse effect on competition:
(a) Tie-in arrangement, i.e. an agreement requiring a purchaser of goods, as a
condition of such purchase, to purchase some other goods.
(b) Exclusive supply agreement, i.e. an agreement restricting in any manner the
purchaser in the course of his trade from acquiring or otherwise dealing in
any goods other than those of the seller or any other person.
(c) Exclusive distribution agreement, i.e., an agreement to limit, restrict or
withhold the output or supply of any goods or allocate any area or market for
the disposal or sale of the goods.
(d) Refusal to deal, i.e., an agreement which restricts, or is likely to restrict, by
any method the persons or classes of persons to whom goods are sold or from
whom goods are bought.
(e) Resale price maintenance, i.e., an agreement to sell goods on condition that
the prices to be charged on the resale by the purchaser shall be the prices
stipulated by the seller unless it is clearly stated that prices lower than those
prices may be charged.

Important Factors while determining whether an agreement has an 'appreciable

adverse effect' on competition
Section 19(3) of the Competition Act, 2002 provides that while determining whether an
agreement has appreciable adverse effect on competition, the Commission shall give
due regard to all or any of the following factors, namely-
a) Creation of barriers to new entrants in the market;
b) Driving existing competitors out of the market;
c) Foreclosure of competition by hindering entry into the market;
d) Accrual of benefits to consumers;
e) Improvements in production or distribution of goods or provision of services;
and
f) Promotion of technical, scientific and economic development by means of
production or distribution of goods or provision of services.

Regulation of Combination
Regulation of Combination is one of the core provisions of the Competition Act, 2002.
section 5 of the Competition Act, 2002 provides that acquisition of one or more
enterprises by one or more persons or merger or amalgamation of enterprises shall be a
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combination of such enterprises and persons or enterprises which are above the certain
prescribed size in terms of (a) assets or (b) turnover as provide under section 5.
Section 6 of the Competition Act, 2002 provides that any person or enterprises entering
into a combination which causes or is likely to cause an appreciable adverse effect on
combination within the relevant market in India and if such a combination is formed, it
shall be void.

COMPETITION COMMISSION OF INDIA

Establishment of CCI [Section 7]
Section 7 empowers the Central Government to establish a Commission to be known as
"Competition Commission of India." The Commission is a body corporate having
perpetual succession and common seal.
The Competition Commission has its head office at New Delhi (established w.e.f. 14-10-
2003). In addition to this, the Commission can establish its offices at other places in
India.

Composition of CCI [Section 8]

The Commission shall consist of a Chairman and other members, which shall not be less
than 2 and more than 10. The Chairman and all the members shall be appointed by the
Central Government.
Following are the qualifications of Chairman and the members:
1) He shall be a person of ability, integrity and standing; and
2) He has been or is qualified to be a Judge of a High Court or he has special
knowledge and professional experience of not less than 15 years in international
trade, economics, business, commerce, law, finance, accountancy, management, etc.

Term of Office [Section 10]

The term of office of Chairman shall be 5 years or up to the age of 67 years, whichever is
earlier and that of other members shall be 5 years or up to the age of 65 years,
whichever is earlier. However, they shall be eligible for reappointment.

Removal of Chairperson and other Members [Section 11]

The Chairperson or a Member of CCI may be removed from the office by the Central
Government in the following cases:
a) Where he is adjusted as an insolvent;
b) Where he has been engaged in any paid employment;
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c) Where he has been convicted of an offence which involved moral turpitude;
d) Where he has acquired such financial or other interest as is likely to affect
prejudicially his functions;
e) Where he has abused his position; and
f) Where he has become physically or mentally incapable.

Powers of CCI
Following are the important powers of CCI:
1) To inquire into anti-competitive agreements and abuse of dominant position;
2) To determine whether an agreement has an appreciable adverse effect on
competition;
3) Enquire whether a combination has cause or likely to cause an appreciable
adverse effect on competition;
4) To issue "cease and desist" orders;
5) To grant such interim relief as would be necessary in a particular case;
6) To award compensation;
7) To impose fines;
8) To order division of dominant undertakings;
9) To order demerger;
10) To order cost for frivolous complaints.

Powers of CCI to regulate its own procedure [Section 36]

The CCI has been empowered to lay down its own procedure and regulation and shall
not be bound by the procedure laid down by the Code of Civil Procedure, 1908.
however, it shall observe the principles of natural justice and shall be subject to the
rules made by the Central Government for the procedure to be followed in inquiries.
The CCI shall have the same powers as are vested in the civil court under the Code of
Civil Procedure, 1908, while trying a suit, in respect of the following matters, namely:
i) Summoning and enforcing the attendance of any person and examining them on
oath;
ii) Requiring the discovery and production of documents;
iii) Receiving the evidence on affidavits;
iv) Issuing the commissions for the examination of witnesses or documents;
v) Requisitioning any public record/document from any office;
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vi) Dismissing an application in default or deciding it;
vii) Any other such matter as may be prescribed.
Section 36 of the Competition Act, 2002 empowers the Commission to call upon the
experts from the fields of economics, commerce, accountancy, international trade or
from any other discipline to assist the Commission in the conduct of any inquiry before
it.

DIRECTOR GENERAL
Section 16 empowers the Central Government to appoint a Director General and such
number of additional, joint, deputy or assistant Director Generals or other advisers,
consultants or officers. These persons shall be appointed from amongst the persons of
integrity and outstanding ability and who have experience in investigation and
knowledge of accountancy, management, business, public administration, international
trade, economics, law etc.

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LEGAL METROLOGY ACT, 2009

1. This Act may be called the Legal Metrology Act, 2009.

2. It extends to the whole of India.

Definitions [Section 2]
"Legal Metrology" means that part of metrology which treats units of weighment and
measurement, methods of weighment and measurement and weighing and measuring
instruments, in relation to the mandatory technical and legal requirements which have
the object of ensuring public guarantee from the point of view of security and accuracy
of the weighments and measurements;

"pre-packaged commodity" means a commodity which without the purchaser being

present is placed in a package of whatever nature, whether sealed or not, so that the
product contained therein has a pre-determined quantity;

Units of weights and measures to be based on metric system. [section 4]

Every unit of weight or measure shall be in accordance with the metric system based on
the international system of units

Base unit of weights and measures. [Section 5]

1. The base unit of –
I. length shall be the metre;
ii. Mass shall be the kilogram;
iii. Time shall be the second;
iv. Electric current shall be the ampere;
V. thermodynamic temperature shall be the Kelvin;
vi. Luminous intensity shall be the candela; and
vii. Amount of substance shall be the mole.
2. The specifications of the base units mentioned in sub-section (1), derived units
and other units shall be such as may be prescribed.

Base unit of numeration [section 6]

1. The base unit of numeration shall be the unit of the international form of Indian
numerals.
2. Every numeration shall be made in accordance with the decimal system.
3. The decimal multiples and sub-multiples of the numerals shall be of such
denominations and be written in such manner as may be prescribed
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Any custom, usage, etc., contrary to standard weight, measure or numeration to be

void [section 12]
Any custom, usage, practice or method of whatever nature which permits a person to
demand, receive or cause to be demanded or received, any quantity of article, thing or
service in excess of or less than, the quantity specified by weight, measure or number in
the contract or other agreement in relation to the said article, thing or service, shall be
void

Declarations on pre-packaged commodities [section 18]

1. No person shall manufacture, pack, sell, import, distribute, deliver, offer,
expose or possess for sale any pre-packaged commodity unless such package is
in such standard quantities or number and bears thereon such declarations and
particulars in such manner as may be prescribed.
2. Any advertisement mentioning the retail sale price of a pre-packaged
commodity shall contain a declaration as to the net quantity or number of the
commodity contained in the package in such form and manner as may be
prescribed.

Registration for importer of weight or measure [section 19]

No person shall import any weight or measure unless he is registered with the Director
in such manner and on payment of such fees, as may be prescribed

Non-standard weights and measures not to be imported [section 20]

No weight or measure, whether singly or as a part or component of any machine shall
be imported unless it conforms to the standards of weight or measure established by or
under this Act.

Penalty for use of non- standard weight or measure [section 25]

Whoever uses or keeps for use any weight or measure or makes use of any numeration
otherwise than in accordance with the standards of weight or measure or the standard
of numeration, as the case may be, specified by or under this Act, shall be punished
with fine which may extend to twenty-five thousand rupees and for the second or
subsequent offence, with imprisonment for a term which may extend to six months and
also with fine.

Act not to apply in certain cases [section 55]

The provisions of this Act, in so far as they relate to verification and stamping of
weights and measures, shall not apply to any weight or measure,-
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A. used in any factory exclusively engaged in the manufacture of any arms,
ammunition or both, for the use of the Armed Forces of the Union;
B. used for scientific investigation or for research;
C. manufactured exclusively for export.

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SPECIFIC RELIEF ACT, 1963

1. Short title, extent and commencement

(1) This Act may be called the Specific Relief Act, 1963.

(2) It extends to the whole of India except the State of Jammu and Kashmir.

4. Specific relief to be granted only for enforcing individual civil rights and not
for enforcing penal laws

Specific relief can be granted only for the purpose of enforcing individual civil rights
and not for the mere purpose of enforcing a penal law.

5. Recovery of specific immovable property

A person entitled to the possession of specific immovable property may recover it in the
manner provided by the Code of Civil Procedure, 1908.

6. Suit by persons dispossessed of immovable property

(1) If any person is dispossessed without his consent of immovable property otherwise
than in due course of law, he or any person claiming through him may, by suit, recover
possession thereof, notwithstanding any other title that may be set up in such suit.

(2) No suit under this section shall be brought-

(a) after the expiry of six months from the date of dispossession; or

(b) against the government.

(3) No appeal shall lie from any order or decree passed in any suit instituted under this
section, nor shall any review of any such order or decree be allowed.

(4) Nothing in this section shall bar any person from suing to establish his title to such
property and to recover possession thereof

10. Cases in which specific performance of contract enforceable

Except as otherwise provided in this Chapter, the specific performance of any contract
may, in the discretion of the court, be enforced-

(a) when there exists no standard for ascertaining actual damage caused by the non-
performance of the act agreed to be done; or

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(b) when the act agreed to be done is such that compensation in money for its non-
performance would not afford adequate relief.

Explanation: Unless and until the contrary is proved, the court shall presume-

(i) that the breach of a contract to transfer immovable property cannot be adequately
relieved by compensation in money; and

(ii) that the breach of a contract to transfer movable property can be so relieved except
in the following cases:

(a) where the property is not an ordinary article of commerce, or is of special

value or interest to the plaintiff, or consists of goods which are not easily
obtainable in the market;

(b) where the property is held by the defendant as the agent or trustee of the
plaintiff.

14. Contracts not specifically enforceable

(1) The following contracts cannot be specifically enforced, namely,-

(a) a contract for the non-performance of which compensation is an adequate

relief;

(b) a contract which runs into such minute or numerous details or which is so
dependent on the personal qualifications or volition of the parties, or otherwise
from its nature is such, that the court cannot enforce specific performance of its
material terms;

(c) a contract which is in its nature determinable;

(d) a contract the performance of which involves the performance of a

continuous duty which the court cannot supervise.

(2) Save as provided by the Arbitration Act, 1940, no contract to refer present or future
differences to arbitration shall be specifically enforced; but if any person who has made
such a contract (other than arbitration agreement to which the provisions of the said Act
apply) and has refused to perform it, sues in respect of any subject which he has
contracted to refer, the existence of such contract shall bar the suit.

(3) Notwithstanding anything contained in clause (a) or clause (c) or clause (d) of sub-
section (1), the court may enforce specific performance in the following cases:

(a) where the suit is for the enforcement of a contract,-

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(i) to execute a mortgage or furnish any other security for securing the
repayment of any loan which the borrower is not willing to repay at once:

PROVIDED that where only a part of the loan has been advanced the
vendor is willing to advance the remaining part of the loan in terms of the
contract; or

(ii) to take up and pay for any debentures of a company;

(b) where the suit is for,-

(i) the execution of a formal deed of partnership, the parties having

commenced to carry on the business of the partnership; or

(ii) the purchase of a share of a partner in a firm;

(c) where the suit is for the enforcement of a contract for the construction of any
building or the execution of any other work on land:

PROVIDED that the following conditions are fulfilled, namely,-

(i) the building or other work is described in the contract in terms sufficiently
precise to enable the court to determine the exact nature of the building or work;

(ii) the plaintiff has a substantial interest in the performance of the contract and
the interest is of such a nature that compensation in money for non-performance
of the contract is not an adequate relief; and

(iii) the defendant has, in pursuance of the contract, obtained possession of the
whole or any part of the land on which the building is to be constructed or other
work is to be executed

15. Who may obtain specific performance

Except as otherwise provided by this Chapter, the specific performance of a contract

may be obtained by-

(a) any party thereto;

(b) the representative in interest or the principal, of any party thereto:

PROVIDED that where the learning, skill, solvency or any personal quality of such
party is a material ingredient in the contract, or where the contract provides that his
interest shall not be assigned, his representative in interest or his principal shall not be
entitled to specific performance of the contract, unless such party has already
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performed his part of the contract, or the performance thereof by his representative in
interest, or his principal, has been accepted by the other party;

(c) where the contract is a settlement on marriage, or a compromise of doubtful rights

between members of the same family, any person beneficially entitled thereunder;

(d) where the contract has been entered into by a tenant for life in due exercise of a
power, the remainder man;

(e) a reversioner in possession, where the agreement is a covenant entered into with his
predecessor in title and the reversioner is entitled to the benefit of such covenant;

(f) a reversioner in remainder, where the agreement is such a covenant, and the
reversioner is entitled to the benefit thereof and will sustain material injury by reason of
its breach;

(g) when a company has entered into a contract and subsequently becomes
amalgamated with another company, the new company which arises out of the
amalgamation;

(h) when the promoters of a company have, before its incorporation, entered into a
contract for the purposes of the company, and such contract is warranted by the terms
of the incorporation, the company:

PROVIDED that the company has accepted the contract and has communicated such
acceptance to the other party to the contract

39. Mandatory injunctions

When, to prevent the breach of an obligation, it is necessary to compel the performance

of certain acts which the court is capable of enforcing, the court may in its discretion
grant an injunction to prevent the breach complained of, and also to compel
performance of the requisite acts

41. Injunction when refused

An injunction cannot be granted-

(a) to restrain any person from prosecuting a judicial proceeding pending at the
institution of the suit in which the injunction is sought, unless such restraint is
necessary to prevent a multiplicity of proceedings;

(b) to restrain any person from instituting or prosecuting any proceeding in a court not
subordinate to that from which the injunction is sought;
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(c) to restrain any person from applying to any legislative body;

(d) to restrain any person from instituting or prosecuting any proceeding in a criminal
matter;

(e) to prevent the breach of a contract the performance of which would not be
specifically enforced;

(f) to prevent, on the ground of nuisance, an act of which it is not reasonably clear that it
will be a nuisance;

(g) to prevent a continuing breach in which the plaintiff has acquiesced;

(h) when equally efficacious relief can certainly be obtained by any other usual mode of
proceeding except in case of breach of trust;

(i) when the conduct of the plaintiff or his agents has been such as to disentitle him to
the assistance of the court;

(j) when the plaintiff has no personal interest in the matter.

42. Injunction to perform negative agreement

Notwithstanding anything contained in clause (e) of section 41, where a contract

comprises an affirmative agreement to do a certain act, coupled with a negative
agreement, express or implied, not to do a certain act, the circumstances that the court is
unable to compel specific performance of the affirmative agreement shall not preclude it
from granting an injunction to perform the negative agreement:

PROVIDED that the plaintiff has not failed to perform the contract so far as it is
binding on him.

Be busy but take it easy

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LAW EXAM PRESENTATION FORMAT

In situation of Theory Question for other subjects

e.g.

Q. Write a short note on Industrial License?

Tell him Ans .As per relevant section of the prescribed Act it provided that
the law
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________ .

Tell him So therefore it is concluded that/ Thus, as aforesaid

your ________________________________________________________________________
answer
________________________________________________________________________
___________________________________________________________

( A B C vs. X Y Z)

In situation of Case Law Questions for other subjects

Q. Mr.Robert, an NRI is willing to purchase 1000 shares of Infosys. Advice?

Ans. As per relevant section of the prescribed act it provided that

Tell him ________________________________________________________________________
the law
________________________________________________________________________
________________________________________________________________________
________________________ .

In this case Mr. Robert____/ In aforesaid situation

Tell him
the Mr.A___________________________________________________________________
question ___________________________________________________________ .

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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
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Tell him
your
answer So therefore it is concluded that/ Thus, as aforesaid
________________________________________________________________________
________________________________________________________________________
___________________________________________________________ .

( A B C vs. X Y Z)

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ICSI ECL Question Paper proves that this book cover 100% marks

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AMENDMENTS BULLETIN & EXTRA TOPICS

FOREIGN EXCHANGE MANAGEMENT (CURRENT ACCOUNT

TRANSACTIONS) AMENDMENT RULES, 2015

As per Rule 5 of the Foreign Exchange Management (Current Account Transactions)

Amendment Rules, 2015, every drawal of foreign exchange for transactions included in
Schedule III shall be governed as provided therein:

Provided that this rule shall not apply where the payment is made out of funds held in
Resident Foreign Currency (RFC) Account of the remitter.

TRANSACTIONS INCLUDED IN SCHEDULE III

FACILITIES FOR INDIVIDUALS—

1. Individuals can avail of foreign exchange facility for the following purposes
within the limitof USD 2,50,000 only. Any additional remittance in excess of the
said limit for the followingpurposes shall require prior approval of the Reserve
Bank of India.
(i) Private visits to any country (except Nepal and Bhutan)
(ii) Gift or donation.
(iii) Going abroad for employment
(iv) Emigration
(v) Maintenance of close relatives abroad
(vi) Travel for business, or attending a conference or specialised training or for
meetingexpenses for meeting medical expenses, or check-up abroad, or for
accompanying asattendant to a patient going abroad for medical
treatment/ check-up.
(vii) Expenses in connection with medical treatment abroad
(viii) Studies abroad
(ix) Any other current account transaction

Provided that for the purposes mentioned at item numbers (iv), (vii) and (viii), the
individualmay avail of exchange facility for an amount in excess of the limit prescribed
under theLiberalised Remittance Scheme as provided in regulation 4 to FEMA
Notification 1/2000-RB,dated the 3rd May, 2000 (here in after referred to as the said
Liberalised Remittance Scheme)if it is so required by a country of emigration, medical
institute offering treatment or theuniversity, respectively:

Provided further that if an individual remits any amount under the said Liberalised
Remittance Scheme in a financial year, then the applicable limit for such individual
would bereduced from USD 250,000 (US Dollars Two Hundred and Fifty Thousand
Only) by theamount so remitted:

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Provided also that for a person who is resident but not permanently resident in India
and
(a) is a citizen of a foreign State other than Pakistan; or
(b) is a citizen of India, who is on deputation to the office or branch of a foreign
company orsubsidiary or joint venture in India of such foreign company,may
make remittance up to his net salary (after deduction of taxes, contribution to
providentfund and other deductions).

FACILITIES FOR PERSONS OTHER THAN INDIVIDUAL -

2. The following remittances by persons other than individuals shall require prior
approval ofthe Reserve Bank of India.
(i) Donations exceeding one per cent. of their foreign exchange earnings during
the previousthree financial years or USD 5,000,000, whichever is less, for-
(a) creation of Chairs in reputed educational institutes,
(b) contribution to funds (not being an investment fund) promoted by
educational institutes;and
(c) contribution to a technical institution or body or association in the field
of activity of thedonor Company.
(ii) Commission, per transaction, to agents abroad for sale of residential flats or
commercialplots in India exceeding USD 25,000 or five percent of the inward
remittance whichever ismore.
(iii) Remittances exceeding USD 10,000,000 per project for any consultancy
services inrespect of infrastructure projects and USD 1,000,000 per project, for
other consultancyservices procured from outside India.
(iv) Remittances exceeding five per cent of investment brought into India or USD
100,000whichever is higher, by an entity in India by way of reimbursement of
pre-incorporationexpenses.‖

LIBERALISED REMITTANCE SCHEME (LRS)

Under Liberalised Remittance Scheme allow remittances by a resident individual up to
USD 250,000 per financial year for any permitted current or capital account transaction
or acombination of both. If an individual has already remitted any amount under the
LRS, then theapplicable limit for such an individual would be reduced from the present
limit of USD 250,000 for the financial year by the amount already remitted. The
permissible capitalaccount transactions by an individual under LRS are:
i) opening of foreign currency account abroad with a bank;
ii) purchase of property abroad;
iii) making investments abroad;
iv) setting up Wholly owned subsidiaries and Joint Ventures abroad;
v) extending loans including loans in Indian Rupees to Non-resident Indians (NRIs)
who arerelatives as defined in Companies Act, 2013.The Scheme cannot be made
use for making remittances for any prohibited or illegal activitiessuch as margin
trading, lottery, etc.

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Requirements to be complied with by the remitter under LRS

The resident individual seeking to make the remittances should furnish an application
cumdeclaration in the prescribed format to the Authorised Dealer / full fledged money
changer(FFMC) concerned regarding the purpose of the remittances and declaration to
the effect thatthe funds belong to the remitter and will not be used for the prohibited
purposes referred toin Para 4 above. Resident individuals can also purchase foreign
exchange from a full fledgedmoney changer (FFMC) for private/business visits. Foreign
exchange thus purchased from anFFMC should also be reckoned within the overall LRS
limit USD 250,000 and declaredaccordingly in the application-cum-declaration form
submitted to the Authorise Dealer bank.

Erstwhile Overseas Corporate Body‘ (OCB) means a company, partnership firm,

societyand other corporate body owned directly or indirectly to the extent of at least
sixty percent bynon-resident Indians and includes overseas trust in which not less than
sixty percent beneficial interest is held by non-resident Indians directly or indirectly but
irrevocably andwhich was in existence on the date of commencement of the Foreign
Exchange Management(Withdrawal of General Permission to Overseas Corporate
Bodies (OCBs) ) Regulations, 2003(the Regulations) and immediately prior to such
commencement was eligible to undertaketransactions pursuant to the general
permission granted under the Regulations.

‗Foreign Portfolio Investor‘(FPI) means a person registered in accordance with

theprovisions of Securities and Exchange Board of India (SEBI) (Foreign Portfolio
Investors)Regulations, 2014, as amended from time to time.

‘Indian Venture Capital Undertaking‘ (IVCU) means an Indian company:

(i) whose shares are not listed in a recognised stock exchange in India;
(ii) which is engaged in the business of providing services, production or
manufacture ofarticles or things, but does not include such activities or sectors
which are specified in thenegative list by the SEBI, with approval of Central
Government, by notification in the OfficialGazette in this behalf.

GENERAL CONDITIONS ON FDI

Who Can Invest in India?

A non-resident entity can invest in India, subject to the FDI Policy except in
thosesectors/activities which are prohibited. However, a citizen of Bangladesh or an
entityincorporated in Bangladesh can invest only under the Government route. Further,
a citizen ofPakistan or an entity incorporated in Pakistan can invest, only under the
Government route, insectors/activities other than defence, space and atomic energy and
sectors/activitiesprohibited for foreign investment.
NRIs resident in Nepal and Bhutan as well as citizens of Nepal and Bhutan are
permitted toinvest in the capital of Indian companies on repatriation basis, subject to
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the condition thatthe amount of consideration for such investment shall be paid only by
way of inwardremittance in free foreign exchange through normal banking channels.

Entities Into Which FDI Can Be Made

1. FDI in an Indian Company
Indian companies can issue capital against FDI.

2. FDI in Partnership Firm/Proprietary Concern

3. FDI in Venture Capital Fund (VCF)

FVCIs are allowed to invest in Indian Venture Capital Undertakings
(IVCUs)/Venture Capital Funds (VCFs)/other companies

4. FDI in Trusts
FDI in Trusts other than VCF is not permitted.

5. FDI in Limited Liability Partnerships (LLPs)

FDI in LLPs is permitted, subject to the following conditions:
(a) FDI will be allowed, through the Government approval route, only in LLPs
operating insectors/activities where 100% FDI is allowed, through the
automatic route and there are noFDI-linked performance conditions (such as
'Non-Banking Finance Companies' or'Development of Townships, Housing,
Built-up infrastructure and Construction-developmentprojects' etc.).
(b) LLPs with FDI will not be allowed to operate in agricultural/plantation
activity, printmedia or real estate business.

TWO-WAY FUNGIBILITY SCHEME

A limited two-way Fungibility scheme has been put in place by the Government of
India forADRs/GDRs. Under this Scheme, a stock broker in India, registered with SEBI,
can purchaseshares of an Indian company from the market for conversion into
ADRs/GDRs based oninstructions received from overseas investors. Re-issuance of
ADRs/GDRs would be permittedto the extent of ADRs/GDRs which have been
redeemed into underlying shares and sold in theIndian market.

PRIOR PERMISSION OF RBI IN CERTAIN CASES FOR TRANSFER OF CAPITAL

INSTRUMENTS
The following cases require prior approval of RBI:
(i) Transfer of capital instruments from resident to non-residents by way of sale
where:
(a) Transfer is at a price which falls outside the pricing guidelines specified by
theReserve Bank from time to time and the transaction does not fall under
the exceptionwhere approval of RBI is not required.
(b) Transfer of capital instruments by the non-resident acquirer involving
deferment ofpayment of the amount of consideration. Further, in case

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approval is granted for atransaction, the same should be reported in Form
FC-TRS, to an AD Category-I bank fornecessary due diligence, within 60
days from the date of receipt of the full and finalamount of consideration.
(ii) Transfer of any capital instrument, by way of gift by a person resident in India to
a personresident outside India. While forwarding applications to Reserve Bank
for approval fortransfer of capital instruments by way of gift, the documents to
be submitted by a personresident in India for transfer of shares to a person
resident outside India by way of gift shouldbe enclosed. Reserve Bank considers
the following factors while processing such applications:
(a) The proposed transferee (donee) is eligible to hold such capital instruments
underSchedules 1, 4 and 5 of Notification No. FEMA 20/2000-RB dated May 3,
2000, asamended from time to time.
(b) The gift does not exceed 5 per cent of the paid-up capital of the
Indiancompany/each series of debentures/each mutual fund scheme.
(c) The applicable sectoral cap limit in the Indian company is not breached.
(d) The transferor (donor) and the proposed transferee (donee) are close relatives
asdefined in Section 2 (77) of Companies Act, 2013, as amended from time to
time.
(e) The value of capital instruments to be transferred together with any
capitalinstruments already transferred by the transferor, as gift, to any person
residingoutside India does not exceed the rupee equivalent of USD 50,000 during
the financialyear.
(f) Such other conditions as stipulated by Reserve Bank in public interest from time
totime.
(i) Transfer of shares from NRI to non-resident.
(ii) In the following cases, approval of RBI is not required:
(iii) A. Transfer of shares from a Non-Resident to Resident under the FDI
scheme where the
(iv) pricing guidelines under FEMA, 1999 are not met provided that:
(v) The original and resultant investment are in line with the extant FDI policy
and FEMA
(vi) Regulations in terms of sectoral caps, conditionalities (such as minimum
capitalization, etc.),
(vii) reporting requirements, documentation, etc.;

B. TRANSFER OF SHARES FROM RESIDENT TO NON-RESIDENT:

(i) where the transfer of shares requires the prior approval of the Government
conveyedthrough FIPB as per the extant FDI policy provided that:
(a) the requisite approval of the FIPB has been obtained; and
(b) the transfer of shares adheres with the pricing guidelines and
documentation requirementsas specified by the Reserve Bank of India
from time to time.

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(ii) where the transfer of shares attract SEBI (SAST) Regulations subject to the
adherencewith the pricing guidelines and documentation requirements as
specified by Reserve Bank ofIndia from time to time.
(iii) where the transfer of shares does not meet the pricing guidelines under the
FEMA, 1999
(iv) where the investee company is in the financial sector provided that:
(a) Any ‗fit and proper/due diligence‘ requirements as regards the non-
resident investor asstipulated by the respective financial sector regulator,
from time to time, have been compliedwith; and
(b) The FDI policy and FEMA regulations in terms of sectoral caps,
conditionalities (such asminimum capitalization, pricing, etc.), reporting
requirements, documentation etc., arecomplied with.

SHARE SWAP
In cases of investment by way of swap of shares, irrespective of the amount, valuation
of the shares will have to be made by a Merchant Banker registered with SEBI or an
Investment Banker outside India registered with the appropriate regulatory authority in
the host country. Approval of the Government conveyed through Foreign Investment
Promotion Board (FIPB) will also be a prerequisite for investment by swap of shares.

ENTRY ROUTES FOR INVESTMENT

Investments can be made by non-residents in the equity shares/fully, compulsorily and
mandatorily convertible debentures/fully, compulsorily and mandatorily convertible
preference shares of an Indian company, through the Automatic Route or the
Government
Route. Under the Automatic Route, the non-resident investor or the Indian company
does not require any approval from Government of India for the investment. Under the
Government Route, prior approval of the Government of India is required. Proposals
for foreign investment under Government route, are considered by FIPB.

FDI-PROHIBITED SECTORS
FDI is prohibited in:
 Lottery Business including Government/private lottery, online lotteries, etc.
 Gambling and Betting including casinos etc.
 Chit funds
 Nidhi company
 Trading in Transferable Development Rights (TDRs)
 Real Estate Business or Construction of Farm Houses
 Manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of
tobaccosubstitutes
 Activities/sectors not open to private sector investment

FDI- PERMITTED SECTORS

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 Floriculture, Horticulture, Apiculture and Cultivation of Vegetables &
Mushroomsunder controlled conditions;
 Development and Production of seeds and planting material;
 Animal Husbandry (including breeding of dogs), Pisciculture, Aquaculture,
undercontrolled conditions; and
 Services related to agro and allied sectors
 Tea sector including tea plantations
 Mining and Exploration of metal and non-metal ores
 Coal & Lignite
 Petroleum & Natural Gas
 Manufacture of items reserved for production in Micro and Small Enterprises
(MSEs)
 Defence Industry subject to Industrial license under the Industries (Development
&Regulation) Act, 1951
 Broadcasting Carriage Services
 Broadcasting Content Services
 Print Media
 Civil Aviation
 Airports
 Air Transport Services
 Courier services
 Construction Development: Townships, Housing, Built-up Infrastructure
 Industrial Parks
 Satellites- establishment and operation
 Private Security Agencies
 Telecom Services
 Cash & Carry Wholesale Trading/Wholesale Trading
 E-commerce activities
 Single Brand product retail trading
 Multi Brand Retail Trading
 Railway Infrastructure
 Asset Reconstruction Companies
 Banking- Private Sector
 Banking- Public Sector
 Commodity Exchanges
 Credit Information Companies (CIC)
 Infrastructure Company in the Securities Market
 Insurance
 Non-Banking Finance Companies (NBFC)
 Pharmaceuticals
 Power Exchanges.

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FOREIGN TRADE POLICY AND PROCEDURE 2015-20

India‘s Foreign Trade Policy (FTP) has, conventionally, been formulated for five years at
a time and reviewed annually. The focus of the FTP has been to provide a framework of
rules and procedures for exports and imports and a set of incentives for promoting
exports. The FTP for 2015-2020 seeks to achieve the following objectives:
(vi) To provide a stable and sustainable policy environment for foreign trade in
merchandiseand services;
(vii) To link rules, procedures and incentives for exports and imports with other
initiativessuch as ―Make in India‖, ―Digital India‖ and ―Skills India‖ to create an
―Export PromotionMission‟ for India;
(viii) To promote the diversification of India‘s export basket by helping various sectors
of theIndian economy to gain global competitiveness with a view to promoting
exports;
(ix) To create an architecture for India‘s global trade engagement with a view to
expanding itsmarkets and better integrating with major regions, thereby
increasing the demand for India‘sproducts and contributing to the government‘s
flagship ―Make in India‖ initiative;
(x) To provide a mechanism for regular appraisal in order to rationalise imports and
reduce the trade imbalance. Exports should not merely be a function of
marketable surplus but should also reflect anenhancement of economic capacity
and development. Foreign Trade Policy envisages:
 Employment creation in both manufacturing and services through the generation
offoreign trade opportunities
 Zero defect products with a focus on quality and standards;
 A stable agricultural trade policy encouraging the import of raw material
whererequired and export of processed products;
 A focus on higher value addition and technology infusion;
 Investment in agriculture overseas to produce raw material for the Indian
industry;
 Lower tariffs on inputs and raw materials; and
 Development of trade infrastructure and provision of production and
exportincentives.

FOCUS OF THE FOREIGN TRADE POLICY (FTP)

The Foreign Trade Policy is primarily focused on accelerating exports. This is sought to
be implemented through various schemes intended to exempt and remit indirect taxes
on inputs physically incorporated in the export product, import capital goods at
concessional duty, stimulate services exports and focus on specific markets and
products. The Policy attempts to dovetail these schemes with the specific market access
openings that India has achieved through negotiations with its trading partners for
various bilateral and regional trading arrangements.

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LEGAL BASIS OF FOREIGN TRADE POLICY (FTP)

The Foreign Trade Policy 2015-20, is notified by Central Government, in exercise of
powers conferred under Section 5 of the Foreign Trade (Development & Regulation)
Act, 1992, as amended. The Foreign Trade Policy, 2015-20 came into force with effect
from 01.04.2015

AMENDMENT TO FOREIGN TRADE POLICY (FTP)

Central Government, in exercise of powers conferred by Section 5 of FT (D&R) Act,
1992, as amended from time to time, reserves the right to make any amendment to the
FTP, by means of notification, in public interest.

DURATION OF FOREIGN TRADE POLICY (FTP)

The Foreign Trade Policy (FTP), 2015-2020, incorporating provisions relating to export
and import of goods and services, shall come into force with effect from the date of
notification and shall remain in force up to 31st March, 2020, unless otherwise specified.
All exports and imports made upto the date of notification shall, accordingly, be
governed by the relevant FTP, unless otherwise specified.

TRANSITIONAL ARRANGEMENTS
Any License / Authorisation / Certificate / Scrip / any instrument bestowing financial
or fiscal benefit issued before commencement of FTP 2015-20 shall continue to be valid
for the purpose and duration for which such License/Authorisation/ Certificate / Scrip
/ any instrument bestowing financial or fiscal benefit Authorisation was issued, unless
otherwise stipulated.

"Capital Goods" means any plant, machinery, equipment or accessories required for
manufacture or production, either directly or indirectly, of goods or for rendering
services, including those required for replacement, modernisation, technological up-
gradation or expansion. It includes packaging machinery and equipment, refrigeration
equipment, power generating sets, machine tools, equipment and instruments for
testing, research and development, quality and pollution control. Capital goods may be
for use in manufacturing, mining, agriculture, aquaculture, animal husbandry,
floriculture, horticulture, pisciculture, poultry, sericulture and viticulture as well as for
use in services sector.

"Counter Trade" means any arrangement under which exports/imports from /to India
are balanced either by direct imports/exports from importing/exporting country or
through a third country under a Trade Agreement or otherwise. Exports/ Imports
under Counter Trade may be carried out through Escrow Account, Buy Back
arrangements, Barter trade or any similar arrangement. Balancing of exports and
imports could wholly or partly be in cash, goods and/or services.

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"Drawback on deemed export‖ in relation to any goods manufactured in India and
supplied as deemed exports, means the rebate of duty or tax, as the case may be,
chargeable on any imported materials or excisable materials used or taxable services
used as input services in the manufacture of such goods.

"Jobbing" means processing or working upon of raw materials or semi-finished goods

supplied to job worker, so as to complete a part of process resulting in manufacture
orfinishing of an article or any operation which is essential for aforesaid process.

"Licensing Year" means period beginning on the 1st April of a year and ending on the
31st
March of the following year.

"Managed Hotel" means hotels managed by a three star or above hotel/ hotel chain
under an operating management contract for a duration of at least three years between
operating hotel/ hotel chain and hotel being managed. Management contract must
necessarily cover the entire gamut of operations/ management of managed hotel.

"Manufacture" means to make, produce, fabricate, assemble, process or bring into

existence, by hand or by machine, a new product having a distinctive name, character
or use and shall include processes such as refrigeration, re-packing, polishing, labelling,
Re-conditioning repair, remaking, refurbishing, testing, calibration, re-engineering.
Manufacture, for the purpose of FTP, shall also include agriculture, aquaculture, animal
husbandry, floriculture, horticulture, pisciculture, poultry, sericulture, viticulture and
mining.

"Manufacturer Exporter" means a person who exports goods manufactured by him or

intends to export such goods.

―Merchant Exporter‖ means a person engaged in trading activity and exporting or

intending to export goods.

―NC‖ means the Norms Committee in the Directorate General of Foreign Trade for
approval of adhoc input –output norms in cases where SION does not exist and
recommend SION to be notified in DGFT.

"Notification" means a notification published in Official Gazette.

"Order" means an Order made by Central Government under the Act.

"Registration-Cum-Membership Certificate" (RCMC) means certificate of registration

and membership granted by an Export Promotion Council / Commodity Board /
Development Authority or other competent authority as prescribed in FTP or
Handbook of Procedures
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―SCOMET‖ is the nomenclature for dual use items of Special Chemicals, Organisms,
Materials, Equipment and Technologies (SCOMET). Export of dual-use items and
technologies under India‘s Foreign Trade Policy is regulated. It is either prohibited or is
permitted under anauthorization.
"Services" include all tradable services covered under General Agreement on Trade in
Services (GATS) and earning free foreign exchange. "Service Provider" means a person
providing:
(v) Supply of a ‗service‘ from India to any other country; (Mode1- Cross border
trade)
(vi) Supply of a ‗service‘ from India to service consumer(s) of any other country;
(Mode 2-Consumption abroad)
(vii) Supply of a ‗service‘ from India through commercial presence in any other
country. (Mode3 – Commercial Presence.)
(viii) Supply of a ‗service‘ from India through the presence of natural persons in any
othercountry (Mode 4- Presence of natural persons.)

IMPORTER-EXPORTER CODE (IEC) NUMBER / E-IEC

An IEC is a 10-digit number allotted to a person that is mandatory for undertaking any
export/import activities. Now the facility for IEC in electronic form or e-IEC has also
been operationalised.
(c) Application for obtaining IEC can be filed manually and submitting the form in
the office ofRegional Authority (RA) of DGFT. Alternatively, Exporters /
Importers shall file an applicationin ANF 2A format for grant of e-IEC. Those
who have digital signatures can sign and submitthe application online along
with the requisite documents. Others may take a printout of theapplication, sign
the undertaking/declaration, upload the same with other requisitedocuments
and thereafter submit the signed copy of the online application form to
concernedjurisdictional Regional Authorities (RA) either through post or by
hand.
(d) Deficiency in the application form has to be removed by re-loging onto ―Online
IEC application‖ on DGFT website and filling the form again by paying the
requisite applicationprocessing charges.
(iv) Details of the entity seeking the IEC:
5. PAN of the business entity in whose name Import/Export would be done
(Applicantindividual in case of Proprietorship firms).
6. Address Proof of the applicant entity.
7. LLPIN /CIN/ Registration Certification Number (whichever is applicable).
8. Bank account details of the entity. Cancelled Cheque bearing entity‘s pre-printed
name orBank certificate in prescribed format ANF2A(I).
(v) Details of the Proprietor/ Partners/ Directors/ Secretary or Chief Executive of
the Society/Managing Trustee of the entity:
3. PAN (for all categories)
4. DIN/DPIN (in case of Company /LLP firm)
(vi) Details of the signatory applicant:
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4. Identity proof
5. PAN
6. Digital photograph

PRINCIPLES OF RESTRICTIONS
DGFT may, through a Notification, impose restrictions on export and import, necessary
for: -
(i) Protection of public morals;
(j) Protection of human, animal or plant life or health;
(k) Protection of patents, trademarks and copyrights, and the prevention of
deceptivepractices;
(l) Prevention of use of prison labour;
(m) Protection of national treasures of artistic, historic or archaeological value;
(n) Conservation of exhaustible natural resources;
(o) Protection of trade of fissionable material or material from which they are
derived;
(p) Prevention of traffic in arms, ammunition and implements of war.

STATUS HOLDER
(e) Status Holders are business leaders who have excelled in international trade and
havesuccessfully contributed to country‘s foreign trade. Status Holders are
expected to not onlycontribute towards India‘s exports but also provide
guidance and handholding to newentrepreneurs.
(f) All exporters of goods, services and technology having an import-export code
(IEC)number shall be eligible for recognition as a status holder. Status
recognition depends uponexport performance. An applicant shall be categorized
as status holder upon achieving exportperformance during current and previous
two financial years, as indicated in Foreign TradePolicy. The export performance
will be counted on the basis of FOB value of export earnings infree foreign
exchange.
(g) For deemed export, FOR value of exports in Indian Rupees shall be converted in
US$ at theexchange rate notified by CBEC, as applicable on 1st April of each
Financial Year.
(h) For granting status, export performance is necessary in at least two out of three
years.

STATUS CATEGORY
Status Category Export Performance
FOB / FOR (as converted) Value
(in US $ million)
One Star Export House 3
Two Star Export House 25
Three Star Export House 100
Four Star Export House 500
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CS. DEV SHARMA Om Maiyya Sharnam ECL-3
(Company Secretary, Cyber Lawyer, M.com)
Five Star Export House 2000

DUTY FREE IMPORT AUTHORISATION SCHEME (DFIA)

(c) Duty Free Import Authorisation is issued to allow duty free import of inputs. In
addition,import of oil and catalyst which is consumed / utilised in the process of
production of exportproduct, may also be allowed.
(d) Provisions of Accounting Imputes, Importability / Exportability of items that
areProhibited/Restricted/ STE, Domestic Sourcing of Inputs, Currency for
Realisation of Export Proceeds and Re-import of exported goods under Duty
Exemption / Remission Scheme of FTPshall be applicable to DFIA also.

QUALITY COMPLAINTS/ TRADE DISPUTES

THE FOLLOWING TYPE OF COMPLAINTS MAY BE CONSIDERED:
(d) Complaints received from foreign buyers in respect of poor quality of the
productssupplied by exporters from India;
(e) Complaints of importers against foreign suppliers in respect of quality of the
productssupplied; and
(f) Complaints of unethical commercial dealings categorized mainly as non-supply/
partialsupply of goods after confirmation of order; supplying goods other than
the ones as agreedupon; non-payment; non-adherence to delivery schedules, etc.

Committee on Quality complaints and Trade Disputes

Composition of the CQCTD
The CQCTD would be constituted under the Chairpersonship of the Head of Office.
The CQCTD may comprise of the following members:
11. Additional DGFT/Joint DGFT/ (H.O.O): Chairperson
12. Representative of Bureau of India Standard (BIS): Member
13. Representative of Agricultural and Processed Food Products Export
DevelopmentAuthority: Member
14. Representative of the Branch Manager of the concerned Bank: Member
15. Representative of Federation of Indian Exporter Organization / and OR Export
PromotionCouncil: Member
16. Representative of Export Inspection Agency: Member
17. Nominee of Director of Industries of State Government: Member
18. Nominee of Development Commissioner of MSME: Member
19. Officer as nominated by Chairperson: Member Secretary
20. Any other agency, as co-opted by Chairperson: Member.

Be busy but take it easy

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