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Q 1. Write short notes on any 5 of the following: (a) Public control of business (b) National Development Council (c) Traditional Partnership Vs. Limited Liability Partnership (d) 3-tier redressal Mechanism under Consumer Protection Act (e) Lifting of Corporate Veil (f) Private Vs Public Comapny (g) Doctrine of Caveat Emptor Ans. 1(a) Public control of business is exercised through the interventions by the government at the centre and at the state level. World Bank has classified the functions of the state along the continuum theses functions vary from activities in which state intervention is essential to activities in which state plays an active role. Basic function: activities that are undertaken only by the state. It is the government‟s responsibility to provide pure public goods like defence, law and order, property rights, macroeconomic stability etc. These functions are very essential for healthy and prosperous nation. Intermediate functions: management of externalities regulation of monopolies, consumer protection, and provision of social insurance Activist functions: Enforcement of rules and regulations regarding the land acting watch dogs as Ministry of Corporate Affairs, CBI and CCB etc. In order to ensure transparency and openness, the state can provide its citizens a greater say in the formulation of public policies. Business councils, interaction groups and consumer groups can be used as the forum. Ans. 1(b) The Government of India set up a National Development Council in order to direct the activities for the development of the nation. The Council comprises of the Prime Minister of India, the Chief Minister of States and Members of the Planning Commission. National Development Council plays a decisive role in the formulation and review of the National Plan. Its role indicates the federal and democratic nature of economic planning in India. Its functions are: (1) To review the working of the National Plan from time to time (2) To consider important questions of social and economic policy affecting national development, and (3) To recommend measures for the achievement of the aims and the targets set out in the National Plan, including measures to secure the active participation and co-operation
of the people, improve the efficiency of the administrative services, ensure the fullest development of the less advanced regions and sections of the community and, through sacrifice borne equally by all citizens, build up the resources for national development. (4) To prescribe the guidelines for the formulation of the National Plan as well assessment of the resources of the plan. Thus, in this new set-up, the function of the Planning Commission is to prepare the Plan according to the guidelines provided by the NDC. In this way, the National Development Council has emerged as the top- most policy-laying agency in the Government. Thus success of this new planning organization could depend mainly upon the tact and sagacity of the Prime Minister and Chief Minister.
Ans. 1(c) Keeping in mind the growth and expansion of the Indian economy a need was felt for the introduction of a new corporate vehicle which could provide for the benefits of a partnership as well as ensure restricted personal liability. Thus the parliament enacted the Limited Liability Partnership Act in 2008. In a limited liability partnership one partner is not responsible for the misconduct or negligence of the acts caused by the other. A limited liability partnership although exhibits all the features of a partnership in the normal course but under its special provision, the concept of limited liability partnership gives the latter an upper hand over the former. The basic differences between the traditional partnership and LLP are as follows: Features Registration Partnership firm Not compulsory. Unregistered Partnership Firm will not have the ability to sue. No guidelines. LLP Compulsory registration required with the ROC Name to end with “LLP”” Limited Liability Partnership” and no two companies can have the same name. Is a separate legal entity Limited to the extent of the contribution to the LLP. Minimum of 2 partners. No maximum limit. Foreign nationals partners. can be
Legal status Liability
Not a separate legal entity Unlimited, can extend to the personal assets of the partners Limit of 2- 20 partners
No. of shareholders / Partners Foreign Nationals as
Foreign nationals cannot form partnership firm.
shareholder / Partner Annual Return No returns to be filed with the Registrar of Firms Annual statement of accounts and solvency & Annual Return has to be filed with ROC Required. State and District levels. if the contribution is above Rs. It is an alternative to the ordinary process of instituting actions before a civil court. insolvency or by Court Order How do the bankers view Dissolution Whistle blowing No such provision Ans. who shall be its president. Audit Not compulsory only if turnover rate is greater than Rs. to be appointed by the central government. speedy and inexpensive redressal of the consumers' grievances. industry. law. Perception is higher compared to that of a partnership but lesser than a company. Less procedural compared to company. who shall have the following qualifications namely: Be not less than 35 years of age Possess a bachelor‟s degree from a recognized university Be persons of ability. public affair or administration The reward can be appealed by any of the aggrieved parties in the supreme court Jurisdiction: . for expeditious and inexpensive settlement of consumer disputes. These forums are mandated to provide simple.25 lakhs or if annual turnover is above Rs. The three redressal agencies are as follows: National Consumer Disputes Redressal Commission (NCDRC) Composition: a) The National Commission consist of a person who is or has been the judge of the Supreme Court. Voluntary or by Order of National Company Law Tribunal Protection provided to employees and partners who provide useful information during the investigation process.60 lac. commerce. accountancy. b) Not less than four and not more than such number of member as may be prescribed one of whom shall be a woman. Creditworthiness depends on goodwill and credit worthiness of the partners By agreement of the partners. 60 lac. integrity and standing and have adequate knowledge and experience of at least ten years in dealing with problems relating to economic. 1(d) The Consumer Protection Act has set up a three-tier quasi-judicial consumer disputes redressal machinery at the National.
Under the Consumer Protection Act. and appeals against the orders of any State Commission. Composition: . who shall be its president. industry. a State Consumer Disputes Redressal Commission shall be set up by the State Government for the respective State. who shall have the following qualifications namely: Be not less than 35 years of age Possess a bachelor‟s degree from a recognized university Be persons of ability. and b) Call for the records and pass appropriate orders in any consumer dispute which is pending before or has been decided by any District Forum within the State. Composition: a) The State Commission consists of a person who is or has been the judge of the high court. The State Commissions are headed by a person who is or has been a Judge of High Court. to be appointed by the State government. State Consumer Disputes Redressal Commission Under the Act. District Forum Under the Act. claimed exceeds rupees one crore. The Forum shall have jurisdiction (subject to the other provisions of this Act) to entertain complaints where the value of the goods or services and the compensation. claimed exceeds rupees twenty lakhs but does not exceed rupees one crore and appeals against the orders of any District Forum within the State. public affair or administration The reward can be appealed in the national council. 1986. the State Government shall establish a District Forum in each district of the State. Jurisdiction: a) Entertain complaints where the value of the goods or services and compensation. or has acted in the exercise of its jurisdiction illegally or with material irregularity. and b) Call for the records and pass appropriate orders in any consumer dispute which is pending before or has been decided by any State Commission where it appears to the National Commission that such State Commission has exercised a jurisdiction not vested in it by law. if any. or has failed to exercise a jurisdiction so vested or has acted in exercise of its jurisdiction illegally or with material irregularity. commerce. if any. integrity and standing and have adequate knowledge and experience of at least ten years in dealing with problems relating to economic. accountancy. claimed does not exceed rupees twenty lakhs.a) Entertain complaints where the value of the goods or services and compensation. the National Consumer Disputes Redressal Commission exercises administrative control over the State Commissions. b) Not less than two and not more than such number of member as may be prescribed one of whom shall be a woman. The District Forums are headed by the person who is or has been or is eligible to be appointed as a District Judge. or has failed to exercise a jurisdiction so vested. law. if any. where it appears to the State Commission that such District Forum has exercised a jurisdiction not vested in it by law.
.a) The district forum consist of a person who is or has been or is qualified to be district judge. For determination of the character of the company For prevention of fraud or improper conduct For the protection of revenue When company is formed to avoid the welfare laws. commerce. who shall have the following qualifications: Be not less than 35 years of age Possess a bachelor‟s degree from a recognized university Be persons of ability. 1(e) Lifting of Corporate Veil: Lifting of the corporate Veil means „Disregarding the corporate entity and paying regard to the individual members behind the legal facade‟. integrity and standing and have adequate knowledge and experience of at least ten years in dealing with problems relating to economics. public affair or administration Ans. industry. accountancy. Circumstances when the corporate Veil can be pierced: Under express provisions statutory Under judicial interpretations When the number of members falls below the statutory minimum Non – Disclosure of Representative capacity To examine the relationship of the holding and subsidiary To investigate into the affairs of related companies To investigate the ownership of a company When business is carried on to defraud the creditors. b) Two other members one of whom shall be a woman. law. who shall be its president.
11. He should be finalizing the goods that he needs. Two-thirds of the directors of a public company must retire by rotation. 2. Restrictions on the appointment of Directors: A director of a public company shall file with the register a consent to act as such. the phrase „Caveat Emptor‟ stands for „let the buyer beware. but a private company cannot have more than fifty members excluding past and present employees. Invitation to public: A public company by issuing a prospectus may invite public to subscribe to its shares whereas a private company cannot extend such invitation to the public. 1.‟ in business laws. He cannot vote or take part in the discussion on a contract in which he is interested. He shall sign the memorandum and enter into a contact for qualification shares. Exceptions to the Doctrine of Caveat Emptor Over time.‟ This implies that the responsibility of identifying goods and finding defects with them lies with buyer. These exceptions include: a) Quality: Under Section 16(1). these conditions are: When the buyer makes the seller aware of the purpose for which the goods are needed. some exceptions have been made to the rule of „let the buyer beware. These restrictions do not apply to a private company. 8. Further Issue of Capital: A public company proposing further issue of shares must offer them to the existing members. 4. But a public company has to use only the word ‘Limited’ at the end of its name. . Ans. Transferability of shares: There is no restriction on the transfer of share In the case of public company whereas a private company by its articles must restrict the right of members to transfer the share. 7. 10. Name: A private company has to use words „private limited‟ at the end of its name. Statutory Meeting: A public company must hold a statutory meeting and file with the register a statutory report.Ans. It implies that the seller is not responsible to enquire what the buyer‟s requirements are and not required to reveal faults in his products or services. A private company is free to allot new issue to outsiders. 1(g) In business laws. But a public company shall not commence its business immediately unless it has been granted the certificate of commencement of business. 6. But in a private company there are no such obligations. Minimum number of members: The minimum number of person required to form a public company is seven. 3. Commencement of Business: A private company can commence its business as soon as it is incorporated. Number of Directors: A public company must have at least three directors whereas a private company may have two directors. Maximum number of members: There is no limit on the maximum number of member of a public company. 5. 1(f). whereas in a private company their number is only two.
(b) Explain the instruments of monetary policy generally used by RBI to handle liquidity problems in the economy. One aspects of business ecosystem is the social environment. The workers expect security of service. promoters and owners expect a reasonable return on their investments. Do you think that five year plans have been successful in achieving these objectives? OR (a) Evaluate fiscal policy of India and give suggestions for its reforms. c) Misrepresentation or fraud by seller: A condition in which a seller misrepresents the products and the buyer buys it trusting the misrepresentation. region or state) should consider to what degree the social environment at a particular location is conducive for business development. there is a tacit condition that these are of merchantable quality. The shareholders. Business will accumulate wealth only if the business ecosystem supports the growth of business. Culture is made up of three inter-related elements: Physical environment. terminal benefits. if the goods are sold on the basis of description. For example. social environment. Therefore each social group has a specific interest. 2(a) A lot of variables should be taken into account if one should decide to do a business in a certain location. would be an exception to the principle „Caveat Emptor‟ as others get the chance to mislead. every leather manufacturing or process unit is made to install pollution prevention system. accident relief and various other compensations from the organizations. exerts enormous pressure on the business unit. Suppliers expect the organizations to give them continuous business and prompt payment of bills. training environment. cheat or exploit you during any purchase or transaction. Marketers should understand the difference between the core values and peripheral cultural value. Government expects the business units to pay tax regularly and participate in social improvement. One variable to consider is to what degree a social environment of the business is conducive to the business success. When the buyer relies on the judgment of the seller. The distributors and agents expect the organizations to ensure smooth delivery process and demand more commission and compensation. Q. Decision to invest in a certain location (either community. Culture is based on our basic system of values.2(a) How socio cultural environment influence the business operations? (b) State the main objectives of planning in India. the combination of all these. Merchantability: As per section 16(3). including: knowledge. The increasing cultural diversity has directed the efforts of the marketers toward multicultural marketing which again . A business unit which succeeds in meeting the interests of all these groups remains successful and grows. belief art morals law customs. Ans. For example. Social responsibility of business is an important force that modern business organizations cannot shirk out of their duties and responsibilities towards the society. b) Wholesomeness: This exception implies that foodstuff sold must be apt for human consumption.
Growth in employment: The Second important objective of economic planning in india has been to increase the employment and our planning has increased the level of employment by taking initiatives like NREGA and contributed toward the development if the nation. There is improvement in the agricultural produce and the ways of farming. if we notice the banking practices in Arab countries we find the differences. implementing and reviewing the national plan. Economic planning is taken by the central authority which is entrusted with the powers of formulating. this example portrays the influence of the culture on the marketing of the products to the marketers. So. as under the banking law the amount of interest is not acceptable whereas in Indian banking law all the transactions are done on the basis of the interest rate. Ans. improvement in the quality of life of people have been other achievements of five year planning in india. 2(b) Planning may be defined as a continuous process which involves decisions or choices pertaining to alternative ways of utilizing the available resources for achieving particular goals during a specified time period in the future.considers the cultural aspects of all while catering to the needs of the consumer. 2(a) Fiscal Policy Fiscal policy can be contrasted with the other main type of macroeconomic policy. Ans. The objectives of the five year planning in India: a) Increase in national income b) Full employment c) Reduction in inequalities of income and wealth d) Social justice e) Self reliance The performance of five year planning in India can be assessed under the following heads: Growth of national income and per capita income: Statistical data shows that there is an increase in both but not as expected by the planners. Farmers are now more independent and self reliant. identification of critical issues of development and taking preventive and curative measures to facilitate the development of the nation. The significance of economic planning lies in the allocation of the available resources optimally. development of science and technology. Development of industrial infrastructure. Industrial progress: With the entry of FDI and FII‟s there is increase in the infrastructural development and the living standards of people has seen a remarkable improvements. For example. monetary policy. diversification of exports import substitution. identification of the deficiencies in the economy and the social structure. which attempts to stabilize the economy by controlling interest rates .
particularly at state and local levels. the government by increasing spending in all sectors of its economy it will increase investment which in turn may lead to an increase in aggregate demand. On the other hand it will decrease government spending thus decreasing investment which will again reduce aggregate demand and thus in turn reduce inflation. c) Repeal the corporate tax. b) Reduce the mean and variance of import tariffs. Fiscal and Administrative Reforms To improve its tax system. the various levels of government should: a) Reduce subsidies (which are generally poorly targeted). This will happen since the decrease in taxation will increase people‟s disposable income and consequently depending on the marginal propensity to consume the domestic consumption of an economy which in turn will increase aggregate demand. On the other hand if a government wants to eliminate recession it will have to pursue a contractionary demand side policy. . c) Restructure tax collection and allocation system to increase revenues at local and state levels. coherent VAT system a) Use technology to better enforce property and agricultural income taxes.and spending. b) Modernize tax administration through better utilizing technology. The two main instruments of fiscal policy are government expenditure and taxation. d) Reduce bureaucratic controls and set performance targets. Similarly. On the expenditure side. An expansionary fiscal policy by decreasing taxation and increasing government spending the fiscal policy will probably achieve in increasing aggregate demand. This is an effective way to combat economic problems such as unemployment and recession. c) Separate policy and implementation functions through administrative reforms. b) Downsize overstaffed public institutions. d) Complete the replacement of complex sales taxes with a more coordinated. e) Institute mechanisms like greater public transparency to increase accountability. Changes in the level and composition of taxation and government spending can impact the following variables in the economy: Aggregate demand and the level of economic activity The pattern of resource allocation The distribution of income A fiscal policy does help the economy for a short period of time by affecting the elements of aggregate demand namely investment and consumption it does have several problems that hinder its effectiveness. India should: a) Increase taxes on services and implement a tax on e-commerce. This policy will increase taxation thus decreasing the citizen‟s disposable income thus in turn reducing consumption which will reduce aggregate demand which will in turn reduce inflation.
This leaves them with more cash balances for lending and increases their credit creation capacities. bill of exchange and commercial papers held by the commercial banks.General or Quantitative Methods. recession can be overcome. Inflation can be controlled. General or Quantitative Methods: These methods maintain and control the total quantity or volume of credit or money supply in the economy. During inflation.Financial Sector Reforms In order to continue supporting the most dynamic sectors of the economy. f) Increase competition from commercial and foreign banks in the financial sector Ans. iii) Repo Rates and Reverse Repo Rates: Repo is a collateralized lending i. Thus it is the rate at which the RBI lends money to the commercial banks for their liquidity requirements. In this way for the . India should: a) Design strategies to increase venture capital. b) Allow investment in securities as an alternative to domestic saving in order to c) reduce reliance on foreign inflows in capital markets d) Allow pension funds to invest in stocks e) Improve and deepen debt markets for larger corporations. ii) Open Market Operations: Open Market Operations indicate the buying/selling of government securities in the open market to balance the money supply in the economy. Thus. usually bonds to Reserve Bank with an agreement to repurchase the same at a predetermined rate and date. During recessions. 1.e. This reduces their cash lending and credit creation capacities. . There are various instruments of RBI‟s Monetary policy. It plays an instrumental role on the financial markets of the country through its monetary policy. Thus. RBI purchases government securities from commercial banks and other financial institution. Changes in the bank rate affect the bank‟s borrowing power from the RBI which in turn influences the bank‟s lending rates. These methods can be grouped as: . RBI sells the government securities to the commercial banks and other financial institution.Selective or Qualitative methods. Instruments of Monetary Policy: The RBI aims to achieve its objectives of economic growth and control of inflation through various methods. the banks which borrow money from Reserve Bank to meet short term needs have to sell securities. Thus. bank rate acts as a guideline to the banks for fixing their interest rates. They are also called as credit control measures. The following are the different credit control measures adopted by the RBI: i) Bank Rate: Bank rate (also known as discount rate) is the rate at which RBI rediscounts eligible papers like approved securities. 2(b) The Reserve Bank of India is the apex bank of the country.
Under SLR. The directives may be related to: . Reserve bank charges some interest rate on the cash borrowed by banks. banks have to invest a certain percentage of its time and demand liabilities in Government approved securities. The following are the various selective measures: i) Ceiling on Credit: The RBI has imposed ceiling on bank credit against the security of certain commodities or Securities. The margin (that varies from 20% to 80%) can be increased /decreased to encourage/discourage the flow of credit to a certain sector. Margin is that proportion of the value of the security against which loan is not sanctioned. This interest rate is called „repo rate‟. 2) Selective / Qualitative Measures: The RBI directs commercial banks to meet their social obligations through selective/ qualitative measures. iv) Directives: RBI uses strict disciplinary action against banks that fail to follow its directives.lender of the cash (usually Reserve Bank) the securities sold by the borrower are the collateral against default risk and for the borrower of cash (usually commercial banks) cash received from the lender is the collateral. In a reverse repo Reserve Bank borrows money from banks by lending securities. Such measures ensure financial discipline in the banking sector. It is the ratio of a bank‟s time and demand liabilities to be kept in reserve with the RBI. Through this method. Higher margin indicates lesser amount of loan. iv) Cash Reserve Ratio: The money supply in the economy is influenced by the cash reserve ratio. This imposes a limit on the amount of credit to different sectors. v) Statutory Liquidity Ratio: SLR is the ratio requirement peculiar to India. A low CRR increases the flow of money and is used to overcome recession. A high CRR reduces the flow of money in the economy and is used to control inflation. ii) Margin Requirements: A loan is sanctioned against collateral security. The reduction in SLR enhances the liquidity of commercial banks. The RBI is authorised to vary the CRR between 3% and 15%. This rate is usually less than the interest rate on bonds as the borrowing is collateral. resources can be directed to priority sectors and speculative use of bank finance can be avoided. iii) Discriminatory Rates of Interest: The RBI has introduced differential rates of interest for different use of credit. These measures control the distribution and direction of credit to various sectors of the economy. The interest paid by Reserve Bank in this case is called reverse repo rate.
" Thus it is clear from this definition that a 'promise' is an agreement. The RBI issues periodic letters and discussions to the banks about the trends in the economy. 3(a) All agreements are not contract but all contracts are the agreements is a statement which is justified by the definition which are given under the section 2(h) of the Indian Contract Act: "An agreement enforceable by law is a contract. Maximum limit on advances to borrowers. becomes a promise.there is an agreement.e.e. a duty enforceable by law.Minimum margin requirement.e. Agreement is a much wider term than the contract and is defined as per section 2 (e): "Every promise and every set of promises. Q3(a) „‟All contracts are agreements but all agreements are not contracts‟‟ by Salmond. is an agreement the object of which is to create a legal obligation i.. therefore. forming the consideration for each other. Explain with suitable examples. b) What are the essentials of a valid contract? OR (a) “No one can give what he does not possess”. v) Moral Suasion: This is the most actively used technique of monetary control. Ans. In short. So. (b) What are NI and explain various types of endorsements under negotiable instruments act. So “all contracts are the agreements but all agreements are not the contracts” due to non binding nature of the terms and conditions on the parties entering. when accepted. an agreement is the sum total of 'offer' and 'acceptance'.e.. What is a 'promise'? The answer to this question is contained in section 2 (b) which defines the term. Thus the RBI acts as a reminder to the banking sector to follow credit control norms and meet its social obligation. comes into existence only when one party makes a proposal or offer to the other party and that other party signifies his assent (i. Explain and give any three exceptions to this rule. a duty enforceable by law. 1881." A contract therefore. . gives his acceptance) thereto. etc. which does not have any legal binding. % of CRR and SLR. the terms are binding on the parties entering into the contract.g: If A agrees to come to the house of B for a dinner at B’s request ." An agreement. From the above definition. A proposal. but it cannot be termed as a contract because it does not carry any legal obligation.. i. we find that a contract essentially consists of two elements: (1) An agreement (2) Legal obligation i. the remarkable feature is the enforceability by the law. E. Minimum lock-in period. especially in money and credit." When the person to whom the proposal is made signifies his assent thereto the proposal is said to be accepted. is an agreement.
h) Legality of Purpose: This means that legally binding contracts can only be for legal transactions Ans. This rule is based on the maxim „nemo dat quod non habet’.g. which means that‟ none can give what he does not have‟. A sale of goods can be made by a person.g. how can he give such property right in those goods to another.g.Ans. 1. but he had a right .owner is invalid and the buyer acquires no title over the goods through such a sale. Consideration 4. f) Consent to Contract: A person must enter into a contract of their own free will. It must be clear and may be implied by conduct e.g. Consent to contract 7. Legality of form 8. there is said to be an agreement. One month later the marriage contract was cancelled.people under 18 except for necessities e. It can be oral (simple contract) or written. food 2. The following parties do not have the capacity to enter a contract. Persons of unsound mind. Essential Elements of a contract( Must be learned) 1. a groom only married his pregnant wifeafter he was threatened by her father. 1. It must be real 2. There should be no use of force or lies. It must be legal d) Intention to create legal obligation: The Person must want to create legal relations. b) Acceptance: This is a positive unqualified assent to all terms of the offer e. If a person does not himself have a property right in some goods. Offer 2. It is a legally binding relationship between two or more people that is enforceable by law. Intention to contract 5. 3(a) The protection of property rights of a person over his belongings is ensured by the general rule that sale by a non. e. Acceptance 3. g) Legality of Form: This refers to the manner in which the contract is made. Therefore the parties signing a contract must know that they are entering a legal agreement that cannot be broken e) Capacity to contract: This is the power of a natural person to enter into a contract. It was held in Whiteley Ltd vs Hilt that the hirer did not have a right to sell the goods. Minors. Capacity to contract 6. c) Consideration: This refers to whatever is exchanged between the parties. a house buyer makes an offer of price for a house and seller is happy to accept. It need not be adequate 3. taking goods to the checkout. 3(b) The law of contract affects every single transaction between buyers and sellers. when accepted. Persons under the influence of alcohol or illegal drugs 3. Legality of purpose a) Offer: An offer is a proposal to give or do something and. who is either the owner of goods or is the authorised agent of the owner.
one action by the endorsee for one part of the amount. The reason for this is that it would subject the prior parties to inconvenience in the form of plurality of actions. (c) The agent should have acted in the ordinary course of business of a mercantile agent i. it was held that the owner was stopped from challenging buyer‟s title. (iii)By seller in possession after sale: a seller of goods may continue to keep possession of goods even after the property has passed to the buyer. the owner of a car handed over blank sale papers duly signed by him to a person which enabled that person to pretend that he was authorised by the owner to sell his car.to assign his rights as hirer to any person. and two. in addition to his signature. The conditions required for this exception are: (a) The goods should have been possessed by the mercantile agent with the permission of the owner in the capacity of that agent only and in no other capacity. it would not be endorsement but merely a receipt for the money received.” The term endorsement means writing of a person‟s name on the back of the instrument for the purpose of negotiation. mentioned in instrument. the endorsement would be said to to be in full. A partial endorsement transferring the rights over only a part of the amount due on the instrument invalid. In Eastern Distributors Ltd vs Goldring. 2. Some of the exceptions to this rule are as follows: (i) By estoppel: an owner of goods may by his words or conduct lead another to believe that the person from whom he was buying the good was his agent. (ii) By mercantile agent: an unauthorised sale of goods by a mercantile agent would be valid for the buyer if certain requirements are met. payable either to order or to bearer. Full or special endorsement: if the endorser puts on the body of the instrument. Ans.e. whether the words “order” OR “Bearer” appears on the instrument or not. therefore. the seller had kept the possession of goods as seller and with buyer‟s approval. a specified person. an order to pay the amount. even if improper. Blank or general endorsements: this is the endorsement done through a mere signature on the instrument without mentioning the name of the indorsee or the transferee. he too can become owner. (b) The buyer should have acted in a bona fide manner. 3(b) “A negotiable instrument means” promissory note. This converts the order instrument into a bearer instrument. in a manner in which any such agent would act. the second buyer had acted in good faith. . But this sale will be valid if two conditions are fulfilled: one. 3. Endorsements can be of the following kinds: 1. It would be create hurdles in free negotiability also. and another action by the endorser for the other part. Partial endorsement: a negotiable instrument can not be endorsed for a part of the amount appearing to be due on the instrument. a purchaser from him would only become a hirer and by paying the remaining instalments. A sale or pledge or any other disposition of goods by such a seller should be valid. bill of exchange or cheque. Where the holder puts signature on the back of the instrument before handing it over to the payer for payment. to the order of.
This doctrine is to protect the interest of the investors and creditors. it is not bound by it because it lacks legal capacity to incur responsibility for the action. OR (a) Define the term „consumer‟ and „complainant‟ as per Consumer Protection Act. An ultra vires transaction cannot be ratified by all the shareholders. by express words in the endorsement. (b) Comment upon state of corporate governance in India. Basic principles included the following: 1.e. Any act done contrary or in excess to the scope of the company will be ultravires the company. Alteration of Articles with retrospective effect. Acts ultra. Example: pay A or order. 6. If an act is beyond the scope of the powers of directors. beyond the legal powers and authority of the company and shall be wholly void and not binding on the company. excludes his liability. Examples: pay Mr. . Cite some corporate examples to support your answer.e. 5.vires the company can neither be legalised nor ratified even with the unanimous consent of all the members of the company. restricts or excludes the endorsee‟s right of further negotiation or merely constitutes the endorsee as his agent. Pay A or order for the account of B. or makes his liability or the endorsee‟s right of receiving payment dependent on the happening of a specified event. although such event may never happen. 4(a) Memorandum of Association of a company defines and confines the powers of the company. such endorsement may be called as a conditional endorsement. i. Where a company exceeds its power as conferred on it by the objects clause of its memorandum. Acts of a company may also be ultra vires the Articles can be ratified and made binding upon the company by altering the articles by a special resolution at a general meeting. Restrictive endorsement: an endorsement which by express words. Conditional endorsement: where the endorser of a negotiable instrument. notice of dishonour waived. is called restrictive endorsement. Ans. (b) Write a short note on Doctrine of Constructive Notice and Doctrine of Indoor Management. A only.4. it can be ratified by the general body of shareholders. Consequently. Facultative endorsement: this is an endorsement wherein the endorser expressly gives up some of his rights under the negotiable instrument. if to the benefit of the company shall be valid. ultra. 1986. even if they wish it to be ratified. Q4 (a) Discuss the doctrine of Ultra-vires with reference to the Memorandum of Association of a limited company.vires the directors. i. here we restrict the meaning of ultra vires objects clause of the company‟s memorandum.
4(a) As per Consumer Protection Act. if a person enters into a contract which ultra vires the company. or partly paid and partly promised. or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised.2. If the contract was partially performed. 1956 (1 of 1956) or under any other law for the time being in force. This doctrine protects the outsiders against the company by entitling them to assume that the provisions of the articles of association have been duly complied with by the company in its internal working. (but does not include a person who avails of such services of any commercial purpose. 1986 "Consumer" means any person whoa) Buys any goods for a consideration which has been paid or promised or partly paid and partly promised. every person dealing with the company is presumed to have the knowledge of the contents of these documents and also have understood them according to their proper meaning. Ans. 4(b) Doctrine of Constructive Notice says that since the Memorandum and Article of association on their registration with the registrar become public documents and are available for public inspection in the registrar‟s office on payment of prescribed fee. 4.) According to the act the actual definition of : "Complainant" means(i) A consumer. If the contract was fully executory. or b) hires or avails of] any services for a consideration which has been paid or promised or partly paid and partly promised. 5. when such services are availed of with the approval of the first mentioned person. The doctrine of estoppel usually precluded reliance on the defense of ultra vires where the transaction was fully performed by one party 3. If an agent of the corporation committed a tort within the scope of his or her employment. The doctrine is based on the principle of justice and public convenience. or under any system of deferred payment and includes any beneficiary of such services other than the person who [hires or avails of] the services for consideration paid or promised. or under any system of deferred payment when such use is made with the approval of such person. or (iii)The Central Government or any State Government. and the performance was held to be insufficient to bring the doctrine of estoppel into play. the defense of ultra vires might be raised by either party. Doctrine of Indoor Mangement is an exception to the doctrine of constructive notice. but does not include a person who obtains such goods for resale or for any commercial purpose. the corporation could not defend on the ground the act was ultra vires. or (ii) Any voluntary consumer association registered under the Companies Act. . Ans. a suit for quasi contract for recovery of benefits conferred was available. Thus. he must do so at his own peril. or under any system of deferred payment.
majority) shareholder. majority) shareholder and the general public holds a minority stake (often as little as 20%). government owned financial institutions hold a comparable stake. where there are numerous consumers having the same interest (v) In case of death of a consumer. The problem of the dominant shareholder arises in three large categories of Indian companies. But.(iv) One or more consumers. the key to better corporate governance in India today lies in a more efficient and vibrant capital market. The Board cannot even in theory resolve this conflict. how can one. It is useful at this point to take a closer look at corporate governance abuses by dominant shareholders in India. his legal heir or representative who or which makes a complaint Ans. 1992) in the United Kingdom. management exercises only such powers as are delegated to it by the Board. Corporate governance is "the system by which companies are directed and controlled" (Cadbury Committee. One finds increasing concern about improving the performance of the Board. and the balance is held by the general public. 1997) is modeled on the lines of the Cadbury Committee (Cadbury. This is doubtless an important issue. Over a period of time. but a close analysis of the ground reality would force one to conclude that the Board is not really central to the corporate governance malaise in India. The corporate governance problems in India require very different solutions at this stage of our corporate development. policies. and institutions that influence the way a corporation is controlled. Third are the Indian business groups where the promoters (together with their friends and relatives) are the dominant shareholders with large minority stakes. envisage a Board that can discipline the dominant shareholders from whom the Board derives all its powers. Second are the multi national companies (MNCs) where the foreign parent is the dominant (in most cases. First are the public sector units (PSUs) where the government is the dominant (in fact. laws. it is possible that Indian corporate . In India. and mechanisms that try to decrease the principal–agent problem. 1992). It involves a set of relationships between a corporation's stakeholders. In short. An important theme of discussions concerning corporate governance is the nature and extent of accountability of decision makers inside the corporation. even in theory. The Board is indeed powerless to prevent such abuses. these issues have come to the fore only in the last couple of years. Some of the most glaring abuses of corporate governance in India have been defended on the principle of “shareholder democracy” since they have been sanctioned by resolutions of the general body of shareholders. At least in theory. It is indeed self evident that the remedies against these abuses can lie only outside the company itself. One can in principle visualize an effective Board which can discipline the management. 4(b) Issues of corporate governance have been hotly debated in the United States and Europe over the last decade or two. The central problem in Indian corporate governance is not a conflict between management and owners as but a conflict between the dominant shareholders and the minority shareholders. customs. The corporate governance code proposed by the Confederation of Indian Industry (Bajaj. The potential for conflict of interests between stakeholders can be prevented or mitigated by the processes.
It is another matter that the enactment of FEMA also brought with it the Prevention of Money Laundering Act 2002. 1999. Presumption of extra territorial jurisdiction as envisaged in section (1) of FERA has been retained. 1973 and FEMA. Example: the Satyam debacle has exposed the chinks in Indian corporate governance mechanism and the monitoring authorities. 5(a) The Foreign Exchange Regulation Act (FERA) was legislation passed by the Indian Parliament in 1973 and came into force with effect from January 1. the dealings in foreign exchange and securities and the transactions which had an indirect impact on the foreign exchange and the import and export of currency. It has raised many questions about corporate governance in India. Ans. Q. which came into effect from 1 July 2005. of investors and of analysts. It extends to the whole of India.structures may approach the Anglo-American pattern of near complete separation of management and ownership.5(a) Compare and contrast provisions of FERA. This act seeks to make offenses related to foreign exchange civil offenses. FERA vs. b) Explain the function of SEBI and its Objective. FEMA The similarities between FEMA and FERA are: 1. The Foreign Exchange Management Act (FEMA) was an act passed in the winter session of Parliament in 1999 which replaced Foreign Exchange Regulation Act. The Directorate of Enforcement continues to be the agency for enforcement of the provisions of the law such as conducting search and seizure. of the auditors.the role of boards of independent directors. 1974. 1986. 2. FERA imposed stringent regulations on certain kinds of payments. (b) Write a note on Competition Commission of India. had become the need of the hour since FERA had become incompatible with the pro-liberalisation policies of the Government of India. Unanimously it has been a gross failure of corporate governance standards in India and protection of minority investors. 3. which liberalized foreign exchange controls and restrictions on foreign investment. FEMA. which replaced Foreign Exchange Regulation Act (FERA). The RBI and central government would continue to be the regulatory bodies. FERA was repealed in 1999 by the government and replaced by the Foreign Exchange Management Act. FEMA has brought a new management regime of Foreign Exchange consistent with the emerging framework of the World Trade Organisation (WTO). The major differences between the two are: . OR (a) Explain salient features of Environment Protection Act.
money changes. 3. FERA consists of 81 complex sections. offence is treated as civil offence. share transfer agents. including mutual funds. person. The amount of money paid as penalty was quite large in FERA. any offence was a criminal one which included imprisonment as per code of criminal procedure. 2. 8. (b) (c) Registering and regulating the working of collective investment schemes. the term has been defined in accordance with the act. To promote the development the development of Securities Market. bankers to an issue. Under FEMA. It works with the basic objective: To protect the interest of investors in securities. Registering and regulating the working of stock brokers. While defining “Resident”. the Securities and Exchange Board of India through an executive resolution. 7. Under FERA. 6. FERA does not have any provision for the complainant to take any legal help whereas FEMA clearly recognizes the right of the complainant to take help from a lawyer or a chartered accountant. (d) Promoting and regulating self-regulatory organizations. the amount has been considerably reduced to three times the amount involved. . sub-brokers. portfolio managers. In FEMA. Functions of SEBI: (a)Regulate the business in stock exchange and any other securities markets. merchant bankers. To regulate the securities Market. An appeal from an order of Appellate Tribunal would lie to the High Court. 5. off shore banking Units etc. before Foreign Exchange Regulation Appellate Board went before High Court. 4. Definition of “Authorized person” as per FERA was limited while in FEMA it has been extended to include banks. Any appeal against the order of "Adjudicating office". In FEMA. registrars to an issue. 5(b) The government of india established in 1988. current Account Transaction. It was five times the amount involved. Ans. 1973. service etc were not defined at all in FERA while they have been defined in detail in FEMA. underwriters. Appeal against the order of Adjudicating Authorities and special Director (appeals) lies before "Appellate Tribunal for Foreign Exchange”. Some terms like Capital Account Transaction. trustees of trust deeds. The appellate authority under FEMA is the special Director (Appeals). investment advisers and such other intermediaries who may be associated with securities markets in any manner. For matters connected therewith or incidental thereto. A penalty has to be paid in terms of money and imprisonment is only for those people who do not pay the penalty.1. while FEMA has only 49 which are relatively simpler. FERA and Income Tax Act differed a lot.
Since its inception SEBI has been working targeting the securities and is attending to the fulfillment of its objectives with commendable zeal and dexterity. iii) Prevention. 1986. The Act empowers the Central Government to take all appropriate measures to prevent and control pollution and to establish effective machinery for the purpose of protecting and improving the quality of the environment and protecting controlling and abating environmental pollution. 1986 has 26 Sections and it has been divided into i) Preliminary. (h) Regulating substantial acquisition of shares and take-over of companies. ii) General Powers of the Central Government. The Act also provides for the further penalty if the failure or contravention continues after the date of conviction. soil or other substances as evidence of the offences under the Environment (Protection) Act. iv) Miscellaneous. establishment of clearing corporations etc. Control.(e) Prohibiting fraudulent and unfair trade practices relating to securities markets. (i) Calling for information from. Ans. (g) Prohibiting insider trading in securities. The Environment (Protection) Act. undertaking inspection. and Abatement of Environmental Pollution. It is Rs. or both.regulatory organizations in the securities market. 5(a) As compared to all other previous laws on environment protection. margining. The Act consists of and deals with more stringent penal provisions. 1986 is a more effective and bold measure to fight the problem of pollution. water. 5000/. The minimum penalty for contravention or violation of any provision of the law is an imprisonment for a term which may extend to five years or fine up to one lakh rupees. If the failure of contravention continues beyond the period of one year. then the offender is punished with imprisonment for a term which may extend to seven years. The Central Government or any other person duly authorised is empowered to collect the samples of air. The improvements in the securities markets like capitalization requirements. 1986 has relaxed the rule of “Locus Standi” and because of such relaxation even a common citizen can approach the Court provided he has given a notice of .per day. It prescribes a special procedure for handling hazardous substances and the concerned person has to handle the hazardous substances according to the procedure of the Act. mutual funds. other persons associated with the securities market] intermediaries and self. The Environment (Protection) Act. conducting inquiries and audits of the stock exchanges. reduced the risk of credit and also reduced the market. the Environment (Protection) Act. (f) Promoting investors' education and training of intermediaries of securities markets.
the Act holds the Head of the Department as guilty of the offence unless the head of the Department proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence. The Competition Commission of India is now fully functional with a Chairperson and six members. regulate the supply of electricity or water or any other service directly without obtaining the order of the Court in this regard. In the commission of the offence under this Act by Government Department. The Commission is also required to give opinion on competition issues on a reference received from a statutory authority established under any law and to undertake competition advocacy. c) To protect the interest of consumers d) To ensure freedom of trade carried on by the other participants in markets in India. 2007. direction. or regulation of any industry. The competition Act has been passed to provide for the establishment of a competition commission for the following purposes: a) To prevent practices having adverse effect on competition. It was subsequently amended by the Competition (Amendment) Act. b) To promote and sustain competition in markets. 2002 was passed by the Parliament in the year 2002. This Act also empowers and authorizes the Central Government to issue directions for the operation or process. order issued by Central Government or other statutory authority under this Act. The Act debars the Civil Courts from having any jurisdiction to entertain any suit or proceeding in respect of an action. protect the interests of consumers and ensure freedom of trade in the markets of India. It is also authorized to enter and inspect any place through any person or through any agency authorized by Central Government. closure. to which the President accorded assent in January. The Central Government is also authorized to stop. To achieve its objectives. 5(b) The Competition Act. In accordance with the provisions of the Amendment Act. the Competition Commission of India and the Competition Appellate Tribunal have been established.sixty days of the alleged offence and his intention to make a complaint to the Central Government or any other competent authority. prohibition. 2009. Implement competition policies with an aim to effectuate the most efficient utilization of economic resources. . the Competition Commission of India endeavors to do the following: Make the markets work for the benefit and welfare of consumers. The provisions of the Competition Act relating to anti-competitive agreements and abuse of dominant position were notified on May 20. promote and sustain competition. Ensure fair and healthy competition in economic activities in the country for faster and inclusive growth and development of economy. create public awareness and impart training on competition issues. 2003. It is the duty of the Commission to eliminate practices having adverse effect on competition. Ans.
. Develop and nurture effective relations and interactions with sectoral regulators to ensure smooth alignment of sectoral regulatory laws in tandem with the competition law. Effectively carry out competition advocacy and spread the information on benefits of competition among all stakeholders to establish and nurture competition culture in Indian economy.