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8/3/2019 Final for Law
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Definition
Contract can be defined as ³ An Agreement
enforceable by law is a contract´. A contract,
therefore, is an agreement the object is to create
a legal obligation , i.e. a duty enforceable by law.
Essential elements of a valid contract
1. Offer and acceptance ± there must be a lawful
offer and a lawful acceptance.2. Intension to create legal relationship ±there must
be an intension among the parties
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Essential elements of a Contract
that the agreement should be attached by legal
consequences and create legal obligations.
3. Lawful consideration ± consideration has beendefined a the price paid by one party for the
promise of the other. An agreement is legally
enforceable only when each of the parties to it
give something and get something.4. Capacity of parties- the parties to an agreement
must be competent to contract, otherwise it
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Essential elements of a Contract(contd..)
cannot be enforced by court of law.
5. Free consent- consent means the parties have
agreed upon the same thing in the same sense.Free consent is absent if there is coercion, undue
influence, fraud, misrepresentation or mistake.
6. Lawful object- the parties to the agreement must
agree for the valid lawful object.7. Writing and Registration- all contracts to be
legally valid, must be in writing and registered.
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Essential elements of a Contract(contd..)
8. Certainty- agreements, the meaning of which is
not certain, or capable of made being certain, are
void.
9. Possibility of performance- the contract must be
capable of performance. An agreement which is
impossible to perform, physically or legally is
void.
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K inds of Contracts
1. Valid contract- it is an agreement enforceable
by law. Here, all the essential elements of a
contract are existing.
2. Voidable contract- an agreement which is
enforceable by law at the option of one or more
of the parties there to, but not at the option of
the other/s, is a voidable contract.3. Void contract- this contract is not binding in
law. The causes can be ±supervening
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K inds of Contracts (contd..)
impossibility or subsequent illegality.
4. Unenforceable contract- this is a contract which
is valid in itself, but is not capable of beingenforced in a court of law because of some
technical defects such as absence of registration,
adequate stamping, or if time barred.
5. Illegal or unlawful contract- this contract iscontrary to the law and hence is void ab-initio.
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K inds of Contracts (contd..)
Contracts can also be expressed ,implied,
constructive/quasi.
³ Quantum Meruit´ means in proportion to thework done. For part performance of the contract,
resulting in a breach, a suit of QM can be brought
by the aggrieved party.
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Discussion on Companies Act, 1956
Most voluminous Legislation in the world;
The Act has 658 Sections, XV Schedules;
The entire Act is split into XIII Parts with eachPart further being split into Chapters;
The Rules and Forms are further stated in the
Guidelines / Rules, 1957;
There are many other Rules / Guidelines for
supporting the provisions of the Sections
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Functional Division of the Act
Part I - Definitions, CLB, National Company Law
Tribunal(NCLT);
Part II ± Incorporation of a Co. & matters incidental thereto;
Part III ± Prospectus & Allotment relating to issue of shares
& Debentures;
Part IV- Share Capital & Debentures;
Part V ± Registration of Charges;
Part VI ± Management & Administration;
Part VII ± Winding Up;
Part VIII ± Companies formed under Previous Co, Law;
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Functional Division of the Act (contd..)
Part IX ± Cos. Authorised to Register under this
Act;
Part X ± Winding up of Unregistered Companies;Part XI- Cos. Incorporated outside India;
Part XII- Registration Offices,& Officers & Fees;
Part XIII- General- collection of Info. & statistics;
The XV SCHEDULES follows thereafter.
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Some Basic facts of the Companies Act, 1956
For the interpretation of each Section, there are
innumerable Case Laws from the various Courts
that have pronounced judgment supporting or
contradicting an earlier decision;
Company Law is the source from which the
subject of Auditing gets its identity, importance
and procedures to initiate Corporate Audit; The Act is heavily based on interpretation and
justification, which decides the case.
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Some Basic facts of the Companies Act, 1956
The Administrative Machinery to monitor the
affairs is vested with the Ministry of Company
Affairs(MCA), the Company Law Board(CLB);
The routine functions are managed by the
Registrar of Companies(ROC), having Regional
Directors (RD), located in various states, where
the companies are required to file documents andReturns, and the public is authorised to inspect
the same according to the provisions of law.
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Some Basic facts of the Companies Act, 1956
The other Regulatory Authority is the Securities
& Exchange Board of India (SEBI). Section 55A
of CA, 1956, gives exclusive powers to SEBI to
administer the issue and transfer of securities and
the non-payment of dividends as is stated in
various Sections of the Act.
In the 2006 Amendment, MCA introduced ³e-Governance´ ( known as MCA-21), u/s 610
B,C,D for filing of Returns & payments.
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A Company, its Nature and K ind
Section 3(1)(i) defines a Company as ³ A
Company formed and registered under the Act or
an existing Company.´ or
³ A company is an incorporated Association,
which is an artificial juridical person, having a
separate legal entity, with a perpetual succession
and a common seal, a common capital comprisedof transferrable shares, and carrying limited
liability.´ ( Saloman vs Saloman & Co. Ltd.)
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A Company, its Nature and K ind( contd.)
Section 11 defines an ³Illegal Association´ which
states that ³ No Company, Association or
Partnership consisting of more than 20 persons
( 10 in the case of Banking Business) be formed
to carry on any business for gain unless it is
registered under the Companies Act or under any
other law´. Here the Liability is unlimited and personal.
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Types of Companies
PRIVATE COMPANY Sec 3(1)(iii):- A company with a minimum
PUC of Rs one lac or more and which by its AOA ±
1) restricts the right of members to transfer shares, if any;
2) Limits the number of members to fifty , excluding members who were
or are in the employment of the company;
3) Prohibits any invitation to the public to subscribe for any shares in, or
debentures of, the company, and
4) Prohibits any invitation or acceptance of deposits from persons other
than members, directors or their relatives.
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Types of Companies (contd.)
PUBLIC COMPANY Sec 3(1)(iv):- It means a
company which :-
1) Which is not a Private Co.;
2) Has a min PUC of Rs. 5 lacs or such higher PUC, as
may be prescribed;
3) Can invite the public to subscribe to its shares & debs;
4) Does not limit the max. number of members;
5) Can invite or accept deposits from the public; and
6) Is a Pvt. Co. but subsidiary of a Public Co.
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Types of Companies (contd.)
STATUTORY CO. :- It is incorporated by a
special Act passed either by the Central or the
State Legislature;
GOVERNMENT CO. :- Section 617 defines a
GC as any Company in which not less than 51%
of the PUC is held by the Central / State Govt.
FOREIGN CO. :- Section 591 to 596 discussesabout such companies.
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Types of Companies (contd.)
Section 25 Co. :- These are Companies having
obtained the prior permission of the CG not to
include the words ³Ltd´ or ³ Pvt. Ltd.´ behind
their names since they have been formed to
promote commerce, art, science, religion or any
other charitable purposes and not to distribute the
profits as dividends but to plough them back for
the aforesaid activities.
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Types of Companies (contd.)
Types of Companies based on Liability of Members:-
Companies limited by shares;
Companies limited by Guarantee ±Sec 12(2)(b); and
Unlimited Companies - Sec 12(2)(c).
Holding and Subsidiary Company ( Sec 4);
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Exemptions & Privileges of Pvt. Co
a) Only 2 Members can start a Co. which is 7 for Pub. Ltd.
Co. ± Sec 12;
b) It can commence business immediately on incorporation
as it need not wait to obtain the Certificate for commencement of business ± Sec 149(7);
c) Can function with 2 Directors while three are required
otherwise ± Sec 252(2);
d) For General Meetings, the Quorum is 2 persons personally present which is five for pub Co ± Sec174(1);
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Formation of a Company
It is a lengthy process involving:
Promotion
Incorporation or Registration;
Capital Subscription; and
Commencement of Business.
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Memorandum Of Association (MOA)
MOA can be defined as the Charter which
defines the limitation of the powers of the
company. The MOA contains the fundamental
conditions upon which alone the company is
allowed to be incorporated.
The contents of the MOA ± NAME clause,REGISTERED OFFICE clause, OBJECTS
clause, LIABILITY clause, CAPITAL clause &
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Memorandum Of Association (MOA)
ASSOCIATION/SUBSCRIPTION clause.
Under the Objects Clause, the MAIN and OTHER
objects shall be separately stated.Alteration of the NAME Clause:
A company may, by passing a Special Resolution,
and with the approval of the C/G, in writing,
change its name ( Sec 21). However, no such permission is required for dropping/addition of
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MOA ( contd..)
the words ³Limited´ or ³ Pvt. Ltd.´ to the
Company¶s name.
Spl Res requires 21 days notice and with 75% of
the Members present ( or through Proxy ) and
voting are in favour of the Resolution.
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MOA ( contd..)
The Doctrine of Ultra Vires:-
According to this Doctrine, all such acts or
transactions of a Company which are ultra vires( beyond the powers of) the objects clause of its
MOA, SHALL BE WHOLLY NULL & VOID,
and can never be subsequently ratified and
validated, even though all the shareholdersconsent or purport to ratify such transaction.
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Articles of Association (AOA)
The AOA contains regulations for the internal
administration of the Company¶s Affairs. It
prescribes the Rules and Bye-Laws for the
General Management of the Company and for the
attainment of its objects as given in its MOA.
Being subordinate to the MOA, the AOA cannot
extend the objects as defined in the MOA.
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Contents of the AOA
The extent to which TABLE ± A is applicable;( Table A-Regulations for management of a company limited by shares)
Different classes of shares and their rights;
Borrowing powers of Directors;
Maintainance of Books of Accts and their Audit;
Matters relating to Board Meetings;
Winding Up; and many other Issues.
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ALTERATION OF AOA
I. Sec 31- The alteration must not be inconsistent
with the prov. of the C.A.,1956, MOA or
alterations ordered by the CLB or any other
statute;
II. The alteration must not deprive any person of
his rights under a contract;
III. Approval of the C/G must be obtained incertain cases;
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ALTERATION OF AOA (contd..)
IV. The alteration must not constitute a fraud on the
minority;
V. The alteration must be bonafide for the benefitof the company as a whole.
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Binding force of MOA & AOA
U/s 36, subject to the provisions of the Act, the
MOA and AOA shall, when registered, bind the
company and the members. This includes:-
Company is bound to its Members;
Each member is bound to the Company;
Each member is bound to other members in
exceptional cases only; and Neither the company nor the members are bound
to outsiders.
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The Doctrine of Constructive Notice states that
after the MOA and AOA is registered, it becomes
a Public Document, and a person dealing with the
company in a manner which is inconsistent with
the provisions contained therein, the person shall
be deemed to have dealt with the company at his
own risk and cost, and shall have to bear the
consequences thereof.
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DOCTRINE OF INDOOR MANAGEMENT
In contrast to the earlier Doctrine, this Doctrine
implies that ³ persons dealing with the company
are not bound to enquire into the regularity of the
internal proceedings´.
The exception to the Rule is that when the
outsider had constructive notice of the
irregularity, or where proper enquiry was notdone which could have revealed the anomaly or
the documents dealt with are forged.
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Distinction between MOA and AOA
MOA
States the broad framework
within which the Co.
functions;
The MOA is subordinate to
the Act;
The MOA must be
compulsorily filed with the
ROC;
Cannot be easily altered;
AOA
Mentions about the internal
functioning which is subservient
to the MOA;
It is subordinate to the MOA;
If Table A is adopted, then filing
not required;
Can be altered by specialresolution only;
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Distinction between MOA and AOA
MOA
Acts done ultra vires the
MOA are void and cannot
be ratified;
Outsiders have no remedy
against the co. even it isultra vires the MOA.
AOA
Acts done by the AOA,
ultra vires the AOA but
intra vires the MOA, aresimply irregular and not
void.
Outsiders can enforce the
contract if ultra vires theAOA.
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COMPANY MEETINGS
Statutory Meetings( Sec 165)- Applicable only
for Public Ltd. Cos.- The issues discussed are:-
1. Total no. of shares allotted and its
characteristics;
2. Total cash received;
3. Abstract of the Receipts & Payments Account;
4. Names,addresses,& occupation of the Directors;
5. Particulars of contracts entered into;
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Statutory Meeting ( contd..)
6. Extent of Underwriting contracts entered into
and the reasons therefor;
7. Arrears of any dues on calls from the directors,
managers and others;
8. Particulars of any commission / brokerage paid
to the Directors.
This Meeting is held once in the lifetime of a PublicLtd. Co.
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Annual General Meeting
U/s 166, every company shall call an AGM every
year and shall notify the members accordingly.
Between two AGMs, there should not be a gap of
more than 15 months. It should be held where the
Registered Office is situated.
The issues generally discussed are- To adopt the
Accounts/ To declare a dividend/To appoint or reappoint Directors and To appoint the Auditors
& fix his Remuneration.
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Convened General Meeting by C/G
U/S 167, the C/Govt. can convene a General
Meeting if default occurs in holding an AGM u/s
166. This generally happens when the Directors
are not ready with the Accounts, or the Auditors
are Qualifying the Statutory Audit Report which
can doubt the integrity of the Directors.
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Extra-Ordinary General Meeting
u/s 169, the Board can, on requisition of the
Members, shall call this meeting to discuss
specific issues.
The Members so requesitioning, should hold at
least 10% of the total voting power.
Section 171 to 186 discusses on Meetings:-
Sec 171- Length of Notice ± 21 days notice inwriting is required.
Sec 173- Explanatory statement attached to the
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Meetings ( contd..)
Notice explaining the facts and reasons for the item
to be discussed.
Sec 174- Quorum ± 5 members in the case of a
Public Company and 2 members in the case of a
Pvt. Co.
Sec 175 ±Appointment of a Chairman.
Sec 176- Proxies ± cannot speak at a meeting andcan vote only if there is a poll.
Sec 189- Ordinary & Special Resolution- It is 49:51
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Meetings (contd..)
for passing an O/R and 75:25 for passing a S/R.
Sec 190 ± Resolutions requiring Special Notice.
Sec 192- Registration of certain resolutions anddocuments;
Sec 205- Dividends to be paid only out of profits;
Sec 205C- Unclaimed dividend to be transferred to
³ Investor Education & Protection Fund´
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Books of Accounts & Audit
Sec 209 ± Books of Accounts to be maintained by
the Company;
Sec 210- At every AGM, the Balance Sheet and the
P&L Account to be placed;
Sec 212- Balance sheet of Holding Co. to include
details of Subsidiaries;
Sec 217- Board¶ Report - the state of company¶saffairs, amounts to be transferred to Reserves,
amount to be recommended as dividend, material
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Board¶s Report
changes that have taken place between the B/S
date and the date of the Report, activities of the
Company and its Subsidiaries, remuneration
received by executives exceeding Rs. 24 lacs per
annum.
Sec 217(2AA) discusses about Directors¶
Responsibility Statement which states that theAccounting Standards have been followed, due
prudence has been applied, proper care has been
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Board¶s Report (contd..)
taken to safe guard the assets and to prevent
frauds and irregularities, and lastly the Accounts
have been prepared on a ³ Going Concern´ basis.
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Auditors ± Appointment & Remuneration
Sec 224 ± The first Auditors are appointed by the
Board within one month of registration and shall
hold office till the AGM; The subsequent
Auditors are appointed by the Members at the
AGM by ordinary resolution ;
Sec 224A states about Auditors appointed by a
Special Resolution where 25% or more is held by
a FI /CG /SG, either singly or jointly.
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Auditors ± Appointment & Remuneration ( contd..)
u/s 224(1B), The Auditor has to give a written
consent accepting the appointment, since the
restriction on 20 Audits per Partner has to be
adhered to;
The Reappointment of Auditors, u/s 224(2), shall
automatically happen, unless :-
1) He is not qualified for re-appointment;2) He has given notice in writing of his
unwillingness to be re-appointed;
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Auditors ± Re-appointment ( contd..)
3) Resolution has been passed that the existing
auditor shall not be re-appointed;
4) Where notice has been given to reappoint
somebody else other than the retiring auditor,
and the person serving the notice has expired or
is incapacitated.
u/s 224(3), the C/G has the power to appoint anauditor in case a vacancy is not being filled up;
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Special Audit (Sec 233A )
The C/G may, on reports received or in its own
volition, direct a Special Audit, if it is of the
opinion that:-
I. That the affairs of the company are not being
managed in accordance with sound business
principles or prudent commercial practices; or
II. That the company is being managed in amanner likely to cause serious injury or damage
to the interests of the trade, industry or business
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Special Audit (Sec 233A ) ( contd..)
to which it pertains; or
III. That the financial position of the company is
such as to endanger its solvency;
Cost Audit ( Sec 233B)
For a company engaged in production, processing,
manufacturing or mining activities, in
accordance with the orders of the C/G, u/s 209,the Books of Accounts also to include such
particulars as relating to utilisation of material,
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Cost Audit ( Sec 233B) ( contd..)
Labour and other items of cost. The C/G may
order the audit of the Cost Books to be
conducted.
The Cost Auditor shall be appointed by the
Board with the previous approval of the
C/G. The report to be furnished to the C/G
with a copy to the Company. The C/G shall,give instructions regarding the action that
needs to be taken.
Jan, 13, 2011 MMS -SEM II -2 ± LEG & TAX ASP
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DIRECTORS
Sec 252(3) defines Directors also as the ³Board´
and are those persons, who are responsible for
Directing, Governing or Controlling the Policy or
Management of the Company
Directors are the Trustees, Agents and Managing
Partners of the Company and play a fiduciary
role;
Public companies to have at least 3 Directors and
Private Co. 2 Directors.
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DIRECTORS( contd..)
iv. Has been convicted by a Court to at least
six months imprisonment and five years
have not lapsed thereafter;v. Has failed to pay the calls on the shares;
vi. Has been disqualified for fraudulent
activities;vii.If the Co. has failed to repay the Fixed
Deposits or filing the Annual Returns.Aug 29, 2011 PGDM -SEM I -3 ± LEG & TAX
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DIRECTORS ( contd..)
Sec 254 stipulates that the First Directors are
appointed by the Subscribers to the
Memorandum.
U/s 255, the subsequent Directors are appointed
by shareholders at the AGM. For a Public Ltd.
Co. at least one ±third of the strength of the
Board must retire by rotation, and can be re-
elected.
FIs and Banks can nominate their Officers on the
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DIRECTORS ( contd..)
Board of companies to whom Term-Loan or W/C
facilities have been granted. These Nominee
Directors are not liable to retire by rotation;
There can also be Additional Directors, Casual
Vacancy and Alternate Directors.
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SALE OF GOODS ACT, 1930
The general provisions of the Indian Contract Act
continue to be applicable to the contract of sale of
goods, so far as they are not inconsistent with the
provisions of the latter.
Section4(1) defines a ³ Contract of Sale´ as a
contract whereby the seller transfers or agrees to
transfer the property in the goods to the Buyer for
a price.
Contract of sale is a generic term and includes a
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SALE OF GOODS ACT, 1930
( contd..)
sale and an Agreement to sell. In an Agreement
to sell, there is no transfer of property to the
buyer at the time of the contract. The conveyance
of property takes place later so that the seller continues to be the owner until the agreement to
sell becomes a sale.
Hire Purchase as distinguished from Sale is
that in HP, there is no agreement to buy, but there
is only an agr. to hire, with an option to purchase.
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SALE OF GOODS ACT, 1930
( contd..)
Goods u/s 2(7), can be Existing goods or Future
goods or Contingent goods.
In a contract for sale of goods, the major terms
are called ³ CONDITIONS´ and the minor terms
are called ³ WARRANTIES´
A Condition is a stipulation essential to the main
purpose of the contract, the breach of which givesthe aggrieved party a right to repudiate the
contract.
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SALE OF GOODS ACT, 1930
( contd..)
A Warranty is a stipulation collateral to the
main purpose of the contract, the breach of which
gives the aggrieved the right to sue for damages
only, and not to avoid the contract itself.
Conditions and Warranties may be either express
or implied. ³ What is expressly done puts an end
to what is tacit or implied, and custom and
agreement over-rule implied conditions and
warranties.
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SALE OF GOODS ACT, 1930
( contd..)
In every contract of sale, the Buyer shall have
and enjoy quiet possession of goods.
Doctrine of Caveat Emptor ± This mean that
³ let the Buyer Beware´. This means that it is the
duty of the Buyer to be careful while purchasing
goods of his requirement and, in the absence of
any enquiry from the buyer, the seller is not bound to disclose every defect in the goods of
which he may be cognisant.
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SALE OF GOODS ACT, 1930
( contd..)
Exceptions to the Doctrine of Caveat Emptor:
1. Where the Seller makes a mis-representation
and the buyer relies on it, such a contract can be
voidable at the option of the Buyer;
2. Where the Seller makes a mis-representation,
amounting to fraud, or conceals a defect which
could not be discovered on reasonableexamination, the buyer can rescind the contract
as well as claim damages;
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SALE OF GOODS ACT, 1930
( contd..)
3. Where the goods are purchased by description
and they do not correspond to the description;
4. Where the goods are bought by sample and the
bulk does not match with the sample;
5. Where the buyer makes known to the Seller the
purpose for which the goods are required and
depends upon the skills and judgment of theseller, and the purpose is not served;
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SALE OF GOODS ACT, 1930
( contd..)
Transfer of Property, can be for :-
Specific or ascertained goods; or
Unascertained and future goods.Transfer of title by Estoppel arises when you are
precluded from denying the truth of anything,
which you have represented as a fact, although it
is not a fact; The Buyer in such a case gets a better title than the Seller.
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SALE OF GOODS ACT, 1930
( contd..)
Under Performance of Contract of Sale, u/s 31, it
is the duty of the Seller to deliver the goods and
of the Buyer to accept and pay for them, in
accordance with the terms of the contract for sale.
R ights of the Unpaid Seller can be against the
goods or against the Buyer personally; as regards
the goods, the Seller has :-
Right of Lien / Right of stoppage of goods in
transit / and Right of Resale.
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SALE OF GOODS ACT, 1930
( contd..)
Lien is the right to retain possession of goods
and refuse to deliver them to the buyer, until the
price due in respect of them is paid or tendered.
Auction Sale is a process in which the
Auctioneer invites bids from prospective
purchasers and sells the goods to the highest
bidder ( u/s 64).
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NEGOTIABLE INSTR UMENTSACT, 1881
Negotiable Instrument(NI) means a ³Promissory
note, Bill of exchange or Cheque payable either
to order or to bearer´.
Only RBI can issue a P/N, ³ payable to Bearer´.
Alternatively, ³a NI is one which is, by a legally
recognised custom of trade or by law,
transferable by delivery or endorsement anddelivery, in such circumstances that- a) the
holder of it for the time being may sue on it in his
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NEG. INSTR M. ACT, 1881(contd..)
own name and- b) the property in it passes, free
from equities to a bonafide transferee for value,
notwithstanding any defect in the title of the
transferor´.
The presumptions o a NI are :- there should be
consideration/ it has to be dated/ that it is
accepted within a reasonable time after its date
but before its maturity/ should be duly
stamped/must be a Holder in due course.
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NEG. INSTR M. ACT, 1881(contd..)
A P/Note is an instrument in writing ( not being a
bank note or a currency note) containing an
unconditional undertaking signed by the Maker,
to pay a certain sum of money only to, or to theorder of, a certain person, or to the bearer of the
instrument.
A Bill of Exchange is an instrument in writing
containing an unconditional order, signed by the
maker, directing a certain person to pay a certain
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NEG. INSTR M. ACT, 1881(contd..)
sum of money only to, or to the order of, a
certain person or to the bearer of the
instrument. There are three parties ± Drawer,
Drawee and Payee.Accommodation Bill is not supported by
any consideration or a trading transaction.
The Drawer does not give any consideration
to the drawee but is drawn to providefinancial help.
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NEG. INSTR M. ACT, 1881(contd..)
A Cheque is a B/E drawn on a specialised
banker and not expressed to be payable otherwise
than on demand and it includes the electronic
image of a truncated cheque and a cheque in theelectronic form.
An Inchoate Instrument is an incomplete or
blank N/I, properly stamped and signed.
Maturity of a N/I falls due three days after the
date stated in the Instrument.
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NEG. INSTR M. ACT, 1881(contd..)
Holder of a N/I means any person entitled to the
possession of the instrument in his own name
and to receive or recover the amount thereon
from the parties thereto.
Holder in due course means any person who for
consideration became the possessor of a N/I, if
payable to bearer, or the payee or the indorsee
thereof if payable to order, before the amount
mentioned therein became payable, and without
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NEG. INSTR M. ACT, 1881(contd..)
sufficient cause to believe that any defect existed
in the title of the person from whom he derived
his title.
A N/I may be dishonoured by ± Non-acceptance
or non-payment.
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The Actual Reality
Facts, as such, never settled anything.
They are working tools only. It is the
implications that can be drawn from factsthat count, and to evaluate these requires
wisdom and judgment that are unrelated
to the computer approach to life.
CLARENCE B. RANDALL
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COMPETITION ACT, 2002
(The PREAMBLE)
An Act to provide, keeping in view the economic
development of the country for the establishment
of a Commission to prevent practices having an
adverse effect on competition, to promote andsustain competition in the markets, to protect the
interests of the consumers and to ensure freedom
of trade carried on by other participants in
markets, in India, and for matters connectedtherewith or incidental thereto.
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COMPETITION ACT, 2002 (contd..)
Sec 2 defines some important terms like :-
a) Acquisition, Agreement, Cartel,
ba) Appellate Tribunal means the Tribunal
established u/s 53A of the Act;
f) Consumer means a person who buys any goods
or hires any service ..
h) Enterprise means any person or a Dept. of theGovt. engaged in the activity of production,
storage, supply, distribution, acquisition or
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COMPETITION ACT, 2002 (contd..)
control of articles or goods, including dealings in
shares and debentures.
Sec 3 ± Anti Competitive Agreements:
No enterprise or AOP shall enter into any
agreement in respect of production, supply,
distribution, storage, acquisition or control which
causes or is likely to cause an appreciableadverse effect on competition in India. This
includes a Cartel.
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S 3 A ti C titi A t
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Sec 3 ± Anti Competitive Agreements
( contd..)
This section does not apply to JVs provided it
increases the efficiency in production, supply,
distribution, storage, acquisition or control of
goods or provision of services.
Under this provision, the following activities are
contraventions :- Tie-in arrangement
b) exclusive supply agreement c) exclusivedistribution agreement d) refusal to deal &
e) resale price maintenance.
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Sec 4 ± Abuse of Dominant position
The above practice includes ± unfair or
discriminatory action, limiting or restricting
production or services, obstructing or denying
market practices, entering into contracts withsupplementary tags, and to spread its dominant
status into another market.
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Sec 5 - COMBINATION
This section discusses about Mergers and
Amalgamations of two or more units and the
adverse impact that may arise on fair competition
due to this combination.
The Commission shall, on a written application
to it, examine the impact of this combination and
grant its approval.
Sec 7 mentions about the setting up of a
COMPETITION COMMISSION of INDIA.
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COMPETITION ACT, 2002 (contd..)
Sec 53A discusses abut establishing an
APPELLATE TRIBUNAL.
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MONOPOLIES & RESTRICTIVE
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MONOPOLIES & RESTRICTIVE
TRADE PRACTICES ACT, 1969
The Preamble An Act to provide that the operation of the
economic system does not result in the
concentration of economic power to the common
detriment, for the control of monopolies, for the prohibition of monopolistic and restrictive trade
practices and for matters connected therewith or
incidental thereto.
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MRTPA, 1969 (contd..)
Section 2 defines some important terms like the
MRTP Commission, Director General of
Investigation and Registration, Undertaking
( which by itself or jointly with inter-connected
u/ts produces, supplies, distributes or controls not
less than one-fourth of the total goods that are
produced or supplied in India, or services
rendered.)
Sec 3 states that the Act is not applicable to:
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MRTPA, 1969 (contd..)
Govt Controlled company, Financial
Institutions, Co-operative Societies, or Trade
Unions.
Secs 5 to 19 discusses about the appointment,
powers, functions of the MRTPC and DGIR
and the ways for implementing the Act.
S
ec 27
± D
ivision of anU
ndertaking: TheMRTPC, on receiving a complaint from a Trade
Association, or Customer, or from the State/
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MRTPA, 1969 (contd..)
C Govt. or upon its own knowledge or
information, is of the opinion that that the
working of the U/t is prejudicial to the public
interest, or has led, or is leading, or is likely tolead, to the adoption of any MTP or R TP,
inquire, as to whether it is expedient in the public
interest to make an order-
For the division of any trade of the u/t by the sale
of any part of the u/t or assets thereof, or
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MRTPA, 1969 (contd..)
for the division of any u/t or interconnected u/t
into such number of u/ts as the circumstances of
the case may justify. The C/G to be informed of
the decision by the MRTPC.
Sec 27A empowers the C/G to direct severance
of inter-connection between U/ts.
Sec 31states about Investigation by Commission
of MTPs ± If the C/G feels that MTP is
prevailing, then it can order the Commission to
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MRTPA, 1969 (contd..)
inquire and to report the findings.
u/s 32, all MTPs are prejudicial to public interest
except when the C/G is a Party or if it is for
Defence related needs or for Internal Security.
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MRTPA, 1969 (contd..)
Sec 33- R egn of Agreements relating to R TPs
Certain activities/agreements as mentioned
below, needs to be registered :-
Which restricts the buying or selling of goods;
For purchase of goods to also agree to purchase
some other goods;
Restricting a person to trade only in the goods of
the Seller;To buy or sell at pre-determined prices;
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Sec 33- R egn of Agreements relating to R TPs
To force discounts, rebates or credit;
Restricting the re-sale prices as fixed by the
Seller;
To restrict the supply of goods or to earmark the
market area for business;
Sec 35 states about Registration of Agreements
as ordered by the C/G.
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UNFAIR TRADE PRACTICES ± Sec 36A
UTP is a trade practice, which, for the purpose of
promoting the sale, use or supply of any goods,
or for the provision of any services, adopts any
unfair method or unfair or deceptive practice,including the undermentioned practices:-
Falsely represents that the goods are of a
particular standard quality, grade, composition,
model etc.
Falsely represents that the services are of a
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UNFAIR TRADE PRACTICES ± Sec 36A
( contd..)
particular standard, quality or grade;
Falsely represents second-hand goods as new
goods;
Makes a false or misleading representation
concerning the need for, or the usefulness of any
goods or services; etc.
Sec 37 ± Investigation into R TPs by MR TPC :Whether a RTP has been registered or not, the
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RTP ( contd..)
Commission ( C ) can conduct an enquiry and if
it is of the opinion that the practice is prejudicial
to public interest, the C can order for the
discontinuance of the practice or shall bemodified as the C directs.
Sec 38 discusses about Presumption as to
public interest. Any RTP is prejudicial to public
interest unless the MRTPC is convinced that the
RTP is for the public good.
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Common Sense above all
Facts, as such, never settled anything.
They are working tools only. It is the
implications that can be drawn from facts
that count, and to evaluate these requires
wisdom and judgment that are unrelated
to the computer approach to life.
CLARENCE B. RANDALL
S t 7 2010 PGDM SEM I 5 LEG & TAX 95