Part A 1. Mrs Puri had bought a precious stone from South Africa during her recent visit. The stone was a wedding gift for Mrs Puris daughter. Mrs Puri handed over the stone to Mr Chopra, a master in the art of cutting and polishing precious stones, to cut and polish the stone for her. It was agreed that Mr Chopra would do the job within two months time and have it ready for Mrs Puri before her daughters wedding. Mr Chopra did an excellent job and had the stone ready in time. However, before he could deliver it to Mrs Puri, the stone was stolen from a well protected safe in the basement of Mr Chopras workshop. Consequently, Mrs Puri could not give the stone to her daughter at her wedding. The thief was caught red-handed two days after the wedding while selling the stone to a stone trader. Mrs Puri demanded the stone back from Mr Chopra and refused to pay for the services rendered by him with respect to the cutting and polishing the stone as penalty/damages for Mr Chopras failure to return the stone in time which caused embarrassment for Mrs Puri since she could not give it to her daughter as planned. Mr Chopra has approached you to seek advice.
You should advise on the following issues: (a) Does a valid contract of bailment exist between Mrs Puri and Mr Chopra under the given circumstances? (b) Explain the general responsibilities of a bailee, and discuss whether Mr Chopra could be held responsible for the delay in the delivery of the stone to Mrs Puri. (c) State whether Mr Chopra is required to return the stone to Mrs Puri without receiving the remuneration for his work. 20
Sec 148 Essential: delivery of possession, of goods, specific purpose, on condition that it will be returned. Kaliapourmal Pillai v Visalakshmi Sec. 150 Duties of bailor Gratuitous bailor v/s bailor for reward Maffat v Bateman Reed v Dean Duty of reasonable care Union of India v Udho Ram and Sons Remedies
2. Kaka Palay, a 17 year old footballer was playing for Everton Football Association. He was a promising footballer and it was predicted that Kaka will play for his country and for big football clubs in years to come. In J anuary 2000, WorldNet an Agency service Company entered into a Exclusive Agency Contract with Kaka and took responsibility of his advertisements and endorsements. The agreement was for 2 years. In J une 2002, prior to the expiry of the 2 year contract with WorldNet, Kaka who had turned 18 decided to enter into another Exclusive Agency contract with Prime Sports, who were offering him better endorsement and financial gains. Kakas father Mr. Samuel wrote to WorldNet about Kakas intention to terminate the agreement. WorldNet approaches to the Court based on two issues: 1. They claim that the agreement with Kaka [who was a minor] was for his necessaries of life and hence is valid and enforceable. 2. WorldNet also states that they must be permitted to claim damages from Prime Sports in tort. WorldNet alleges that Prime sports had induced Kaka to commit breach of contract with them and hence Prime sports must be held liable for payment of damages to the extent of Rs 50 lakh.
Discuss the liability of Kaka in this case and also the liability of Prime Sports in case of inducing breach of contract. 20
Contract entered in Jan 2000, effective dated of the contract was later in the same year [effective date and expiration date] Sec. 10 Latent and patent incapacity Position of minors in contract Mohoribibi v Dharmodas Ghose Khan Gul v Lakha Singh Minor liable of necessaries of life Chappel v Cooper Minor liable under various labour laws/service contract Liability for inducing breach of contract: If proved Sec. 27 Agreement in restraint of trade. Gujarat Bottling case
3. Aavni wants to sell her house, which in the market is priced at 30 lakh. She sends letters to two of her friends offering and expressing her willingness to sell the house to them if they are interested. She makes a preferential bid to her two friends and invites them on 3 rd October 2009 at her house for an auction sale. Aavni prefers to sell the house in the auction -without reserve. On 3 rd October, Bharati and Chaitra come to Aavnis house and start the bidding process. The highest bid was claimed by Bharati at Rs 20 lakh and the Auctioneer puts down the hammer the third time at Rs 20 lakh. Aavni is unhappy with the price. She suspects foul game by her two friends. She alleges that the two friends have colluded to rig and lower down the price, deliberately to defeat competition. Aavni refuses to accept the final bid amount and perform the contract. Bharati sues Aavni for breach of contract and is seeking the remedy of specific performance from the Court. Advise Aavni. 20 Essential of offer and acceptance Mail box rule Essential of auction sale Customary practices in auction With reserve and without reserve Fair procedure in auction Cartel, rigging, anti competitive bids: liable for rejection Breach of contract and liability of parties
Part B Answer Any 4 [4x10] 1. Mere consent is not enough to constitute a valid contract; it should be free and voluntary, so that the contracting persons can subject themselves to the binding obligations that are created by the contract. J ustify the above statement with the help of case law. Key: sec. 10, 15, 17, 17 and 18, 20 and 22. Ranganayakamma v Alwar Chetty Chikkam Ammiraju v Chikkam Seshamma Allcard v Skinner Fiduciary relations Uberrimae fidei Silence as a means of frau0d Derry v Peek Bell v Lever Brothers Ltd Philips v Brooks
2. Explain the below para: According to sec. 55, when there is a promise to do a certain thing or certain things at or before a specified time, and the promisor fails to perform before the specified time, the contract or so much of it as has not been performed becomes voidable at the option of the promise, if the intention was that time should be the essence of the contract. If such was not the intention, the contract does not become voidable, but the promise is entitled to compensation for any loss. If, in such a voidable contract the promisee accepts performance at any time other than agreed, he cannot claim compensation for any loss unless at the time he accepts performance he gives the promisor notice of his intention to so claim.
Sec. 55 China Cotton Exporters v B R c Mills Bhudra Chand Betts Mahabir Prasad Rangta v Durga Datta Hind Construction Contractors v State of Maharashtra
3. Under the contract of Guarantee, examine the rights of a Surety with the help of case law Sec. 126 Sec. 140 [Subrogation Sec. 145 [Indemnity] Sec. 147 [contribution] Mamata Ghose v United Industrial Bank Right of share reduction Right of set-off Right against co-sureties Sec. 138
4. Examine the various situations under which a Contract of Agency comes to an end. Revocation by Principal Read v Anderson Renunciation by Agent Agreement Performance by Agent
Termination by Operation of Law By Efflux of time Death of the parties Insanity of the parties Insolvency of the parties Destruction of the subject matter Agency business becoming unlawful By termination of agents authority
5. Write a brief note on Anticipatory Breach. Hoschster v De La Tour Frost v Kinght Sec. 39
6. Write a note on counter offer Sec. 2 b: Acceptance Conditional acceptance General principles of offer and acceptance McPherson v Appanna
1 NATIONAL LAW SCHOOL OF INDIA UNIVERSITY BANGALORE MASTERS IN BUSINESS LAW EXAMINATION JUNE 2010 BANKING LAW AND PRACTICE-Key Answer Total Marks 100 Time 3 hrs. INSTRUCTIONS i. Students are expected to rely entirely upon the question paper as it is, and respond to it. Clarifications can be sought; ii. No bare acts are allowed to be consulted during the examination; iii. Mobile phones are strictly prohibited inside the examination hall. Any one found in possession of same will be subject to disciplinary proceedings; iv. ANSWER ANY FIVE QUESTIONS; v. All questions carry equal marks. ------------------ 1. Answer the following in brief a. Regulation of foreign banks (in addition to domestic banks); i. Standing and stability of all the banks is extremely critical for overall strength of financial sector hence, banks are to be regulated; and more so the foreign banks; ii. Foreign banks are those which are incorporated outside India and have their branches (or banking business in India); iii. Entry point barrier (through license U/s 22 of Banking Regulation act) whether carrying on of banking business is in the public interest? Whether the origin country discriminates any banking company registered in India whether the company complies with the provisions of the BR act as applicable to foreign companies; iv. Sec. 17 Reserve Fund to be created the foreign banks shall deposit 20% of their deposits with RBI every year; - the amount may be in cash or in unencumbered approved securities
b. RBIs power to regulate commercial banks. i. At the point of entry s.22 ii. At the time of expansion of branches (s. 23) iii. Capital & Reserve [S. 12(1)] subscribed capital shall not be less than 50% of the its authorized capital; - paid up capital shall not be less than 50% of its subscribed 2 capital the capital structure is changed then these proportions shall also be changed. iv. Sec. 21 directions regarding advances the purposes for which the advances may or may not be made margins to be maintained the maxim guarantee rate of interest and other terms & conditions for making advances v. Sec. 35A general power to issue directions, which are binding upon the banks vi. Sec. 36 the RBI may caution and advise the bank; vii. Sec. 17 creation of reserve fund not less than 20% of the profit has to be transferred to its reserve fund. viii. Sec. 42 cash reserve to be maintained 3% to 20% daily balance of the total demand deposit and time deposits as specified by the RBI from time to time; ix. RBI also provides for additional cash reserve (however not exceeding the ceiling of 20%) x. S. 24 maintenance of liquid assets not exceeding 40% of the total demand and time liabilities in cash, gold or unencumbered approved securities xi. Sec. 29 regulation regarding accounts and audit.
2. Explain the following a. Paying and collecting banker; including the protection envisaged under negotiable instruments act; i. Paying banker is one who is expected to pay under the cheque, either to the payee directly, or to the collecting banker; ii. There is protection envisaged under Negotiable Instruments Act, for paying banker under sec. 10, 85 and 89 Where as S. 10 talks about the payment in due course S. 85 specifically deals with specific protection available to the paying banker iii. And it states that the banker is dischared from his duty when he makes payment in due course either to the holder in due course, if the cheque is order cheque or to the bearer of the instrument, if the cheque is a bearer cheque. Finally s. 89 deals with altered instruments and payment made there under. iv. Collecting banker is on who is causing the proceeds of the cheque collected from the paying banker on behalf of his customer v. If the cheque is crossed one then it is imperative that, the cheque must be collected through the intervention of the collecting banker; vi. He is also protected under the NI act. vii. Cases which may be cited in support of this answer 1. Bhatoria Trading Company v Allahabad Bank, AIR 1977 Cal. 363; 3 2. Madras Provincial Co-operative Bank Ltd., v Official Liquidator, South Indian match Factory Ltd., AIR 1945 Mad. 30; 3. Bank of Maharashtra v Automotive Engineering Ltd., (1993) 2 SCC97; 4. Canara Bank v Canara Sales Corporation & Others (1987) 2 SCC 666. b. Holder and holder-in-due course. i. Holder is one who is (s. 8 of the Negotiable Instruments Act) 1. Entitled in his own name to the possession of the instrument; and 2. Have the right to receive or recover the amount due thereon from the parties thereto. ii. Otherwise a holder means 1. The payee; or 2. The bearer; or 3. The endorsee of an instrument iii. Holder in due course is a person who takes an instrument in good-faith and for value - And he becomes the true owner of the instrument and is known technically as holder in due course iv. Holder must have taken the instrument for value [consideration] v. Must have obtained the instrument before its maturity vi. Instrument must be complete and regular on its face; and vii. Must have taken the instrument in good faith and without notice of any defect either in the instrument of the title of the person negotiating it to him viii. The development of English law on the point of good- faith may be explained with the assistance of 1. Brooks v Mitchell (1841) 2. Miller v Race etc., ix. Finally the wordings of Indian Law However, under the Act, the words used in sec. 9 are without having sufficient cause to believe therefore, the legislature seems to have intended to make due care and caution on the part of the holder, a test of his bona fides and that mere good faith on his part would not suffice. Accordingly, it seems negligence on the part of a holder at the time of taking a negotiable instrument, would disentitle him to the rights of a holder in due course. There will be sufficient cause to believe in the existence of defects if the holder was in fact negligent or careless, though he was acting honestly and in good faith. Khergamwala
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3. Write short notes on the following a. Banking Ombudsman Scheme; i. The scheme prepared and implemented by the RBI 1. First with the active assistance of all banks ii. Now (in a sense) entirely by itself 1. Legislative power to introduce and implement the scheme 2. Sec. 35A, Banking Regulation Act, 1949 iii. the present scheme came into force from January 1, 2006 iv. First introduced in 1995 v. Revamped in the year 2002 vi. Enlargement of the process in 2006 1. being satisfied that, it is necessary in public interest and in the interest of banking policy to enlarge the extent and scope of the authority and functions of Banking Ombudsman for redressal of grievances against deficiency in banking services, concerning loans and advances and other specified matters vii. Amendment in the year 2007 (May) viii. The Scheme (as updated from time to time) provides 1. a forum to bank customers to seek redressal of their most common complaints against banks, including those relating to 2. credit cards, 3. services charges, 4. promises given by the sales agents of the banks, but not kept by the banks, 5. delays in delivery of bank services. ix. 15 Banking Ombudsmen have been appointed 1. offices located mostly in the State Capitals x. Coverage of the Banks 1. All Scheduled Commercial Banks, 2. Regional Rural Banks and 3. Scheduled Primary Cooperative Banks xi. Appointment, qualifications of the ombudsman and general procedure of resolving the complaint. b. Bankers Book Evidence law. i. in certain respect modifies, and in few other respects supplements, the provisions of the general law of evidence ii. Most notably, it permits certified copies of certain books of bankers to be given in evidence without summoning the original iii. This is to facilitate Bankers working generally iv. Bankers books include 1. ledgers, 2. day-books, 5 3. cash-books, 4. account-books and 5. all other books used in the ordinary business of a bank; v. Legal Proceeding means 1. any proceeding before the court or 2. Inquiry being conducted by the authority competent for that 3. in which evidence is or may be given and 4. Proceedings of arbitration. vi. Certified Copy means a copy of any entry in the books of a bank together with certificate written at the foot of such copy that 1. it is a true copy of such entry, 2. that such entry is contained in one of the ordinary books and was made in the usual and ordinary course of business, and 3. that such book is still in the custody of the bank, 4. and if the copy was obtained by a mechanical or other process that, in itself ensures the accuracy of the copy, a further certificate to that effect. 5. If after taking out the copy from the books of the bank, the original books are destroyed in usual course of the banks business a further certificate to that effect of having destroyed the book is necessary. 6. Each of such certificates above should be dated and subscribed by the principal accountant or manager of the bank with his name and official title. vii. If the concerned record is maintained in electronic form 1. Consists of printouts of data stored in a floppy, disc, tape or any other electromagnetic data storage device; or 2. A copy of such printout; 3. And it should contain a certificate having all the applicable contents detailed above. 4. If the record is maintained in mechanical form 5. A printout of any entry in the books of a bank stored in a micro-film, magnetic tape; or 6. Any other form of mechanical or electronic data retrieval mechanism obtained by a mechanical or other process; viii. And it should contain the certificate having all the applicable contents detailed above.
4. Write short notes on the following a. Legal status of the passbook; 6 i. Pass book is issued to banks customer, who generally keeps savings account ii. In case of current accounts it is issued only upon demand by the customer iii. Pass book is replica of the ledger at the bank branch iv. In case of current accounts statement of their accounts are given to them periodically (daily, weekly, fortnightly etc.) v. Entries made in the pass-book 1. Two prominent thoughts Once the passbook entry is made and passed on the customer he shall verify and raise objection if any afterwards the entries made in the passbook shall be treated as final Passbook entries are for general convenience hence, the entries can be questioned any time by the parties vi. Entries favouring the customer 1. the passbook belongs the customer and the entries made in it by the bank are statements on which the customer is entitled to act In Atlantic Mines Ltd., v Economic Bank [(1904) 2 KB 471] 2. If the position of the customer has not been adversely affected, by relying upon the passbook, the banker may rectify it (within reasonable time) 3. A fictitious entry made by a bank employee cannot be relied upon by a customer 4. Example State Bank of India v Shyma Devi, AIR 1978 SC 1263 vii. Entries favouring the bank 1. The proposition of law is extremely difficult to make in this regard 2. Therefore the following few points in this regard are to be taken into account (all these points arise out of decisional law from time to time) viii. Interesting point is when the customer has acted on the basis of a wrong entry (favouring the customer) and then shifted his position to his detriment then what would be the situation? b. Bankers duty to maintain secrecy (of customers account). i. banker is a privileged creditor in some special sense the customer is also privileged in some sense ii. The banker is obligated to maintain the secrecy of the customers accounts iii. the duty to maintain secrecy is an added obligation or an exception to the general rule that the relationship between a banker and the customer is that of a debtor and creditor 7 iv. May be it has woven in to the banking tradition from time immemorial v. All employees and officers of the bank have to sign and submit a declaration of fidelity and secrecy at the time of their joining service vi. The Exceptions 1. Where the disclosure is under compulsion of law; 2. Where there is a duty to the public to disclose; 3. Where the interests of the bank require disclosure; and 4. Where the disclosure is made with the express or implied consent of the customer vii. Some specific reference to the disclosure under the Banking Regulation Act.
5. Write short notes on the following a. Bankers lien; i. The general concept of lien; ii. Categories of lien; iii. The banker as a person enjoying special lien iv. The extent of his exercise over his customers accounts, goods etc., b. Consortium lending. i. The challenge 1. Meeting the credit needs of borrowers (which are ever increasing); and 2. Safeguarding the lender from (various risks) ii. To meet the said challenge consortium lending gained prominence over the last century iii. It is a mechanism by which single borrower is financed by multiple lenders (generally who are related to each other in many ways) iv. The consortium lending has grown immensely in all over the world (including India) v. But.. There are some challenges 1. Improper (or no) regulations 2. Lack of guidelines by the regulatory agencies vi. Indian system has no dedicated legal framework to regulate consortium lending 1. Hence we have to have piecemeal approach vii. The main law is law of contracts viii. There is very little decisional law on the point 1. As consortium lending in India has not faced much of litigation as of now ix. But there is some amount of soft law on the point x. In 1973 RBI set up a study group to develop a policy xi. The study groups strongly supported the development and accepted this as a foundational aspect of banking xii. Based on the report of the study group the RBI developed certain guidelines 8 xiii. RBI Guidelines 1. Large credit amounts to any borrower in the public or private sector, in excess of 1.5% of banks deposits, should be extended as consortium loan 2. Where multiple lenders exist, with no consortium arrangement, a procedure for the coordination between different lenders and an exchange of information should be evolved 3. All consortium lending should try to fulfill all the credit needs of the borrower so as to prevent multiple consortium being formed 4. The bank with the maximum credit limit should act as the agent bank xiv. Reinforcement of the guidelines by the RBI 1. The share of each bank in the consortium should not be less than 10% 2. The lead bank must be given the responsibility for appraising the borrowers credit requirements 3. The terms and conditions under the consortium should be the same for all members 4. The formation of the consortium was obligatory where the credit limit sanctioned by many banks to a single borrower exceeded Rs.5 crores 5. The total drawing from each of the banks in the consortium must be proportional to the ratio of sharing 6. Finally in 2007 the role of RRBs was also highlighted by RBI in consortium lending
6. Write short notes on the following a. Debt recovery tribunals; i. The banks experienced considerable difficulties in 1. Recovering loans; and 2. Enforcement of securities charge with them ii. Significant portion of bank funds were blocked iii. Successful implementation of financial sector reforms 1. Speedy recovery of advances 2. Rapid adjudication of such matters iv. The Narishmam Committee on Financial Systems and v. There were few committees recommended for 1. Setting up of a Special Tribunal for the purpose vi. Keeping in view of the recommendations Bank and Financial Institutions Bill, 1993 was introduced in the Parliament vii. There are two layers 1. The Debt Recovery Tribunal 2. The Debt Recovery Appellate Tribunal 9 viii. The Central Government is authorized to establish both these tribunals 1. They can go for establishing multiple tribunals as the case deserves ix. The tribunals composition; x. The jurisdiction of the tribunal; xi. Procedure of the tribunal; and xii. Few reference to the constitutionality of these tribunals. b. Letters of credit & banker. i. The concept of letters of credit; ii. The issueance of letters of credit; iii. General banking practice with regard to same; iv. And some decisional law on the point.
7. Solve the following problems a. A is the Chief Accountant at NAL Ltd., a software company, which banks with Axis Bank. A is generally responsible for almost all banking transactions of NAL Ltd. During the date of his retirement, he withdraw Rs.50,000 by forging the signature of his CEO. The NAL Ltd., wants to hold the bank responsible for this loss Decide. i. Here the NAL Ltd., would be able to recover the loss as the cheque was forged one. ii. The authority on the point is Canara Bank v Canara Sales Corporation where the SC has held that, if the cheque is forged there is no mandate on the banker to make the payment and the said situation is different from the protection which is envisaged under the statute for his favour. b. A makes a promissory note in a stamp paper sufficient for Rs.1,00,000 but without stipulating the amount and the date of making the note. However, A actually owes only Rs.75,000 under the instrument. The holder of the said note fill the promissory note for Rs.1,00,000 and endorsed the same to another person Mr. X. Does Mr. A obligated to pay Rs.1,00,000 to Mr. X. i. Here Mr. A is obligated to pay the entire amount of Rs.1,00,000 to Mr. X. ii. When there are blanks left un filled they can be filled later on etc., -0-0-0-0-0-0-0-0-0-0-0-
1 KEY ANSWER CORPORATE LAW- June 2010 Annual Examination
PART A
1. a) Steps to be taken
(1) Name & approval of the name by ROC (See S. 20) (2) Preparation of the Constitutional documents(MOA & AOA) printed and duly stamped complying with requirements of Sections 13 to 15 (MOA), Sections 26 & 27 (AOA) (3) Signing these documents by the Subscribers (Minimum 7) and Compliance of S. 33(2). Attestation of the signatures of Subscribers (4) Presentation of the documents to ROC, after payment of the registration fee stipulated in schedule X Articles to contain a provision empowering the Board of Directors to enter into a contract for the purchase of the property from the promoters.
1. b) Further Steps
(1) Since the Promoters and associates can provide only part of the amount required for the Commencement of business, a public issue is necessary. For this a Prospectus satisfying the requirements of section 56 etc and Schedule II is to be registered with the ROC. The Prospectus should contain full disclosure with respect to the purchase of property from promoters. (2) If Minimum Subscription requirement is satisfied, allotment may be made. (S. 69 and 73 requirements to be complied). S. 75- Return on allotment to be filed with ROC. 75 (1) (b) to be satisfied Section 149 (2) requirement to be complied with. (Trading certificate)
1. c) Purchase of property
- AOA to contain the provision that the Company may enter into the contract for the purchase of the property identical with the agreement but A & B on One part and other promoters on the other. - Board Resolution adopting the contract and intimating the Vendors in Writing about this. - Refer S. 15 & 19 of the Special Relief Act, 1963.
2. a) Two Situations
(i) The Object clause in the MOA Contain a provision for carrying on the hotel Business (other Object) If so, S. 149 (2A) or (2B) as the case may be is to be satisfied, 2 (ii) The Object clause does not at present contain the hotel business. Then the object clause has to be altered complying with requisites of Sections 17 and 18.
2. b) If the Object clause is not amended the proposed transaction is ultravires the company. A member has the locus standi to seek an injunction remedy preventing the parties from proceeding with the transactions. Even if the contract is executed the court may declare the contract null & Void. In such a case equitable remedies would be available to the parties. If the Company enters into an ultravires contract, the directors will be liable to the company and third party to pay damages. As regards the claim by the other contracting party, the directors may plead constructive notice of the MOA which would reveal that the transaction is ultra vires.
3. Relevant Statutory Provisions- Companies Act, 1956- Section 64, Whether the Company can be made liable for the prospectus published by S Liability in respect of the expert opinion. Sections 57, 58, 59- Whether expert liable Criminal Liability. Section 63- Who can be fastened Liability? Defences Burden of Proof
4. a) See Section 45 A public Company with 12 Members. After the accident, membership of the Company reduced to 6. Still the company continued to carry on business with membership less than the statutory minimum of 7 & 45 is attracted. In respect of the debts incurred by the company 6 Months after the date on which the membership is reduced below the statutory minimum (April) all the members who are aware of the fact will be personally liable to the creditors Examination of whether the two transactions viz (1) Loan from canara Bank and (2) Amount due to the construction Contractor fall within the ambit of S. 45.
4. b) Here also the issue is whether the doctrine of lifting the veil applies to fasten liability (1) On the holding Co. X & Y Ltd. On the ground that both the Companies are one and the same economic entity and also on the principles laid down in Smithstone & Knight v. Bermingham Corporation (2) Vivekanandan as the shadow director of the Company and the person actually carrying on the business as the subsidiary Co. and the holding Co. are mere his instrumentality and that it was he who really carried on the business. (3) Other Directors for the loss caused to the plaintiffs on account of their failure to discharge their duties of due care and skill and exercise of unfettered discretion.
3
PART - B
1. a) Examine the ambit of Section 36. The Provisions of AOA as such are not contractual terms between (a) Company and outsiders (b) Company and members in respect of matters which do not affect the rights or liabilities members as members. In other words S. 36 does not cover outsider rights. But they may be the basis of an implied Contract between Company and outsider. In such cases the parties (i.e. the company and the other contracting party) may refer to them. But the company can alter these provisions (See S.31) without the consent of the other party. Such alteration would not be treated as a breach of contract by the company. The reason is that the parties have presumed to have consented that the implied contract is liable to be altered by the company without the consent of the other contracting party. The only gloss on this that by such alteration the accrued rights of the other party cannot be affected.
1. b ) (1) No alteration having the effect of increasing the liability of the existing members without their consent (exception S. 38). (2) Class Rights cannot be varied without the consent of the affected class as provided in S. 106.In certain cases class rights cannot be varied at all. (3) No alteration which is a fraud on the Minority. (For the meaning of the term and the scope of the exception see the leading cases- Allen v. Gold Reef, Greenhalgh v. Arderone Cinemas Ltd, Peter American, and Gambatto).
2. a) Chairman responsible for the orderly conduct of company meeting. He has duties derived from common law, Statute (Companies Act) and AOA. He is responsible for the orderly conduct of the meeting. He must be impartial. His duties are of a quasi fiduciary nature. He has suo moto powers in regard to the orderly conduct of the business of the meeting including adjournment.
2. b) EGM on requisition- Sec 169 (1) Within 21 days of a valid requisition being made by these members who satisfy the requirements of s. 169(4) the Board shall take steps for the calling of the EGM which is to be held within 45 days of the receipt of the notice. Failure to do so is an offence by virtue of s. 629 A. The Board has no discretion in this matter. (2) If the Board fails to call the EGM within the time specified in S.169 (6) , the requisitionists themselves , or such of them who satisfy s. 169 (6) (b) or (c) may call the EGM. Such meeting shall be held within 90 days of the date of requisition being received by the company.
4 3. a) See Gover: 6 th ed., P. 610-623 The three divisions made therein (1) Transaction with the company (2) Use of Corporate Opportunity (3) Competition with the Company The Relevant case law is to be examined: (a) Aberdeen Railway Co. and other cases (b) Regal Hastings, Industrial Development Consultants Ltd v. Cooley, Canadian Aerospace, Boardman v. Phipps etc.
3. b) Floating Charge- Distinction from fixed charge- Impact of S. 534. Two theories: (1) Licence theory and (2) Mortgage of future assets theory Distinction between the two Negative Covenant Meaning - Priority list earlier floating charge and subsequent legal mortgage. - What is the effect of Subsequent mortgagees Knowledge of earlier floating charge. - Whether Constructive notice will operate to impute Knowledge. ( S. 125)
4. a) Allotment One of the two devices which a person becomes a shareholder. Allotment- Original Transfer Company creating new shares and issuing the same to those persons either Apply for them or accept the offer made by the company. See the scope of sections 69 and 70. Effect of irregular allotment- The allotment voidable at the option of the allottee Allotment- Original title Transfer and transmission- derivative title. Sections 69 & 70 apply to a public company only.
4. b) Section 299 to be read with S. 300 Extension of the principle of fiduciary duties of the directors. - Envisages that the directors should disclose their personal interest in any transaction- Contract or other arrangement to the Board - Not to participate in the discussion of the matter by the Board: not to Vote etc. - Exception: see section 300 (2) - The concerned directors presence will not be considered for quorum requirement. - Failure to comply with the requirement (see S. 299(4) & (5) - Companies to which S. 299 applies See S. 299 (4) & 299(6)
5 5. SHORT NOTES
a) Declaration of Solvency See S. 488 Consequences of not filing the declaration of solvency- The voluntary winding up can be only creditors Voluntary winding up. Declaration of solvency to be accompanied by a copy of auditors report. Declaration of solvency shall not be earlier than 5 weeks before the special Resolution to wind up the company voluntarily.
b) Preference shares Where any of the principal rights attached to a share different from those of another legally they belong to two different classes- The Principal rights are:- (1) Voting rights (2) Right to dividend (3) Return of Capital either on reduction of capital (S. 100 etc) or in the winding up. (4) Right to the surplus assets in winding up as regards public Companies and subsidiary private Companies .Sections 85 to 90 apply.
c) Squeezing out of the minority The right of an offeror Company to compulsorily acquire the shares of the minority shareholders satisfying the requirements of S. 395. The dissenting minority have also been given certain legal rights and remedies by the section.
d) Illegal association See S. 11: The Principle of compulsory incorporation. The maximum strength permitted for an unincorporated business association is 10 (Banking) or 20 (Non Banking association). Consequences of violation of S. 11 request (1) Penal liability fastened on members (2) Personal liability on them for the debts and liabilities incurred by the unincorporated body. (3) Neither the association nor members can sue the third parties.
******** National Law School of India University Bangalore M.B.L. Part I Annual Examination (June) 2010 INDUSTRIAL RELATION LAW I. Answer any six of the following: Ql. Define 'Industry'. Explain in brief with the help of decided Cases. Ans. Section 20) of ID Act, 1947 - Analysis-Supreme Court cases delineating the definition. Important cases - D.R.Baneerjea vis P.R.Mukherjea. Corporation of City of Nag pur Case. Hospital Mazdoor Sabha Case. Safdarjung Hospital Case. Solicitors Case. University of Delhi vis Ramnath. Harinagar Cane Sugar Farm vis State of Bihar. Madras Gymkhana Club Case. Bangalore Water Supply and Sewage Board vis A.Rajappa. Coirboard vis Indiradevi. Jalbir Singh Case. Reference to Amended definition of 1982. Q2. What is collective bargaining? Explain different methods of collective bargaining recognised by law. Ans. Defir,ition of Collective Bargaining by different scholars - Analysis-Methods of collective bargaining provided by ID Act, like Works Committee, Conciliation - reference to tools of collective bargaining like strike and lockout - Joint Working Committee, etc. Q3. Examine the scope and the extent of immunities of registered trade unions with the help of decided cases. Ans. Reference to Ss. 17 & 18 - detailed analysis - requirements to avail immunity - reference to decided cases. Important cases - Law of Trilogy Moghai Steam ship company case, Allan vis Flood, Quin vis Leathem. Rotas Indutries vis Staff Union, any other Indian cases. i ! I' Q4. Explain in brief different methods of resolution ofIndustrial disputes as provided under the Industrial Disputes Act, 1947. Ans. Trace the method adopted to resolve the Industrial disputes - show the movement from voluntary settlement to compulsory adjudication of Industrial disputes. Make reference to authorities provided under the ID Act, 1947. viz, Works Committee, Conciliation (Conciliation Officer and Board of Conciliation) Court of Inquiry, Grievance Settlement Authority, Arbitration and Compulsory Adjudication (Labour Court, Industrial Tribunal and National Tribunal). Critical assesment and analysis of working of the system. Q5. Critically examine the regulation of managerial prerogatives in an industry. Ans. Audit of provisions relating to regulation of managerial prerogatives like a. Notice of change under Section 9A. b. Provisions regulating employer's right to layoff, retrenchment and closer of Industry. c. Works Committee. d. Ss. 33, 33A & 33C. and other provisions. Q6. Define' Appropriate Government'. Critically evaluate the role of' Appropriate Government' in maintenance of industrial peace. Ans. Definition of 'Appropriate Government' uls 2(a)-Analyze with the help of decided cases - Critically evaluate the role of 'Appropriate Government' in maintaining Industrial peace with reference to power of reference of ID, publication of award, regulation of strikes and lock outs and so on. Q7. Define 'Industrial Dispute' and explain its scope with the help of decided cases. Ans. Definition of Industrial dispute uls 2(k) - Analysis - Individual Dispute vis Industrial dispute - requirements for Individual Dispute to become Industrial Dispute with the help of decided cases - reference to section 2A and its analysis - Interpretation of 'any person' . Q8. Critically evaluate the vanishing role of Trade Unions in the era of globalization. Ans. Trade unions and globalization - Trace the origin and growth of trade unions with reference to the objects of trade unions - return of lesseize faire era and the changed scenario with reference to trade union movement - individualized contract contributing to , I I I I I the weakened social security and term security as the evils of the globalized era and the like aspects may be discussed. II. Write short notes on the following. A. Kinds of Strikes. a. Tooldown, stay in strike. b. Go slow c. Hunger strike d. Sympethic strike. e. Lighing strike - Analyse the nature of these strikes with reference to decided cases, if any. Test the validity of these strike u/s 2(q). B. Funds of registered Trade Union - general fund & political fund - nature of contribution towards these funds - objects for which these funds may be spent - effect upon rights of the members not contributing to the political funds. C. Industrial Employment Standing Orders - meaning, definition and objects of Standing Orders - Certification of Standing Orders - notice to workers about Standing Orders, etc. D. Unfair labour practices - meaning & definition - prohibition & penalty for unfair labour practices u/Ss. 25T & 25U r/w V schedule to ID Act, 1947. I , I KEY ANSWER- ENVIRONMENTAL LAW June 2010 Annual Examination
PART-A
1. Powers 1. Powers of Entry; 2. Inspection; 3. Taking samples; 4. Consent; 5. Launching Prosecution; 6. Instructing the other agencies of state (Water supply, electricity, etc.); 7. acting on complaints; 8. requiring Information disclosure; 9. Enforcement of standards and Functions 1. Creating awareness 2. Education 3. Building capacity and 4. Extending technical assistance & Expertise.
2. Significance of Biological Diversity: 1. Ecological Balance; 2. Source of food; 3. Source of medicine; 4. source of livelihood ; 5. article of commerce; 6. Life-support and carbon sink International Legal Developments: Convention on Biological Diversity, 1992 & Biosafety Protocol 2000-Salient features and Evaluation.
3. Umbrella Law: Analyse S.24 & S.26 of EPA, 1986- Status of Rules, Notifications & Authorities- same as that of EPA (Aqua culture Case). Background: Stockholm Conference 1972 & Bhopal Gas Tragedy 1984. Need for a law to deal with environmental problems.
4. Waste Management Laws in India:- Rules for different types of wastes( Municipal wastes; Hazardous Substances; Hazardous Microorganisms; Hazardous Chemicals; Chemical Accidents; Bio-medical wastes; Lead Acid Batteries etc) - Obligations of waste Generator, Transporter and Disposer - Waste Segregation, Labelling and handling - Application of principles of Polluter Pays and Precaution.
5. Common Law & Pollution Control: - Nuisance- Public and Private; - Sic utere tuo ut alienum non loedas - Negligence - Strict Liability- No fault Liability- Absolute Liability- Public Liability Insurance Act, 1991.
6. Environmental Summits - Stockholm, 1972: Human Environment Idea of UNEP- reflections on Environmental Crisis- Environment Day-Commitment to enact and enforce national Environment Protection Laws. - Rio de J aneiro, 1992:Environment & Development: Rio declaration; CBD;UNFCCC; Forestry Principles: Agenda 21; Commission on Sustainable Development - J ohannesburg, 2002: Sustainable Development- Participation of Industry and Civil Society Organizations- Review and Revision of environment Protection goals- Continuation of the good work of the II summit.
PART- B 7. a) Analyse Sections 16 &17 of EPA, 1986. 7. b) Individual right to initiate legal proceedings: Analyse S. 49 of water Act, 1974.
8. a) Public Trust: Analyse M.C Mehta v. Union of India (Kamalnath, 1997) - Article 48A of the Constitution. 8. b) Precaution: Concept & Analysis- Analyse Vellore Citizens Welfare Forum v. U.O.I (1996)
9. a) Wildlife Protection Act: Analyse the basis; classification; Authorities & their functions- 2002 Amendment and impacts of the law. 9. b) Trail smelter Arbitration- Case of Transborder Pollution and fixing liability- case between Canada &U.S- Analyse.