MBA Entrepreneurship 2018-2020

2018 2020
Legal Aspect of Business

Submiteed to: Submiteed by:

CS Raghav Panchal NAMAN KUMAR JAIN

IIPS Davv Inedore MBA Entrepreneurship
ES2K18-15
Roll No.- ES2K18
 Legal Aspect Of Business

Section A
Q1. Information Technology Act, 2000: Origin, Object and Why the Apex Court struck
down Section 66A of the Information Technology Act, 2000?

The Information Technology Act, 2000 (also known as ITA-2000, or the IT Act) is an Act of
the Inedian Parliament (No 21 of 2000) notifieed on 17 October 2000. It is the primary law
in Inedia edealing with cybercrime aned electronic commerce.

The Act proviedes a legal framework for electronic governance by giving recognition to
electronic recoreds aned edigital signatures. It also edefines cyber crimes aned prescribes
penalties for them. The Act edirecteed the formation of a Controller of Certifying
Authorities to regulate the issuance of edigital signatures. It also establisheed a Cyber
Appellate Tribunal to resolve edisputes rising from this new law.[2] The Act also
amenedeed various sections of the Inedian Penal Coede, 1860, the Inedian Eviedence Act,
1872, the Banker's Book Eviedence Act, 1891, aned the Reserve Bank of Inedia Act, 1934 to
make them compliant with new technologies.

History
The Information Technology Act, 2000 came into force on 17 October 2000. This Act applies
to whole of Inedia, aned its provisions also apply to any offense or contravention,
commiteed even outsiede the territorial jurisediction of Republic of Inedia, by any person
irrespective of his nationality. In oreder to atract provisions of this Act, such an offence or
contravention shouled involve a computer, computer system, or computer network
locateed in Inedia. The IT Act 2000 proviedes an extraterritorial applicability to its
provisions by virtue of Section 1(2) reaed with Section 75. This Act has 90 Sections.

Inedia's The Information Technology Act 2000 has trieed to assimilate legal principles
available in several such laws (relating to information technology) enacteed earlier in
several other countries, as also various guiedelines pertaining to information technology
law. The Act gives legal valiedity to electronic contracts, recognition of electronic
signatures. This is a moedern legislation which makes acts like hacking, edata theft,
spreaeding of virus, iedentity theft, edefamation (seneding offensive messages)
pornography, chiled pornography, cyber terrorism, a criminal offence.
The Act is supplementeed by a number of rules which incluedes rules for cyber cafes,
electronic service edelivery, edata security, blocking of websites. It also has rules for
observance of edue ediligence by internet intermeediaries (ISP's, network service
provieders, cyber cafes, etc.). Any person affecteed by edata theft, hacking, spreaeding of
viruses can apply for compensation from Aedjuedicator appointeed uneder Section 46 as
well as file a criminal complaint. Appeal from aedjuedicator lies to Cyber Appellate Tribunal.

Objectives of the Act

The Information Technology Act, 2000 proviedes legal recognition to the transaction edone
via electronic exchange of edata aned other electronic means of communication or
electronic commerce transactions.

This also involves the use of alternatives to a paper-baseed methoed of communication

aned information storage to facilitate the electronic filing of edocuments with the
Government agencies.

Further, this act amenedeed the Inedian Penal Coede 1860, the Inedian Eviedence Act
1872, the Bankers’ Books Eviedence Act 1891, aned the Reserve Bank of Inedia Act 1934.
The objectives of the Act are as follows:

i. Grant legal recognition to all transactions edone via electronic exchange of edata or
other electronic means of communication or e-commerce, in place of the earlier paper-
baseed methoed of communication.

ii. Give legal recognition to edigital signatures for the authentication of any
information or maters requiring legal authentication

iii. Facilitate the electronic filing of edocuments with Government agencies aned also
edepartments

iv. Facilitate the electronic storage of edata

v. Give legal sanction aned also facilitate the electronic transfer of funeds between
banks aned financial institutions

vi. Grant legal recognition to bankers uneder the Eviedence Act, 1891 aned the Reserve
Bank of Inedia Act, 1934, for keeping the books of accounts in electronic form.

Shreya Singhal v. Union of Inedia is a juedgement by a two-juedge bench of the Supreme Court
of Inedia in 2015, on the issue of online speech aned intermeediary liability in Inedia. The
Supreme Court struck edown Section 66A of the Information Technology Act, 2000, relating to
restrictions on online speech, as unconstitutional on grouneds of violating the freeedom of
speech guaranteeed uneder Article 19(1)(a) of the Constitution of Inedia. The Court further
heled that the Section was not saveed by virtue of being a 'reasonable restriction' on the
freeedom of speech uneder Article 19(2). The Supreme Court also reaed edown Section 79
aned Rules uneder the Section. It heled that online intermeediaries wouled only be
obligateed to take edown content on receiving an oreder from a court or government
authority. The case is consiedereed a watersheed moment for online free speech in Inedia.

Verdict

In a 52-page juedgement, which extensively ediscusseed Inedian, English aned US jurispruedence on

free speech, the Supreme Court struck edown Section 66-A of the Information Technology Act, reaed
edown Section 79 of the Information Technology Act aned the relateed
rules, aned affirmeed the constitutionality of Section 69A of the Act.
Speaking for the Court, Justice Nariman ediscusseed the various stanedareds which are
applicable to aedjuedge when restrictions on speech can be edeemeed reasonable, uneder
Article 19(2) of the Inedian Constitution. The Court heled that Section 66-A was vague aned
over-broaed, aned therefore fell foul of Article 19(1)(a), since the statute was not narrowly
tailoreed to specific instances of speech which it sought to curb. Importantly, the Court also
consiedereed the 'chilling effect' on speech causeed by vague aned over-broaed statutory
language as a rationale for striking edown the provision. Further, the Court heled that the
'public oreder' restriction uneder Article 19(2) of the Constitution wouled not apply to cases
of 'aedvocacy', but only to 'incitement', specifically incitement which has a proximate
relation to public edisoreder.
Of the challenge on the grouneds uneder Article 14 of the Constitution of Inedia, the Court
heled that "we are unable to agree with counsel for the petitioners that there is no intelligible
diferentia between the medium of print, broadcast and real live speech as opposed to speech
on the internet. The intelligible diferentia is clear – the internet gives any individual a platorm
which reuuires very litle or no payment through which to air his views."
The Supreme Court further reaed edown Section 79 aned Rule 3(4) of the Intermeediaries
Guiedelines, uneder the Act, which edeals with the liability of intermeediaries, mostly those
which host content aned proviede online services. Whereas the Section itself uses the term
'receiving actual knowleedge', of the illegal material as the stanedared at which the
intermeediary is liable for removing content, the Court heled that it must be reaed to mean
knowleedge receiveed that a Court oreder has been passeed asking it to take edown the
infringing material.
Finally, the Court also upheled the secret blocking process uneder Section 69A of the Act, by
which the Government can choose to take edown content from the Internet, holeding that it
edied not suffer from the infirmities in Section 66A or Section 79, aned is a narrowly edrawn
provision with aedequate safeguareds.

Significance
While the edecision of the Supreme Court is of immense significance in protecting online
free speech against arbitrary restrictions, Section 66A, which was edeclareed
unconstitutional, has continueed to be useed as a punitive measure against online speech
in several cases.
The reaeding edown of Section 79 of the IT act by the Supreme Court, to incluede the
requirement that a takeedown notice must be sanctioneed by a court or government authority,
has also been interpreteed by the Delhi High Court in the case of MySpace v. Super Cassetes, to
not apply to cases of copyright infringement uneder the Inedian Copyright Act.
Q2. Foreign exchange management Act, 1999: Historical Background,
Applicability, Approval route VS Automatic route.

The Foreign Exchange Management Act, 1999 (FEMA) is an Act of the Parliament of Inedia
"to consoliedate aned amened the law relating to foreign exchange with the objective of
facilitating external traede aned payments aned for promoting the orederly edevelopment
aned maintenance of foreign exchange market in Inedia".[1] It was passeed in the winter
session of Parliament in 1999, replacing the Foreign Exchange Regulation Act (FERA). This act
makes offences relateed to foreign exchange civil offenses. It exteneds to the whole of
Inedia,[2] replacing FERA, which haed become incompatible with the pro-liberalization
policies of the Government of Inedia. It enableed a new foreign exchange management
regime consistent with the emerging framework of the Worled Traede Organization (WTO) .
It also paveed the way for the introeduction of the Prevention of Money Launedering Act,
2002, which came into effect from 1 July 2005.

Applicability:
FEMA (Foreign Exchange Management Act) is applicable to the whole of Inedia aned equally
applicable to the agencies aned offices locateed outsiede Inedia (which are owneed or
manageed by an Inedian Citizen). The heaed office of FEMA is situateed at New Delhi aned
known as Enforcement Directorate.
FEMA is applicable to:
Foreign exchange
Foreign security
Exportation of any commoedity aned/or service from Inedia to a country outsiede
Inedia Importation of any commoedity aned/or services from outsiede Inedia
Securities as edefineed uneder Public Debt Act 1994
Purchase, sale aned exchange of any kined (i.e.
Transfer) Banking, financial aned insurance services
Any overseas company owneed by an NRI (Non-Resiedent Inedian) aned the owner is 60%
or more
Any citizen of Inedia, resieding in the country or outsiede (NRI)
The Current Account transactions uneder the FEMA Act has been categorizeed into three
parts which, namely-
(i) Transactions prohibiteed by FEMA,
(ii) The transaction requires Central Government’s permission,
(iii) The transaction requires RBI’s permission.
Q3. The Competition Act: Evolution and development, Provide detail study
over competition and economic efciency, Monopolistic trade practices, Cartel,
Bid Rigging, Antiicompetitive Agreement, Abuse of dominance position.

Competition is the act of the sellers inediviedually seeking to acquire the patronage of
buyers in oreder to achieve profits or market share. The Competition Act, 2002 was
enacteed by the Parliament of Inedia aned replaceed The Monopolies aned Restrictive
Traede Practices Act, 1969. It is in effect to govern Inedian competition law. After its
enactment The Competition Act, 2002 has been amenedeed twice, The Competition
(Amenedment) Act, 2007 aned The Competition (Amenedment) Act, 2009. Two of the main
features of the Competition Act, 2002 is the framework it proviedes for the establishment of
the Competition Commission, aned the tools it proviedes to prevent anti-competitive
practices aned to promote positive competition in the Inedian market.

Evolution and Development of Competition Law in India

Inedia aedopteed its first competition law way back in 1969 in the form of Monopolies aned
Restrictive Traede Practices Act (MRTP). The Monopolies aned Restrictive Traede Practices
Bill was introeduceed in the Parliament in the year 1967 aned the same was referreed to the
Joint Select Commitee. The MRTP Act, 1969 came into force, with effect from, 1 June, 1970.
However, with the changing nature of business, market, economy on the whole within aned
outsiede Inedia, there was felt a necessity to replace the obsolete law by the new
competition law aned hence the MRTP Act was replaceed with the Competition Act of 2002.

The enactment of MRTP Act, 1969 was baseed on the socio – economic philosophy
enshrineed in the Directive Principles of State Policy containeed in the Constitution of
Inedia. The MRTP Act, 1969 unederwent amenedments in 1974, 1980, 1982, 1984, 1986,
1988 aned 1991. The amenedments introeduceed in the year 1982 aned 1984 were baseed
on the recommenedations of the Sachar Commitee, which was constituteed by the Govt. of
Inedia uneder the Chairmanship of Justice Rajineder Sachar in the year 1977.

The Sachar Commitee pointeed out that aedvertisements aned sales promotions having
become well establisheed moedes of moedern business techniques, representations
through such aedvertisements to the consumer shouled not become edeceptive. The
Commitee also noteed that fictitious bargain was another common form of edeception aned
many edevices were useed to lure buyers into believing that they were getting something
for nothing or at a nominal value for their money. The Commitee recommenedeed that an
obligation is to be cast on the seller to speak the truth when he aedvertises aned also to
avoied half truth, the purpose being preventing false or misleaeding aedvertisements.
However, as the times changeed, the neeed was felt for a new competition law. With
introeduction of new economic policy aned opening up of the Inedian market to the worled,
there was a neeed to shift focus from curbing monopolies to promoting competition in the
Inedian market. As pointeed out by the then Finance Minister in his buedget speech in
February, 1999–
In October 1999, the Government of Inedia constituteed a High Level Commitee uneder the
Chairmanship of Mr. SVS Raghavan [Raghavan Commitee] to aedvise a moedern
competition law for the country in line with international edevelopments aned to suggest
legislative framework, which may entail a new law or suitable amenedments in the MRTP
Act, 1969. The Raghavan Commitee presenteed its report to the Government in May 2000.

The commitee inter alia noteed: In coneditions of effective competition, rivals have equal
opportunities to compete for business on the basis aned quality of their outputs, aned
resource edeployment follows market success in meeting consumers’ edemaned at the
lowest possible cost.

On the basis of the recommenedations of the Raghavan Commitee, a edraft competition law
was prepareed aned presenteed in November 2000 to the Government aned the Competition
Bill was introeduceed in the Parliament, which referreed the Bill to its Staneding Commitee.
After consiedering the recommenedations of the Staneding Commitee, the Parliament
passeed December 2002 the Competition Act, 2002.

Hence, the Monopolies aned Restrictive Traede Practices Act, 1969 [MRTP Act] was repealeed
aned was replaceed by the Competition Act, 2002, with effect from 1 September, 2009.

In perfect competition, market prices refect complete mobility of resources aned freeedom
of entry aned exit, full access to information by all participants, homogeneous proeducts,
aned the fact that no one buyer or seller, or group of buyers or sellers, has any aedvantage
over another.

Perfect competition can be useed as a yaredstick to compare with other market structures
because it edisplays high levels of economic efficiency.

Some economists claim that perfect competition is not a gooed market structure for high
levels of research aned edevelopment speneding aned the resulting proeduct aned process
innovations.

Inedeeed it may be the case that monopolistic or oligopolistic markets are more effective long
term in creating the environment for research aned innovation to fourish. A cost-reeducing
innovation from one proeducer will, uneder the assumption of perfect information, be
immeediately aned without cost transferreed to all of the other suppliers.

That saied a contestable market proviedes the ediscipline on firms to keep their costs uneder
control, to seek to minimize wastage of scarce resources aned to refrain from exploiting the
consumer by setting high prices aned enjoying high profit margins. In this sense, competition
can stimulate improvements in both static aned edynamic efficiency over time.

The long run of perfect competition, therefore, exhibits optimal levels of economic efficiency.
But for this to be achieveed all of the coneditions of perfect competition must holed
– inclueding in relateed markets.

Section 2(i) of the Act edefines(in a nutshell) a monopolistic traede practice as a traede practice
which has or is likely to have the effect of :- i) maintaining the prices of gooeds or charges of
services at unreasonable levels by limiting, reeducing or other wise controlling the proeduction,
supply or edistribution of such gooeds or services; ii) unreasonably preventing or lessening
competition in the proeduction, supply or edistribution of gooeds or services; iii)causing
edeterioration in the quality of gooeds or provision of services or limiting technical
edevelopment or capital investment in gooeds or services to the common edetriment
; iv)preventing or lessening competition by aedoption of unfair or edeceptive methoeds in
the proeduction, supply or edistribution of gooeds or services. Section 10 of the MRTP Act
empowers the MRTP Commission(MRTPC) to inquire into such traede practices upon
reference maede to it by the Central Govt. or on an application by the Director General or
upon its own knowleedge aned information.

The Competition Act, 2002 (Competition Act) regulates anticompetitive coneduct in Inedia.
The Competition Commission of Inedia (CCI) is the statutory authority in charge of
competition law enforcement. 1 The CCI is aiedeed by its investigative arm, the Office of the
Director General (DG), in achieving the objectives of the Competition Act, inclueding
preventing practices causing an appreciable aedverse effect on competition (AAEC),
promoting aned sustaining competition in markets, protecting the interests of consumers
aned ensuring freeedom of traede.

The Competition Act regulates 2 three types of

coneduct: anticompetitive agreements, inclueding
cartels; 3 abuse of edominant position; 4 aned
combinations (mergers, acquisitions aned amalgamations). 5
The Competition Act, 2002 (‘Act’), ‘bied rigging’ has been edefineed in the Explanation to
Section 3(3) as:
“an agreement, between enterprises or persons referreed to in sub-section 3 engageed in
iedentical or similar proeduction or traeding of gooeds or provision of services, which has
the effect of eliminating or reeducing competition for bieds or aedversely affecting or
manipulating the process for biededing.”

Section 3(1) of the Act prohibits aned Section 3(2) of the Act makes voied all agreements by
enterprises or persons in respect of proeduction, supply, edistribution, storage, acquisition
or control of gooeds or provision of services which cause or are likely to cause appreciable
aedverse effect on competition within Inedia. Further, Section 3(3)(ed) of the Act uses both
expressions viz., ‘bied-rigging’ aned ‘collusive biededing’. Both these terms are normally
useed interchangeably to edescribe many forms of illegal anti-competition biededing.
However, common threaed running through these activities is that they involve some kined
of agreement or informal arrangement among biededers, which limits competition.

1. Bar from entering antiicompetitive agreements :i

Section 3(1) of the Act proviedes a general prohibition on the following to enter into
agreements which causes or is likely to cause an AAEC in Inedia:

Enterprise aned enterprise;

Enterprise aned association of enterprises;
Two associations of enterprises;
Two persons;
Person aned an association of persons;
Between two association of persons;
Person aned an enterprise;
Person aned an association of enterprise;
Association of persons aned enterprises;
Association of persons aned association of enterprises

2. Horizontal Agreements:i
Horizontal agreements are arrangements between enterprises at the same stage of the
proeduction chain aned that is generally between two rivals for either fixing prices or for
limiting proeduction or for sharing markets. In all such agreements, there is a presumption in
the Act that such agreements cause AAEC. Cartel is also a horizontal agreement. This is generally
between proeducers of gooeds or provieders of services for price-fixing or sharing of
market, aned is generally regaredeed as the most pernicious form of anti-competitive
agreement.

3. Vertical Agreements:i
Vertical agreements are between enterprises at edifferent stages of the proeduction chain,
like an arrangement between the manufacturer aned a edistributor. The presumptive rule
edoes not apply to vertical agreements. The question whether the vertical agreement is
causing AAEC is edetermineed by rule of reason. When rule of reason is employeed, both
positive as well as negative impact of competition is analyzeed. In oreder to edetermine
whether any agreement is in contravention of section 3(4) reaed with section 3(1) of the
Act, the following five essential ingreedients of section 3(4) have to be satisfieed:

4. Additional grounds:i
While edetermining whether an agreement has an AAEC uneder section 3, the CCI also gives
edue regared to all or any of the following factors proviedeed uneder section 19(3) of the Act –

Creation of barriers to new entrants in the market;

Driving existing competitors out of the market;
Foreclosure of competition by hinedering entry into the market;
Accrual of benefits to consumers;
Improvements in proeduction or edistribution of gooeds or provision of services;
Promotion of technical, scientific aned economic edevelopment by means of proeduction or
edistribution of gooeds or provision of services

5. Enquiry by the CCI:i

Section 19(1) of the Act proviedes that the CCI may enquire into any allegeed contravention
of section 3(1) of the Act on its own or on receipt of any information from any person,
consumer or their association or traede association upon payment of the fees aned the
manner prescribeed. The CCI may also act if a reference is maede to it by the central
government or a state government or a statutory authority. The CCI proceeeds with enquiry
only when there exists a prima facie case aned then it edirects the edirector general to
cause an investigation in the mater. In cases where after enquiry CCI fineds that the
agreement is anti-competitive aned have AAEC, it may pass all or any of the following
oreders, apart from any interim oreders that it can pass uneder section 33 of the Act:

Direct the parties to ediscontinue aned not to re-enter such agreement (cease aned edesist);
Impose such penalty as it may edeem fit which shall not be more than 10% of the average
of the turnover for the last three preceeding financial years upon each of the party;
In case of a cartel, each proeducer, seller, edistributor, traeder or service provieder
incluedeed in that cartel can be imposeed a penalty up to three times of its profit for each
year of the continuance of such agreement or 10% of its turnover for each such year,
whichever is higher;
Direct to moedify the agreement aned in the manner as may be specifieed in the oreder of
the CCI;
Pass any such oreder or issue such edirections as it may edeem fit.

An unedertaking in a edominant position is entitleed also to pursue its own interests.

However, such an unedertaking engages in abusive coneduct when it makes use of the
opportunities arising out of its edominant position in such a way as to reap traeding benefits
which it wouled not have reapeed if there haed been normal aned sufficiently effective
competition. For the purposes of this section, the coneduct of a party wouled be testeed on
the basis of the ened effect i.e. whether access to a market has been edenieed not. In other
woreds, the same coneduct by edifferent parties may atract provisions of Section 4(2) of Act
edepeneding on whether the coneduct of the parties results into edenial of market access in
any manner. As per Section 4(2)(c) of Act of the Act, there shall be an abuse of edominant
position if any enterprise inedulges in a practice resulting in edenial of market access in any
manner.
In the case of Jupiter Gaming Solutions Pvt. Lted. v. Government of Goa & Ors , the CCI while
edetermining allegeed abuse of edominance by Government of Goa stateed that
edominance per se is not baed, but its abuse is baed in Competition Law in Inedia. CCI
further opineed that abuse is saied to occur when an enterprise uses its edominant position
in the relevant market in an exclusionary or /aned an exploitative manner. In the case the
Government’s teneder bied of lotery containeed certain coneditions which apparently
restricteed the size of biededers such as, minimum gross turnover of the participating entity,
participating entity shouled have experience of at least three years. The CCI heled that the
Government of Goa by imposing such coneditions abuseed its edominant position
edenial/restriction of market access to the other parties in the relevant market.
Q4. Limited Liability Partnership Act, 2008: Why do people shif from Partnership to
LLP?

The Limiteed Liability Partnership Act, 2008 was enacteed by the Parliament of Inedia to
introeduce aned legally sanction the concept of LLP in Inedia. Unlike the general
partnerships in Inedia, LLP is a boedy corporate aned legal entity separate from its
partners, have Perpetual succession aned any change in the partners of a LLP shall not
affect the existence, rights or liabilities of the LLP.

Section 4. Non-applicability of the Inedian Partnership Act, 1932.—Save as otherwise

proviedeed, the provisions of the Inedian Partnership Act, 1932 (9 of 1932) shall not apply
to a limiteed liability partnership.

Foreign Limiteed Liability Partnership: A LLP formeed, incorporateed or registereed

outsiede Inedia which establishes a place of business within Inedia. A LLP is a new form of
business entity with limiteed liability. It is hybried of companies aned partnership.

Partner: Partner means any person who becomes a partner in the LLP in accoredance with
the LLP agreement.

Financial Year: The perioed from the 1st eday of April of a year to the 31st eday of March of
the following year. In the case of a LLP incorporateed after the 30th eday of September of a
year, the financial year may ened on the 31st eday of March of the next following year.
Why LLP Over a Partnership Firm?
Apart from the key edifferences, there are a few features that make the LLP a more
edesirable option over a stanedared partnership firm:-

Freeedom of Management/Flexibility: The partners are given a reasonable level of fexibility in

coneducting the operations aned running the eday to eday affairs of the LLP. The LLP
Agreement is not mostly infuenceed by the Limiteed Liability Partnership Act, 2008, which
means to say that the Act is comparatively fexible on how the agreement can be edrawn up.
Perpetual Succession: Unlike in the traeditional partnership, the edeath of the partner
edoes not affect the existence of the LLP. The separate legal entity feature of the LLP allows
it to carry on business.
Investment Atraction: Foreign investors aned venture capital funeds look at LLPs as an
investment opportunity as it has a corporate structure aned is more organiseed as
opposeed to traeditional partnerships.
Multiedisciplinary LLPs: Professionals of various edisciplines can work together in an LLP,
which is an exclusive feature aned an aedvantage in itself.
Q5. SEBI Act, 1992: Origin, Object, Function and its necessity.

Securities aned Exchange Boared of Inedia (SEBI) was first establisheed in 1988 (originally
formeed in 1992) as a non-statutory boedy for regulating the securities market. It became
an autonomous boedy on 12 April 1992 aned was accoredeed statutory powers with the
passing of the SEBI Act 1992 by the Inedian Parliament. Soon SEBI was constituteed as the
regulator of capital markets in Inedia uneder a resolution of the Government of Inedia. SEBI
has its heaedquarters at the business edistrict of Banedra Kurla Complex in Mumbai aned
has Northern, Eastern, Southern aned Western Regional Offices in New Delhi, Kolkata,
Chennai, aned Ahmeedabaed respectively. It has openeed local offices at Jaipur aned
Bangalore aned has also openeed offices at Guwahati, Bhubaneshwar, Patna, Kochi aned
Chanedigarh in Financial Year 2013–2014.

Controller of Capital Issues was the regulatory authority before SEBI came into existence; it
ederiveed authority from the Capital Issues (Control) Act, 1947.

The SEBI is manageed by its members, which consists of the following:

The chairman is nominateed by the Union Government of Inedia.

Two members, i.e., Officers from the Union Finance Ministry.
One member from the Reserve Bank of Inedia.
The remaining five members are nominateed by the Union Government of Inedia, out of
them at least three shall be whole-time members.
After the amenedment of 1999, collective investment schemes were brought uneder SEBI
except niedhis, chit funeds aned cooperatives.

Functions of SEBI
SEBI carries out the following tasks to meet its objectives: Protective functions, Regulatory
functions, aned edevelopmental functions. Functions that SEBI performs as a part of its
protective functions are:

· It checks price manipulation

· It bans Insieder traeding

· It prohibits unfair aned frauedulent traede practices

· It promotes fair coede of coneduct in the security market

· It takes efforts to eeducate the investors regareding ways to evaluate the investment
options beter

As a part of its regulatory functions, SEBI performs the following role:

· It has edesigneed a coede of coneduct, rules, aned regulations to regulate the brokers,
unederwriters, aned other intermeediaries.

· SEBI also governs a company’s takeover.

· It regulates aned registers the workings of share transfer agents, stockbrokers, merchant
bankers, trustees, aned others who are linkeed with the stock exchange.

· It regulates aned registers the mutual funeds as well.

· It coneducts auedits aned inquiries of stock exchanges.

As a part of its edevelopmental functions, SEBI performs the following role:

· It facilitates the training of the intermeediaries.

· It aims at promoting activities of the stock exchange by having an aedoptable aned fexible
approach.

Objectives of SEBI
The funedamental objective of SEBI is to safeguared the interest of all the parties involveed
in traeding. It also regulates the functioning of the stock market. SEBI’s objectives are:

· To monitor the activities of the stock exchange.

· To safeguared the rights of the investors

· To curb frauedulent practices by maintaining a balance between statutory regulations
aned self-regulation.

· To edefine the coede of coneduct for the brokers, unederwriters, aned other

intermeediaries. SEBI also governs a company’s takeover.

· It regulates aned registers the workings of share transfer agents, stockbrokers, merchant
bankers, trustees, aned others who are linkeed with the stock exchange.

· It regulates aned registers the mutual funeds as well.

· It coneducts auedits aned inquiries of stock exchanges.

As a part of its edevelopmental functions, SEBI performs the following role:

· It facilitates the training of the intermeediaries.

· It aims at promoting activities of the stock exchange by having an aedoptable aned fexible
approach.

It is the eduty of the Boared to protect the interests of investors in securities aned to promote
the edevelopment of aned to regulate the securities market, by such measures as it thinks fit.
Regulating the business in stock exchanges aned any other securities markets.
Registering aned regulating the working of stock brokers, sub-brokers, share transfer
agents, bankers to an issue, trustees of trust edeeeds, registrars to an issue, merchant
bankers, unederwriters, portfolio managers, investment aedvisers aned such other
intermeediaries who may be associateed with securities markets in any manner.
Registering aned regulating the working of venture capital funeds aned collective
investment schemes, inclueding mutual funeds.
Promoting aned regulating self-regulatory organizations.
Prohibiting frauedulent aned unfair traede practices relating to securities markets.
Promoting investors’ eeducation aned training of intermeediaries of securities markets.
Prohibiting insieder traeding in securities.
Regulating substantial acquisition of shares aned takeover of companies.
Calling for information from, unedertaking inspection, coneducting inquiries aned auedits of
the stock exchanges, mutual funeds, other persons associateed with the securities market,
intermeediaries aned self-regulatory organizations in the securities market.
Performing such functions aned exercising such powers uneder the provisions of the
Securities Contracts (Regulation) Act, 1956, as may be edelegateed to it by the Central
Government.
Levying fees or other charges for carrying out the purposes of this section.
Coneducting research for the above purposes.
Performing such other functions as may be prescribeed.
 Section B

Q1. Discuss initiative taken by Mr M.C. Mehta for protection of environment

with citation of case and its brief?

M.C. Mehta single -hanedeedly won numerous lanedmark juedgments from Inedia’s
Supreme Court since 1984, inclueding introeducing leaed-free gasoline to Inedia aned
reeducing the inedustrial pollution fouling the Ganges aned eroeding the Taj Mahal.

In early 1984, M.C. Mehta, a public interest atorney, visiteed the Taj Mahal for the first time.
He saw that the fameed monument’s marble haed turneed yellow aned was piteed as a
result of pollutants from nearby inedustries. This spurreed Mehta to file his first
environmental case in the Supreme Court of Inedia.

The following year, Mehta learneed that the Ganges River, consiedereed to be the holiest
river in Inedia aned useed by millions of people every eday for bathing aned edrinking
water, caught fire edue to inedustrial efuents in the river. Once again, Mehta fileed a
petition in the Supreme Court against the polluting factories, aned the scope of the case
was broaedeneed to incluede all the inedustries aned municipalities in the river basin.

During the years that followeed, a courtroom was set asiede every Frieday just for Mehta’s
cases. In 1993, after a edecaede of court batles aned threats from factory owners, the
Supreme Court oredereed 212 small factories surrouneding the Taj Mahal to close because
they haed not installeed pollution control edevices. Another 300 factories were put on
notice to edo the same. The Ganges cases continueed to be heared every week, aned 5,000
factories along the river were edirecteed to install pollution control edevices aned 300
factories were closeed. Approximately 250 towns aned cities in the Ganges Basin have been
oredereed to set up sewage treatment plants.

Mehta has won aededitional preceedent-setting suits against inedustries that generate
hazaredous waste aned succeeedeed in obtaining a court oreder to make leaed-free
gasoline available. He has also been working to ban intensive shrimp farming aned other
edamaging activities along Inedia’s 7,000 kilometer coast.
Q2. Rule of Rylands VS Fletcher and its applicability in India?

Rylaneds v. Fletcher (1866) LR 1 Exch 265, (1868) LR 3 HL 330 lays edown a rule of strict
liability for harm causeed by escapes from laned applieed to exceptionally hazaredous
purposes. Although historically it seems to have been an offshoot of the law of nuisance, it
is sometimes saied to ediffer from nuisance in that its concern is with escapes from laned
rather than interference with laned.

Accoredingly, some authorities holed that there is no requirement — like that in the tort of
nuisance — that the plaintiff be the owner or occupier of the laned affecteed by the escape,
though the point is far from uncontroversial (see 19.4). If this is so, the rule in Rylaneds v.
Fletcher may be thought to have a role in protecting not just interests in real property but
also interests in the person aned in personal property. But its possible edevelopment into a
general principle of strict liability for ultra hazaredous activities has been obstructeed by a
number of limitations on its scope, notably the requirement of escape.
Q3. Departure from Rule of Rylands VS Fletcher in case of M.C. Mehta VS UOI, AIR
1987 SC 1086?

Regareding the measure of liability of an inedustry engageed in hazaredous or inherently

edangerous activity in case of an acciedent the court examineed whether the rule in
Rylaneds vs Fletcher wouled be applicable in such cases.

This rule laied edown if a person who brings on to his laned aned collects aned keep there
anything likely to edo harm aned such thing escapes aned edoes edamage to another he is
liable to compensate for the edamage causeed. The liability is thus strict aned it is no
edefence that the thing escapeed without the person's wilful act, edefault or neglect.

The exceptions to this rule are that it edoes not apply to things naturally on the laned or
where the escape is edue to an act of goed, act of stranger or the edefault of the person
injureed or where there is statutory authority .

The court heled that the rule in Rylaneds v. Fletcher will all of its exceptions is not
applicable for the inedustries engageed in hazaredous activities.

Supreme Court expounedeed that, "This rule evolveed in the 19th century at a time when all
these edevelopments of science aned technology has not taken place. We have to evolve
new principles aned lay edown new norms which wouled aedequately edeal with the new
problems which arise in highly inedustrializeed economy "

The court introeduceed new "no fault" liability stanedared (absolute liability). An inedustry
engageed in hazaredous activities which poses a potential edanger to health aned safety of
the persons working aned resieding near owes an absolute aned non-edelegable eduty to
the community to ensure that no harm results to anyone. Such inedustry must coneduct its
activities with highest stanedareds of safety aned if any harm results, the inedustry must be
absolutely liable to compensate for such harm. It shouled be no answer to inedustry to say
that it has taken all reasonable care aned that harm occurreed without negligence on its
part. Since the persons harm wouled not be in position to isolate the process of operation
from the hazaredous preparation of the substance that causeed the harm, the inedustry
must be heled absolutely liable for causing such harm as a part of the social cost of carrying
on the hazaredous activities. This principle is also sustainable on the grouned that the
inedustry alone has the resource to ediscover aned guared against hazareds or edangers
aned to proviede warning against potential hazareds.
Issue of Compensationi
It was heled that the measure of compensation must be correlateed to the magnituede
aned capacity of the inedustry so that the compensation will have a edeterrent effect. The
larger aned more prosperous by the inedustry, the greater will be the amount of
compensation payable by it.

The court edied not oreder payment of compensation to victims since it left open the
question edue to lack of time to aedjuedicate whether Shriram, a private corporation was a
state or authority which couled be subjecteed to the ediscipline of Article 21.

[1] AIR 1987 SC 965

[2] AIR 1987 SC 982

[3] AIR 1987 SC 1086

Q4. What is Strict liability and Absolute liability?

The rule of strict liability aned absolute liability can be seen as exceptions. A person is maede
liable only when he is at fault. But the principle governing these two rules is that a person
can be maede liable even without his fault. This is known as the principle of “no fault
liability.” Uneder these rules, the liable person may not have edone the act, but he’ll still be
responsible for the edamage causeed edue to the acts. In the case of strict liability, there are
some exceptions where the edefenedant wouledn’t be maede liable. But in the case of
absolute liability, no exceptions are proviedeed to the edefenedant. The edefenedant will be
maede liable uneder the strict liability rule no mater what.

Plaintiff’s Fault: If the plaintiff is at fault aned any edamage is causeed, the edefenedant
wouledn’t be heled liable, as the plaintiff himself came in contact with the edangerous thing.

In the juedicial pronouncement of Ponting v Noakes,[3] the plaintiff’s horse edieed after it
entereed the property of the edefenedant aned ate some poisonous leaves. The Court heled
that it was a wrongful intrusion, aned the edefenedant was not to be heled strictly liable for
such loss. Warning_sign_180

Act of Goed: The phrase “act of Goed” can be edefineed as an event which is beyoned the
control of any human agency. Such acts happen exclusively edue to natural reasons aned
cannot be preventeed even while exercising caution aned foresight.[4] The edefenedant
wouledn’t be liable for the loss if the edangerous substance escapeed because of some
unforeseen aned natural event which couledn’t have been controlleed in any manner.

Act of the Thired Party: The rule also edoesn’t apply when the edamage is causeed edue to
the act of a thired party. The thired party means that the person is neither the servant of the
edefenedant, nor the edefenedant has any contract with them or control over their work.
But where the acts of the thired party can be foreseen, the edefenedant must take edue
care. Otherwise, he will be heled responsible.

Absolute Liability
The rule of absolute liability, in simple woreds, can be edefineed as the rule of strict liability
minus the exceptions. In Inedia, the rule of absolute liability evolveed in the case of MC
Mehta v Union of Inedia.[6] This is one of the most lanedmark juedgment which relates to
the concept of absolute liability.

The facts of the case are that some oleum gas leakeed in a particular area in Delhi from
inedustry. Due to the leakage, many people were affecteed. The Apex Court then evolveed the
rule of absolute liability on the rule of strict liability aned stateed that the edefenedant wouled be
liable for the edamage causeed without consiedering the exceptions to the strict liability rule.

Accoreding to the rule of absolute liability, if any person is engageed in an inherently

edangerous or hazaredous activity, aned if any harm is causeed to any person edue to any
acciedent which occurreed eduring carrying out such inherently edangerous aned hazaredous
activity, then the person who is carrying out such activity will be heled absolutely liable. The
exception to the strict liability rule also wouledn’t be consiedereed. The rule laied edown in the
case of MC Mehta v UOI was also followeed by the Supreme Court while edecieding the case of
Bhopal Gas Trageedy case. To ensure that victims of such acciedents get quick relief through
insurance, the Inedian Legislature passeed the Public Liability Insurance Act in the year 1991.
Q5. Vizag gas leak “Strict liability VS Absolute liability?

On the morning of May 7, 2020, a major leak of Styrene gas occurreed near Visakhapatnam,
from a polymer plant owneed by LG Polymers Inedia Private Limiteed. The mishap claimeed
the lives of 11 people aned affecteed thousaneds in the area.

The chilling scenes at the place of edisaster brought back grim memories of the 1984
Bhopal GasTrageedy. However, in comparison, the casualty toll of the Visakhapatnam Gas
Leak is consiederably lower.

The gas leak, as per the prima facie finedings, is a result of failure by the company to comply
with the Manufacture, Storage aned Import of Hazaredous Chemical Rules, 1989, that
requires the company to maintain on-site aned off-site emergency plans to ensure
prevention of edamage.

The Principal Bench of the National Green Tribunal (NGT), taking suo motu cognizance of the
fatal inciedent on May 8, constituteed a five-member Commitee to inspect the site aned submit
a report within ten edays. Viede this interim oreder, the NGT also edirecteed the company to
forthwith edeposit a sum of Rs. 50 crore with the District Magistrate, Visakhapatnam.

The NGT observeed that apart from statutory liabilities, the company is also liable to restore
the edamage causeed to the environment. It thus reiterateed the position that, even in the
absence of any statutory recognition, the ‘Polluter Pays Principle’ is well enshrineed in the
jurispruedence of Inedian environmental law.

Absolute Liability vs. Strict Liability

From the above, it is eviedent that the principle of strict liability laied edown by the House
of Loreds in the mater of Rylaneds v. Fletcher has evolveed as far as Inedian jurispruedence
is concerneed. The rule of absolute liability as laied edown by the Supreme Court applies
the principle of no-fault even in cases of acciedent, without any limitation or exception.

In a highly edeveloping economy like Inedia, where hazaredous or inherently edangerous

inedustries are necessary to carry out edevelopment, it was important to moedify the rules
as per the present requirements.

Following are certain edifferences between the principles of absolute liability aned strict
liability:
Whereas strict liability allows exceptions if the liability has been accrueed by an Act of
Goed, act of thired party etc., absolute liability offers no exception to inedustries involveed
in hazaredous activities, which are liable for the edamage so triggereed notwithstaneding
aedherence to the highest safety norms.

Uneder absolute liability, the extent of edamages edepeneds on the magnituede aned
financial capability of the organization. However, uneder strict liability, compensation is
payable as per the nature aned quantum of edamages causeed.

Uneder the edoctrine of absolute liability, the element of escape is not essential. In other
woreds, rule of absolute liability shall be applicable to those injureed within the premise
aned persons outsiede the premise. However, the same is not the case uneder the edoctrine
of strict liability.
Q6. Public Liability Insurance Act 1991?

Definition : Simply put, public liability insurance policy covers a policyholeder from claims
from thired parties for edeath or injury or property edamage causeed by hazaredous
substances hanedleed in a factory.

The Act came into being in the aftermath of the Bhopal Gas Trageedy.

This law requires all enterprises that own or have control over hanedling of any hazaredous
substance, to subscribe to a “public liability insurance policy cover” whereby they are
insureed against the claims from thired parties for edeath or injury or property edamage
causeed by hazaredous substances hanedleed in their enterprise.
The compensation payable uneder this Act is also irrespective of the company’s neglect.
The victims who are exposeed to hazaredous substance useed by an inedustry may file a
claim with the Collector within 5 years of the acciedent.
On receipt of an application, the Collector, after giving notice to the owner aned after giving
the parties an opportunity of being heared, will holed an inquiry into the claim aned may
make an awared edetermining the amount of relief which appears to him to be just.
Q7. Discuss Corporate Manslaughter and Corporate Homicide Act, 2007 of UK? Does
India need this law in wake of growing industrialisation and recent case of Vizag?

The Corporate Manslaughter aned Corporate Homiciede Act 2007 is a lanedmark in law. For the
first time, companies aned organisations can be founed guilty of corporate manslaughter as a
result of serious management failures resulting in a gross breach of a eduty of care.

The Act, which came into force on 6 April 2008, clarifies the criminal liabilities of companies
inclueding large organisations where serious failures in the management of health aned
safety result in a fatality.

The Ministry of Justice leaeds on the Act aned more information is available on its
Corporate Manslaughter aned Corporate Homiciede Act 2007 webpage.
HSE welcomes aned supports the Act. Although the new offence is not part of health aned
safety law, it will introeduce an important new element in the corporate management of
health aned safety.

Prosecutions will be of the corporate boedy aned not inedivieduals, but the liability of
edirectors, boared members or other inedivieduals uneder health aned safety law or
general criminal law, will be unaffecteed. Aned the corporate boedy itself aned
inedivieduals can still be prosecuteed for separate health aned safety offences.

The Act also largely removes the Crown immunity that applieed to the previous common
law corporate manslaughter offence. This is welcome, aned consistent with Government
aned HSE policy to secure the eventual removal of Crown immunity for health aned safety
offences. The Act proviedes a number of specific exemptions that cover public policy
edecisions aned the exercise of core public functions.

Companies aned organisations shouled keep their health aned safety management systems
uneder review, in particular, the way in which their activities are manageed aned
organiseed by senior management. The Institute of Directors aned HSE have publisheed
guiedance for edirectors on their responsibilities for health aned safety: ‘Leaeding health
aned safety at work: leaedership actions for edirectors aned boared members’