Professional Documents
Culture Documents
India has both private sector banks (which include branches and subsidiaries of foreign banks)
and public-sector banks (ie, banks in which the government directly or indirectly holds
ownership interest). Banks in India can primarily be classified as:
scheduled commercial banks (ie, commercial banks performing all banking functions);
cooperative banks (set up by cooperative societies for providing financing to small
borrowers); and
regional rural banks (RRBs) (for providing credit to rural and agricultural areas)
Recently, the RBI has also introduced specialised banks such as payments banks and small
finance banks that perform only some banking functions.
The objectives of bank regulation, and the emphasis, vary between jurisdictions. The most
common objectives are:
Prudential - to reduce the level of risk to which bank creditors are exposed (i.e. to protect
depositors)
Systemic risk reduction - to reduce the risk of disruption resulting from adverse trading
conditions for banks causing multiple or major bank failures
To avoid misuse of banks - to reduce the risk of banks being used for criminal purposes,
e.g. laundering the proceeds of crime
To protect banking confidentiality
Credit allocation - to direct credit to favoured sectors
It may also include rules about treating customers fairly and having corporate social
responsibility.
4. Moral suation
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Corporate governance: Corporate governance requirements are intended to encourage the
bank to be well managed, and is an indirect way of achieving other objectives. As many banks
are relatively large, and with many divisions, it is important for management to maintain a
close watch on all operations. I
Financial reporting and disclosure requirements: Among the most important regulations
that are placed on banking institutions is the requirement for disclosure of the bank's finances
Credit rating requirement: Banks may be required to obtain and maintain a current credit
rating from an approved credit rating agency, and to disclose it to investors and prospective
investors. Also, banks may be required to maintain a minimum credit rating.
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Session 22
Insurance Laws and IRDA
The word insurance means an arrangement for protection against any likely loss or damage.
Insurance contracts are based on the contingency of an event which causes a loss. Such
contracts are legal agreements which are entered into between two parties wherein, the
company promises to make good the loss as and when it occurs, in return for a regular premium
to be paid by the party.
In India, several insurance laws have been enacted to save the interest of the various
policyholders. Health insurance, fire insurance, car insurance, marine insurance, life insurance,
etc are few examples of the insurance available in India.
To regulate the insurance sector, several regulatory authorities have been formed:
IRDA (Insurance Regulatory and Development Authority)
Tariff Advisory Committee
Insurance Association of India, councils and committees
Ombudsman
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Every insurer seeking to carry on the insurance business in India is required to obtain the
certificate of registration from the IRDA prior to commencement of business. However,
conditions for applying have been envisaged in various Acts.
The Indian Government however after several years, implemented the changes recommended
by the Malhotra Committee and made changes in insurance act,1938 and General insurance
business act,1972.
Functions of IRDA:
1. Protecting interest of policyholders
2. Systematic growth of insurance sector
3. Amicable resolution of conflicts.
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4. Regular monitoring so as to check any discrepancies /frauds etc.
5. Fair dealings in the market.
For the systematic growth of the economy, it is imperative that government should establish
authorities who govern the working of the companies, ex- insurance companies. An
investor must be protected from any fraudulent activities and his money must be utilised
and put to judicious use. Like Banking sector, is governed by RBI and the later regulates
the entire functioning of the banks, similarly, IRDA regulates all insurance companies
managing different insurance operations.
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Session 23
SEBI as a regulator:
Securities and Exchange Board of India (SEBI) is a statutory regulatory body entrusted with
the responsibility to regulate the Indian capital markets. It monitors and regulates the securities
market and protects the interests of the investors by enforcing certain rules and regulations.
The SEBI is the regulatory authority in India established under Section 3 of SEBI Act to protect
the interests of the investors in securities and to promote the development of, and to regulate,
the securities market and for matters connected therewith and incidental thereto. Main
objectives of SEBI are as follows:
Protecting the interests of investors in securities and promoting and regulating the
development of the securities market
Regulating the business in stock exchanges
Registering and regulating the working of stock brokers, sub–brokers, share transfer agent
etc.
Registering and regulating the working of venture capital funds, collective investment
schemes (like mutual funds) etc
Promoting investor’s education and training intermediaries
Promoting and regulating self-regulatory organizations
Prohibiting fraudulent and unfair trade practices
Calling for information from, undertaking inspection, conducting inquiries and audits of
the stock exchanges, intermediaries, self – regulatory organizations, mutual funds and other
persons associated with the securities market
SEBI, just like any corporate firm has a hierarchical structure and consists of numerous
departments headed by their respective heads. Following is a list of some of the departments:
Foreign Portfolio Investors and Custodians
Human Resources Department
Information Technology
Investment Management Department
Office of International Affairs
Commodity and Derivative Market Regulation Department
National Institute of Securities Market
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The functions and powers of SEBI have been listed in the SEBI Act,1992. SEBI caters to the
needs of three parties operating in the Indian Capital Market. These three participants are
mentioned below:
Issuers of the Securities: Companies that issue securities are listed on the stock
exchange. They issue shares to raise funds. SEBI ensures that the issuance of Initial
Public Offerings (IPOs) and Follow-up Public Offers (FPOs) can take place in a healthy
and transparent way.
Protects the Interests of Traders & Investors: It is a fact that the capital markets are
functioning just because the traders exist. SEBI is responsible for safeguarding their
interests and ensuring that the investors do not become victims of any stock market
fraud or manipulation.
Financial Intermediaries: SEBI acts as a mediator in the stock market to ensure that
all the market transactions take place in a secure and smooth manner. It monitors every
activity of the financial intermediaries, such as broker, sub-broker, NBFCs, etc
Securities and Exchange Board of India has the following three powers:
Quasi-Judicial: With this authority, SEBI can conduct hearings and pass ruling
judgements in cases of unethical and fraudulent trade practices. This ensures
transparency, fairness, accountability and reliability in the capital market. SEBI PACL
case is an example of this power.
Quasi-Legislative: Powers under this segment allow SEBI to draft rules and
regulations for the protection of the interests of the investor. One such regulation is
SEBI LODR (Listing Obligation and Disclosure Requirements). It aims at
consolidating and streamlining the provisions of existing listing agreements for several
segments of the financial market like equity shares. This type of regulation formulated
by SEBI aims to keep any malpractice and fraudulent trading activates at bay.
Quasi-Executive: SEBI is authorised to file a case against anyone who violates its rules
and regulation. It is empowered to inspect account books and other documents as well
if it finds traces of any suspicious activity
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Session 24
Environment laws
Government has been introducing various measure so as to preserve the environment. Various
environmental laws have been introduced to restore our natural resources and at the same time
and maintain a sustainable system with regard to the same. The ever-emerging growth of
consumerism has led to major environment issues. However, with the application of various
legislations, the govt is trying to strike a balance in the eco system. Companies have been given
moral, ethical and social responsibility to maintain the purity of the ecosystem and hence save
the environment. The Constitution of our country also contains special provisions on
environment protection. Directive principles and the fundamental duties expressly provide
measures to protect the environment.
However, there is a need for an integrated strategy at the national level, international
cooperation and plan for sustainable development for bringing out radical positive environment
change.
As the right to pure environment is an implied right, hence any violation of this fundamental
right, can be pleaded by filling a writ petition to the Supreme Court under Art.32 and the High
Court under Art.226.
The writs of Mandamus, Certiorari and Prohibition can be invoked for such environmental
matters. A writ of mandamus would lie against a municipality which fails to construct sewers
and drains, clean street and clear garbage.
Supreme Court by virtue of various judgments for example: Oleum gas leak case, Bhopal Gas
Leak case etc has laid the rule of absolute liability and following these judgments, even The
Public Liability Insurance Act was passed, following by many other legislations.
Though the Indian Judiciary has done remarkable contribution by enacting various
environment laws but still the responsibility is on each individual to preserve the natural
resources.
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Session 25
Property Law
Property has a wide meaning in its legal sense. It means something of value and includes both
tangible and intangible assets. When a man owns a property, it means he can not only possess
and enjoy the same with an absolute right but can also derive benefit from it without violating
the law of land.
All properties are classified as either personal property or real property. Personal property is
movable property, anything that can be subject to ownership, except land. Real property on
the other hand, is immovable property such as land and anything attached to the land.
Though the Transfer of Property Act, 1882 does not define the term ‘Property’ the
Interpretation of the Act, says Immovable property does not includes standing timber, growing
crops or grass". Section 3(26), The General Clauses Act, 1897, defines, " immovable property"
shall include land, benefits to arise out of the land, and things attached to the earth, or
permanently fastened to anything attached to the earth.
"Immovable property" includes land, buildings, hereditary allowances, rights to ways, lights,
ferries, fisheries or any other benefit to arise out of the land, and things attached to the earth or
permanently fastened to anything which is attached to the earth, but not standing timber,
growing crops nor grass.
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Movable Property
The definition of movable property is given differently under various Statutes. Some of the
definitions are as follows:
Section 3(36) of the General Clauses Act defines Movable Property as: “Movable Property
shall mean property of every description, except immovable property”.
Section 2(9) of the Registration Act, 1908 defines property as: “Moveable property’ includes
standing timber, growing crops and grass, fruit upon and juice in trees, and property of every
other description except immovable property”.
Section 22 of IPC defines property as - The words ‘Moveable property” is intended to include
corporeal property of every description except land and things attached to the earth. Things
attached to the land may become moveable property by severance from the Earth.
Tangible Property
Tangible Property refers to any type of property that can generally be moved (i.e., it is not
attached to real property or land), touched or felt.
Intangible Property
Intangible Property refers to personal property that cannot actually be moved, touched or felt
but instead represents something of value such as negotiable instruments, securities, service
(economics), and intangible assets.
Intellectual Property
Intellectual Property is a term referring to a number of distinct types of creations of the mind
for which property rights are recognized.
Under intellectual property law, owners are granted certain exclusive rights to a variety of
intangible assets, such as musical, literary and artistic works, discoveries and inventions; and
words, phrases, symbols and designs. Patents, trademarks, and copyrights, designs are the four
main categories of intellectual property.
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Session 26
Hypothecation & Pledge
The term” Hypothecation” is not defined under the Indian contract Act, 1872, however, section
2(n) of Securitization and reconstruction of Financial assets & Enforcement of Securities
Interest Act, 2002 defines hypothecation as:
“’Hypothecation’ means a charge in or upon any moveable property, existing in future, created
by borrower in favour of a secured creditor, without delivery of possession of the moveable
property to such creditor, as a security for financial assistance and includes floating charge and
crystallization of such charge into fixed charge on moveable property”.
It means that the borrower, even after hypothecating the property with the lender/ creditor has
the possession of the said property and no beneficial interest is created in favour of the creditor.
Under a deed of hypothecation, the right of the creditor is limited to enforcing the charge
created under the deed of hypothecation in the manner specified in the deed. Hence under a
deed of hypothecation the creditor neither gets the title nor the possession of the goods or asset
so hypothecated. It merely means creating a charge over the asset in favour of the creditor.
Hypothecation is also defined as: “where property is charged with the amount of a debt, but
neither ownership nor possession is passed to the creditor, it is said to be hypothecated”.
Hence a deed of hypothecation signifies:
• Offering of an asset as collateral security to the lender or the creditor.
• While a charge is created in favour of the creditor, the borrower enjoys the possession
of the property so hypothecated.
• However, if the borrower defaults in repayment the lender can exercise his ownership
rights to seize the asset.
• Assets are of moveable nature.
• Purpose of a deed of hypothecation is to mitigate the creditor’s credit risk.
Pledge
Bailment of goods as security for payment of a debt or performance of a promise is called
pledge. It is a special kind of bailment. The bailor in this case is called the pledgor or pawnor
and the bailee is called the pledgee or pawnee. Any kind of moveable property may be pledged
but delivery of the said property is necessary to complete ‘Pledge’. The delivery may be actual
or constructive. If for some reason physical delivery is not possible, a symbolic delivery will
suffice.
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Difference between Hypothecation and Pledge:
1. In pledge the creditor takes actual possession of the assets. While in hypothecation a
charge is created against the security of moveable assets
2. In a pledge the pledgee retains the possession of the goods until the pledgor repays the
entire debt amount. In case of hypothecation the possession of the security remains with
the borrower itself.
3. Where the borrower defaults in repayment of the loan amount the pledgee has a right
to sell the goods in his possession and adjust the proceeds towards the amount due.
However in case of hypothecation the lender has to first take the possession of the asset
and then sell it.
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Session 27
Real Estate (Development & Regulation) Act, 2016
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The relevant provisions for registration are as below:
Prior Registration of Real Estate project with Real Estate Regulatory Authority.
A promoter shall not advertise, market, book, sell or offer for sale, or invite persons to
purchase in any manner any plot, apartment or building, as the case may be, in any real
estate project or part of it, in any planning area, without registering the real estate
project with the Real Estate Regulatory Authority established .
The projects those are ongoing on the date of commencement of this Act and for which
the completion certificate has not been issued, the promoter shall make an application
to the Authority for registration of the said project within a period of three months from
the date of commencement of this Act.
For projects which are developed beyond the planning area but with the requisite
permission of the local authority, it may, by order, direct the promoter of such project
to register with the Authority, and the provisions of this Act or the rules and regulations
made there under, shall apply to such projects from that stage of registration.
Where the real estate project is to be developed in phases, every such phase shall be
considered a standalone real estate project, and the promoter shall obtain registration
under this Act for each phase separately.
To bring in transparency and accountability, Real Estate Agents have also been covered under
the ambit of RERA and registration requirement has been mandatory for them as per section 9
of the Act. Without obtaining registration, real estate agent shall not facilitate the sale or
purchase of or act on behalf of any person to facilitate the sale or purchase of any plot,
apartment or building, as the case may be, in a real estate project or part of it, being the part of
the real estate project registered, being sold by the promoter in any planning area.
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Promote orderly growth through efficient project execution and standardization: -
While the Real Estate sector has grown significantly in recent years, it has been largely
unregulated, with absence of professionalism and standardization and lack of adequate
consumer protection.
The most important duty of the promoter which has been mandated by the Act is to provide
complete details of the project so that a layman who does not even know the legal requirements
is able to check the legal sanctity of the project. The promoter has also been debarred from
advertising and selling his project until he has procured the requisite approvals from the
authorities and got his project registered with RERA. On successful registration, the promoter
of the project will be provided with a registration number, a login id and password to track the
status of the project and showing the approvals/ permissions in place to execute the project.
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Session 28
Intellectual Property
Intellectual Property is a term referring to a number of distinct types of creations of the mind
for which property rights are recognized.
Under intellectual property law, owners are granted certain exclusive rights to a variety of
intangible assets, such as musical, literary and artistic works, discoveries and inventions; and
words, phrases, symbols and designs. Patents, trademarks, and copyrights, designs are the four
main categories of intellectual property.
Patents
Patents are used to protect new product, process, apparatus, and uses provided the inventions
are not obvious in the light of what has been done before, is not in the public domain, and has
not been disclosed anywhere in the world at the time of the application. The invention must
have a practical purpose. Patents can be registered.
Importance of Patents
Gives a competitive edge
Protects one’s efforts and knowledge
Avoids duplication of research and acts as a stepping stone for scientific research
Identifies emerging technologies, research areas and business opportunities
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Trade Marks
A symbol (logo, words, shapes, a celebrity name, jingles) used to provide a product or service
with a recognizable identity to distinguish It from competing products. Trademarks protect the
distinctive components which make up the marketing identity of a brand, including
pharmaceuticals. They can be registered nationally or internationally, enabling the use of the
symbol.
A mark can include a device, brand, heading, label, ticket, name, signature, word, letter,
numeral, shape of goods, packaging or combination of colors or any such combinations.
Copyright
Copyright is used to protect original creative works, published editions, sound recordings, films
and broadcasts. It exists independently of the recording medium, so buying a copy does not
confer the right to copy. Limited copying (photocopying, scanning, downloading) without
permission is possible, e.g. for research, publication of excerpts or quotes needs
acknowledgment. However, an idea cannot be copyrighted.
In the case of original literary, dramatic, musical and artistic works, the duration of copyright
is the lifetime of the author or artist, and 60 years counted from the year following the death
of the author.
Design Registration
Design registrations are used to protect products distinguished by their novel shape or pattern.
They are available for one-off items. The design itself must be new, although a 1-year grace
period is allowed for test-marketing. Registration is not possible where the new form is dictated
by function. The design is registrable either nationally or under an EU-wide single right. It can
also be protected by copyright.
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Session 29 & 30
Cyber Law and The Information Technology Act, 2000
IT Act was formed to provide legal recognition for transactions carried out by means of
electronic data interchange and other means of electronic communication, commonly referred
to as "electronic commerce", which involve the use of alternatives to paper-based methods of
communication and storage of information, to facilitate electronic filing of documents with the
Government agencies
Digital Signature
Digital signature is a mathematical scheme to verify the authenticity of digital documents or
messages. Also, a valid digital signature allows the recipient to trust the fact that a known
sender has sent the message and it was not altered in transit. Like written signatures, digital
signatures provide authentication of the messages.
Further, digital signatures authenticate the source of messages like an electronic mail or a
contract in electronic form.
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• Non-Repudiation (denial of the validity) – A sender cannot deny sending a message which
has a digital signature.
Electronic Signature
Electronic Signature has been defined under Section 2(1)(ta) of the Information Technology
Act, 2000. Electronic Signature means the authentication of any electronic record by a
subscriber by means of the electronic technique as specified under the Second Schedule and
also includes a digital signature. An electronic signature is described as any electronic symbol,
process or sound that is associated with a record or contract where there is intention to sign the
document by the party involved. The major feature of an electronic signature is thus the
intention to sign the document or the contract.
Electronic devices used for E-Commerce are – (I) Bar Code Machines, (II) Vending Machines,
(III) Telephone & Telegraphs (IV) Fax (V) Television (VI) Stand-alone Computers (VII)
Computer Network (VIII) Internet, WWW & E-mail.
Cyber Laws
The growth of Electronic Commerce has propelled the need for vibrant and effective regulatory
mechanisms which would further strengthen the legal infrastructure, so crucial to the success
of Electronic Commerce. All these governing mechanisms and legal structures come within the
domain of Cyber law.
Cyber law is important because it touches almost all aspects of transactions and activities and
on involving the internet, World Wide Web and cyberspace. Every action and reaction in
cyberspace has some legal and cyber legal angles Cyber law encompasses laws relating to:
· Cyber-crimes
· Electronic and digital signatures
· Intellectual property
· Data protection and privacy
Cybercrimes: is not defined in Information Technology Act 2000 nor in the I.T. Amendment
Act 2008 nor in any other legislation in India. Cybercrimes can be defined as: "Offences that
are committed against individuals or groups of individuals with a criminal motive to
intentionally harm the reputation of the victim or cause physical or mental harm, or loss, to the
victim directly or indirectly, using modern telecommunication networks such as Internet
(networks including chat rooms, emails, notice boards and groups) and mobile phones
(Bluetooth/SMS/MMS)".
To put it in simple terms ‘any offence or crime in which a computer is used is a ‘cyber-crime’.
Interestingly even a petty offence like stealing or pick-pocket can be brought within the broader
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purview of cyber-crime if the basic data or aid to such an offence is a computer or an
information stored in a computer used (or misused) by the fraudster. The I.T. Act defines a
computer, computer network, data, information and all other necessary ingredients that form
part of a cyber-crime. In a cyber-crime, computer or the data itself is the target or the object of
offence or a tool in committing some other offence, providing the necessary inputs for that
offence. All such acts of crime will come under the broader definition of cyber-crime.
Cybercrime may threaten a person or a nation's security and financial health. Issues
surrounding these types of crimes have become high-profile, particularly those
regarding hacking, copyright infringement, unwarranted mass-surveillance, sextortion, child
pornography, and child grooming.
Cybercrime usually includes:
(a) Unauthorized access of the computers (b) Data diddling (c) Virus/worms attack (d) Theft
of computer system (e) Hacking (f) Denial of attacks (g) Logic bombs (h) Trojan attacks (i)
Internet time theft (j) Web jacking (k) Email bombing, etc.
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Session 31
The Consumer Protection Act
The Consumer Protection Act, 1986 (CPA) is an Act that provides for effective protection of
interests of consumers by prescribing specific remedies to make good the loss or damage
caused to consumers as a result of unfair trade practices. It makes provision for the
establishment of consumer councils and other authorities that help in settlement of consumer
disputes and matters connected therewith.
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(iv) The Act provides for relief of a specific nature and also for compensation to the consumer
as appropriate.
(v) The provisions of the Act are in addition to and not in derogation of the provisions of any
other law for the time being in force
Redressal Forums: Consumer Protection Act, 1986 enables the ordinary consumers to secure
less expensive and often speedy redressal of their grievances. Under the Consumer Protection,
it provides for a three-tier structure of the National and State Commissions and District Forums
for speedy resolution of consumer disputes. Any individual consumer or association of
consumers can lodge a complaint with the district, state or national level forum, depending on
the value of goods and claim for compensation. At present there are 632 District Forums, 35
State Commissions with the National Consumer Disputes Redressal Commission (NCDRC) at
the apex.
The provisions of this Act cover, ‘goods as well as services.’ The goods are those which are
manufactured or produced or sold to consumers through whole sellers and retailers. The
services are in the nature of transport, telephone, electricity, housing, banking, insurance,
medical treatment etc. The Act provides a mechanism for redressal of complaints regarding
defect in goods and deficiency in services.
The CPA categorises the following four types of persons to be the complainants. These are
as follows: (i) a consumer; or (ii) any voluntary consumer association registered under the
Companies Act, 1956, or under any other law for the time being in force; or (iii) the central
government or any state government who or which makes a complaint; or (iv) one or more
consumers, where there are numerous consumers having the same interest; who or which
makes a complaint.
Consumer Protection Bill of 2018 replaces the Consumer Protection Act, 1986. The Bill
sets up a Central Consumer Protection Authority to promote, protect and enforce consumer
rights as a class. It can issue safety notices for goods and services, order refunds, recall goods
and rule against misleading advertisements. If a consumer suffers an injury from a defect in a
good or a deficiency in service, he may file a claim of product liability against the manufacturer,
the seller, or the service provider.
The Bill empowers the central government to appoint, remove and prescribe conditions of
service for members of the District, State and National Consumer Disputes Redressal
Commissions. The Bill leaves the composition of the Commissions to the central government.
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Session 32
Competition Law
Competition law is the regulation that promotes and maintains market competition. It regulates
the market scenario for a healthy market environment. However, the said law is enforced
through public and private enforcement.
The Competition Act 2002 was amended in the year 2007 and 2009. Under the Act, a
Commission is appointed which protects the interests of the parties and ensure fairness in the
market environment. The Act replaced the old Monopolistic and Restrictive Trade Practices
Act.1969.
The Commission appointed under the Act performs three major functions:
To check unfair agreements
Anti-competitive agreements include all those agreements which are entered so as to
hamper the market conditions in India. Commission holds a power to check upon such
agreements, the decisions of such persons/companies and to oversee their conduct also.
Examples of such agreements are:
Limiting or controlling the production market
Limiting or controlling the technical market
Engaging in any manner in bid rigging or collusive bidding
Entering into exclusive distribution or supply arrangement. Etc
To check dominance in agreements
The Act defines dominant position as a position of strength, enjoyed by an enterprise,
in the relevant market in India , which enables it to:
i. Operate independently of competitive forces prevailing in the relevant manner.
ii. Affect its competitors or consumers or the relevant market in its favour.
Ex- engaging in predatory pricing, etc
To check unhealthy combinations/mergers and amalgamations outside India so as to
hamper conditions in India. Such combinations/ mergers happen when the main motive
is to limit the number of players in the market. Herein, the companies become one entity
so as to deceive the market environment and to gain unjust benefit.
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The Act ensures through the commission that all such unhealthy practices must not exist and
hence give wide powers to the appointed commission. To handle the cross-border issues, the
Commission is empowered to enter into MOU with any foreign agency of any foreign country,
with the prior approval of the central government. With the rapid growth of our economy, it
has become imperative to check and regulate the competition happening within India and from
outside the international borders.
Competition Commission of India is a quasi-judicial body , which entails the task of ensuring
compliance under the Act in India. It can give orders of:
Cease and desist
Imposition of penalty
Order for changes or modification in the agreements, etc.
The main aim of the legislation to promote healthy competition in the market, to eradicate
unfair trade practices, thus boosting the economy of the country. It ensures clear, fair and
transparent conduct of all the players in the market scenario. It is a check on the companies,
while conducting their day to day activities, to maintain fairness in all dealings.
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Session 33
Alternate Dispute Resolution
The alternative Dispute Resolution (ADR) mechanism is used all over the world which is more
effective, faster and less expensive.
Under ADR mechanism, there are basically four methods:
(a) Negotiation
(b) Mediation
(c) Conciliation
(d) Arbitration
While the first two methods are not recognized by law, the methods of conciliation and
arbitration are quasi-judicial methods to resolve a dispute with minimum court intervention.
The same is now recognized by the Arbitration and Conciliation Act, 1996 (Act 26 of 1996).
The courts have always assisted in proper conduct of the arbitration proceedings and
enforcement of arbitration awards.
Quick decision of any commercial dispute is necessary for smooth functioning of business and
industry. In today’s world of shrinking boundaries, free trade and international commerce have
become global necessities. Increasing competitiveness often leads to conflicts between
entrepreneurs, resulting in commercial disputes.
Arbitration is chosen as a means of effective consensual and speedy dispute resolution. The
growing strength and role of India and the Indian industry in the Asian and global economy
has seen the country's emergence as a force to be contended with. Increasing foreign direct
investment and other forms of collaboration by foreign companies have witnessed disputes
between Indian and foreign parties. This has raised the need for an act that will address
commercial disputes quickly and efficiently.
Arbitration:
"Arbitration is the reference of dispute between not less than two parties, for determination,
after hearing both sides in a judicial manner, by a person or persons other than a court of
competent jurisdiction.”
Cost of arbitration: means reasonable cost relating to fees and expenses of arbitrators and
witnesses, legal fees and expenses, administration fees of the institution supervising the
arbitration and other expenses in connection with arbitral proceedings. The tribunal can decide
the cost and share of each party. If the parties refuse to pay the costs, the Arbitral Tribunal may
refuse to deliver its award. In such case, any party can approach Court. The Court will ask for
deposit from the parties and on such deposit, the award will be delivered by the Tribunal. Then
Court will decide the costs of arbitration and shall pay the same to Arbitrators. Balance, if any,
will be refunded to the party.
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Award of Arbitration Tribunal
The award shall be in writing and the reasons on the basis of which award was passed, shall be
recorded unless the parties agree otherwise. The award shall be drawn on a Rs. 100/- stamp
paper. It shall be dated and signed by the arbitrators. The sum awarded may include the interest
which the claimant is entitled. It shall also provide for the costs and it shall mention the party
liable to pay the costs. A signed copy of the award shall be delivered to each party.
The Act also empowers the arbitrator to make an interim arbitral award on any matter with
respect to which he may make a final award.
The parties are free to settle the matter any time during the arbitration proceedings. The
arbitrator, if satisfied about the impartiality of the settlement, has to make the award in term of
the settlement arrived at by the parties
Conciliation –
Part III of the Act makes provision for conciliation proceedings. In conciliation proceedings,
there is no agreement for arbitration. In fact, conciliation can be done even if there is arbitration
agreement. The conciliator only brings parties together and tries to solve the dispute using his
good offices. The conciliator has no authority to give any award. He only helps parties in
arriving at a mutually accepted settlement. After such agreement they may draw and sign a
written settlement agreement. It will be signed by the conciliator.
However after the settlement agreement is signed by both the parties and the conciliator, it has
the same status and effect as if it is an arbitral award. Conciliation is the amicable settlement
of disputes between the parties, with the help of a conciliator. All matters of a civil nature or
breach of contract or disputes of movable or immovable property can be referred to
conciliation. Matters of criminal nature, illegal transactions, matrimonial matters like divorce
suit etc. cannot be referred to conciliation.
The conciliation proceedings can start when one of the parties makes a written request to other
to conciliate, briefly identifying the dispute. The conciliation can start only if other party
accepts in writing the invitation to conciliate. Unless there is written acceptance, conciliation
cannot commence. If the other party does not reply within 30 days, the offer for conciliation
can be treated as rejected.
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