DECEMBER 2021 P/ID 77506/PMBF/

PMB1F/PMBSF
Time : Three hours Maximum : 100 marks
PART A — (5  6 = 30 marks)
Answer any FIVE questions.

1. State the essential elements of valid contract.

1. Offer and Acceptance

Basically, a contract unfolds when an offer by one party is accepted by the other
party . The accepted offer should be without any qualification and be definite. An
offer needs to be clear, definite, complete and final. It should be communicated to
the offeree. A proposal when accepted becomes a promise or agreement. The offer and
acceptance must be ‘consensus ad idem’ which means that both the parties must agree
on the same thing in the same sense i.e. identity of wills or uniformity of minds.

2. Intention to Create Legal Relationship

The intention of the parties to a contract must be to create a legal relationship
between them. Agreements of social nature, as they do not contemplate legal
relationship, are not contracts. For instance, if a father fails to give his
daughter the promised pocket money, the daughter cannot sue the father, because it
was purely a domestic arrangement. Thus, it is clear that all agreements, which do
not result in legal relations, are not contracts.

3. Capacity to Contract
If an agreement is entered between parties who are competent enough to contract,
then the agreement becomes a contract.

4. Genuine and Free Consent

Free consent is another essential element of a valid contract. An agreement must
have been made by free consent of the parties. The contract would be void in case
of mutual mistakes. When consent is obtained by unfair means, the contract would be
voidable.

5. Lawful Object
Objectives of an agreement should be lawful. It must not be illegal or immoral or
opposed to public policy. It is lawful unless it is forbidden by law. When the
object of a contract is not lawful, the contract is void.

6. Lawful Consideration
Something in return is Consideration. In every contract, agreement must be
supported by consideration. It must be lawful and real.

7. Certainty and Possibility of Performance

The agreements, in which the meaning is uncertain or if the agreement is not
capable of being made certain, it is deemed void. T&C of the contract should always
be certain and cannot be vague. Any contract that are uncertain are considered
void. The terms of the agreement must also be capable of performance and should not
enforce impossible act.

8. Legal Formalities
Legal formalities if any required for particular agreement such as registration,
writing, they must be followed. Writing is essential in order to effect a sale,
lease, mortgage, gift of immovable property etc. Registration is required in such
cases and legal formalities in the relevant legislation should be strictly
followed.

2. What do you understand by proposal? Explain the

conditions for legal proposal.

According to the Indian Contract Act 1872, proposal is defined in Section 2 (a) as
“when one person will signify to another person his willingness to do or not do
something (abstain) with a view to obtain the assent of such person to such an act
or abstinence, he is said to make a proposal or an offer.”

....The proposal must be made for the creation of a legal relationship

Merely, a statement of hope, desire, or intention does not constitute a binding
proposal. It is a very essential condition to constitute a legal relationship for
the creation of a contract.
....The proposal must be communicated
An offer is valid only when it is communicated to the offeree. Without
communication of the proposal, it cannot be accepted.
....Signifies willingness of proposal to obtain assent to it
In order to constitute a valid proposal, a proposal is of such type in which the
promisee has a reasonable opportunity for either acceptance and ignorance of the
proposal. The unilateral decision does not amount to a valid proposal.
....The proposal must be constituted with a view to obtaining the assents
The proposal must be made with an intention to obtain the assent of the other
party. Merely disclosing the intention of making a proposal does not amount to a
proposal.
....The proposal must contain a Promise
The proposal must contain a promise in which it is shown by the promiser that if
the proposal is accepted, then something shall be done or not be done, shall or
shall not happen.
....The proposal must be certain and definite
The proposal must not be vague and not be of such a type which is impossible to
enforce. A proposal must state the essential term of performance on both sides.
.... Must not contain a mere expression of intention
If a proposal contains a mere expression of intention to do anything only, then it
cannot be enforceable.
....The proposal must be different from preliminary negotiations
The advertisement card, catalogues and circular cards that contain price notation
do not amount to the proposal because it is just an invitation to the proposal.
....Must not contain negative terms
The proposal must not contain such a clause that if the promisee will give no
reaction, then it will be considered that proposal is accepted.
....Must not contain the false statement
If any of the statements in which proposals are the basis of the acceptance and
form the basis of the contract between parties, and are found to be a false
statement, then it will consider that contract becomes void and not enforceable.
....May be subject to a condition
A proposal can be created on a subject to condition. When a person accepts an offer
that is subject to a condition, then it is presumed that he has accepted that offer
with the condition and he cannot deny it later on.

3. Elaborate quasi contracts.

4. Who are the parties to indemnity contract?

5. Discuss the liability of parties to Negotiable

Instruments.

Liabilities of parties to Negotiable Instruments are as follows :

1. Liability of Drawer:

According to Section 30 of the Negotiable Instrument Act 1881, The

drawer of a bill of exchange or cheque is bound in case of dishonor by the drawee
or acceptor thereof, to compensate the holder, provided due notice of dishonor has
been given to, or received by, the drawer .

2 Liability of Drawee of Cheque

The drawee of a cheque having sufficient funds of the drawer in his

hands properly applicable to the payment of such cheque must pay the cheque when
duly required so to do, and, in default of such payment, must compensate the drawer
for any loss or damage caused by such default (Section 31 of the Negotiable
Instrument Act 1881)

3 Liability of Makers of note and acceptor of bill :

The maker of a promissory note and the acceptor before maturity of a

bill of exchange are bound to pay the amount thereof at maturity according to the
apparent tenor of the note or acceptance respectively, and the acceptor of a bill
of exchange at or after maturity is bound to pay the amount thereof to the holder
on demand. In default of such payment as aforesaid, such maker or acceptor is bound
to compensate any party to the note or bill for any loss or damage sustained by him
and caused by such default.(Section 32 of the Negotiable Instrument Act 1881)

4 Liability of endorse :

Liability of endorser In the absence of a contract to the contrary,

whoever endorses and delivers a negotiable instrument before maturity, without, in
such endorsement, expressly excluding or making conditional his own liability, is
bound thereby to every subsequent holder, in case of dishonor by the drawee,
acceptor or maker, to compensate such holder for any loss or damage caused to him
by such dishonor, provided due notice of dishonor has been given to, or received
by, such endorser as hereinafter provided. Every endorser after dishonor is liable
as upon an instrument payable on demand.(Section 35 of the Negotiable Instrument
Act 1881)

5.Liability of Prior Parties to a holder in due course

 Every prior party to a negotiable instrument is liable thereon to a
holder in due course until the instrument is duly satisfied.(Section 36 of the
Negotiable Instrument Act 1881)

6. Describe the classification of companies based on

the basis of ownership.

On the basis of ownership or control, companies may be classified into three

categories, i.e. (1) Holding company, (2) Subsidiary company, and (3) Government
company.

(1) Holding Company:

A holding company is a company which holds majority of shares of another company.

Such company exercises control over the composition of Board of Directors of the
other company and is in a position to influence the formulation of policy

(2) Subsidiary Company:

A company is known as a subsidiary company when (a) the composition of its Board of
Directors is controlled by another company; or (b) the other company holds majority
of its equity shares; or (c) the other company controls more than half of its
voting rights; or (d) it is a subsidiary of another subsidiary company.

(3) Government Company:

A Government company means any company in which not less than 51 per cent of the
paid-up share capital is held by the Central Government, or by any State Government
or Governments, or partly by Central Government and partly by one or more State
Governments and includes a company which is subsidiary of the Government company.
Some of the examples of Government companies in India are : Coal Mines Authority
Ltd., Steel Authority of India Limited and National Aluminum Company Ltd. etc.
Entrepreneur has no scope for this type of company.

7. Explain the settlement of disputes through

conciliation.

8. Discuss the benefits of Employees State Insurance

Act.

The following are some ESI benefits that employees can avail under the ESI Act

Medical benefit
Sickness benefit
Maternity benefit
Dependants benefits
Disablement benefits
Other benefits
1. Medical benefit
Every insurable employee under the Act gets medical benefits the day he becomes an
employee. This benefit extends to his family members as well. This medical benefit
has no ceiling in terms of expenditure on healthcare.

2. Sickness benefit
Insurable employees under the Act can draw some cash compensation in case they fall
sick. This compensation is generally 70% of their wages during the period of
sickness for a maximum of 91 days in a year.

In order to avail this sickness benefit, a worker must pay his contribution for 78
days out of 6 months. Hence, he cannot seek this benefit if he contributes for less
than 78 days.

3. Maternity benefit
All female insurable employees can avail maternity benefits under the Act in cases
of pregnancy or confinement.

Confinement, in this case, means labour which results in the birth of a living
child. It can also mean birth after 26 weeks of pregnancy, whether the child is
living or not.

This maternity benefit is generally payable to employees for three months. It may,
however, be extendable for one more month depending on medical advice.

The compensation amount in such cases is the full wage amount of the employees.
This is payable only if the employee makes a contribution for 70 days in the
preceding year.

4. Dependants benefits
ESI benefits extend not only to the employees but to their dependents as well in
case of the employee’s death. Such death, however, must occur in the course of an
employment injury or an occupational hazard.

This compensation is generally 90% of the dead employee’s wages in the form of
monthly payments.

5. Disablement benefits
In case an employee suffers some disablement due to an employment injury, he can
seek disablement benefits. Such disablement may be either temporary or permanent.

In the case of temporary disablement, the compensation is generally 90% of the wage
amount until the disablement continues. The employee can claim this benefit
irrespective of whether or not he paid his contribution.

As far as permanent disablement is concerned, the compensation amount depends on 0n

the extent of the injury. The Medical Board first determines the extent of the
employee’s loss of earning capacity and then decides it.

6. Other benefits
Apart from these five basic ESI benefits, an insurable employee can avail the
following miscellaneous benefits also:

a) Funeral expenses: The dependents of a deceased employee receive Rs. 10,000 to

perform his last rites.

b) Vocational/physical rehabilitation: This is generally payable to permanently

disabled employees. They can avail of this benefit for undergoing vocational and
physical rehabilitation.

c) Old age medical care: This is payable for employees retiring on superannuation
or under VRS/ERS. Even persons who leave employment after suffering a permanent
injury and their spouses can avail this benefit. The compensation amount here is
generally Rs. 120 per month.

PART B — (5  10 = 50 marks)
Answer any FIVE questions.

9. Examine the Nature and classification of contracts

in detail.

Pictures sent

10. What is offer? Explain the features of valid offer.

In order to create a valid contract, one party must make an offer, another party
must accept the offer, and consideration must be exchanged. The one who makes the
offer is known as the “offerer,” while the person who receives the offer is called
the “offeree.” Although you can make an offer with just a single-sentence verbal
statement, you and the other party will generally benefit from a detailed written
description of the offer and its terms.

An offer refers to a promise that is dependent on a certain act, promise, or

forbearance given in exchange for the initial promise. It is a demonstration of
your willingness to enter into an agreement and an invitation to the other party to
conclude the agreement by expressing assent.

Determining whether a party has actually made an offer is a common challenge in a

contract case. As a rule of thumb, the offer must be definite and reasonable enough
for the receiving party to believe that it is indeed an offer. If your offer
includes terms such as quantity, price, quality, and place and time of delivery,
the court may find that you have indeed made an offer.

A simple price quote is generally not regarded as an offer. While an advertisement

may be considered an invitation to an offer, it is not an actual offer. However, if
an advertisement promises to give out an award, it may constitute an offer. A
verbal offer is not enforceable against the offerer for contracts involving real
estate, the sale of goods worth $500 or more, or transactions that require more
than a year to complete. Such contracts must be written in order to be enforceable.

Following are the features of a valid offer:

The offer must be communicated to the other party: The offer is completed
only when it has been communicated to the offeree. Until the offer is communicated,
it cannot be accepted. Thus, an offer accepted without its knowledge does not
confer any legal rights on the acceptor.
Example : A's nephew had absconded from his home. He sent his servant to
trace his missing nephew. When the servant had left, A then announced that anybody
who discovered the missing boy would be given the reward of Rs. 500. The servant
discovered the missing boy without knowing the reward. When the servant came to
know about the reward, he brought an action against A to recover the same. But his
action failed. It was held that the servant was not entitled to the reward because
he did not know about the offer when he discovered the missing boy.

The offer must be made with a view to obtain the consent of the offeree: When
a person is making an offer it means that he is making it with a view to obtain the
consent of the offeree. As soon as the offeree accepts it, the offeror is bound by
it.
The offer must have its terms definite and clear: The terms of an offer must
be definite, clear and certain. If the terms of the offer are vague and uncertain,
no contract will come into existence.
Example : A offered to sell to B ‘a hundred tonnes of oil’. The offer is
uncertain as there is nothing to show what kind of oil is intended to be sold.

The offer must be capable of creating legal relationship: An offer must be

such that when accepted it will result in a valid contract. A mere social
invitation cannot be regarded as an offer, because if such an invitation is
accepted it will not give rise to any legal relationship.
Example : A invited B to a dinner and B accepted the invitation. It is a mere
social invitation. And A will not be liable if he fails to provide dinner to B.

The offer must express the final willingness of the offeror: The terms of the
offer should be such that they contain final willingness of the offeror. Sometimes,
a party does not express his final willingness but proposes certain terms on which
he is willing to negotiate. In such cases, he is not making an offer because he is
not expressing his final willingness to enter into a contract.

11. What are the duties and liabilities of Director

under Companies Act 2012?

Directorships are always susceptible to abuse. Here is a constant struggle to

balance the personal and the company’s interest. As they are equipped with immense
power by virtue of their position, it must not only be regulated in public interest
but also for the protection of those who have invested and are the stakeholders.
Sec 149(1) of companies act stipulates that the company should have a board of
directors.

DUTIES/LIABILITY OF DIRECTORS, AND INDEMNIFICATION BY COMPANIES, UNDER THE CA2012

1. The CA2012 has like other modern laws codified the duties of the director of
Indian companies. The proposed s.166 of the CA2012 mention the duties of the
director as under:

A director shall act in accordance its constitution document, i.e., articles of

association.
A director shall act in good faith in order to promote the objects of the company
for the benefit of its members as a whole, and in the best interests of the
company, its employees, the shareholders, the community and for the protection of
environment.
A director shall exercise his duties with due and reasonable care, skill and
diligence and shall exercise independent judgment.
A director shall not involve in a situation in which he may have a direct or
indirect interest that conflicts, or possibly may conflict, with the interest of
the company.
A director shall not achieve or attempt to achieve any undue gain or advantage
either to himself or to his relatives, partners, or associates and if such director
is found guilty of making any undue gain, he shall be liable to pay an amount equal
to that gain to the company.
2. The CA2012 has widened the definition of the 'officer who is in default' to
include key managerial personnel (chief executive officer and chief financial
officer) and shadow directors. Interestingly, the CA2012 has proposed that every
Indian company must have at least one director who stayed in India for a total
period of not less than 182 days in the previous calendar year. Notably, the CA1956
has no such provision and this proposed change will require the resident Indian
director to be more careful as he will be first one to be caught in case of
violation by an Indian company.

3. The CA2012 has no provision corresponding to s.201 of the CA1956 meaning thereby
that there is no restriction on the companies to indemnity its directors under the
CA2012. The only reference to the provisions of indemnity to directors is given in
s.197 of the CA2012 stating that the premium paid on insurance policy shall be
treated as part of the remuneration of the officers only if such officer is found
guilty.

12. Discuss the statutory machinery constituted under

the Industrial Disputes Act for conciliation and
adjudication of Industrial disputes.

13. Explain the provision relating to closure of an

undertaking under Industrial Disputes Act, 1947.

SPECIAL PROVISION RELATIONG TO CLOSURE

Section 25-O Procedure for closing down an undertaking-
(1) An employer who intends to close down an undertaking of an industrial
establishment to which this Chapter applies shall, in the prescribed manner, apply,
for prior permission at least ninety days before the date on which the intended
closure is to become effective, to the appropriate Government, stating clearly the
reasons for the intended closure of the undertaking and a copy of such application
shall also be served simultaneously on the representatives of the workmen in the
prescribed manner: Provided that nothing in this sub-section shall apply to an
undertaking set up for the construction of buildings, bridges, roads, canals, dams
or for other construction work,

(2) Where an application for permission has been made under sub-section (1), the
appropriate Government, after making such enquiry as it thinks fit and after giving
a reasonable opportunity of being heard to the employer, the workmen! and the
persons interested in such closure may, having regard to the genuineness and
adequacy of the reasons stated by the employer, the interests of the general public
and all other relevant factors, by order and for reasons to be recorded in writing,
grant or refuse to grant such permission and a copy of such order shall be
communicated to the employer and the workmen.

(3) Where an application has been made under sub-section (1) and the appropriate
Government does not communicate the order granting or refusing to grant permission
to the employer within a period of sixty days from the date on which such
application is made, the permission applied for shall be deemed to have been
granted on the expiration of the said period of sixty days.

(4) An order of the appropriate Government granting or refusing to grant permission

shall, subject to the provisions of sub-section (5), be final and binding on all
the parties and shall remain in force for one year from the date of such order.

(5) The appropriate Government may, either on its own motion or on the application
made by the employer or any workman, review its order granting or refusing to grant
permission under sub-section (2) or refer the matter to a Tribunal for
adjudication: Provided that where a reference has been made to a Tribunal under
this sub-section, it shall pass an award within a period of thirty days from the
date of such reference.

(6) Where no application for permission under sub-section (1) is made within the
period specified therein, or where the permission for closure has been refused, the
closure of the undertaking shall be deemed to be illegal from the date of closure
and the workmen shall be entitled to all the benefits under any law for the time
being in force as if the undertaking had not been closed down.

(7) Notwithstanding anything contained in the foregoing provisions of this section,

the appropriate Government may, if it is satisfied that owing to such exceptional
circumstances as accident in the undertaking or death of the employer or the like,
it is necessary so to do, by order, direct that the provisions of sub-section (1)
shall not apply in relation to such undertaking for such period as may be specified
in the order.

(8) Where an undertaking is permitted to be closed down under subsection (2) or

where permission for closure is deemed to be granted under sub-section (3), every
workman who is employed in that undertaking immediately before the date of
application for permission under this section, shall be entitled to receive
compensation which shall be equivalent to fifteen days’ average pay for every
completed year of continuous service or any part thereof in excess of six months.]

14. Describe the employer's liability for Compensation

under employee's Compensation Act 1923.

Pictures sending

15. Discuss the salient features of CPF Act 1952.

16. Bring out the procedure of Employees insurance

claims under ESI Act 1948.

PART C — (1  20 = 20 marks)
(Compulsory)

17. Describe the procedure for hearing claims arising

out of wrong deduction of wages.

To hear and decide all claims arising out of deductions from the wages, or delay in
payment of the wages, of persons employed or paid, including all matters,
incidental to such claims, there will be a officer mentioned below appointed by the
appropriate government.

(a) any Commissioner for Workmen's Compensation; or

(b) any officer of the Central Government exercising functions as –

(i) Regional Labour Commissioner; or

(ii) Assistant Labour Commissioner with at least two years' experience; or

(c) any officer of the State Government not below the rank of Assistant Labour
Commissioner with at least two years' experience; or

(d) a presiding officer of any Labour Court or Industrial Tribunal, constituted

under the Industrial Disputes Act, 1947 (14 of 1947) or under any corresponding law
relating to the investigation and settlement of industrial disputes in force in the
State; or

(e) any other officer with experience as a Judge of a Civil Court or a Judicial
Magistrate, as the authority to hear and decide for any specified area all claims
arising out of deductions from the wages, or delay in payment of the wages, of
persons employed or paid in that area, including all matters incidental to such
claims:

Appropriate Government considers it necessary so to do, it may appoint more than

one authority for any specified area and may, by general or special order, provide
for the distribution or allocation of work to be performed by them under this Act.

[Sec 15(2)]

If any employer does opposite to the provisions of this act, any unreasonable
deduction has been made from the wages of an employed person, or any payment of
wages has been delayed, in such case any lawyer or any Inspector under this Act or
official of a registered trade union authorized to write an application to the
authority appointed by government for direction of payment of wages according to
this act. Every such application shall be presented within 12 months from the date
on which the deduction from the wages was made or from the date on which the
payment of the wages was due to be made. Time of making an application can be
accepted if there is reasonable cause.
[Sec 15(3)]

After receiving of the application the authority shall give an opportunity to hear
the applicant and the employer or other person responsible for the payment of wages
and conducts the enquiry if necessary. It is found that there is mistake with
employer; authority shall order the employer for payment of the wage or refund to
the employee of the amount deducted unreasonably or the payment of the delayed
wages, together with the payment of such compensation as the authority may think
fit. There will not be any compensation payable by employer if there is a
reasonable and genuine cause in delay in the payment of wages.

Claims arising out of deductions from wages or delay in payment of wages and
penalty for malicious or vexatious claims

(1) The State Government may by notification in the Official Gazette appoint a
presiding officer of any Labour Court or Industrial Tribunal constituted under the
Industrial Disputes Act 1947 (14 of 1947) or under any corresponding law relating
to the investigation and settlement of industrial disputes in force in the State or
any Commissioner for Workmen's Compensation or other officer with experience as a
Judge of a Civil Court or as a Stipendiary Magistrate to be the authority to hear
and decide for any specified area all claims arising out of deductions from the
wages or delay in payment of the wages of persons employed or paid in that area
including all matters incidental to such claims :

Provided that where the State Government considers it necessary so to do it may

appoint more than one authority for any specified area and may by general or
special order provide for the distribution or allocation of work to be performed by
them under this Act.

(2) Where contrary to the provisions of this Act any deduction has been made from
the wages of an employed person or any payment of wages has been delayed such
person himself or any legal practitioner or any official of a registered trade
union authorised in writing to act on his behalf or any Inspector under this Act or
any other person acting with the permission of the authority appointed under sub-
section (1) may apply to such authority for a direction under sub-section (3):

Provided that every such application shall be presented within twelve months from
the date on which the deduction from the wages was made or from the date on which
the payment of the wages was due to be made as the case may be:

Provided Further that any application may be admitted after the said period of
twelve months when the applicant satisfies the authority that he had sufficient
cause for not making the application within such period.

(3) When any application under sub-section (2) is entertained the authority shall
hear the applicant and the employer or other person responsible for the payment of
wages under section 3 or give them an opportunity of being heard and after such
further inquiry (if any) as may be necessary may without prejudice to any other
penalty to which such employer or other person is liable under this Act direct the
refund to the employed person of the amount deducted or the payment of the delayed
wages together with the payment of such compensation as the authority may think fit
not exceeding ten times the amount deducted in the former case and not exceeding
twenty-five rupees in the latter and even if the amount deducted or the delayed
wages are paid before the disposal of the application direct the payment of such
compensation as the authority may think fit not exceeding twenty-five rupees :

Provided that no direction for the payment of compensation shall be made in the
case of delayed wages if the authority is satisfied that the delay was due to -
(a) a bona fide error or bona fide dispute as to the amount payable to the employed
person or

(b) the occurrence of an emergency or the existence of exceptional circumstances

such that the person responsible for the payment of the wages was unable though
exercising reasonable diligence to make prompt payment or

(c) the failure of the employed person to apply for or accept payment.

(4) If the authority hearing an application under this section is satisfied -

(a) that the application was either malicious or vexatious the authority may direct
that a penalty not exceeding fifty rupees be paid to the employer or other person
responsible for the payment of wages by the person presenting the application; or

(b) that in any case in which compensation is directed to be paid under sub-section
(3) the applicant ought not to have been compelled to seek redress under this
section the authority may direct that a penalty not exceeding fifty rupees be paid
to the State Government by the employer or other person responsible for the payment
of wages.

(4A) Where there is any dispute as to the person or persons being the legal
representative or representatives of the employer or of the employed person the
decision of the authority on such dispute shall be final.

(4B) Any inquiry under this section shall be deemed to be a judicial proceeding
within the meaning of sections 193 219 and 228 of the Indian Penal Code (45 of
1860).

(5) Any amount directed to be paid under this section may be recovered -

(a) if the authority is a Magistrate by the authority as if it were a fine imposed

by him as Magistrate and

(b) if the authority is not a Magistrate by any Magistrate to whom the authority
makes application in this behalf as if it were a fine imposed by such Magistrate.

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