Important aspects of companies

Act -1956
Company and its forms
 Definition of a company
• According to justice Lindley “ a company is an
association of many persons who contribute
money or moneys to a common stock and
employ it for a common purpose.
• The common stock so contributed is denoted in
money is the capital of the company.
• The persons who contribute to it or whom it
belongs are its members.
• The proportion of capital to which member is
entitled is his share.
 As per chief justice Marshal of
U.S.A.
• Company is a person, artificial, invisible,
intangible, and existing only in the eyes of
law.
• Being a creation of law it possess only
those properties which the charter of its
creation confers upon it , either expressly
or as incidental to its very existence
 As per companies Act of 1956
• Section 3(1)I of the Act defines the
company as
• A company formed and registered under
the companies Act or an existing company
, means a company formed and registered
under any of the former companies Act.
 Unique features of the
Company
• Voluntary Association
• Independent Legal Entity
1. Oakes v/s Turquarnd and Hording
2. Kondoli Tea co ltd
• Perpetual existence
• Common seal
• Limited Liability
• Transferability of shares.
 Kinds of company
There are mainly 8 kinds of companies
1. Statutory companies
2. Registered companies
a. private companies
b. public companies
3. Companies deemed to be public
According to section 43A, a private limited company deemed to be public co,.
If 25% or of its paid up share capital is held by one or more bodies
corporate
If it holds 25% or more the paid up share capital of a public company
If it invites deposit from the public.
4.Holding and subsidiary companies
5.Government companies
6.Foreing companies
7.One man companies or Family companies
8.Multinational companies
 Advantages and disadvantages of
a company
• Advantages of company
• 1.Financial Strength
• 2.Economies of scale
• 3.limited liability
• 4.Efficient management
• 5.Stability
• 6.Transferability of interest
• 7.Diffused risk
• 8.Tax relief
• 9.Good will
 Disadvantages of company
• 1.Legal formalities
• 2.Lack of personal interest
• 3.Corrupt mgt
• 4.Oligarchy
• 5.Excessive statutory control
• 6.Delay in decisions
• 7.Conflict of interest
• 8.Unhealthy Speculation
• 9.Social evils
 Formation of a company
• Formation of company involves three
prime stages they are
• 1.promotion
• 2.Incorporation
• 3.Commencement of business
 Promotion
• Conceiving an idea and its working up either by himself
or with the help of others i.e. with the help of experts,
either his own finance or with the help of any institutions.
• The term “Promoter” has not been defined in the
companies Act. It is a term of business not of law.
• The person who give birth to an idea and starts working
on it is called as promoter.
• He may be considered as father of the company
• As per Palmer “He is a person who originates a scheme
for the formation of a company and prepares the MA and
AA, executed and registered, finds first directors, settles
the terms of preliminary contracts, prospectus and
makes arrangements for advertising and circulation of
the prospectus and placing the capital”
 Kinds of promoters
• 1.professional promoters
• 2.Occasional Promoters
• Financial Promoters
• Entrepreneur promoters
 Functions of a promoters
1.To conceive an idea of starting a business and explore its possibilities

• 2.To conduct the negotiation for the purchase of the business in case it is intended to purchase
an existing business. The help of experts can be taken in this context, if considered necessary.

• 3. To collect the requisite number of persons i.e. two in case of a public company, who can sign
the memorandum and articles and also agree to act as the first directors of the company.

• 4. To decide about the name of the company, location of the registered office of the company,
the amount and form of its capital ,arrangements for underwriters and brokers for capital, to make
arrangement for bankers, auditors, the legal advisers.

• 5.To get the MA and AA and printed

• 6. To enter in to preliminary contracts with vendors, underwriters etc.

• 7.To prepare prospectus, its filling, advertisement, and issue of capital

• 8. To pay preliminary expenses and to make arrangements for the loans and other types of
financial assistance.
 Duties and liabilities of
promoters
• 1. Observance of fiduciary relationship
• 2. Disclosure of all material facts
• 3. Liability for false statements, omission
of facts etc
 Some important points
• Remuneration to the promoters
• Liability of promoters for preliminary
contracts
 Incorporation
• Incorporation is a process which brings a company in to existence as a separate legal entity or
corporate entity.
• The promoters has to take the following preliminary steps in this connection

• 1. Ascertainment of availability of the proposed name of the company

• 2. Application for license

• 3. SEBI’s approval to draft prospectus

• 4. Preparation of company’s MA and AA

• 5. Fixation of the underwriters, Brokers, Solicitors, Auditors, etc.

• 6. Filing of necessary documents

a. MA, AA, list of directors and their written consent, notice of address of the registered
office, statutory declaration by experts.

• 7. Payment of necessary fees

• 8. Obtaining the certificate of incorporation

 Commencement of business
• A private company can commence
business immediately after incorporation,
but a public company has to fulfill certain
formalities before it can commence
business or exercise borrowing powers.
These formalities are as follows
 To get COB
• 1. Appointment of underwriters or brokers
• 2. Make application to recognized stock exchange for listing of shares and debentures
• Issue of prospectus to the general public

• Registration of following documents

• 1.A company which issue a prospectus
a. copy of prospectus
b. statutory declaration verified by the directors or company secretary to the effect that
Whether the directors have taken up and paid for the qualification shares, whether the shares
have been allotted equalently to the amount of minimum subscription etc.

2. Company which do not issue a prospectus must file the following documents with registrar
a. statement in lieu of prospectus
b. Statutory declaration regarding the qualified shares and on the allotment of shares for
minimum subscription.
Any contract made by the company before the date of its commencement, shall be binding on
the date of obtaining COB .
 Basic documents of the
company
• Memorandum of association
• Articles of association
• prospectus
 Memorandum of association
• M/A is the main document of the company,
Which defines its constitution and objects
and lay down fundamental conditions upon
which alone the company is allowed to be
formed.
• It may also termed as charter or the
constitution of the company since it
governs the relationship of the company
with outside world.
 Some important points
• Any provisions of M/A which is repugnant to
the company law is void.
• After registration of the M/A with the company
registrar the provisions of the company law
will get the legal effect.
• It is a public document therefore every person
who deal with the company is presumed to
have sufficient knowledge of its contents. It is
kept open for public inspection.
 Clauses of M/A U/S 13
• Name clause
• Situation clause
• Object clause
• Liability clause
• Capital clause
• Association clause or subscription clause
 Name clause
• A company is a legal entity therefore it must
have a name to establish its identity.
• Name clause of the M/A confers protection
against subsequent company registration in the
same or closely similar name.
• A company can have any name except
• A name which is identical or closely similar with
the name of other company so as to mislead the
prospective customer of that company.
• A name which is prohibited by the government.
• The last word of the name must be ‘limited’ in case of public
companies and private limited in case of private limited companies.
• It is not necessary the word company should be the part of the
name.
• Central government may permit a company to be registered with
limited liability with out addition to its name word ‘limited’ or ‘private
limited’
• Name of every company together with the address of its of
registered office must be painted or affixed out side the premises
where ever its business carried on, legible in one of the local
languages. It need not necessarily be in English language
• Name of the company and address of its registered office should be
mentioned in all official papers and publications
 Situation Clause
• MA should state the name of the state in which the registered office
of the company is to be situated.
• It will fix up the domicile of the company.
• Further every company must have a registered office either from the
day it begin to carry a business or with in 30 days of its
incorporation,
• The place where the registered office of the company is situated
that is the place of its residence for the purpose of delivering or
addressing any communication, service of any notice or process of
court of law for determining the question of jurisdiction in any action
against the company.
• It is the place where all statutory books and registers of the
company shall be maintained.
• Address of the registered office of the company need not be
mentioned in the MA
 Objects clause
• It defines and limits the scope and
operation of the company.
• It explains the members about the scope
of the activity of the company where there
capital has been employed.
• It gives protection to the share holders
against unwanted risk.
 Sec 13(1) –MA should contain the
following
• Main objects of the company to be
perused and also the objects which are
incidental or ancillary to the main object.
• Objects of the company should be well
defined and lawful.
 Liability clause
• It should contain each and every details
regarding the liability of a particular
company
• If the MA imposed unlimited liability for the
directors, their liability is unlimited.
 Capital clause
• Amount of share Capital with which the
company should be registered.

• Division in to shares of a fixed amount.

• All other relevant information regarding the

types of shares, mode of payment.
 Association clause
• The persons subscribing their signatures at the
end of the memorandum are desirous of forming
themselves in to an association in pursuance of
the memorandum. MA must be signed by seven
or more in case of public ltd co, and two or more
in case of private limited co,.
• Signatures shall be attested by the witnesses.
• There may be one witness for all the signatures
but one subscriber can not be a witness to the
signature of another.
• Full description address, occupation etc of the
subscriber and witness must be written
 Alteration of MA
• Alteration of name clause
• A company can change its name at any time
by
• Passing a special resolution
• By obtaining the approval of the central govet
to that effect
• No such permission is required if the change
of name is as a consequence of conversion
of the public company in to private company
or vice versa. That is to say just addition or
deletion of the word “private”
• If the name of the company is too identical or
closely resembles with the name of any existing
company 1. by passing a special resolution 2.
with the previous approval from the central govet
, the name can be changed.
• In the above said cases the central govet can
give directions to the company to change its
name in case of any default on the side of
company or its officials, shall be punished with
the fine that may be extended up to 1000 RS per
day.
• Such changed name shall be notified to
the registrar who shall enter the new name
in the register in the place of the former
name and issue a fresh certificate of
incorporation with the necessary
alterations embodied there in.
 Situation clause
• Changes in the registered office clause can be cause
by
1. Passing a resolution by the board of directors to
change the registered office from the one place to
another place with in the same city, town or village.
2. To change one city to another city with in the same
state requires special resolution of the share holders to
that effect. The change should also confirmed by the
regional director of the CLB.
3. Change of registered office from one state to another
state requires , special resolution of the share holders
as well as confirmation by the CLB.
• Company can not shift its registered office from one
state to another state unless the change is for bonafide
reason like to attain the economy or for the better
administration.
• U/S 17(1) the CLB must satisfied that
• Sufficient notice has been given to every debenture
holder and every other person whose interest will be
affected.
• The consent of the disagreeing creditors have been
obtained or their claims have been paid off or they have
been provided security to the satisfaction of the CLB
• Registrar shall be given reasonable opportunity to
appear before the CLB and state his objections and
suggestion regarding such alteration.
 Alteration of objects clause
• Change in the object clause is the most complicated affair. However
alteration can be made for the following purposes
• To carry on business more economically or more efficiently
• To attain its main purpose by new or improved means
• To enlarge or change the location of its operations.
• To carry some business which under existing circumstances ma
conveniently or advantageously be combined with the business of
the company.
• To restrict or abandon any of the objects specified in the MA
• To sell or dispose the whole or any part of the undertaking
• To amalgamate with an other company or body of persons.
• By passing a special resolution of share holders, notice to registrar,
to be heard before the CLB. Objections from any interested parties
to heard and satisfied if possible.
 Alteration of Liability Clause
• Alteration of liability Clause of the MA can
not be made so as to impose unlimited
liability on the members.
• However the additional liability can be
imposed to buy additional shares of the
company can not be made with out the
consent of the concerned member in
writing.
 Alteration of capital clause
• Alteration proper
• Reduction of capital
• Variation of the rights of the share holders
• Creation of reserve liability
 Doctrine of Ultra-Vires
• MA defines and confines the power of the
company, any act in contrary to the defined
power of the company is ultra vires to the
company.
• It means act Beyond the legal Power and
authority of the company.
• Such acts are completely void and not binding
on the company.
• This doctrine tries to protect the interest of the
investors and creditors.
• Ashbury railway carriage co ltd V. Riche
• German date coffee co.
• Effects of Ultra vires transactions.
• Injunction
• Personal liability of directors
• Contracts void
 Articles of association
• AA are the regulations and bye laws for
governing the internal affairs of the
company. They may be described as the
internal regulations of the company as well
as the powers of the share holders.
• According to the companies Act “ AA of the
company as originally framed or as altered
from time to time in pursuance of any
previous company law or this Act.”
 Section 26 of the company Act
• Private limited companies
• Companies limited by Guarantee
• Unlimited Companies
• Companies should prepare and file AA as per the
provisions of Table A –Schedule 1 of companies Act.
Which contains a model set of Articles. In case if a
company has not adopted the AA it means that company
has adopted table A as its article.
• AA should be printed and divided in to different
paragraphs, each consisting generally of one regulation
and should be signed by the subscribers to the MA.
•
 Contents of the Articles
• Adoption or execution of preliminary contracts
• Definition of important terms and phrases
• Share capital and different classes of shares
• Procedures to make calls and forfeiture of shares.
• Appointments of managerial personal, their rotation, powers and duties.
• Rules as to
• Transfer and transmission of shares
• Issue of share warrants
• General meetings
• Common seal of the company
• Dividend, reserves and capitalization of profits.
• Accounts and audit
• Line on shares
• Remuneration to managerial personnel
• Issue of redeemable preference shares
• Paying interest out of capital
• Winding up of the company
 Binding effects of MA and AA
• Binding the company to its members
• Binding on the members in their relation
to the company
• Binding between members
 Alteration of AA
• A company has an inherent power to alter its
articles any provision making Articles
unalterable is regarded as bad in law. how ever
there are certain limitations these are as follows
• 1. Articles can be altered only by a special
resolution. Conformation of the court is not
required. Articles can never be altered by an
ordinary resolution even if they provide for such
a procedure.
• 2. Alteration neither be beyond the provisions of
companies act nor the M/A. However Articles
may be altered to explain ambiguous portion or
to supplement the MA with regard to those
things upon which it is silent
• 3.Alteration of articles seeking to take away the
company's power to alter its articles would be
void as being contrary to the provisions of the
act. But an article prescribing a special method
for passing a special resolution for altering the
articles will be valid.
• 4. Alteration seeking to impose an additional
liability on a member of the company after the
date on which he became a member,
• to take share more than what he has already
taken or to pay any more money than what he is
liable to pay on his shares shall not be binding
upon him unless he agrees in writing to such an
alteration
• except in case where the company is a club or
any other association and the alteration of
articles provided for increase in the rate of
subscription by the members.
• 5. Alteration should not be illegal or against public policy
besides not being contrary to any other statute in force.
• 6. The power to alter the articles must be exercised by
the share holders in good faith for the benefit of the
company as a whole.
• Alteration of the articles for bona fide reason is valid
though it is likely to harm the interest of some members
of the company.
• Alteration of the articles shall not be valid if it has been
made for the benefit of an aggressive, vindictive or
fraudulent majority.
• Articles can not be altered so as to unseat a member
Distinction between MA and AA
• MA is the charter of the company that contains each and every
information of the co.,. Where as the AA contain rules and
regulations framed to govern the internal management of the
company.
• MA can not be altered easily where as AA can be altered with out
permission from the govet, or CLB. Members of the company has
full control over the articles by passing a special resolution.
• Both are public documents and MA defines the relation between the
company and outsiders, while the articles regulate the relation
between the company and members.
• The provisions of MA should not be contrary to the law. Where as
AA is a subsidiary document which should not go beyond the MA
and company law
 Constructive notice of the MA and
AA
• Both MA and AA are considered to be the public
document hence once they were registered with the
company registrar these documents should be kept open
for the public inspection in the office of the registrar or on
the demand.
• Hence it is the presumption that every one who deals
with the company in any respect they should have the
knowledge of the contents of the MA and AA and also
understood them according to their proper meaning.
• Therefore every person dealing with the company in any
respect should have the constructive notice of the MA
and AA and any act in contravention to these provisions
are not valid and such acts will be attached with the
consequences for the lapse.
Doctrine of Indoor Management
• With the constructive notice of MA and AA the outsiders can
ascertain the powers of the company and the extent to which the
powers have been delegated to the directors and any limitations
placed upon their powers.
• Hence any person (who had the constructive notice of the company
documents), deal with the company, shall deal at his own risk or
own cost and shall have to bear the consequences there off
• However this rule is subject to the doctrine of indoor management
which requires the persons in charge of the management of the
company to do all the things according to the procedures prescribed
by the AA and entitles the outsiders to assume that things have
been done in according with the provisions and procedure laid down
in the AA
• The duty of observing internal managerial
procedures such as regarding constitution of the
board, quorum, voting, internal regulations and
resolutions etc has been imposed upon those
who are responsible for the management of the
affairs of the company.
• Hence in all such cases the company shall
continue to be liable to the third parties even if
the internal formalities are found not to have
been completed.
• According to the doctrine of indoor management “
Person dealing with the company are bound to read the
registered documents and to see that the proposed
dealings are apparently regular and consistent with the
MA and AA therewith. But they are not bound to do any
more, they need not enquire in to the regularity of the
internal affairs of the company. They need not enquire
whether proper authority has been delegated to the
person who deal with the outsiders.
• It means outsiders need not enquire whether the
company has fulfilled each and every procedures and
regulations of internal mgt.
• Royal British Bank V/S Turquand
•
 Exceptions
• Knowledge of irregularity.
• Enquiry
• Forgery
• Lack of knowledge of AA
• Acts beyond the apparent authority
 Prospectus
• According to companies act prospectus means “
any document described or issued as a
prospectus and includes any notice, circular,
advertisement or other document inviting
deposits from the public or inviting offers from
the public for the subscription or purchase of any
shares in or debentures of a body corporate”

• Hence any document which intends to secure

required capital from the public at large can be
considered with in the meaning of prospectus.
 Requirement as to prospectus
• Issued after incorporation
• SEBI’s approval to the draft prospectus
• It must be dated
• It must be registered with the registrar
• Experts to be unconnected with the formation or
management of the company
• Experts consent to be obtained
• Terms of the contract not to be varied
• Share application form to be a part of
memorandum containing salient features of the
prospectus
 Contents of prospectus
• Part I of schedule II
• General Information
• Capital structure of the company
• Terms of the present issue
• Particulars of the issue
• Company management and project
• Information regarding company and other listed
companies under the same management
• Information regarding to outstanding litigation
• Management perception of risk factors
 Part II of schedule II
• General Information
• Financial information
• Statutory and other information
Effect of omission and mis –statements in
a prospectus

• Effect of omission
• Effect of mis-statements
• Liability of directors, promoters
 Statement in lieu of prospectus
• In all respect it is similar to the prospectus
 Allotment of shares
• Prospectus issued by a company is an invitation
• Application for shares is an offer and allotment
order or notice is an acceptance that give rise to
a valid contract between both the parties.
• Allotment means “ the appropriation out of the
previously unappropriate share capital of the
company”.
• Allotment is the acceptance of the offer to take
up shares. On entry being made in the register
of members, allottee becomes members of the
company, but until then allotment remains only a
contract.
• Allotment of shares is usually done by a
resolution of the board of directors.
• However reissue of forfeited shares is not
allotment, it is just resale of existing
shares.
General principles of allotment
• Allotment should be made by proper
authority
• It should be made with in reasonable time
• It must be communicated
• It should be absolute and unconditional
 Statutory restrictions on allotment
of shares
• Minimum subscription
• Shall be fixed either by the director or by the
subscriber of the MA
• Application money shall be at least 5% of the
nominal value of the share.
• Money to be deposited in a schedule bank until
to obtain the COB or till collect the entire money
on shares
• Statement in lieu of prospectus should be filed at
least 3 days before the allotment
 Consequences of irregular
allotment
• Contract voidable
• Directors liability
• Fine
• Allotment void
• Return of allotment should be filed with in
thirty days of such allotment.
• Allotment of shares in fictitious name shall
be liable for the punishment up to five
years
 Shares and share capital
Share means “share in the share capital of a
company” however it is not an exhaustive
definition.
According to J. Farwell a share is “ the interest of a
shareholder in the company measured by a sum
of money, for the purpose of liability in the first
place and of interest in the second and also
consist of a series of mutual covenants entered
in to by all the share holders inter se in
accordance with the provisions of companies Act
and its articles”.
 Kinds of shares
• Preference shares
• Equity shares
• Preference Shares are those which carry
the following two preferential rights over
other classes of shares
• 1. Preferential rights over the dividends
• 2. preferential right as to the repayment of
capital in case of winding up of company
 Types of preference Shares
• Cumulative and non cumulative
preference shares
• Redeemable and irredeemable preference
shares
• Participating and non participating
preference shares
• Convertible and non convertible
preference shares
 Equity shares
• Equity shares are those shares which are
not preference shares. There are two
types of shares.
• With voting rights
• With differential right as to dividends,
voting or other wise in accordance with the
rules and subject to such conditions as
may be prescribed.
 Share capital
• Preference share capital
• Equity share capital
• As per schedule VI of the Act share capital
of the company should be classified in the
balance sheet under 3 heads.
• Authorized share capital
• Issued share capital
• Subscribed share capital
 Transfer of shares
• Shares are movable property and can be
transferred by the share holders in the manner
prescribed by the articles.
• Right to transfer is absolute and inherent to the
ownership of the shares.
• Articles can not absolutely take away the rights
of members to transfer shares thus making
shares non transferable is ultra vires the
companies Act. However for the bonafide
reasons few restrictions can be imposed but
such restriction should not prohibit the share
holder to transfer his shares.
 Procedures for the transfer of
shares
• Transfer ordinarily by a member
• Transfer should be in the prescribed form
• Transfer application should be made by
the transferor or the transferee
• Proposed transfer to be placed before the
directors meeting
• Notice in case of refusal to register
transfer
 Transmission of shares
• Transfer of shares on account of operation of
law is termed as transmission of shares.
• Transmission of shares occur in case of death,
lunacy, or insolvency of an individual member or
if the member is a limited company, on its
liquidation.
• In all such cases the legal representatives,
administrator, or the official assignee or receiver
respectively shall be entitled to the shares.
 Forfeiture of shares
• If a call remains unpaid and time allowed
for its payment has expired, the company
may subject to the articles, forfeit those
shares and the amount received there on
• The power to forfeit shares must be
expressly given in the companies articles.
• It should not be implied
 Procedures to be followed for the
forfeiture of shares
• Default in the payment of a valid call
• Notice precedent to forfeiture
• Resolution for forfeiture
• Bona fide reasons
• Consequences of forfeiture
 Surrender of shares
• It means return of shares by the share holder to
the company for cancellation.
• It is voluntary abundance by the share holder of
all his shares of a company.
• Mere refusal to take up newly issued shares, to
which a shareholder is entitled to, is not a
surrender of shares.
• The power to accept surrender of shares can not
be exercised unless expressly given in the AA.
 Meetings and proceedings
• Kinds of meeting
1. Meetings of share holders or general meeting
• Statutory meeting
• Annual general meeting
• Extraordinary general meeting
• Meeting convened by the CLB
• Class meeting
2. Other meetings
• Meetings of the creditors
• Meetings of the debenture holder
• Meetings of the directors
 Resolutions
• Ordinary resolution
• It is passed by a simple majority of votes at a general meeting which needs
notice to be given as per sec 171 of the Act.
• Simple majority means vote casting either by raising their hands or on a poll
in favour of particular proposal, including the vote of the chairmen, exceed
the votes cast against it.
• It is required to pass the annual accounts, to declare dividends, to hold
elections of directors, to appoint auditors, to issue shares at discount, etc.

• Special resolution
• It must be passed by a majority of three fourth of the votes in person or by
proxy
• Notice should contain the intention for passing such special resolution must
specifically be mentioned.
• It is required to alter situation clause in MA, changing object as well as
name of the company, to reduce capital, alteration of AA, to wind up the
company.
 Directors
• Meaning of directors
• The directors are the persons elected by the
shareholders to direct, conduct, manage or
supervise the affairs of the company.
• The companies act does not define the term
‘director’ however sec 2 (13) simply provides
that the term director “ includes any person
occupying the position of a director by what ever
name called” thus a person will be deemed to be
a director if he performs the functions of a
director, though he may be named differently.
 Some important points
• Sec 303 further provides that “any person in
accordance with whose directions or
instructions the board of directors of a
company is accustomed to act shall be
deemed to be a directors of the company”
• The directors of the company collectively
referred as a “Board of Directors” or
“board”
• Only individuals to be a directors
 Number of directors
• Every public company shall have at least 3 directors.
• The company having share capital of Rs 5cr to 1000cr or
more, small shareholders may have a director elected by
such small shareholders.
• Other companies must have 2 directors.
• The company can increase or decrease the number
director by passing ordinary resolution, but not more
than 12.
• To increase the number of directors beyond the limits of
articles should obtain the permission from the c.govt .
• This provision does not applicable to the private
company.
 Appointment of directors
• Appointment of directors by promoters
• By members
• Retirement by rotation- 1/3 shall be retire at the I annual
general meeting and shall be appointed on the rotation
• By the board in case of C.vacancy
• Appointment of directors by third parties- as empowered
by the AA, such power may be delegated to the banking
authority, debenture holders or any other financial
institutions
• By central govt.-for the period of 3 years, not liable to
reappoint on rotation
 Qualification shares
• Every director of a company by its articles, required to
hold certain qualification shares, but the nominal value of
these shares should not exceed Rs 5000. if it exceeds
Rs 5000, director may purchase such qualified shares
with in 2 months of his appointment.
• Directors appointed by the govet to prevent the
oppression and mis mgt need not hold the qualified
shares.
• The person acts as a director with out qualified shares,
shall vacate office at the expery of period of 2 months,
otherwise shall be liable for punishment of Rs 500 per
day.
 Disqualifications of director
• Unsound minded person
• Insolvent
• Person convicted by Indian courts or any
foreign courts for an offence of mental
turpitude and sentenced to 6 months
• Person who failed to pay on calls
• If a person committed any fraud played in the
promotion, formation, management ,or winding
up of the company.
 Removal of directors
• By the shareholders
• By the central govet
• By the court
 Powers of directors
• As empowered and authorized by the
company. However there are two
limitations on the powers of directors
• which the Act or MA or AA requires to be
exercised by the share holders in the
general meeting.
• Directors are subjected to provisions of the
Act, MA, AA and other regulations.
Exceptional cases where the share holders can
interfere with the powers of directors

• Where the directors actions are found to

be mala fide.
• Where the board becomes incompetent to
act
• Dead lock in the board
 Power to be exercised only by the
board
• The power to make calls
• The power to issue debentures
• Power to borrow money.
• Power to invest the funds of the company
• Power to fill c.vacancy in the board.
Duties of directors (as per common
Law)
• Duty of good faith
• Duty of reasonable care
• Duty to attend board meetings
• Personal attendance
• Duty to disclose interest
 Secretary
• Secretary is one of the most important officials of a company,
basically concerned with various legislations prevalent in the county
as applicable to companies.

• According to sec 2(45) of the companies Act 1956, secretary means

“a company secretary who is a member of the institute of company
secretaries of India ( constituted under the companies secretaries
Act 1980) and includes any other individual possessing the
prescribed qualifications appointed to perform the duties which may
be performed by a secretary under this Act or any other ministerial
and administrative duties.”

• As per the Companies secretaries Act 1980, the person to be

appointed as a secretary must have passed the companies
secretaries examination of the institute of companies secretaries
and also be member of the institute.
• According to sec 45(a) of companies Act,
“Secretary in whole time practice” means a
secretary who shall be deemed to be in
practice as per provision of section 2(2) of
the companies secretaries Act, 1980 and
who is not in full time employment.
 Appointment of secretary
• Certain companies have to appoint company secretary

• Sec 383-A, every companies having share capital of Rs 2cr or more

should have a full time secretary

• Companies having 10 lacs and less than 2cr should obtain

compliance certificate from the company secretary who is in whole
time practice and such certificate should be attached with the report
of directors and submit to the company registrar

• In case of any default to comply with this rule, shall be punishable

with the fine of Rs 500 for each day of default.
 Mode of appointment
• The first secretary may be named in the
companies articles, but such nomination
does not give rise to any right to the
person nominated as secretary since
article bind the company to its members
only in their capacity as member and not
in any other capacity.
 Dismissal of secretary
• The secretary may be removed from his office by a resolution of the
board of directors. This may be done by the directors under the
general powers of management and administration given to them
under companies articles.
• A secretary is also an employee of the company and therefore the
general rules of employment of company will also be applicable to
him, hence he can not be removed from his office with out being
given a proper notice or compensation in lieu thereof unless he has
been found guilty of misconduct of the agreement of service.
• Misconduct includes wilful disobedience of any lawful order of the
company
• Even in those cases where the engagement is for a fixed term but
absolute discretion is given to the company to terminate the
employment earlier, proper notice of the companies intention to do
so is necessary.
Duties and liabilities of secretary
• Duties of secretary can be classified in to
two categories
• Statutory duties
• General duties
 Statutory duties
• He has to give notice to the registrar, for
increase of share capital
• He has to issue certificate of shares and
debentures
• He has to deliver for registration to the registrar
particulars of mortgages and charges
• He has to assist in the making of the statement
of affairs of the company in the winding up for
the purpose of submitting it to the liquidator.
 General duties
• To attend all meeting of shareholders, directors
and record their proceedings.
• To issue the necessary notice for calling of such
meetings on the instructions of the board of
directors.
• To supervise all issue of capital and debentures
• To conduct corresponds not only with the
shareholders regarding calls, transfers and
forfeitures of shares etc but also with the various
departments of the companies activities
• To supervise all issues of capital and
debentures
• To act as a medium and link between company
and the outsider
• To keep and maintain statutory and other books
• To organize, control and manage the internal
management of the company
• To register transfer and transmission of the
shares.
 Liabilities of secretary
• The company secretary is held liable for the following
matters
• 1. Default in the preparation on share certificates and
debentures certificates, that should be deliver with in 3
months after allotment and 2 months after the application
for registration of transfer or fine of Rs 5000 may be
imposed.
• Default regarding the register of members
• Default in filing of particulars regarding charges-
attached with 5000.
• Default regarding the publication of name by the
company
• Default in holding annual general meeting
• Default in holding statutory meeting
• Default in circulating the member’s
resolution
• Falsification of books of accounts
 Prevention of oppression and
Mismanagement-sec 397-409
• Meaning of oppression
• According to dictionary meaning the term “oppression”
includes any act exercised in a burdensome, harsh and
wrongful manner.
• To the context of companies Act “ It implies unjust or
unfair conduct, which is likely to result in some type of
harsh or tyrannical burden upon the shareholders who
have come to the court with a complaint , eg
• depriving of certain members of their membership rights
or unnecessary burden on company’s financial
resources on account of holding of separate meeting by
two rival board of directors etc
Ripon press co ltd v. Gopal Chetty
• “ there must be unfair abuse of powers
and impairment of confidence in the
probity with which the companies affairs
are being conducted as distinguished from
mere resentment on the part of the
minority at being out voted on some issue
of domestic policy
• It is not lack of confidence between the
share holders
• Oppression involves at least an element of lack of
probity or fair dealing to a member in the matter of his
proprietary rights as a shareholder.
• Persons concerned with the management of companies
affairs must , in connection there by, be guilty of fraud
misfeasance or mis conduct towards the members.
• It does not include mere domestic disputes between
directors and members or lack of confidence between
one section of members and another section in the
matter of policy or administration
• It does not covers mere private enmity between
members and directors
 Conditions for oppression
• Sec 397(2) provides that on a complaint by
members against oppression, the company law
board will interfere only when it is of the opinion
that-
• The companies affairs are being conducted in a
manner prejudicial to public interest or in a
manner oppressive to any member or members
• Circumstances suggest winding up of company
on just and equitable grounds but to order
winding up would be prejudicial to the interest of
the oppressed members
 Grounds to determine oppression,
as per CLB
1. When an attempt is made by majority to
force new and risky objects on the
unwilling minority
2. When an attempt is made to deprive a
member of his ordinary membership
rights
3. When the provision of the Act or articles
or MA are flout (disobey)
4. When conditions of fair play are violated
 Meaning of mis management-398
• If company affairs are being conducted in a
manner prejudicial to public interest or the
interest of the company or
• A material change has taken place in the
management or control of the company whether
by an alteration in its board of directors or
manager or the ownership of the companies
shares or if it has no share capital, in its
membership and that by reason of change, it is
likely that the affairs of the company will be
conducted in a manner prejudicial to public
interest or the interest of the company
 Application to the company law
board
• Who can apply- U/S399 and 401 following persons can
apply to the company law board for relief against
oppression and mismanagement
• A. In case of company having share capital –one
hundred fully paid share holders of the company or not
less than 1/10 of its member –which ever is less.
• In case of company not having share capital- not less
than 1/5 of total number of its members.
• Any lesser number of members, if so authorized by the
central govet if it considers just and equitable.
• The central govt can it self make an application
 Important points
• Rights to apply is available to equity and preference share holders.

• Besides that the right to apply not confined to oppressed minority

alone, an oppressed majority can also apply

• In Sindhri Iron Foundary (p) Ltd – If the court finds that the
companies interest is being seriously prejudiced by the activities of
one or other group of shareholders- that two different registered
offices at two different addresses have been set up that two rival
boards are holding meetings – that the companies business
property and assets have passed to the hands of unauthorized
persons who have taken wrongful possession and who claim to be
the shareholders and directors- then the court can pass appropriate
order to put an end to such matters
• Written consent of the of requisite number
of members i.s enough. If any member
withdraw their consent after the institution
of proceedings the validity of the
application will be affected there by.
• The CLB has to make an application to the
central govet before passing final order
 Powers of CLB
• According to section 402 CLB has the following powers
• To regulate the company affairs in future
• To terminate, to setting aside or modification of any
agreement, how so ever arrived at between the
company on the one hand and any of the following
persons on the other hand viz
1. Managing director
2. Any other director
3. The manager upon such terms and condition as may,
in opinion of the court, be just and equitable in all the
circumstances of the case
• To terminate any contract entered by the
company with in three months before the
presentation of the application
• Any matter which the CLB deems
necessary and just
 Powers of central govet
• To appoint directors as per the order of the
central govet
• It also issue such directions to the
company as it may consider appropriate
• It even conferred with the power to change
the auditors or order for the alteration of
AA.
 Winding up
• Meaning of winding up
• Winding up is the process by which a company
is dissolved and its properties are administered
for the benefit of its creditors and members. It
involves realization of companies assets,
payments of its liabilities and return of money
back to the members in proportion to the
contribution made by them to the capital of the
company.
 According to prof gower
• The liquidation or winding up of company is the
process whereby its life is ended and its
property is administered for the benefit of its
creditors and members.
• An administrator called liquidator, who takes
control of the company, collects its assets, pays
its debts and finally distributes any surplus
among the members in accordance with their
rights.
• Thus winding means dissolution of the company
 Modes of winding up
• Compulsory winding up under an order of
the court
• Voluntary winding up
• Winding up under the supervision of the
court
 Compulsory winding up
• Winding up of a company by an order of the
court is known as compulsory winding up – the
following are the grounds for compulsory
winding up of the company
1. Passing special resolution for the winding up
2. Default in holding statutory meeting
3. Failure to commence business
4. Reduction in membership
5. Liability to pay debts
6. Just and equitable
 Who may apply
• Petition by the company
• Petition by the creditors
• Petition by the contributories
• Petition by the registrar

• Withdrawal of petition
 Powers of the court on the
presentation of the petition
• 442 and 443
• Restrain proceedings against the company
• Hearing petition
 Voluntary winding up
• Winding up by the creditors or members with out any intervention
of the court is termed as voluntary winding up
• According to sec 484 a company may be wound up voluntarily by
passing an ordinary resolution in the general meeting
1. When the period, for the duration of which the company was
constituted, has expired or
2. When the event on the happening of which depended the
termination of the existence of the company has happened
• By passing special resolution to wind up voluntarily for any reason
what so ever
• With in 14 days of passing of resolution the company shall give
notice of the resolution by advertisement in the official gazette
and also in some news paper circulating in the district of the
registered office of the company
• Office responsible for the default of publication shall be
punishable for fine of Rs 500 for every day of default
 Types of voluntary winding up
• Members voluntary winding up
• Creditors voluntary winding up
• Member’s voluntary winding up requires the filing of a
statutory declaration of solvency by the majority of the
directors of the company with registrar.
• The question of creditors voluntary winding up will arise
in a case where the company is not in a position to pay
off its liabilities in full. In such a case declaration of
solvency shall not be made and filed with the registrar.
 Provisions applicable to Members
voluntary winding up
1. Appointment of liquidators
2. Managerial persons powers to cease on the
appointment of liquidator
3. Power to fill up vacancy in the office of the liquidator
4. Notice of appointment of liquidator to be given to the
registrar
5. Power of the liquidator to accept shares
6. Duty of liquidator to call creditors meeting in the case
of insolvency
7. Duty of liquidator to call general meeting at the end of
the each year
8. Final meeting and dissolution
 Provisions applicable to the
creditors voluntary winding up
1. Meeting of the creditors
2. Notice of resolution of registrar
3. Appointment of liquidator
4. Appointment of committee of inspection
5. Fixing of liquidators remuneration
6. Board’s powers to cease on the appointment of the
liquidator
7. Power to fill vacancy in the office of liquidator
8. Duty of liquidator to call meeting of company and
creditors at the end of each year
9. Final meeting and dissolution
 Winding up subject to the
supervision of the court
• At any time after a company had passed a resolution
for voluntary winding up the court may make an order
that the voluntary winding shall continue subject to the
supervision of the court under following circumstances
1. The liquidator under the voluntary winding up is
prejudiced or is negligent in collecting the assets or
2. The resolution for winding up was obtained by fraud
• The application for the courts supervision may be
made by any creditor/liquidator/by company itself.
• The court has the full discretion to grant or refuse a
supervision order.
 Dissolution of company or conduct
of winding up
• The object of winding up is to realize assets, discharge liabilities and
then to distribute any surplus among the share holders according to
their respective rights.
• All this work is conducted according to certain prescribed rules.
• In many respects, these rules are more or less uniform irrespective
of the mode of winding up for e.g. payment of liabilities, overriding
preferential payments, like all revenue/taxes due from the company
to the state govet or central govet.
• All wages and salary due to the company employees
• Assured holiday remuneration
• Sum due to the employee in the form of PF/pension fund/gratuity etc

• **********************************
Intellectual Property Law
Definition of intellectual property
 Nature of intellectual property
• Intangible incorporate property
• It consists of bundle of rights in relation to
certain material object created by the
owner
• Rights are created by the statutes.
• The invention may relate to a new product
or an improvement of an existing product
or a new process of manufacturing an
existing or new product.
 What is a patent
A patent is an exclusive right granted to a
person who has invented a new and useful
article or an improvement of an existing
article or a new process of making an
article.
It consists of an exclusive right to make use
of invention for a limited period. After the
expiry of the duration of patent any body
can make use of the invention.
 The objects of patent law
• To encourage the research and invention
and develop new technology and industry
• Induces an inventor to disclose the
invention
• To reward the inventor
• To provide protection to the inventions
 Patentable invention2(1) (j).
• An invention is defined as “ a new product or
process involving an inventive step and capable
of industrial application”
• Such invention should result in the production of
some vendible product
• Improves or restores to its former condition of a
vendible product
• Has the effect of preserving from deterioration
some vendible product to which it is applied.
 Inventions not patentable 3-4
1. An invention which is frivolous or which claims any thing
obviously or contrary to well established natural laws.

2. An invention the primary or intended use of which would be

contrary to law or morality or injurious to public health

3. The mere discovery of a scientific principle or the formulation of

the abstract theory or discovery of any living or non living
substances occurring in nature.

4. Method of agriculture or horticulture.

5. A mathematical or business method or computer programe
,algorithms
6. The works which can be covered under copy right law, law of
trade marks.
 Who may apply -6
1. Actual inventor
2. Assignee of the right to make an
application
3. Legal representative
 Who is eligible for the grant
1. Who applies first
2. Subsequent applicant will not get the patent
3. A person who has merely communicated an
idea is not an inventor but the person who
really gave a shape to such an idea is eligible
for the grant
4. A mere financial partner, a firm or a
corporation can not be a sole applicant for the
grant of patent
 Nature of right to apply
• Right to apply for patent is assignable and
should be in writing
• On the death of the inventor the right to
apply rest with the legal rep.
• Whether a particular invention conducted
during the course of employment is
belongs to the employer or not, depends
on the terms of contract to that context.
 Term of patent
• The term of patent after the
commencement of patents amendment
Act 2002 shall be 20 years.
• Procedure
• An application with the prescribed fees
should be filed in the appropriate office
• The application should be accompanied by
provisional or complete specification
• Where the provisional specification is filed
the complete specification should be filed
with in 12 months, in case of failure the
application will be deemed to be
abandoned.
• An application of patent will not be open
for public till 18 months from the date of
application.
• Thereafter the application will be published
• After publication of the application, with in the prescribed
period a request for examination of application should be
made by the applicant, in case of failure the application
will be deemed to be withdrawn.

• After such request , the application will be examined by

the examiners of patents to see whether such application
complies with all the requirements of the Act, Whether is
there any Lawful grounds for objection to the grant of
patent or the said invention is already claimed or
published by any other person
• After examination of the application, the patent
office will communicate to the applicant, the
objections if any , to the grant of patent.
• Where the applicant has satisfactorily removed
the official objections, the controller will accept
the complete specification and advertise it in the
official gazette.
• Any person interested may give notice of
opposition with in three months from the date of
advertisement in the official gazette.
 Specification
• A description of the invention is called as specification.
• A patent specification is a technical as well as a legal
document.
• Two types of specification
1. provisional specification
2. complete specification
Provisional specification need not be full and specific. It is
sufficient if it contains a general description of the
invention, its field of application and anticipated result.
The object of the provisional specification is to fix the
priority date of the patent . Once the provisional
specification was filed the applicant gets 12 months to
file complete specification.
 2. Complete specification
• A complete specification should contain the following
1. A full and particular description of the invention and its
operation or use and the method by which it is to be
performed
2. A disclosure of the best method of performing the
invention which is known to the applicant and for which
he is entitled to claim protection.
3. specification should contain the detail description of one
invention. Whether product or process.
4. The specification should be accompanied by the abstract
to provide technical information of the invention. If the
invention contains any biological material which is not
available to the public such materials shall be deposited
to an international depository
 Opposition to grant of patent.
• The acceptance of the complete specification
will be advertised in the official gazette. Any
person interested may, with in one year from the
date of publication of grant of patent, give notice
of opposition in the prescribed form.
• based on such opposition the applicant for
patent will be given an opportunity to replay to
the grounds of opposition and both parties will
be enabled to support to their respective cases
by evidence.
 Register of patents and patent
office
• Section 67-72 –for the registration of the patent
the following particulars should be entered in the
register kept in the office of the patents
• The name and full address of the grantee, the
title of the invention , the date of the patent, the
date of sealing and the official number of the
patent.
• Notification of assignments, transmissions,
licenses, amendments, extensions and
revocation of patents
• Particulars of such other matters affecting the
validity or proprietor of patents
 Powers of central government-sec
99 -103.
• Notification of invention relevant for the defense
purposes and their periodical review.
• Petitioning for revocation of patent under any
ground specified in the act.
• Giving directions to the controller in respect of
inventions relating to atomic energy.
• Declaring a patent as deemed to be revoked in
public interest.
• Applying to the controller for revocation on the
ground of non working in India.
 Notifying any patent for grant of
compulsory license.
• Use of inventions or patent for the purpose
of government without paying royalty.
• Acquisition of a patent by notification for
public purpose.
 Rights and obligations of patentee
• Right to exploit patent

• Right to assign and license

• Right to surrender
 Infringement of patents.
The patents Act has not defined the term
infringement of patents in exact terms but
obviously it means violation of the monopoly
rights conferred by the grant.
The determination of infringement of patent
Involves the following questions.
1. The extent of the monopoly rights granted
2. Whether the alleged acts amount to making ,
using exercising ,or distributing a product or
using exercising a method or process,
patented.
 copyright
• Copyright means the exclusive right to do
or authorize others to do certain acts in
relation to
• 1.literary, dramatic, musical and artistic
works,
• 2.Cinimatograph film
• 3.sound recordings etc.
• Basically CR is the right to copy or
reproduce the work in which CR subsists.
 Nature of CR
• CR is a multiple right consisting of a bundle of
different rights in the same work.
• These rights can be assigned or licensed either
as a whole or separately e.g. In literary work
there is a right of reproduction in hard back and
paper back editions , the right of paper
publication in magazines, the right or of dramatic
and cinematographic version the right of
translations, adaptation, the right of public
performance.
 Ideas are not the subject matter of
CR
• CR subsists only in the original work

• Original does not mean that should be a new invention but thought
should be original and should not copied from any other work.

• No formal registration is required, CR subsists in a work

automatically once it has been published and came in to existence.

• Live events are not the subject matter of CR. No license is required
to transmit programmes of supporting events and news events

• The grossly immoral, illegal, defamatory, seditious, irreligious or

contrary to the public policy or intended to deceive the public
 Term of CR
• Section 22 to 29 of the act deals with the term of the CR
protection
• The term of the CR varies according to the nature of the
work and whether the author is a natural person or a
legal person or a government.
• But in common, it is 60 years from the date of death of
the original author.
• If the work involves two or more authors then the 60 year
time starts from the date of death of the author who dies
last.
• If the work belongs to any govt or public under taking
then time starts from the date of its publication.
 Infringement of copy right
• Section 51 defined the term CR
infringement
• CR is deemed to be infringed when any
person involved in an unauthorized use of
the CR conferred on the original owner.
 Essential ingredients of the
infringement
• Reproduction of the work in a material
form
• Publication of the work
• Communication of the work to the public
• Performance of the work in the public
• Making of adaptations and translations of
the work and doing any of the above acts
in relation to a substantial part of the work
 Factors to be considered to
determine the infringement of CR
• Coping –casual connection-sub conscious
copying-indirect copying

• Substantial taking-un altered copying-

extent of defendant’s alteration, character
of defendants and plaintiffs work, nature
and extent of plaintiffs work, manner in
which defendant has taken advantage of
plaintiffs work etc.
 Definition of the designs Section 2
(d) of the designs Act 2000.
• Design means only the features of shape
configuration, pattern, ornament or composition
of lines or colour applied to any article whether
in two dimensional or three dimensional or in
both forms by any industrial process or means
whether manual , mechanical or chemical
separate or combined which in the finished
article are judged solely by the eye
• It excludes the subject matter of trade mark.
 Basic elements of designs
• 1. design must be applied to articles –design is one
which is applied to the article but not the article it self.
• A peace of paper on which a pattern is drawn can not
be a subject matter of the design but if such pattern has
drawn to present any article then it can be the matter of
protection.
• Similarly if the drawing is that article like bottle , vase,
chair, table etc can be register able as a design.
• 2. appeal to the eye means judged solely by eye not by
the functional characteristics and the eye must be the
eye of the customer.
• 3. Novelty and originality- new , original , unique ,not
published prior to making application for the grant of the
design protection.
Designs prohibited from registration
• The following designs are prohibited from the
registration.
• 1. design which is not new and original
• 2. design which has been disclosed to the public
anywhere in the world prior to the filing date or
the priority date of application.
• 3. a design which have significant similarities
• 4. which contain scandalous or obscene matter.
• 5. a design which is contrary to the public order
or morality.
 Trade marks
• Definition of trade mark.
• Section 2(1)(zb) of the 1999 Act.
• Trade mark must be a mark which includes a device,
brand, heading, label, ticket, name, signature, word,
letter, numeral, shape of goods, packaging or
combination of colours or any combination thereof.
• 2. TM must be capable of being represented graphically.
• 3. Must be capable of distinguishing the goods or
services of on person to another person.
• 4. It may include shape of goods, their packaging and
combination of colours.
• 5. It must be used or proposed to be used in relation to
goods or services.
 6.The use must be for the purpose of indicating
the connection
• 7. It is a statutory right which requires no actual
user but only an intention to use the mark is
essential.
• 8. A registered trade mark can be protected by
an action of infringement which is statutory
remedy and unregistered TM can be protected
by taking an action for passing off which is a
common law remedy.
 Functions of TM
• 1. It identifies the product and its origin.
• 2. It guarantees its un changed quality
• 3. It advertises the product
• 4. It creates an image for the product.
 What is good Trade Mark.
• It should be easy to pronounce and remember, if
the mark is word,
• It should be easy to spell correctly and write
legibly.
• It should not be descriptive but may be
suggestive of the quality of the goods.
• It should be short
• It should be appeal to the eye as well as to the
ear.
• It should not belong the class of marks that has
been prohibited for registration.
 Grounds of the refusal for
registration
• Deceptive similarity.
• Which have become customary in the
current language or in the bona fide or
established practice of the trade.
 What is deceptive similarity
• The degree of resemblance between the marks
phonetic, visual as well as similarity in idea.
• The nature of the goods in respect of which they are
used or likely to be used as a trade mark.
• The similarity in the nature, character, purpose of the
goods of the rival traders.
• The class of purchasers who are likely to buy the goods
bearing the marks, there level of education and
intelligence. The degree of care that they are likely to
exercise in purchasing.
• Mode of purchase of goods or of placing orders for the
goods,
 Infringement of TM
• Sec 29
• The uses of the registered TM which are likely to
cause confusion or likely to have an association
with the registered mark constitute infringement
of the registered TM.
• The mark identical and goods and services are
similar.
• Marks similar and goods or services are similar
or identical.
• Marks identical and goods or services identical.
• Term

• Term of TM protection is unlimited but

subjected to periodical review
 Confidential information.
• The general rule of business do not
disclose the confidential information that
effects their business should be
confidential.
• It is obvious, where one business holder
looking for confidential information of their
rivals similarly all will strive to protect
confidential information and it is based on
“let others to know little about us”
 Nature of confidential information
• Information may be trade secret – method
of production not protected by the patent
• Business secret like financial
arrangements of undertaking or
information like salary of clerk etc
• Confidence may be implied in contract
• Since it is based on equitable obligation of
confidence which may be implied from the
circumstances of the case
 Identification of confidential
information
• 4 elements to be identified
1. Information must be information the release of
which the owner believes would be injurious to
him or of advantage to his rivals or others.
2. The owner must believe the information as
confidential and secret which is not already in
public domine.
3. Such believe must be reasonable.
4. The information must be judged in the light of
the usage and practices of the particular
industry or trade concerned.
Essentials of breach of confidence
• The information itself must have the
necessary quality of confidence about it
• That information must have been imparted
in circumstances importing an obligation of
confidence
• There must be an un authorized use of
that information to the determent of the
party communicating it.
Exceptions to breach of confidence
• To protect the public interest
• For the national security
 Lay out designs of integrated
circuits
• Article 35 to 38 of the TRIPS agreement
deal with the protection of new form of
intellectual property that is a result of the
technological advancement in Electricity
and Electronics.
• In India- Semiconductor Integrated circuits
Layout Design Act 2000
 Definition
• Lay out designs means a lay out of transistors, and other
circuitry element and includes lead wires connecting
such elements and expressed in any manner in a
semiconductor integrated circuit.

• Semiconductor integrated circuit means a product having

transistors or other circuitry elements which are
inseparably formed on a semiconductor material or an
insulating material or inside the semi conductor material
and designed to perform an electronic circuitry function.
 Essential criteria's for registration
• Should be original
• That have not been commercially
exploited any where in India or in a
country who is member to the convention.
• That are inherently distinctive
• That are inherently capable of being
distinguishable from any other registered
layout designs.
• The term of protection is 10 years.
 Geographical indications
• Certain geographical names have acquired a lot of
importance in the commercial market , particularly with
regard to the goods uniquely associated with such
names. Here the protection is for indication of source
and appellations of origin
• Indication of source is merely a geographic designation
indicating where the goods came from e.g.. Paris
perfume,
• Appellation of origin means the geographical name of
the country, region or locality which serves to designate
a product originating there in, the quality and
characteristics of which are due exclusively or essentially
to the geographical environment, including natural and
human factors.
 Prohibition on the assignment
• Notwithstanding any thing contained in law
that is in force for the time being- any right
to registered geographical indication shall
not be assigned, transferred, and shall not
be pledged, mortgaged. It will pass to the
legal successor.
 FEMA 1999
• HISTORY
• After second world war, the scarcity in the foreign
exchange resources and reserves exposed the need for
conservation and control over the foreign exchange.

• Hence FERA 1947 has been enacted for the period of 10

years later in 1957 the same has been regularized

• Again the FERA 1947 has been repealed by the FERA

1973 to consolidate and amend the law relating to
certain payments , dealing with foreign exchange and
securities
• The FERA1973 has been reviewed in 1993 and thought several
amendments as a part of on going process of economic liberalization
relating to foreign investments and foreign trade.

• The Reserve Bank of India has also suggested for the establishment of new
Act. A task force was constituted to this context that submitted its report in
1994 and suggested many changes to the existing Act.

• Significant developments has been took place in 1993 ,such as substantial

increase in foreign exchange reserves, growth in foreign trade,
rationalization of tariff, current account convertibility, liberalization of Indian
investments abroad, participation of foreign investors in abroad. But the
FERA was widely described as a draconian and obnoxious law

• Again due to economic liberalization, and to fill the loop holes that exist in
FERA the FEMA 1999 has been enacted, in order to strengthen the
exchange policies
 Important definitions
• Currency sec 2(h) includes all currency notes, postal notes, postal
orders, money orders cheques, drafts, travelers cheques,
Letter of credits, bills of exchange, promissory notes.

Foreign currency means and includes

• Deposits, credits, and balances payable in any foreign currency.
• Drafts, travelers cheques, letter of credit, bill of exchange,
expressed or drawn in Indian currency but payable in any foreign
currency.
• Drafts travelers cheques, letter of credit or bill of exchange, drawn
by banks institutions or persons out side India, but payable in Indian
currency.
• Credit cards or such other similar instruments as may be notified by
the Reserve Bank, ATM cards.
 Objectives of FEMA
• To facilitate External Trade and Payments

• To promote the orderly development and

maintenance of foreign exchange market
 Salient features of FEMA 1999.
• Section 3 deals with the regulation and management of foreign
exchange and sec 5 current account transactions.

• Such as- No person other than the authorized person shall deal
with foreign exchange or with foreign currency,- shall not make
payment to or for the credit of any person resident out side India in
any manner- No person shall enter in to any financial transaction in
India as a consideration for or in association with acquisition or
creation or transfer of a right to acquire, any asset outside India by
any person

• Unless other wise provided in the Act, No person resident in India

shall acquire, hold, own posses, or transfer any foreign exchange,
foreign security or any immovable property situated out side India
• The Act requires the exporters to furnish to
reserve bank or to such other authority
certain details regarding the exports.
• However to ensure the export value of the
goods received with out any delay,
Reserve Bank can impose any restrictions
as it deems fit.
 Comparison between the FERA
and FEMA
• FEMA is a smaller enactment consist with 49 sections –
where as FERA contained 81.
• Contraventions in FERA was a criminal offence but in
FEMA civil and compoundable offences and confined
only to compensation. Arrest shall be resorted to only if
the defaulter has transferred the property or part of that
property dishonestly.
• In FERA to determine the residential status of a person
the actual intention was an essential condition. But in
FEMA the Actual period of stay.

*******************************************************************
 Consumer protection Act 1986
amended in 1993.
• Objectives
• 1. To provide better protection to the consumers
• 2. To establish councils for the settlement of consumers
disputes and for the matters connected there with.
• 3. To protect the rights of the consumers against
marketing goods which are hazardous to life and
property.
• 4. To provide protection against the unfair trade
practices.
• 5. To provide protection to the right to information
regarding the quality, quantity, purity, standard and price
of goods.
 Who is a consumer
• A consumer is a person who
• 1. buys any goods for a consideration
• 2. hires or avails of any services for a
consideration
• 3. uses the goods with the approval of the
person who has bought the goods for
consideration
• 4. Is beneficiary of services with the consent of
the person who has hired the services for
consideration.
 Three essential criteria's to be a
consumer
• 1. The services should have been
rendered to him.
• 2. The services should be hired by him.
• 3. He should have paid the consideration
for hiring the services.
• The consideration may have been paid or
promised or partly paid or partly promised.
• Buying of goods and services for
consideration is essential.
 Who is a person

• A firm whether registered or not.

• A Hindu undivided family.
• A co operative society.
• Every other association of persons
whether registered under the SRAct1860
or not.
 Who is not a consumer
1. who obtains the goods for resale or any commercial
purpose.
2. Who buys goods with out consideration.
3. Hires or avails of any services without consideration.
4. Uses the goods with out the approval of the person
who has bought the goods for consideration or
5. Who is beneficiary of services with out consent of the
person who has hired the services for the
consideration.
6. Who obtains the service under a contract of personal
service.
 What is goods
• Goods has been defined as
• Every kind of movable property other than
actionable claims and money. Goods
includes stock and shares, growing crops,
grass and things attached to or forming
part of the land which are agreed to be
served before sale or under the contract of
sale.
 What is service
• Service of any description which is made
available to potential users. It includes the
provisions of facilities in connection with
banking, finance, insurance, transport,
processing, supply of electrical or other
energy.
 Who are held as consumers
• Bank customers
• Telephone subscribers
• Consumer of electricity.
• A passenger traveling by train.
• A patient receiving medical treatment
• A depositor of money
• Nominee of a insurance policy.
Who are held not to be consumers

• A patient receiving medical treatment in a

government hospital
• Client hiring services of an advocate
• A student of a private tutor.
• Purchaser of a shares or debentures for
resale etc.
 Consumer dispute
• Complaint, allegations or accusation
stated in the complaint, in a prescribed
form but not accepted by the other party
is called as consumer dispute.
• Compliant is any allegation in writing made
by a complainant
 Consumerism
• Philip kotler defines consumerism as “a
social movement seeking to augment the
rights and powers of the buyers in relation
to sellers”
• Boyed and Allen state that “dedication of
those activities of both public and private
organizations which are designed to
protect individuals from practices that
impinge their rights as consumers”.
 Points against the interest of the
consumer
• Making false statements or making
publications regarding the standard,
quality, grade, composition, style, model,
usefulness, and price of the goods or
services.
• Falsely representing the rebuilt and
second hand product.
• False statement regarding the warranty
• Deficiency means any fault, imperfection, short
coming or inadequacy in the quality, nature and
manner of performance which is required to be
maintained under the law.
• Defects in the goods
• Excessive price
• Hazardous goods while dealing with such goods
the manufacturer should display the contents
and its harm full effects on the life and health.
 Consumer protection councils
• Central consumer protection council
• State consumer protection council
• Central consumer protection council
• The minister in charge of the consumer affairs in
the central government as a chairmen
• As per the consumer protection rules 1987the
number of members of consumer protection
council should not exceed 150, they include the
following
• Minister of state or dy minister of central govet
who shall in charge of the consumer affairs shall
be the wise chairmen of the central council.
• 8 members from parliament, 5 from Loksabha,
3from Rajyasabha
• Secretary or the national commissioner for S.C
and S.T
• Representatives of the consumer organizations-
not less then 35
• Representatives from farmers, traders,
industries not exceeding 20.
 Consumer protection councils
• Central consumer protection council
• State consumer protection council
• Central consumer protection council
• The minister in charge of the consumer affairs in
the central government as a chairmen
• As per the consumer protection rules 1987the
number of members of consumer protection
council should not exceed 150, they include the
following
• Minister of state or dy minister of central govet
who shall in charge of the consumer affairs shall
be the wise chairmen of the central council.
• 8 members from parliament, 5 from Loksabha,
3from Rajyasabha
• Secretary or the national commissioner for S.C
and S.T
• Representatives of the consumer organizations-
not less then 35
• Representatives from farmers, traders,
industries not exceeding 20.
Objectives of the central council
• The right to be protected against the
marketing of goods and services which are
hazardous to life and property
• The right to be informed about the quality
and quantity, purity, standard and price of
goods and services
• The right to be assured verity of goods
and services at competitive price
• the right to consumer education
 State consumer protection council
• Members
• 1. the minister in charge of consumer
affairs
• Such other members having interest in the
consumers affairs and as prescribed by
the state govet
 Consumer dispute redressal
agencies
• Section 9
• District forum
• State forum
• National commission
 Composition of
Agencies
• District forum
• President –the person who possess the
qualification to become a district court judge
• Two other members –one should be women
• Every member will hold the office till the
completion of 65 years or 5 years which ever is
earlier and not eligible for reappointment
Objectives of the central council
• The right to be protected against the
marketing of goods and services which are
hazardous to life and property
• The right to be informed about the quality
and quantity, purity, standard and price of
goods and services
 Procedure on receipt of complaint
• Same as the civil court
 Environmental protection Act 1986
INDIAN LEGISLATIONS TO GOVERN THE ENVIRONMENT

• In India there are enormous laws which directly or indirectly deal

with hazardous waste, toxic substances and other waste which are
in solid form. These legislations are,

• The Indian Penal Code 1860, where section 268, 269, 277, 278 and
284 enumerated that the acts and omissions that affecting the public
health, safety and convenience are considered as penal offences.

• But these sections are not directly addressed the discharge and
disposal of most of the modern hazardous wastes, because this law
is more than a century old and at that time the framers of the code
has not visualized the problems
• The Stock Holm Conference 1972 can be
termed as step stone in the evolution of the
environmental jurisprudence in India.
• Being a participant to the Stock Holm
Conference in 1972, India has taken a lead
among all other developing countries to have
different administrative, regulatory and legal
measures to control the hazardous and all other
kinds of waste that are in solid form.
• After the Stockholm Conference in 1972, India
has enacted many Acts, They are, the Water
(prevention and control of pollution) Act 1974,
and The Environmental Protection Act 1986 etc.
• Further it was realized that most of the
hazardous wastes are generated by factories,
industries etc. therefore many more laws were
enacted to address the said problem.
• Similarly the Environment Protection Act
1986 (EPA 1986) was enacted that
comprehensively deal with all aspects of
environmental problems.
• Sec 3 of the Environmental Protection Act
empowered the central government to
take all measures as it deems necessary
or expedient for the purpose of protection
and preservation of environment.
• The central government in exercise of the powers
conferred under section 3, 6, 8 the EPA has passed the
following laws
• A. Hazardous waste (Management and Handling) Rules
1989
• B. Manufacture, storage and import of Hazardous
chemical Rules 1989.
• C. Hazardous Micro-Organisms Rules (1989)
• D. The Chemical Accidents (emergency, planning,
preparedness, and response)
• Rules 1996.
• E. Bio-Medical Waste (Management and Handle) Rules
1998
• F. Recycled Plastic Manufacture and uses Rules 1999.
• G. The Ozone Depleting Substances (Regulation and
Control) Rules 2000.
• H. Municipal Solid Waste (Management and Handling)
Rules 2000.
• I. The Batteries (Management and Handling) Rules
2001.
• J. Environment (siting for industrial projects) Rules 1999.
• K. Environmental Impact Assessment Notifications.
• L. Public Hearing Notifications.
• These are the important rules and notifications enacted
by the central government to
• For the protection and preservation of environment.
V. WATER (PREVENTION AND CONTROL
OF POLLUTION) ACT 1974

• Water (Prevention and Control of Pollution) Act 1974 has forwarded

elaborate definition for water pollution which means

• “ such contamination of water or such alteration of the physical

chemical or biological properties of water or such discharge of any
sewage or trade effluent or of any other liquid, gaseous or solid
substance in to water ( whether directly or indirectly) as may or is
likely to, create a nuisance or render such water harmful or injurious
to public health or safety, or to domestic, commercial, industrial,
agricultural or other legitimate uses ,or to the life and health of
animals or plants or of aquatic organism”
• Pollutants enter the marine through numerous
pathways most important of them
• are, water ways, rivers, estuaries and floods etc.
Therefore the protection and preservation of the
rivers and estuaries plays a significant role in the
protection and preservation of the marine
environment, because huge quantum of land
based waste enter the marine through these
path ways.
•
• Hence the ‘Water (Prevention and Control of pollution)
Act 1974’ mainly designed to prevent and control the
water pollution and to maintain or restore the
wholesomeness of the water.
• The Act has established the pollution control boards and
conferred the powers and imposed obligations for the
protection and preservation of the water. Presently these
pollution control boards are acting as a watch dog for the
protection and preservation of internal water.
• The Water (Prevention and Control of Pollution ) Act
1974 has been designed with the help of 64 sections
divided in to 8 chapters
• The Act has established State Pollution
Control Board, Central Pollution Control
Board and also
• Joint Pollution Control Board.
• The boards are entrusted with certain
duties such as to advice the central
government in the matters relating to the
protection and preservation of the
wholesomeness of the water.
• The boards have to co-ordinate with the
activities of the state pollution control
board and resolve dispute among them .
• Further these boards have to plan and
organize the nation wide plan and co-
ordinate with each other to execute such
action plans.
• These boards are under the obligation to collect
the information, statistical data regarding the
water pollution and publish such information. In
addition power to establish the environmental
laboratories are also vests with these boards.
• Hence these boards are performing significant
role in the protection and preservation of the
internal and marine water.
• However the constitutional structure of
these boards is not sufficient to regulate
the environmental challenges. Hence soon
steps should be taken to revive the
structure, functions and powers of the
pollution control boards in order to make
them stronger to face the new
environmental problems
 Competition Act 2002
• The prime object is to prevent the un
fair practices of trade that affects the
competition.
• There by -to promote and sustain fair
competitions in the market.
• -to protect the ultimate interest of the
consumers.
• -to protect the interest of the co
participants in the market.
• The Act has been enacted to establish a
commission to prevent the practices
having adverse effect on the competition.
• Section 2 deals with the definition part
• Sec-2(a)- ACQUISITION , which means
directly or indirectly acquiring or agreeing
to acquire (i) shares, voting rights, or
assets of any enterprise.
 Section 2( c ) -CARTEL
• Includes an association of producers,
sellers, distributors, traders or service
providers who by agreement amongst
them selves, limit, control or attempt to
control the production, distribution, sale, or
price or trade in goods or provision of
services.
Chapter 2 –prohibition of certain agreements
,abuse of dominant position
• Section 3 prohibits anti competitive agreements
• Anti competitive agreements are those
agreements which intend to determine purchase
or sales price or to limits or control the
production ,supply, market ,technical
development, investment or provision of
services, by way of allocation of geographical
area of market or type of goods or services or
number of customers in the market or any other
similar way.
 Only exception
• The above provision is not applicable to
the agreements which are made to
increase the efficacy of the production
,distribution, supply, storage, or any other
similar purposes.
The following agreements are considered as
anti competitive agreements
• Tie- in- arrangement.
• Exclusive supply agreement .
• Exclusive distribution agreement.
• Refusal to deal .
• Re-sale price maintenance.
• TIE- IN- ARRANGEMENTS. Includes any
agreement requiring a purchaser of goods , as a
condition of such purchase, to purchase some
other goods .

• EXCLUSIVE SUPPLY AGREEMENT. Includes

the agreements restricting the purchaser ,during
the course of his trade, to acquire or to deal with
any goods other than those of the seller or any
other person.
• EXCLUSIVE DISTRIBUTION AGREEMENT.
Includes any agreement to limit ,restrict or with
hold the out put or supply of any goods or
allocate any area or market for disposal or sale
of the goods. (in the particular market only.)
• REFUSAL TO DEAL, includes any agreements
which restrict or likely to restrict, by any method,
the persons or classes of persons to whom
goods are sold or from goods are bought.
• RE-SALE PRICE MAINTENANCE.
Includes any agreement to sell goods on
condition that the price to be charged on
the resale by the purchaser.
 Abuse of dominant position

• Section 4 has described that no enterprise

is permitted to abuse its dominant position
• Abuse of dominant position means and
includes,
• 1. If an enterprise has imposed unfair or
discriminatory conditions on the purchase
or sale of goods and services or on its
price.
• 2. Limits or restricts the production of
goods and provisions of services
• 3. limits or restricts the scientific and
technical development of the goods or
services so as to prejudice the ultimate
consumer.
• 4. Denial of market access
 What is the meaning of dominant position?

• The position or strength enjoined by an

enterprise in a relevant market, in India ,
which enable it to operate independently
of competitive forces in India.
 Exception
• The provision is not applicable if such
agreements intend to,
• Increase the quality or quantity of
production.
• To increase the capacity of supply and
storage.
• To protect the interest of consumers.
 Section 7-Competition commission of India

• It is a commission established by the

central govt
• It is a body corporate, having perpetual
succession, common seal, with a
common object.
• It can hold, acquire, deal with the
moveable and immovable property, as
directed by the Act.
 Section 8-Composition of the
Commission
• During the first year of establishment of
commission the central govt has to appoint
one chairmen and other ten members but
not less then two.
• Min -2,Max-10, 1-chairmen-to be
appointed by the central govt
 Section 8(2),(3)-Qualification of
members of the commission
• He shall be an out standing candidate
having the ability and qualification to
become a judge of the high court, or he
should be a person having special
knowledge or professional experience of
15 years, in the field of law. International
trade, economics, commerce,
accountancy .
• They are the full time members.
Selection of should be made as per
the rules prescribed by the c. govt
• Duration of the chairmen is 5 years and
can be re appointed.
• The retirement age of the chairmen is till
he attain the 67 years and for members it
is 65 years.
• If any vacancy occurred due to the
resignation, removal, or death then
appointment should be made as per the
provisions of sec-8,9.
 DUTIES, POWERS, AND FUNCTIONS OF THE
COMMISSION

1. Eliminate practices that have an adverse

effects on the competition
2.for the purpose of discharging its duties
and functions ,with the permission of the
central govt, the commission can enter in
to an arrangement or memorandum with
the agency of foreign countries.
 .

• 3. Section 19- investigation on the anti

competitive agreements and dominance of
power On the application, with the
prescribed fee made by the person, trade
association or group the commission can
conduct inquiry in to adverse trade
practices
• However while doing so commission has to
kept certain points in the mind.
 Stock exchange and its regulation
• Stock exchange is a market in which securities
are brought and sold and it is an essential
component of a developed capital market.
• According to the securities contracts
(Regulation) Act 1956 stock exchange means
any body of individuals, whether incorporated or
not, constituted for the purpose of assisting,
regulating, or controlling the business of buying,
selling or dealing in securities.
• According to this Act, securities include
1. Shares, stocks, bonds, debentures,
stocks other marketable securities of a
like nature in or any incorporated
company or body corporate.
2. Government securities such other
instruments as may be declared by the
central govet to be securities.
3. Right or interest in the securities.