RESERVE BANK OF INDIA 1

ACT,1934
1. Reserve Bank of India is the central ORIGIN AND BACKGROUND OF RBI
bank of the country
2. also known as banker’s bank and 1926 The Royal Commission on Indian Currency and Finance recommended the
government’s bank creation of the central bank of India
1927 A bill to give effect to the above recommendation was introduced in the
legislative assembly. But it was later withdrawn due to lack of agreement
ORGANISATION STRUCTURE among various sections of people
1933 The white paper on Indian constitutional reforms recommended the
Central Board of
Governor creation of a Reserve Bank. A fresh bill was introduced in the legislative
Directors
assembly
Executive Directors Deputy Governor 1934 The bill was passed and received the governor general assent
1935 The reserve bank commenced operations as India central bank on April 1 as
Principal Chief General Chief General
a private shareholders bank with a paid up capital of Rs. 5 crore
Manager Manager
1942 The reserve bank ceased to be the currency issuing authority of Burma now
Deputy General General Manager Myanmar
1947 The reserve bank stopped acting as banker to the government of Burma
Assistant Manager 1948 The reserve bank stopped rendering central banking services to Pakistan
Support staff Assistant 1949 The government of India nationalized the reserve bank under the reserve
bank transfer of public ownership act. 1948
 RESERVE BANK OF INDIA 2

ACT,1934
SECTION 1:- SHORT TITLE,EXTENT SECTION 9:- LOCAL BOARDS, THEIR
AND COMMENCEMENT CONSTITUTION AND FUNCTIONS:-
1. Act may be called the Reserve Bank of India Act, 1934 2) Sec 9(2) Chairman
1) Sec 9(1) Establishment of Local Board
2. extends to whole of India The members of the Local
3. Section shall come into force on such date and the • The Reserve Bank also has four Local
Board shall elect from amongst
remaining provisions of the Act shall come into force Boards, constituted by the Central
themselves one person to be
on such date or dates as the Central Government may Government the Chairman of the Board
by notification in the Official Gazette, appoint • One each for the Western, Eastern,
Northern and Southern areas of the 3) Sec 9(3) Tenure
country, which are located in Mumbai, • Members are appointed for
SECTION 3:- ESTABLISHMENT AND
Kolkata, New Delhi and Chennai a term of 4 years
INCORPORATION OF RESERVE BANK:- • Consist of 5 Members appointed by • They are eligible for re-
1) Purpose of RBI 2. Nature of RBI Central Government appointment
• Management of • Body Corporate
currency from the 4) Sec 9(4) Functions
• Perpetual
Central Government • These Boards represent territorial and economic interests of their
Succession
• Carrying on business of respective areas and
• Common Seal
banking in accordance • Advise the Central Board on such Matters
• By the name be
with the provisions of • They also perform other functions that the Central Board may delegate to
sued or sue
the Act them
 RESERVE BANK OF INDIA ACT,1934 3

6)Sec 8(5) Effect of The banking function of RBI may be further classified
vacancy or defect Offices and Branches Banking into 2 parts:-
a) Government’s Bank
in constitution of
1. network of offices and Functions b) Banker’s Bank
the Board
branches
No act or 2. The units operating in the
Government’s BANKERS BANK/ LENDER
proceeding of the four metros
Board can be 3. The units located in other bank OF LAST RESORT
questioned on the cities are known as branches
1. acts as banker of the 1. open current account of bank with itself
ground merely of 4. Currently RBI has its offices
Central Government 2. provides short term loans and advances
the existence of including branches, at 27
as well as all the State to the select bank
any vacancy in, or locations in India
Government 3. acts as lender of last resort.It can come to
any defect in the 5. The offices and large
2. functions are carried the rescue of a bank that is solvent but
constitution, of the branches are headed by
out by the Public faces temporary liquidity problems by
board. senior officer of the rank of
Accounts supplying it with much needed liquidity
Chief General Managers,
7) Sec 8(7) Re- Departments 4. RBI helps bank in fund management,
designated as Regional
Nomination 3. The various functions bank can access information of their
Director
that RBI carries out balances at a single location
A retiring director 6. Small branches are headed by
as a banker of 5. periodically inspect banks and asks them
shall be eligible senior officer of the rank of
Government for returns and necessary information
for re-nomination General manager
 RESERVE BANK OF INDIA ACT,1934 4

ISSUE FUNCTIONS/ ISSUE OF CURRENCY/ RIGHT FOREIGN EXCHANGE

TO ISSUE BANK NOTES MANAGEMENT FUNCTION
• currency is one of the core central banking functions of the Reserve Bank 1. custodian of the 2. basic parameters
• The Paper Currency Act of 1861 conferred upon the Government of India the country’s foreign for foreign
monopoly of issuing note, thus ending the practice of private and presidency exchange reserves exchange reserves
banks issuing currency. 3. Reserve Bank’s reserves management function
• Government of India managed the issue of paper currency has in recent years grown for two reasons:-
• separate dedicated department a) share of foreign currency assets in the balance
Forms of Bank Notes sheet of the Reserve Bank has substantially increased
a) Recommend on the design of bank notes b) increased volatility in exchange and interest rates
Denomination of the b) forecasts the demand for notes in the global market
Notes c) ensure smooth distribution of notes and coins
4. FEMA empowers the RBI to authorize to deal in
d) Arranges unfit notes
foreign exchange or in foreign securities
Legal Tender e) Review the work system and procedures at
issue office on an ongoing basis 5. revocation of an 6. Granting
Combating Counterfeiting authorization may be approval for
1. Coins can be issued upto denomination of Rs done by the RBI after approval routes
coins 1000 as per the Coinage Act,1906 following the prescribed of Foreign Direct
2. Fifty paisa coins are legal tender for any sum procedure in FEMA or Investment and
Bank Exempt from Stamp not exceeding ten rupees and smaller coins the Regulations made Overseas Direct
Duty on bank Notes for any sum not exceeding one rupee thereunder Investment
 RESERVE BANK OF INDIA ACT,1934 5

PUBLIC DEBT REGULATION AND SUPERVISION

FUNCTION REGULATION OF
OF CO-OPERATIVE BANKS DERIVATIVES AND MONEY
1. the public debt and 1. Power to issue license
issues new loans on 2. Power to cancel licenses of co-operative banks MARKET INSTRUMENTS
behalf of the Central 3. Power to supersede the Board
4. Power to Inspect 1. RBI has the power to regulate the
and State
5. Power to issue directions to them in public interest, transactions relating to derivatives,
Governments.
interest of banking policy, control over loans and money market instruments, securities,
2. It involves issue and etc
advances etc
retirement of rupee 2. Derivative means an instrument to be
loans, interest CONSUMER settled at future date, whose value is
payment on the loan PRUDENTIAL
PROTECTION derived from an underlying asset
and operational NORMS FOR 3. Similarly money market instruments
matters about debt FUNCTION have been defined to include call or
BANK
certificates and their 1) Factors to bear in mind while notice money, term money, repo,
registration issuing license by RBI a) Capital reverse repo, certificate of deposit,
2) No Specific Provision in Adequacy commercial paper, and such other
3. union budget decides
Banking Regulation Act,1949 b) Loans and debt instruments of original or initial
the annual borrowing
3) Formulate Banking Advances maturity up to one year as the RBI may
needs of the Central
Government Ombudsman Scheme c) Investments specify from time to time.
 RESERVE BANK OF INDIA ACT,1934 6

MONETARY POLICY
ISSUE OF DEMAND INSTRUMENTS OF
a) Monetary policy refers to the policy of the central bank
BILLS AND NOTES:- with regard to the use of monetary instruments under
MONETARY
No person in India other than the Bank, its control to achieve the goals specified in the Act. POLICY
or, as expressly authorized by the Act b) vested with the responsibility of adopting and
1) Repo Rate:
the Central Government shall draw, implementing monetary policy.
2) Reverse Repo Rate:
accept, make or issue any bill of c) objective of monetary policy is to maintain price
3) Liquidity Adjustment
exchange, hundi, promissory note, etc. stability
Facility (LAF
4) Marginal Standing
Facility (MSF):
SECTION 45ZO: POWER TO MAKE RULES 5) Corridor:
6) Bank Rate:
7) Cash Reserve Ratio (CRR):
1. Central Government may, by notification in the Official Gazette, make rules for the purpose of
8) Statutory Liquidity Ratio
carrying out the provisions
(SLR):
2. Rules may provide for
9) Open Market Operations
• The procedure of functioning of the Search-cum-Selection Committee
(OMOs):
• The terms and conditions of appointment of Members of the Monetary PolicyCommittee
10) Market Stabilisation
• Any other matter which is to be, or may be, prescribed by the Central Government byrules
Scheme (MSS):
 RESERVE BANK OF INDIA ACT,1934 7

SECTION 45ZI: SECTION 45ZM:

SECTION 45ZB: CONSTITUTION OF
MEETINGS OF MONETARY POLICY
MONETARY POLICY COMMITTEE
MONETARY POLICY REPORT
1. Central Government may, by a) Chairperson COMMITTEE
every six months, publish a
notification in the Official b) Deputy Governor 1) Minimum meetings document to be called the
Gazette, constitute Monetary of the Bank, in 2) Publication of meetings Monetary Policy Report,
Policy Committee of the Bank charge of 3) Publication of Change explaining
Monetary 4) Quorum
2. Monetary Policy Committee Policy—Member, 5) Change in schedule
shall consist of the following c) one officer of the a) the sources of
6) President of Meeting
Members, Bank to be inflation; and
7) One Vote
nominated by the 8) Majority Vote and Casting b) the forecasts of
3. The Monetary Policy
Central Board— Vote inflation for the
Committee shall determine
Member, and 9) Opinion by Central period between six to
the Policy Rate required to
achieve the inflation target. d) three persons to Government eighteen months from
be appointed by 10) Record of vote the date of publication
4. The decision of the Monetary the Central 11) Mention reason for vote of the document
Policy Committee shall be Government— 12) Regulations
binding on the Bank. Members. 13) Confidential
 Foreign Exchange Management
Act,1999-Introduction
FEMA) was enacted in 1999,assented on
29thDecember 1999, by President
came into effect on 1st June 2000.
INTRODUCTION
replaced and repealed the Foreign
Exchange Regulation Act (FERA) which
was formulated in 1973
considerably liberalized provisions in
respect of foreign exchange.
replacing the Former Act was to meet
the post-liberalised scenario of Indian
Economy
Act extends to whole of India
8
HISTORICAL BACKGROUND
Stage 1 Stage 2
Initially, Exchange was controlled Foreign Exchange
through as series of rules under Regulation Act 1947 was
the Defence of India Act,1939 on enacted initially to a period
temporary basis of ten years
Stage 3
Stage 4
Subsequently, Foreign
Later, Foreign Exchange Regulation
Exchange Regulation Act,
Act, 1973 was introduced
1947 was permanently
replacing the FERA,1947
enacted in 1957
Stage 5
Thereafter, to meet the post liberalization
phase FERA,1973 was replaced and
repealed by FEMA 1999

FEMA provides
Free transaction on current
account subject to reasonable
restriction
Capital Account Transaction
Realization of Export proceeds
Dealing of foreign exchange
through authorised person
Adjudication of offence
including Special Director
(Appeals) and Appellate
Tribunal
Foreign Exchange Management 9
Act,1999-Introduction
APPLICABILITY Structure of FEMA
• FEMA extends to whole of India
• The Act also applies to all branches, offices and
agencies outside India owned and controlled by a Main Act divided into & chapters and
Person resident in India 49 Sections
• It applies to any contravention thereunder
committed outside India by any person to whom
Rules made by Ministry of Finance
this Act applied .
(Delegated Regulations)
MAIN ACT DIVIDED INTO 7
Regulations Made by RBI ( Delegated
CHAPTERS AND 49 SECTIONS regulations)
• CHAPTER I – Preliminary (Section 1&2)
• CHAPTER II- Regulation and Management of Foreign Foreign Direct Investment policy
Exchange (Section 3 –9) made by Department of Policy and
• CHAPTER III – Authorised Person (Section 10 –12)
• CHAPTER IV – Contravention and Penalties (Section 13-15)
• CHAPTER V – Adjudication and Appeal (Section 16- 35)
Notifications and Regulations
• CHAPTER VI – Directorate of Enforcement (Section 36-38)
• CHAPTER VII- Miscellaneous (Section 39 – 49)
 Foreign Exchange Management Act,1999- 10
Introduction
RULES MADE BY MINISTRY OF REGULATIONS MADE BY RBI
FINANCE • FEM (Acquisition and Transfer of Immovable Property Outside India)
Regulations, 2015
• FEM (Borrowing and Lending in Rupees) Regulations, 2000
• FEM (Borrowing or Lending in Foreign Exchange) Regulations, 2000
FEM (Encashment of • FEM (Deposit) Regulations, 2016
Draft, Cheque, • FEM (Export and Import of Currency) Regulations, 2015 6. FEM (Guarantees)
FEM (Authentication of
Instrument and Regulations, 2000
Documents) Rules,
Payment of Interest) • FEM (Acquisition and Transfer of Immovable Property in India) Regulations,
2000
Rules, 2000 2000
• FEM (Establishment in India of Branch office or a Project office or any other Place
of Business) Regulations, 2016
FEM (Current Account FEM (Adjudication • FEM (Export of Goods and Services) Regulations, 2015
Transaction) Rules, Proceedings and • FEM (Foreign Currency Accounts by a Person Resident in India) Regulations,
2000 Appeal) Rules, 2000 2015
• FEM (Insurance) Regulations, 2015
• FEM (Investment in Firm or Proprietary Concern in India) Regulations, 2000
The Appellate Tribunal for • FEM (Manner of Receipt and Payment) Regulations, 2016
Foreign Exchange
FEM (Compounding (Recruitment, Salary and • FEM (Permissible Capital Account Transactions) Regulations, 2000
Proceedings) Allowances and Other • FEM (Possession and Retention of Foreign Currency) Regulations, 2015
Rules,2000 Conditions of Service of • FEM (Realization, Repatriation and Surrender of Foreign Exchange) Regulations,
Chairperson and Members) 2015
Rules, 2000 • FEM (Transfer or Issue of Security by a person Resident outside India)
Regulations, 2017
• FEM (Foreign Exchange Derivative Contracts) Regulations, 2000
 The FOREIGN CONTRIBUTION
(REGULATION) ACT, 2010
INTRODUCTION
• New legislation Foreign Contribution
(Regulation) Act, 2010 was passed
and it replaced the FCRA, 1976 .
• has come into effect from May 1,
2011.
• The Ministry of Home Affairs also
issued a Gazette Notification vide
dated the 29th April, 2011 notifying
the Foreign Contribution
(Regulation) Rules, 2011
11
SCOPE AND DEFINITIONS
OBJECTIVE OF ACT
Association [Section
• enacted to regulate the acceptance 2(a)]
and utilisation of foreign
“Association” means an
contribution or foreign hospitality
association of
by certain individuals or individuals, whether
associations or companies incorporated or not,
having an office in India
• prohibits acceptance and utilisation
of foreign contribution or foreign and includes a society,
hospitality for any activities whether registered
detrimental to the national interest under the Societies
Registration Act, 1860
and for matters connected
(21 of 1860), or not, and
therewith or incidental thereto.
any other organisation,
by whatever name
called.
 The FOREIGN CONTRIBUTION
12
(REGULATION) ACT, 2010

DEFINITIONS Foreign Contribution [Section 2(h)]

Authorised “Authorised Person in Foreign Exchange” “Foreign Contribution” means the
Person in means an authorised person referred to in donation, delivery or transfer made by
Foreign clause (c) of section 2 of the Foreign any foreign source,—
Exchange Exchange Management Act, 1999. • of any article, not being an article
given to a person as a gift for his
[Section 2(b)]
personal use, if the market value, in
Bank [Section “Bank” means a banking company as India, of such article, on the date of
2(c)] referred to in clause (c) of section 5 of the such gift, is not more than such sum
Banking Regulation Act, 1949 as may be specified from time to
time, by the Central Government by
Candidate for “Candidate for Election” means a person the rules made by it in this behalf;
Election- who has been duly nominated as a • of any currency, whether Indian or
[Section 2(d)] candidate for election to any Legislature. foreign;
• of any security as defined in clause
Certificate- “Certificate” means certificate of (h) of section 2 of the Securities
[Section 2(e)] registration granted under sub-section (3) Contracts (Regulation) Act, 1956
of section 12. and includes any foreign security as
Company[Sectio “Company” shall have the meaning defined in clause (o) of section 2 of`
the Foreign Exchange Management
n 2(f)] assigned to it under clause (17) of section
Act, 1999 .
2 of the Income-tax Act, 1961.
 OVERSEAS DIRECT 13
INVESTMENT
INTRODUCTION "Financial Commitment" means the amount of direct investment
by way of contribution to equity, loan, and 100 percent of the
IMPORTANT
IMPORTANT number of guarantees and 50 percent of the performance
Overseas investments (or financial TERMS
TERMS guarantees issued by an Indian Party to or on behalf of its
commitment) in Joint Ventures (JV) overseas Joint Venture Company or Wholly Owned Subsidiary.
and Wholly Owned Subsidiaries The total financial commitment hall comprises the following:
(WOS) have been recognized as
important avenues for promoting 1 2 3 4
the global reach of Indian
entrepreneurs 100% of the number of 100% of the 100% of the amount of
100% of the
equity shares and/ or number of guarantee (other than
amount of the
Indian companies have set up their Compulsorily other performance
loan;
business outside India via their Convertible Preference preference guarantee) issued by
Wholly-owned Subsidiary and Joint Shares (CCPS); shares the Indian
venture Party;

The object of this chapter is to
cover regulatory and procedural
aspects of investment in Joint
Venture and Wholly Owned
Subsidiary abroad.
100% of the amount of bank guarantee issued by
50% of the amount of
a resident bank on behalf of JV or WOS of the
performance
6 5 Indian party provided the bank guarantee is
guarantee issued by
backed by a counter-guarantee/collateral by the
the Indian Party
Indian Party.
 OVERSEAS DIRECT INVESTMENT
Joint Venture/ Wholly Owned
Subsidiary:-
"Joint Venture (JV)"/ "Wholly Owned
Subsidiary (WOS)" means a foreign entity
formed, registered, or incorporated in
accordance with the laws and regulations of
the host country in which the Indian party
makes a direct investment
REGISTERED TRUST AND
SOCIETIES
By Registered Trusts / Societies (satisfying
certain eligibility criteria) engaged in the
manufacturing / educational / hospital
sector in the same sector in a JV / WOS
outside India
14
METHODS OF INVESTMENT
The Government has adopted a two-way approach to the approval of direct
investment, i.e. 1) Automatic Route and 2) Approval Route
An Indian Party does not require any prior approval from
1 Automatic Route the Reserve Bank for making direct investments in a JV/
WOS abroad.
The Indian Party should approach an Authorized Dealer
Category – I bank with an application in Form ODI and the
prescribed enclosures /documents for effecting the remittances
towards such investments.
2 Approval Route Under this route, every proposal is required to be
prior. approved by RBI
 OVERSEAS DIRECT INVESTMENT
ELIGIBILITY CRITERIA FOR PROPRIETORSHIP/ UNREGISTERED PARTNERSHIP
Status Holder
Is classified as ‘Status Holder’ as per the Foreign Trade
1 Policy
KYC complaint
authorized Dealer bank is satisfied that the proprietorship
3 concern / unregistered partnership firm India is KYC (Know
Your Customer) compliant, engaged in the proposed business,
and has turnover as indicated authorized
Exporter’s caution list
5 It does not appear in the exporters' caution list of the
Reserve Bank or in the list of defaulters to the banking
system in India
15
Past track record
2 has a proven track record, i.e., the export outstanding does
not exceed 10% of the average export preceding three years
No adverse notice
Proprietorship concern / unregistered partnership firm
in India has not come under the adverse notice of any
4 Government agency like
a) Directorate of Enforcement,
b) Central Bureau of Investigation,
c) Income Tax Department, etc
amount of outside India does not exceed 10 percent of
the average of last three years’ export realization or 200
6 percent of the net owned funds of the proprietorship
concern/ unregistered partnership firm in India,
whichever is lower
 OVERSEAS DIRECT INVESTMENT 16

Registration- Trust should be registered under the Indian Eligibility Criteria For Society
1 Trust Act, 1882
1
Registration- Registered under the Societies Registration
Act, 1860
Authority by deed -Trust deed permits the proposed
2 investment oversea 2
Authorized by MOA and rules- The Memorandum of
Association and rules and regulations permit the Society
to make a proposed investment which should also be
Eligibility 3 Approval- Proposed investment should be approved approved by the governing body/council or a managing/
by the trustee/s
Criteria executive committee.
For Trust 3
KYC complaint- The AD Category - I bank is satisfied that
Existence- Trust has been in existence at least for a the Society is KYC (Know Your Customer) compliant and is
4 period of three years
engaged in a bonafide activity.

4
KYC compliant - AD Category – I bank is satisfied that Existence- The Society has been in existence at least for a
5 the Trust is KYC (Know Your Customer) compliant and period of three years;
is engaged in a bonafide activity
5
No adverse notice- The Society has not come under the
6 No adverse notice -Trust has not come under the adverse notice adverse notice of any Regulatory / Enforcement agency
of any Regulatory / Enforcement agency like theDirectorate of like the Directorate of Enforcement, CBI etc.
Enforcement, Central Bureau of Investigation (CBI), etc.
 OVERSEAS DIRECT INVESTMENT 17

What is Financial Commitment? AUTOMATIC ROUTE:- PERMISSIBLE

Financial Commitment means the amount of direct
investment outside India by the Indian party financial
ELIGIBILITY SOURCES OF
commitment in the following ways:- Indian Parties which are not required to get
FUNDING OVERSEAS
contribution to equity shares or Compulsory approval from RBI are eligible to make ODI DIRECT INVESTMENT
Convertible Preference Shares (CCPS) of the under Automatic Route. The following person
JV/OWS abroad can invest under the automatic route of ODI:- 1) Drawal of foreign exchange
from an AD bank in India
Contribution to JV/WOS as preference shares 2) Swap of Shares
3 3) Capitalization of exports and
Partnership
Any other dues and investment
As loans to its JV/WOS abroad Firm
4) Proceeds of ECB/ FCCB’s
registered other
1 5) In exchange of ADRs/GDRs
100% of the amount of corporate guarantee under Indian entity issued in accordance with
issued on behalf of its overseas JV/WOS and Partnership notified the scheme and also
by RBI
4 guidelines issued by the
Act,1932
50 % of the amount of performance guarantee A company Government of India
issued on behalf of its JV/ WOS 2 incorporated 6) Balances held in Exchange
Limited Liability in India or a Earner Foreign Currency A/C
body corporate ( EEFC A/C) of the Indian
Bank guarantee/ standby letter of credit issued Partnership (LLP)
Party with authorized dealer
by a resident bank on behalf of an overseas incorporated under created under
7) Proceeds of foreign currency
JV/WOS of the Indian party, which is counter the Limited Liability an Act of funds raised through
guarantee/ collateral by the Indian Party. Partnership Act 2008 Parliament ADR/GDR issues
 OVERSEAS DIRECT INVESTMENT 18

ACQUISITION OR SALE OF FOREIGN SECURITIES BY INDIAN

Profitable Registration
RESIDENT INDIVIDUAL IN INDIA position COMPANY Is registered with
Gift:- a gift from PROI It has earned net MAKING the appropriate
profit during the INVESTMENT regulatory
ESOP:- By way of ESOPs issued by a company incorporated preceding three IN A JV/WOS authority in India
outside India under Cashless Employees Stock Option financial years IN THE for conducting
Scheme which does not involve any remittance from India
from the financial FINANCIAL financial services
ESOP:- By way of ESOPs issued to an employee or a services SERVICES activities
director of Indian office or branch of a foreign company or activities;
of a subsidiary in India of a foreign company or of an SECTOR
Indian company

Inheritance:- As inheritance from a person whether Fulfilled norms Approval from

resident in or outside India Has fulfilled the concerned authority
prudential norms Has obtained approval
relating to capital for undertaking such
By purchase of foreign securities:- By purchase of foreign
adequacy as activities from the
securities out of funds held in the Resident Foreign
Currency Account maintained in accordance with the prescribed by the concerned regulatory
Foreign Exchange Management (Foreign Currency concerned authorities both in
Account) Regulations, 2000 regulatory authority India and abroad
in India before venturing into
Bonus/ Right Issue:- By way of bonus/rights shares on the such financial activity;
foreign securities already held by them
 OVERSEAS DIRECT INVESTMENT
RESIDENT INDIVIDUAL
ACQUIRE SHARES OF A
FOREIGN COMPANY IN THE
CAPACITY AS DIRECTOR 1.
RBI has given general permission to a 2.
resident individual to acquire foreign
securities to the extent of the minimum 3.
number of qualification shares required to
be held for holding the post of Director
4.
5.
Resident individuals can remit funds for 6.
acquiring shares to the extent prescribed
as per the law of the host country. 7.
8.
Limit of remittance for acquiring such
qualification shares shall be within the
overall ceiling prescribed under the
Liberalized Remittance Scheme (LRS)
19
INVESTMENT BY INDIAN OBLIGATIONS ON
MUTUAL FUND INDIAN PARTY WHICH
HAS MADE DIRECT
ADRs / GDRs of the Indian and foreign
INVESTMENT OUTSIDE
companies
Equity of overseas companies listed on INDIA
recognized overseas stock exchanges
Foreign debt securities- short term as well Receipt of Share
as long term with fully convertible certificate:-
currencies;
Money market investments Receive share certificates or any
Government securities other documentary evidence of
1 investment as an evidence of
Derivatives traded on recognized stock
exchanges overseas investment and submit the same to
the designated AD within 6 months
Short term deposits with banks oversea
Units/securities issued by overseas
Mutual Funds or Unit Trusts registered Repatriation of Receivables:-
with overseas regulators.
Repatriate to India, all dues
2 receivable from the foreign JV /
WOS , like dividend, royalty,
technical fees etc
 OVERSEAS DIRECT INVESTMENT 20

Submit Annual Performance report:-

3 Submit to the Reserve Bank through the designated Authorized Dealer, every year, an Annual Performance Report in Part III of Form
ODI in respect of each JV or WOS outside India set up or acquired by the Indian party

Report on Decision
Report the details of the decisions taken by a JV/WOS regarding diversification of its activities within 30 days of the approval of
4 those decisions by the competent authority concerned of such JV/WOS in terms of the local laws of the host country

Repatriation of Sale proceeds:-

In case of disinvestment, sale proceeds of shares/securities are to be repatriated to India immediately on receipt thereof and in
5 any case not later than 90 days from the date of sale of the shares /securities and documentary evidence to this effect is to be
submitted to the Reserve Bank through the designated Authorised Dealer
 LIBERALISED REMITTANCE
SCHEME
INTRODUCTION
• Indian residents are free to buy or sell foreign exchange for
current account transactions except prohibited transactions.
• (LRS) facilities individual residents to remit funds abroad for
permitted current and/ or capital account transactions.
• LRS permits the Authorised Dealers to freely allow remittance by
resident individuals up to $ 250,000 .
• Under LRS, Authorised Dealers may freely allow remittances by
resident individuals up to $250,000
21
PERMISSIBLE CAPITAL ACCOUNT TRANSACTIONS
a) Opening of Foreign Currency Account overseas with a bank;
b) Purchase of property overseas.
c) Making investments overseas.
d) Setting up wholly owned subsidiaries and joint ventures
outside India for bonafide business;
e) Extending loans including loans in Indian Rupees to non-
resident Indians

PERMISSIBLE CURRENT ACCOUNT

TRANSACTIONS DOCUMENTATION BY THE REMITTER
• Private visits to any country (except Bhutan and Nepal). • designate a branch of an AD through which all the remittances under
• Gifts or donation. the scheme will be made.
• Going abroad for employment. • make the remittance should furnish Form-A2 for purchase of foreign
• Emigration. exchange under LRS.
• Maintenance of close relatives abroad. Relative as per • remitter shall mandatory have PAN card.
Section 6 of the Companies Act.
• Business trip. Note: Pan card would not be required for remittances made towards
• Medical treatment abroad. permissible current account transactions up to $25,000.
• Education abroad.
 LIBERALISED REMITTANCE
SCHEME
REMITTANCE FACILITIES TO PERSONS
OTHER THAN INDIVIDUALS (INCLUDING
CORPORATES OR
OTHERS)
• Gift/donation.
• Procedure for remittance.
• Commissions to agents abroad for sale of residential
flats or commercial plots in India
• Remittances towards consultancy services.
• Remittances towards re-imbursement of pre-
incorporation expenses.
• Payment of fees in foreign currency- embassy affiliated
educational institutions
• Remittance towards payments of collected
subscription to overseas TV Media Company.
• Bids in foreign currency for projects to be executed in
India
• Sale of overseas telephone cards.
• Remittances for making tour arrangements by agents
22
AD may open foreign currency accounts in the name of agents in India
who have tie-up arrangements with hotels/agents, etc., abroad for
providing hotel accommodation or making other tour arrangements
for travellers from India provided:
• The credits to the account are by way of depositing: a) Collections
made in foreign exchange from travellers; and b) Refunds received
from outside India on account of cancellation of bookings/tour
arrangements etc., and
• The debits in foreign exchange are for making payments towards
hotel accommodation, arrangements etc., outside India.
• AD may also allow tour operators to remit the cost of
transportation charges outside India without a prior approval from
RBI, net of commission/mark up due to the agent.
• In respect of consolidated tours arranged by travel agents in India
for foreign tourists visiting India and neighboring countries like
Nepal, Bangladesh, etc., against such consolidated tour
arrangements may require to be remitted from India to these
neighboring countries for services rendered by travel agents and
hoteliers in these countries.
 ESSENTIAL COMMODITIES
ACT,1955
HISTORICALY BACKGROUND
1939: Defence of • Government of India made certain
India Act rules to control the production,
supply and distribution of certain
commodities
• Act ceased to have force in
September 1946
Essential • Ordinance was subsequently
Commodities replaced by the present Act namely,
Act, 1955 the Essential Commodities Act, 1955.
• It was with effect from 1s April 1955
Scope In the interest of the general public for
the control of the production, supply
and distribution of, and trade and
commerce in, certain commodities.
Objective • Secure equitable distribution
• Fair prices of essential commodities
• Protect the interest of general public
23
Meaning of Seizure
Seize’ means to take possession contrary to the wishes of the owner of the
property and that such action is unilateral action of the person seizing
Consequences of Seizure Reference to Code of Criminal
• Right or power to control Procedures
or seizure had been used therein in
• Regulate the use of that connection with the taking of actual
thing
physical possession of moveable property
Confiscation POWER TO CONTROL
PRODUCTION,SUPPLY,DISTRIBUTI
It means selling of seized O ETC OF ESSENTIAL
property and crediting sale COMMODITIES
proceeds to the Government
Accountant. Central Government can issue orders
Confiscation is action taken regulating or prohibiting the
after seizure of commodity. A production, supply and distribution of
commodity which has been essential commodities and trade and
seized could be confiscated. commerce therein .

SECTION 3(1A):SPECIAL
CIRCUMSTANCES AND SITUATION
• Application
• Regulation on which commodities
• Regulator
• Action of Imposing Stock Limit
CONTENT OF ORDER
• License, Permits.
• Cultivation on any waste land
• Price Control .
• Regulation of handling commodity.
• Withholding of essential commodity
• Person to sell essential commodity
to Government.
• Regulating commercial or financial
transaction.
• Collecting Information.
• Charging fees, deposit and forfeiture.
• Incidental and supplementary
matters
ESSENTIAL COMMODITIES
ACT,1955
FIXING PRICE OF ESSENTIAL
COMMODITIES BEING SOLD TO
GOVERNMENT
When the commodities are being sold to
Central/State Government in compliance
of order Central Government to deal with
the pricing of the essential commodities
Agreed Where the price can be
Price agreed upon consistently
with the controlled price
fixed
Controlled Where no such agreement
Price can be reached, the price
calculated with reference to
controlled price
Market The price calculated at the
Price market rate prevailing in
the locality on the date of
sale when above clause not
applicable
24
SECTION 3(3A:)FIXING THE PRICE OF ESSENTIAL
COMMODITIES DURING EMERGENCY
• There is emergency situation so to tackle
situation arising in a particular locality.
• Power of Central Government
• Controlling price rise
• Validity of Notification 3 months only.
• Price paid to seller - Agreed Price , Controlled
Price , Market Price
• SECTION 3(3B): PAYMENT OF PROCUREMENT PRICE
FOR FOODGRAINS AND EDIBLE OIL.
• SECTION 3(3C): FIXING PRICE OF SUGAR.
• SECTION 3(3D) CENTRAL GOVERNMENT SHALL
ISSUE DIRECTIONS FOR DISPOSAL OF SUGAR.
• SECTION 3(3E):GENERAL AND SPECIAL ORDER BY
CENTRAL GOVERNMENT.
• SECTION 3(4):POWER TO APPOINT AUTHORISED
CONTROLLER
• SECTION 3(5): ISSUANCE AND SERVICE OF ORDER.
• SECTION 3(6): LAYING THE ORDER BEFORE
PARLIAMENT
 ESSENTIAL COMMODITIES 25

ACT,1955
SECTION 4: IMPOSITION OF DUTIES ON SECTION 5: DELEGATION OF SECTION 7: PENALTY
STATE GOVERNMENT POWER
• Penalty for records and information.
• powers and impose duties upon the • The Central Government may,
• Penalty for contravention of order.
Central Government or the State by notified order direct that
• Penalty for contravention of direction.
Government the power to make orders or
• Penalty for Second Conviction
• may contain directions to any, State issue notifications
Government or to officers or authorities
ATTEMPT AND ABETMENT-SECTION 8
SECTION 6:EFFECT OF ORDER INCONSISTENT WITH ENACTMENT
• Any person who attempts to contravene or abets a
Order made shall have effect notwithstanding anything inconsistent therewith contravention of any order made under Section 3
contained in any enactment other than this Act or any instrument having effect by shall be deemed to have contravened that order
virtue of any enactment other than this Act.
• SECTION 6A:CONFISCATION OF ESSENTIAL COMMODITY .
SECTION 9: FALSE STATEMENT
• SECTION 6A(2):SALE OF COMMODITY SUBJECT TO NATURAL DECAY.
• SECTION 6A(3):DISPOSAL OF SALE PROCEEDS OF CONFISCATED GOODS.
• SECTION 6B: ISSUE OF SHOW CAUSE NOTICE BEFORE CONFISCATION OF • furnishes any information which is false in any
ESSENTIAL COMMODITY material particular.
• SECTION 6C: APPEAL AGAINST CONFISCATING ORDER • Imprisonment- Extend upto 5 years
• SECTION 6D:AWARD FOR CONFISCATION NOT TO INTERFERE WITH OTHER • Fine
PUNISHMENTS • Both
 ESSENTIAL COMMODITIES 26
ACT,1955
SECTION 10:OFFENCE BY COMPANIES SECTION 12B: GRANT OF INJUNCTION BY CIVIL
at the time of the contravention, was in charge of, and was COURTS
responsible to, the company for the conduct of the business of the No Civil Court can grant any injunction or make any order for any
company, shall be deemed to be guilty of the contravention . other relief against the Central or State Government or any public
Person shall not be liable if he proves that the contravention took officer until after notice of the application for such injunction or
place without his knowledge or that he exercised all due diligence other report is given to the Government or to such officer.
to prevent it .
COGNIZANCE OF SECTION 10B: SECTION 10C: SECTION 13: PRESUMPTION AS TO ORDER
OFFENCE-SECTION PUBLICATION OF PRESUMPTION court shall presume that such order was so made by that authority
10A NAMES OF CONVICTED OF CULPABLE within the meaning of the Indian Evidence Act, 1872.
COMPANIES BY COURT MIND
A cognizable offence • Publication when a any prosecution SECTION 14:BURDEN OF PROOF IN CERTAIN CASES
is one, where, under company has been for an offence • prosecuted for contravention under Section 3
the Criminal convicted under the Act • Burden of proof lies upon such person who need to prove that he
Procedure Code or • No Publication which requires a has such authority, permit, licence or other document
any other law in • expenses of any culpable mental
force, a police publication shall be state on the part
SECTION 15A: PROSECUTION OF PUBLIC SERVANT
officer may arrest a recoverable from of the accused,
If any public servant is accused of any offence alleged to have been
person without a the company
committed by him while acting, or purporting to act, in the discharge of his
warrant
duties
 LEGAL METROLOGY ACT,2009 27

Legal metrology can be defined as that part OIML CERTIFICATE SYSTEM WEIGHTS AND MEASURE SHOULD BE
of metrology which deals with units of FOR MEASURING BASED ON METRIC SYSTEM
measurement, methods of measurement INSTRUMENTS Every unit of weight and measure shall be in
and measuring instruments accordance with the metric system based on
• Introduced in 1991
the international system of units
• Manufacturer can obtain an OIML
INTERNATIONAL ORGANIZATION Certificate and a Test Report
OF LEGAL METROLOGY(OIML) • Certificates are delivered by OIML BASE UNIT OF BASE UNIT OF
member states. WEIGHTS AND MEASUREMENT
• Intergovernmental treaty organisation • OIML member states have MEASURE
• Established in 1955 established Issuing Authority • unit of the
• Length- meter
• promote global harmonization of legal responsible for processing international form
• Mass- kilogram
metrology procedures . application by manufacturers of Indian numerals.
• time-Seconds • accordance with the
• OIML has developed a worldwide wishing to have their instrument
• Electric current- decimal system.
technical structure that provides its certified .
ampere • The decimal
Members with metrological guidelines • Certificates issued by OIML. multiples and
• Thermodynamic
• Increasing national implementation of • If accepted by national metrology submultiples of the
temperature-
OIML guidelines, more and more then following are benefits numerals shall be
Kelvin
manufacturers are referring to OIML a) Simplifying approval process of such
• Luminous denominations and
International Recommendations to b) Eliminating costly duplication of
Intensity- be written in such
ensure that their products meet application
Candela manner as may be
international specifications c) Eliminating costly duplication of prescribed
• Substance-Mole
test procedures

STANDARD UNITS OF WEIGHTS
AND MEASURE
• Standard units of weights and measure.
• Standard units of numeration
• Objects and Equipment’s
• Other details
APPOINTMENT OF DIRECTOR,
LEGAL METROLOGY OFFICERS
AND OTHER EMPLOYEES
• Central Government to appoint (by
Notification) a Director of legal
metrology,
• Direction and supervision
• Public Servant
• No Suit or action while performing
duty
• Delegation by Central Government
• Delegation by Controller
LEGAL METROLOGY ACT,2009
APPOINTMENT OF
CONTROLLER,LEGAL
METROLOGY OFFICERS AND
EMPLOYEES
• State Government may, by notification,
appoint
• The Controller and every legal
metrology officer so appointed shall
exercise such powers and discharge.
• General Direction and control
POWER OF INSPECTION,SEIZURE
• Director, Controller or any legal
metrology officer may exercise powers
of inspection
• The powers include entry at any
reasonable time
• The powers include entry at any
reasonable time
• Goods subject to natural decay
28
FORFEITURE
• Every non-standard or unverified
weight or measure and every package
used in the course of, or in relation to,
any trade and commerce and seized
under section 15, shall be liable to be
forfeited, to the State Government.
• If the person from whom such weight
or measure was seized gets the same
verified and stamped within such time
as may be prescribed then it will not
be forfeited
MANUFACTURERS TO
MAINTAIN RECORD
• Manufacturer • Repairer • Dealer need
to maintain record
• Manner of record as prescribed
• The records Produced at time of
inspection

SECTION 31: PENALTY FOR NON-
PRODUCTION OF DOCUMENTS,ETC
• First time contravention Fine – Rs
5000
• Second or Subsequent
Contravention Imprisonment -
Extend upto 1 year Fine or Both
PENALTY FOR SELLING NON-
STANDARD PACKAGES
• Rendering any service in terms of
other than standard weights,
measure
• First time contravention Fine – Rs
1000-Rs 500.
• Second or Subsequent
Contravention Imprisonment –
3months to 1 year Fine or Both
LEGAL METROLOGY ACT,2009
PENALTY FOR SELLING NON-
STANDARD PACKAGES
• Rendering any service in terms of
other than standard weights,
measure
• First time contravention Fine – Rs
1000-Rs 500.
• Second or Subsequent
Contravention Imprisonment –
3months to 1 year Fine or Both
SECTION 35:PENALTY FOR
RENDERING SERVICES BY NON-
STANDARD WEIGHT,MEASURE OR
• First time contravention Fine – Rs
1000-Rs 5000
• Second or Subsequent
Contravention Imprisonment –
3months to 1 year Fine or Both
29
OFFENCE BY COMPANY
• Person committing a contravention of any of
the provisions of the Act or of any rule,
direction or order is a company .
• Every person who, at the time the
contravention was committed, was in charge
of, and was responsible to, the company,
• Not liable for punishment
• Director, manager, secretary or other officer
• Different branches and units
• Publication of Contravention
POWER OF STATE GOVERNMENT TO
MAKE RULES
• State Government is empowered to make rules
• Fine for breach of rules
• Every rule made shall, as soon as may be after
it is made, be laid before each House of State
Legislature,
 THE BENAMI TRANSACTION 30
(PROHIBITION) ACT,1988

I
N
With a view to
T The Benami providing effective The Benami
During the
R Transactions regime for Transactions
administration of the
(Prohibition) Act, prohibition of (Prohibition)
O Benami Transactions
1988 was enacted to benami transactions, Amendment Act,
(Prohibition) Act,
prohibit benami the Benami 2016 received the
D 1988, it was found
Transactions assent of the
transactions and the that the provisions of
U right to recover the aforesaid Act are
(Prohibition) Act, President on the10th
property held 1988 was amended August, 2016 and
C inadequate to deal
benamiz through the Benami came into effect
with benami
Transactions from1st November,
T transactions
(Prohibition) 2016.
I Amended Act, 2016

O
N
 THE BENAMI TRANSACTION 31
(PROHIBITION) ACT,1988
It defines a Benami transaction and It lays down the procedure for
Benami property and also provides for determination and related penal
exclusions and transactions which shall consequences in the case of a prohibited
not be construed as Benami benami transaction

Central Government empowers to make

It provides the consequences of entering
into a prohibited benami transactions
INTRODUCTION SALIENT rules for the implementation of the
FEATURES OF BENAMI provisions of the Act

TRANSACTION(PROHIBIT
It provides penalty for entering into
benami transactions and for furnishing
ION)ACT,1988 It enables the Central Government in
consultation with the Chief Justice of the
any false documents in any proceeding
High Court to designate one or more
under the Act

It also provides that the powers of civil
court shall be available to authorities
under the said Act Miscellaneous
Provisions have been provided for service
of notice, protection of action taken in
good faith, etc.
Courts of Session as Special Court or
Special Courts for the purpose of the
Act
It provides for transfer of any suit or
proceeding in respect of a benami
transaction pending in any court (other
than High Court) or Tribunal or before
any authority to the Appellate
Tribunal
 THE BENAMI TRANSACTION
1 Attachment-Section 2(5)
Attachment means the prohibition
of transfer, conversion, disposition
or movement of property, by
an order issued under the Act
IMPORTANT
DEFINITIONS
2 Benami Property-Section 2(8)
Attachment means the prohibition
of transfer, conversion, disposition
or movement of property, by
an order issued under the Act
32
(PROHIBITION) ACT,1988
3 Benami Transaction-Section 2(9)
As per Section 2 (9) of the benami transaction means a transaction or an
arrangement—
(a) where a property is transferred to or is held by, a person and the consideration
for such property has been provided, or paid by, another person; and
b) the property is held for the immediate or future benefit, direct or indirect, of the
person who has provided the consideration, except when the property is held by—
(i) A Karta, or a member of a Hindu ii) a person standing in a fiduciary
undivided family, as the case may be, and capacity for the benefit of another person
the property is held for his benefit or towards whom he stands in such capacity
benefit of other members in the family and includes a trustee, executor, partner,
and the consideration for such property director of a company, a depository, or a
has been provided or paid out of the participant as an agent of a depository
known sources of the Hindu undivided under the Depositories Act, 1996 and any
family; Other people as may be notified by the
Central Government for this purpose;

IMPORTANT DEFINITIONS
(iii) any person being an individual in the name
of his spouse or in the name of any child of such
individual and the consideration for such
property has been provided or paid out of the
known sources of the individual;
THE BENAMI TRANSACTION
(PROHIBITION) ACT,1988
Benamidar-Section 2(10)
4
(iv) any person in the name of his brother or Benamidar means a person or a
sister or lineal ascendant or descendant, where fictitious person, as the case
the names of brother or sister or lineal may be, in whose name the
ascendant or descendant and the individual benami
appear as joint owners in any document, and property is transferred or held
the consideration for such property has been and includes a person who
provided or paid out of the known sources of lends his name
the individual; or

5 Beneficial Owner-Section 2(12)

B. a transaction or an arrangement in respect of a property carried out or made

in a fictitious name; or
Beneficial Owner” means a
C. a transaction or an arrangement in respect of a property where the owner of the person, whether his identity is
property is not aware of, or, denies knowledge of, such ownership; known or not, for whose
D. a transaction or an arrangement in respect of a property where the person benefit the benami property is
providing the consideration is not traceable or is fictitious held by a benamidar
 7 THE BENAMI TRANSACTION 34
(PROHIBITION)
8 ACT,1988
Firm-Section 2(17) Person-Section 2(24) Property-Section 2(26)
6 8 9

Firm shall have the Person shall include— Property means assets of any kind,
same meaning as (i) an individual; whether movable or immovable,
34
assigned to it in section (ii) a Hindu undivided family; tangible or intangible, corporeal or
4 of the Indian (iii) a company; incorporeal and includes any right or
Partnership Act, 1932 (iv) a firm; interest or legal documents or
and shall include a (v) an association of persons instruments evidencing title to or
limited liability or a body of individuals, interest in the property and where the
partnership as defined whether incorporated or not; property is capable of conversion into
in the Limited Liability (vi) every artificial juridical some other form, then the property in
Partnership Act, 2008. person, not falling under sub the converted form and also includes
clause (i) to(v). the proceeds from the property
7 Partnership-Section 2(23)
10 Transfer-Section 2(29)
Partnership shall have the same meaning as assigned to it in section 4
of the Indian Partnership Act, 1932, and shall include a limited Transfer includes sale, purchase or any
liability partnership formed and registered under the Limited Liability other form of transfer of right, title,
Partnership Act, 2008 possession or lien.
 THE BENAMI TRANSACTION
(PROHIBITION) ACT,1988
SECTION 3:- PROHIBITION OF BENAMI SECTION 6: PROHIBITION ON RE-
TRANSACTION TRANSFER OF PROPERTY BY BENAMIDAR

• No person shall enter into any benami • Benamidar shall not re-transfer the benami
Prohibition transaction No re-transfer property held by him to the beneficial owner
or any other person acting on his behalf

Punishment • Any property is re-transferred in

• Imprisonment -May extend upto 3 years or Re-transfer in
under old contravention of the above the transaction of
• Fine contravention
provision such property shall be deemed to be null and
• Both void.
Punishment
as per
Benami • Imprisonment- Not less than one year
Transaction( Exception • Transfer made in accordance with the
but may extend up to 7 years
Prohibition) provisions of section 190 of the Finance
• Fine-May extend up to 25% of the value
Amendment Act, 2016
of property
Act,2016

SECTION 5: PROPERTY HELD BENAMI SHALL BE LIABLE FOR CONFISCATION

Any property, which is the subject matter of a Benami transaction, shall be liable to be confiscated by the Central Government
35
 THE BENAMI TRANSACTION 36
(PROHIBITION) ACT,1988
Notice in writing
SECTION 24:
NOTICE AND Provisionally attach
• Initiating Officer on the basis of material in his
• Person in possession of the property held
possession ATTACHMENT Benami
• Reason to believe that any person is a benamidar in OF PROPERTY
respect of a property • Person may alienate such property during
the period specified in the notice
• Record reasons in writing INVOLVED IN
• Previous approval of the Approving Authority
• Issue a notice to such person to show cause within such BENAMI • Order in writing
time as may be specified in the notice why the property
should not be treated as benami property
TRANSACTION • Attach provisionally such property in the
manner as may be prescribed
Passing of order Notice to
• Period not exceeding ninety days from the
date of issue of notice
a) Already provisional attachment beneficial
• Pass an order continuing the provisional attachment of owner
the property A copy of the
• Revoke the provisional attachment of the property notice may also Refer to Adjudicating Authority
be served upon
b) Provisionally attachment not made such other When an order is passed to provisionally attach he
• Pass an order provisionally attaching the property person who is a shall within 15 days from the date of attachmet draw
beneficial up statement and refer it to Adjudicating authority
• Decide not to attach the property as specified in the
notice owner
 THE BENAMI TRANSACTION
(PROHIBITION) ACT,1988
Manner of giving notice
• Post
• Summons issued by a Court under the Code of
Civil Procedure, 1908
SECTION 25: MANNER OF
NOTICE
Notice to a specific person
• In case of an individual- Individual
• In case of firm-Managing Partner or
manager of the firm
• In the case of Hindu Undivided family-Karta
or any member of such family
• In the case of a company-Principal officer
• In case of any other association or body of
individuals-principal officer or any member
• In case of any other person-the person who
manages or controls his affairs
SECTION 26:ADJUDICATION OF BENAMI PROPERTY
Notice by Adjudicating Authority
The Adjudicating Authority shall
issue notice within a period of
thirty days The Adjudicating
Authority shall issue notice, to
furnish such documents,
particulars, or evidence
As is considered necessary on a
date to be specified therein, on the
following persons:
• Benamidar
• Beneficial owner
• Any Party interested, banking
company
• Any person who has made a
claim in respect of the property
Jointly held by more than one person
Adjudicating Authority shall make
endeavors to serve notice to all persons
holding such property
Order by Adjudicating Authority
It shall pass an order holding the property
not to be a benami property and revoking
the attachment order; or Holding the
property to be a benami property and
confirming the attachment order in all
other cases.
Add or remove the name
The Adjudicating Authority may strike out
the name of any party improperly joined or
add the name of any person
37
 THE BENAMI TRANSACTION
(PROHIBITION) ACT,1988
Power of administrator
MANAGEMENT
OF PROPERTY The administrator shall
CONFISCATED have the power to
receive and manage the
property, in relation to
which an order of
confiscation
Appointment of Administrator
Central Government may, by
order published in the
Official Gazette, notify as
many of its officers as it
thinks fit, to perform the
functions of Administrators
38
Dispose of Property
The administrator shall also
take such measures, as the
Central Government may
direct, to dispose of the
property which is vested in
the Central Government

Take possession Notice in writing

The Administrator shall proceed to take the Administrator shall by notice in writing order within
possession of such property where an order seven days o surrender or deliver possession thereof
SECTION 29: of confiscation in respect of a property is to the Administrator or any other person duly
POSSESSION passed authorised in writing by him on this behalf

OF Non-compliance of order Meaning of Administrator

PROPERTY In the event of non-compliance of the order Administrator” means an Income-tax Officer as
he may take over the possession forcibly defined in clause (25) of section 2 of the Income-tax
with requisition the service of any police Act, 1961
officer to assist him
THE BENAMI TRANSACTION (PROHIBITION) 39
ACT,1988
SECTION 30:ESTABLISHMENT 1 Code of Civil Procedure, 1908
OF APPELLATE TRIBUNAL The Appellate Tribunal shall not be
bound by the procedure laid down by
the Code of Civil Procedure, 1908

SECTION
40:PROCEDURE
Opportunity of being heard
❑ Central Government shall, by AND POWER OF 2 It be guided by the principles of
notification, establish an APPELLATE natural justice
Appellate Tribunal TRIBUNAL
❑ Appellate Tribunal hear
appeals against the orders of
the Adjudicating Authority and 3 Own Procedures
the authorities under the Act. The Appellate Tribunal shall have
powers to regulate its own procedure
 THE BENAMI TRANSACTION 40
(PROHIBITION) ACT,1988

SECTION 49: APPEAL TO HIGH COURT

1 2 3 4 5
• Time Limit to • Appeal after • Grounds of • Issues may be • Code of Civil
file an appeal time limit Appeal determined by High Procedure,1908
Court
• Any party • High Court may • High Court is • The provisions of the
aggrieved by any entertain any satisfied that a • High Court may Code of Civil Procedure,
decision or order appeal after the substantial determine any issue 1908, relating to appeals
of the Appellate said period of question of law which —• has not to the High Court shall
Tribunal may file sixty days, if it is is involved in been determined by • apply in the case of
an appeal to the satisfied that the any case, it the Appellate appeals under the
High Court within appellant was shall formulate Tribunal or section
sixty days prevented by that question.
sufficient cause • has been wrongly
from filing the determined by the
appeal Appellate Tribunal
 THE BENAMI TRANSACTION 41
(PROHIBITION) ACT,1988
SECTION 50:SPECIAL COURT
• Established by
• Central Government shall notify one or more Court of Session as Special Court
1 • Central Government shall consult Chief Justice of High Court

• Code of Criminal Procedure,1973

• A Special Court shall also try an offence under the Code of Criminal Procedure, 1973
2

• Cognizance of Offence
• Special Court shall take cognizance of any offence only upon compliant is made in writing by
• The authority or
3 • Any officer of the Central Government or State Government authorizedz

• Term to conclude
• Special Court to conclude the trial within six months from the date of filing of the complaint
4
 THE BENAMI TRANSACTION 42
(PROHIBITION) ACT,1988
SECTION 54:PENALTY FOR FALSE
Imprisonment: One year to seven-year and INFORMATION
SECTION Any person who is required to furnish information under this
Act knowingly gives false information
53:PENALTY Fine:25% fair market value
to any authority or furnishes any false document
FOR BENAMI • Imprisonment: 6 months to five years and
TRANSACTION • Fine:10% fair market value

Contravention by Company- A person committing Not liable for punishment- Person shall not be
a contravention of any of the provisions of the Act liable if he proves that the contravention took
or of any rule, direction or order is a company place without his knowledge

SECTION 62:- Director, manager, secretary, or another officer

Who is liable- Every person who, at the time
OFFENCES the contravention was committed, was in
• It is proved that the contravention has taken place
with the consent or connivance of, or is attributable
BY charge of, and was responsible to, the
to any neglect on the part of any director, manager,
company, for the conduct of the business of
COMPANIES the company as well as the company, shall
secretary, or another officer of the company
• Director, manager, secretary, or another officer shall
be deemed to be guilty of the contravention
also be deemed to be guilty of the contravention
 PREVENTION OF MONEY 43
LAUNDERING
OBJECTIVE
INTRODUCTION • To prevent money laundering
• To combat channelizing money into illegal activities and economic crime
The purpose and object of the • To provide for confiscation of property derived from or involved in money
Act is the prevention of money laundering
laundering, which simply means • To punish those who commit the offense of money laundering.
the conversion of tainted (black)
money into untainted (white)
money. PROCESS OF MONEY LAUNDERING
Black money is generated in a
large scale from various crimes Process of money laundering are classified into three stages
and this black money is
converted into white money so 1 Placement 2 Layering 3 Integration
that it can be used. Thus, one way
to prevent crime is to make it • Launderer introduces his illegal The launderer -Funds re-enter the
difficult to convert Black money profits into the financial system engages in a series of legitimate economy
into white money i.e., the process • Breaking up large amounts of cash conversions or -Launderer might
of money laundering. into less conspicuous smaller sums movements of the choose to invest the
The present Act has been passed that are then deposited directly into funds to distance funds into real estate,
to implement the UN Resolution. a bank account,
them from their luxury assets, or
It is effective from 1st July 2005 • Purchasing a series of monetary
source business ventures
applicable to the whole of INDIA instruments
 PREVENTION OF MONEY 44
LAUNDERING
History of FATF Major Recommendations
FINANCIAL ACTION TASK
-Established by the G-7 Summit that was FORCE (FATF) • Declare money
held in Paris laundering as a criminal
offense.
- G-7 Heads of State or Government and
President of the European Commission Function
• Confiscation of proceeds
convened the Task Force from the G-7 of crime
member States, the European • Monitors the progress of its members in
Commission, and eight other countries implementing necessary measures
• Extradition of the person
• It is an inter-governmental body involved in money
• Established in 1989 • Reviews money laundering and terrorist
financing techniques and counter-measures laundering offense

• Promotes the adoption and implementation • International co-

Objectives
It is an international body that promotes
measures taken up to counteract the
worldwide impact of money laundering
of appropriate measures globally operation in the
prevention money
• FATF works to identify national-level laundering
vulnerabilities with the aim of protecting
the international financial system from
misuse.
 PREVENTION OF MONEY 45
LAUNDERING
PREVENTION OF MONEY
FINANCIAL ACTION TASK FORCE (FATF) LAUNDERING-INDIAN INITIATIVES

4TH August 1998

Recommendations Prevention of Money Laundering Bill,1998 was introduced
in Parliament
• April 1990- FATF issued a report containing a set of Forty
Recommendations that Provide a comprehensive plan of action
4TH March 1999
needed to fight against money laundering.
Standing Committee presented its report to Lok Sabha
• October 2001- FATF issued the Eight Special Recommendations
to deal with the issue of terrorist financing 29th October 1999
GOI introduced the Prevention of Money Laundering Bill
• June 2003- The continued evolution of money laundering 1999 was introduced in the Parliament
techniques led the FATF to revise the FATF standards
17Th January 2003
• October 2004- FATF published a Ninth Special Bill received assent of President
Recommendations, further strengthening the agreed
international standards for combating money laundering and 1st July 2005
terrorist financing - the 40+9 Recommendations The Act came into force
 PREVENTION OF MONEY
46
LAUNDERING
INDIAN INITIATIVES TO FIGHT MONEY LAUNDERING

The Prevention of Money

The agency monitoring the FIU-IND is an independent
Laundering Act, 2002
(PMLA) forms the core of
2 Anti-Money laundering 4 body reporting directly to
activities in India is the the Economic Intelligence
the legal framework
Financial Intelligence Council (EIC) headed by
put in place by India to
Unit( FIU-IND) Finance Minister
combat money laundering.

This unit is responsible for

PMLA defines Money
receiving, processing,
laundering offence and
analyzing, and
provides for freezing,
1 seizure and confiscation of 3 disseminating information 5
relating to suspect to
the proceeds of crime.
financial transactions
 PREVENTION OF MONEY 47
LAUNDERING
PREVENTION OF MONEY LAUNDERING-GLOBAL INITIATIVES

Vienna Convention Council of European European Money Basel Committee’s Statement of Principles
• First major Convention Laundering Directive a) Basle Committee on Banking Regulation
initiative in the • September 1993 Supervisory Practices (December 1988)
prevention of • Common policy on money The member states
• It issued a statement of principles to be
money laundering laundering have been put under
complied by the international banks of member
• December 1988 • Common definition of money obligation to require
financial institutions states.
• Against Illicit laundering and common
• To establish and • These principles include identifying customers,
Traffic in Narcotic measures for dealing with it.
Drugs and maintain internal avoiding suspicious transactions, and
• Purposes of the convention is
Psychotropic to facilitate international systems to prevent cooperating with law enforcement agencies.
Substances cooperation as regards laundering. • The statement aims at encouraging the banking
• Obliging the investigative assistance, • To obtain the sector to adopt common position in order
member states to search, seizure and identification of • to ensure that banks are not used to hide or
criminalize the confiscation of the proceeds of customers launder funds acquired through criminal
laundering of all types of criminality, • To keep proper activities.
money from drug particularly serious crimes, records for at least b) International Organization of Securities
trafficking and such as, drug offences, arms five years Commissions (IOSCO)-October 1992 A
confiscation of dealing, terrorist offences etc. • To report
resolution encouraging its members to take
proceeds derived and other offences which suspicious
necessary steps to combat money laundering in
from such offence generate large profits transactions
securities and futures markets
 PREVENTION OF MONEY
LAUNDERING
The money Laundering process may create the
HARMFUL EFFECTS OF MONEY LAUNDERING following harmful effects on the society:

Widespread use of bribery in government offices Reduces revenue in term of tax

leading to corruption.

Control over vast sector of economy by handful Infiltration of banking and financial institutions
persons through investment by unfair means. through organized crimes

Dampen social fabric and ethical standards prevalent

The reputation of country and its financial in the society.
institutions can be tarnished.

Weakens the democratic institutions from grass-root

Increases criminal activities level itself.

Loss of Control of Economic Policy as monetary and

Criminal acquire control over market and its financial statistics gives misleading information to
financial institutions by investment policymakers and leads to misallocation of resources

48
 PREVENTION OF MONEY 49
LAUNDERING
1) Chapter- 10
2) Sections-75
3) Schedule-1
SCHEME OF Chapter I(Section 1 -2) :- Short title, extent and commencement, and definitions
Chapter II (Section 3 -4):- Offences and Punishment for money laundering
THE ACT Chapter III(Section 5-11):- Attachment, adjudication, and confiscation
Chapter IV(Section 12-15):-Obligation of banks, financial institutions, and intermediaries
Chapter V(Section 16-24):-Summons, Search and Seizure
Chapter VI(Section 25-42):- Composition, Procedure, Power, and Jurisdiction of Appellate tribunal
Chapter VII(Section 43-47):- Special Court
Chapter VIII(Section 48-54):- Establishment of various authorities
Chapter IX(Section 55-61):-Reciprocal arrangement for assistance, attachment and confiscation of property
Chapter X(Section 62-75):- Miscellaneous Provisions

SECTION 3:OFFENCE OF MONEY LAUNDERING

Directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or actually involved in any process or activity
connected with the proceeds of crime including its concealment, possession, acquisition or use, and projecting or claiming it is an
untainted property shall be guilty of the offense of money laundering.

SECTION 4:
PUNISHMENT FOR
MONEY LAUNDERING
Any person who commits the
offence of money laundering
shall be punishable
• Rigorous Imprisonment – 3
year to 7 years and
• Fine
Proceeds of crime involved in
money laundering relates to
any offence specified under
the Narcotic Drugs and
Psychotropic Substances Act
• The punishment may extend
to rigorous imprisonment for
ten years.
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LAUNDERING
SECTION 5: ATTACHMENT OF PROPERTY INVOLVED IN
MONEY LAUNDERING
• Any person is in possession of any proceeds of money laundering
Reasons of • Person has been charged of having committed a scheduled offence
Attachment • Proceeds of crime are likely to be concealed, transferred or dealt with in
any manner which may result in frustrating any proceedings
Power of • Provisionally attach by order in writing such property for a period not
exceeding 180 days from the date of the order
Director
• Prohibits from creating any third party interest in the said property
Consequences • It does not debar the person who has the possession of the property from
of Attachment enjoying the same
Director is required to forward a copy of the order along with material in
his possession to the Adjudicating Authority immediately
Duty of • He is required to file, within a period of thirty days from such attachment
Director file a complaint, stating the facts of such attachment before the
Adjudicating Authority
 PREVENTION OF MONEY 51
LAUNDERING
SECTION 6:
SECTION 8: ADJUDICATION
ADJUDICATING
AUTHORITY Serve notice
Adjudicating Authority may serve a notice of not less than thirty days on such person
calling upon him to indicate the sources of his income, earnings or assets, out of which
Central or by means of which he has acquired the property
Adjudicating
Government authority shall
shall exercise the
appoint jurisdiction, Power of Adjudicating authority
adjudicating powers and (a) considering the reply, if any, to the notice issued under sub-section (1);
authority authority (b) hearing the aggrieved person and the Director or any other officer authorized by
conferred on or him in this behalf
under the Act (c) taking into account all relevant materials placed on record before him.

Confirm the attachment

Central Government shall appoint not Any property is involved in money laundering, he shall, by an order in writing, confirm
below the prescribed rank or designation the attachment of the property by adjudicating authority.
or having experience
 PREVENTION OF MONEY 52
LAUNDERING
SECTION 9: VESTING OF PROPERTY IN
SECTION 8: ADJUDICATION
CENTRAL GOVERNMENT
Possession of property Rights vest with Central Government
Where the provisional order of attachment made has been confirmed All the rights and title in such property shall vest
the Director or any officer authorized shall take the possession of the 1
absolutely in the Central Government free from all
property encumbrances

Order of confiscation Encumbrance or Lease hold interest created

Special Court or Ajudicating Authority is of the opinion
The Special Court finds that the offense of money-laundering has
2 that any encumbrance on the property or lease-hold
been committed, it shall order that such property involved in the
interest has been created with a view to defeat the
money laundering shall stand confiscated to the Central Government.
provisions of this Chapter, it may, by order, declare such
encumbrance or lease-hold interest to be void

Release of Property
The Special Court finds that the offense of money laundering has not No Discharge of liabilities
taken place or the property is not involved in money laundering, it It shall not operate to discharge any person from any
shall order the release of such property to the person entitled to
3 liability in respect of such encumbrances which may be
receive it enforced against such person by a suit for damages
 PREVENTION OF MONEY 53
LAUNDERING
REPORTING ENTITY TO MAINTAIN RECORD

Preservation of
Furnish Record of Preservation of Record after
Maintain Record Confidentiality
Information Identity Record accounts are
closed

Furnish to the Record shall be

Director within Every maintained for a
Maintain record
such time as may information period of five
of documents
Maintain a be prescribed, evidencing maintained, years from the Record shall be
record of all information furnished or date of maintained for
identity of its
transactions relating to such verified shall be transaction a period of five
clients and
transactions, he kept between a client years
beneficial
nature and value confidential. and the reporting
owners
of which may be entity
prescribed.
PREVENTION OF MONEY LAUNDERING

SECTION 13:POWER OF DIRECTOR

Power to call and make enquiry
• Director may call for records of all transactions and
make such inquiry or cause such inquiry to be
made, as he thinks fit.
• Director may call on its own motion or on
application made by any authority
Failed to maintain record
Director finds that a banking company, financial
institution or an intermediary or any of its
officers has failed to maintain or retain records
he may, by an order, levy a fine on such banking
company, financial institution or intermediary

SECTION 15: PROCEDURE AND MANNER OF FURNISHING INFORMATION

BY REPORTING ENTITIES

Central Government to prescribe, the procedure and the Central Government shall prescribe after consultation
manner of maintaining and furnishing information for the with Reserve Bank of India
purpose of implementation of the provisions of the Act

54
 PREVENTION OF MONEY 55
LAUNDERING
SECTION 16:- SUMMON,SEARCH,SEIZURE SECTION 18:SEARCH OF A PERSON
• Central Government
• General or Special Order
Power of Authority • Reason to believe that any person has secreted about
his person or in anything under his possession,
1. Place marks of identification on the records inspected by him
ownership, or control any record or proceeds of crime
2. Make or cause to be made extracts or copies therefrom
• He may search that person and seize such record or
3. Make an inventory of any property checked or verified by him
property which may be useful for or relevant to any
4. Record the statement of any person present in the place
proceedings under the Act

Term of retention
Where any property has been seized, a reason to believe that such
SECTION 20:RETENTION property is required to be retained for the purposes of adjudication, such
OF PROPERTY property shall continue to be seized for a period ot exceeding 180 days
 PREVENTION OF MONEY 56
LAUNDERING

SECTION 20:RETENTION OF PROPERTY

Property shall be returned

The property shall be returned to the person from whom such property was seized on the expiry of the period

Condition before authorization

Adjudicating Authority, before authorizing the retention or continuation of freezing of such property beyond the period specified
shall satisfy himself that the property is prima facie involved in money-laundering

Order of confiscation and release

Special Court shall direct the release of all property other than the property involved in money laundering

Withhold the release property

The director or any officer authorized by him on this behalf may withhold the release of any such property for a period of ninety
days withhold
 PREVENTION OF MONEY LAUNDERING
SECTION 21:
RETENTION
OF RECORD
1. Term of retention
Where any records have been
seized, a reason to believe that
such property is required to
be retained for the purposes
of adjudication, such property
shall continue to be seized for
a period not exceeding 180
days
57
3. Return of records
4. Release of record
• On the expiry of the period specified the records shall be
returned to the person from whom such records were
seized After passing of an order of release
• Adjudicating Authority may permit retention or , the Adjudicating Authority shall
continuation of freezing of such records beyond the said direct the release of the records to
period the person from whom such
• Adjudicating Authority shall satisfy himself that the records were seized
records are required for the purposes of adjudication
5. Withhold the release
2. Obtain copies
The director or any officer authorized by him in this behalf
The person, from whom records may withhold the release of any such record for a period of
seized or frozen, shall be entitled ninety days from the date of such order, if he is of the
to obtain copies of records opinion that such record is relevant for the appeal
proceedings under the Act.
 PREVENTION OF MONEY
LAUNDERING
Central Government
SECTION 23: PRESUMPTION to choose one or more
IN INTER-CONNECTED
Courts of Session as
Special Court
TRANSACTION
Central Government shall choose in consultation with the Chief Justice of the High
Money laundering involves two or
more transactions and one or more SECTION 44(1): OFFENCE
such transactions is or are proved to
be involved in money laundering
TRIABLE BY SPECIAL COURTS
then it shall be presumed that the
remaining transactions form part of
such interconnected transactions.
An offence punishable
under Prevention of
Money Laundering
shall be triable only by
Special Court
58
Special Court shall
SECTION 43:- trial of offence
SPECIAL COURT punishable under
Section 4
Court
Complaint shall be filed
with the special court
constituted for the area
Compliant shall be
where the offence has
made by authority
been committed
authorized in this
behalf
 PREVENTION OF MONEY 59
LAUNDERING
SECTION 45:- OFFENCE TO BE
COGNIZABLE AND NON-BAILABLE
Exception to Non-Bailable
Non-Bailable

Cognizable
1) Cognizable offence means an offence in which a
police officer has the authority to make an arrest
without a warrant and to start an investigation
with or without the permission of a court
2) Every offence punishable under the Prevention
of Money Laundering Act to be cognizable
3) Compliant must be made by
i) Director
ii) An officer of Central Government or State
Government authorized
1) Generally the offence is non- • Person less than 16 years
bailable of age
2) It is Bailable subject to the • Women
following conditions
• Sick
i) Public Prosecutor has been given
an opportunity to oppose the • Infirm
application for such release; • Accused either on its own
ii) Court is satisfied that there are or along with other co-
accused of money
reasonable grounds for believing
that he is not guilty of such offence laundering of a sum of
iii) He is not likely to commit any less than one crore rupees
offence while in bail
 PREVENTION OF MONEY LAUNDERING
SECTION 52: POWER OF
CENTRAL GOVERNMENT TO
ISSUE DIRECTIONS
Power of Central Government
Central Government issue such orders, instructions and
directions to the authorities as it may deem fit for the
proper administration of this Act
Obligation to observe
The authorities and all other persons employed in
execution of the Act have been put under obligation to
observe and follow such orders, instructions and
directions of the Central Government
No Order in particular case
No such orders, instructions or directions shall be
issued so as to require any authority to decide a
particular case in a particular manner
60
SECTION 56: AGREEMENT WITH FOREIGN
COUNTRIES
Central Government is empowered to enter into an agreement
with the governments of other countries
For the following purpose
• Enforcing the provision of the Act
• Exchange of information
- Prevention of any offense under the Act
- Investigation of cases relating to any offense under the Act.
SECTION 58:ASSISTANCE TO A CONTRACTING
STATE IN CERTAIN CASES
• Letter of request is received by the Central Government
• Request is received from a court or authority in a contracting State
• Requesting for investigation into an offence or proceedings under the Act
• The Central Government may forward such letter of request to the Special
Court or to any authority as it thinks fit for execution of such request
 PREVENTION OF MONEY LAUNDERING
KNOW YOUR CUSTOMER GUIDELINES
1. Background of KYC Guidelines
• Know Your Customer’ guidelines have
been issued based on Recommendations
made by the Financial Action Task Force
(FATF) on Anti Money Laundering (AML)
standards
• These standards have become the
international benchmark
• Banks have been advised to ensure that
a proper policy framework on ‘Know Your
Customer’
• RBI (Reserve Bank of India) has issue
the guidelines known as 'Know Your
Customer' [KYC] on November 29, 2004.
2. Objectives of the guidelines
Safeguard banks from acting as a
chain in money laundering activities
Helps banks to know more about the
clients and keep a check Helps to
check on their financial dealing and
transactions
3. Four Key elements
• Customer Acceptance Policy
• Customer Identification
Procedures
• Monitoring transactions
• Management of risk
61
4. Customer as defined
Customer is defined as
• A person or entity that maintains an account
and/or has a business relationship with the
Bank
• One on whose behalf the account is maintained
(i.e. the beneficial owner)
• beneficiaries of transactions conducted by
professional intermediaries, such as Stock
Brokers, Chartered Accountants, Solicitors etc. as
permitted under the law, and
• Any person or entity connected with a financial
transaction which can pose significant
reputational or other risks to the bank, say, a
wire transfer or issue of a high value demand
draft as a single transaction.
 PREVENTION OF MONEY LAUNDERING 62

INTRODUCTION OF NEW TECHNOLOGIES- FREEZING OF ASSET-SECTION 51A-UNLAWFUL

CREDIT /DEBIT/SMART/GIFT CARDS ACTIVITIES(PREVENTION) ACT,1967

1. New Business by Banks Objective

Many banks are engaged in the business of issuing a variety of
Electronic Cards that are used by customers for buying goods and
services, drawing cash from ATMs, and can be used for electronic
transfer of funds
2. Information to be preserved
• Nature of the transactions;
• Amount of the transaction and the currency in which it was
denominated;
• Date on which the transaction was conducted; and
• Parties to the transaction
• More effective prevention of certain unlawful activities of individual
and association
• Dealing with terrorist activities
Provision-Section 51A
Freeze, seize or attach funds and other financial assets or economic
resources held by,
on behalf of or at the direction of the individuals or entities Listed in the
Schedule to the Order, or any other person engaged in or suspected to be
engaged in terrorism

3. Steps to be taken by Banks

Prohibit any individual or entity from making any funds, financial assets
• Ensure full compliance with all KYC/AML/CFT guidelines
or economic resources or related services available for the benefit of the
issued from time to time
individuals or entities Listed in the Schedule to the Order or any other
• Marketing of credit cards is generally done through the
person engaged in or suspected to be engaged in terrorism.
services of agents.
• It is also desirable that agents are also subjected to KYC
measures.

SCOPE OF THE
PARTNERSHIP ACT
1932
1. The Act extends to the whole
of India except the state of
Jammu and Kashmir.
2. It came into force on the 1st
day of October 1932 and sec.
69 came into force on the
day of 1st October 1933.
3. The expression used but not
defined in this Act and
defined in the Indian
Contract Act, 1872 shall have
the meanings assigned to
them in that Act.
PARTNERSHIP ACT, 1932 63
DEFINITIONS UNDER THE PARTNERSHIP ACT, 19321.
1. Partner: persons who have entered into partnership with one are individually called Partners.
2. The following persons are not deemed to be partners – (i) members of HUF carrying on family
business, (ii) A Burmese Buddhist husband and wife carrying on a business. (sec. 5)
3. Firm: Persons who have entered into partnership with one another are collectively called firm.
4. Firm Name: The name under which their business is carried on is called the firm name.
5. Act of Firm – [Sec. 2 (a)]: Act of Firm means any act or omission by all the partners, or by any
partners, or agent of the firm which gives rise to a right enforceable by or against the firm.
RIGHTS OF Right to receive interest on capital : Right to be consulted
PARTNER Right to share subsequent profits Right to be indemnified
Right to take part n the Right not to be expelled
Right to access the books of accounts
conduct of the business
Interest on advances
Right to use partnership property
Right to be consulted at the Right to share profits
time of admission of a new Right to receive remuneration Sec.
partner 13(a) : Right to retire
 PARTNERSHIP ACT, 1932 64

• Definition – Sec. 4: Partnership is the relation between persons who have agreed to share the
profits of a business carried on by all or any of them acting for all.
MEANING OF
• Person Competent to enter into a valid contract can enter into Partnership
PARTNERSHIP • Minor cannot become a partner, but with the consent of all other, he can admitted
AND PERSONS • company can become a partner by itself, but not as a group of individuals representing it.
• Partnership between Indian nationals and alien friends is possible, but no partnership can be
COMPETENT TO
entered into with alien enemies.
BE PARTNERS • Two Partnership Firms cannot enter into Partnership, though all the partners of the two firms
may form a partnership

1. Association of two or more persons: As per Companies Act when the association of persons exceeds
50 business an illegal association
2. Carrying on business: Partnership can be formed only for the purpose of carrying on some business
ESSENTIAL 3. Agreement: Partnership originates from an agreements / contract between persons.
4. Sharing the profits of business is the essence of partnership but it cannot be the conclusive evidence
ELEMENTS OF • Sharing of profits implies sharing of losses as well, unless agreed otherwise.
PARTNERSHIP • A person may become a partner only in profits and not for losses by agreement between all partners.
• Ratio in which profits and losses will be shared is based on agreement amongst the partners.
5. Mutual Agency: Partnership business is carried on by all or any of them acting for all. Hence
• A partner is both an agent and principal
 PARTNERSHIP ACT, 1932
CONCEPT OF 2. Sharing of profits NOT
MUTUAL AGENCY conclusive test:
1. Real relation – [sec. 6]: 1. Joint owners sharing
determining (a) Gross Return arising
whether a group of property held by them
are not partners.
person is or is not firm,
or (b)whether a person 2. A partnership is NOT
is or is not a partner in created when share or
a firm, regard shall be payment is received by –
had to the real relation • A lender of money – to any
between the parties, as persons engaged or about
to engage in any business,
shown by all relevant
• A servant or agent – as
facts taken together.
remuneration,
• A window or child of a
3. Existence of mutual
deceased partner – as an
Agency – True Test: The
annuity.
true test of partnership • A previous owner or part
lies in existence of owner of the business, as
mutual of mutual consideration for sale of
agency relationship goodwill or share thereof.
65
DUTIES OF A PARTNER :
ABSOLUTE DUTIES
Absolute duties are Duty to act in good faith
imposed by law and Duty to carry on the business of the firm to
cannot be varied by an the greatest common advantage
agreement among the Duty to render true accounts
partners. The law has Duty to give full information
imposed the following Duty to indemnify for the loss caused by
unalterable duties of a fraud
partner. Duty not to transfer his rights and interest
QUALIFIED DUTIES
Qualified duties are those Duty to attend to his duties diligently
which depend upon the Duty to share loss equally
contract between the partners
Duty to account for personal profits
and therefore can be varied by
Duty to account for profits in a
express or implied agreement
among the partners. If the competing business
agreement is silent, then the Duty to use firm’s property exclusively
duties imposed by The for the firm
Partnership Act will prevail. Duty to indemnify for will ful neglect
 PARTNERSHIP ACT, 1932 66

RELATION OF PARTNERS WITH THIRD PARTIES :

Every partner is an agent of the firm for the purpose of the business of the firm. He can act on behalf of the firm and bind the firm.

AUTHORITY OF A PARTNER ACTS OUTSIDE STATUTORY RESTRICTIONS

THE IMPLIED
Express authority: It can be described as the
AUTHORITY • The submit a dispute relating to the business
authority which is expressly given by words,
of the firm to arbitration [settlement]
spoken or write a partner assumes a little too
• To compromise or surrender any claim or
much about his implied
Implied authority: The implied authority of a portion of claim by the firm
authority and tries to misuse
partner is the authority that is ordinarily • To withdraw a suit or proceedings filed on
the facility. Such misuse may
available to any partner to do the routine behalf of the firm.
take place even without an
business of the firm. However, the firm will be • To admit any liability in a suit or proceedings
intention to do any wrong.
liable only if the following conditions are against the firm.
fulfilled These restrictions may be • To acquire immovable property on behalf of
• The act must relate to the normal business of discussed under the following the firm
the firm two sub-heads : • Transfer immovable property on behalf of
• The act must be done in the usual way in 1. Statutory restrictions the firm.
which such a business is carried on 2. Restrictions imposed by • To enter into a partnership on behalf of the
• The act must be done in the name of the firm the partnership deed. firm.

RESTRICTIONS
IMPOSED BY A
PARTNERSHIP DEED
The restrictions on the implied
authority may also be imposed
by a partnership deed. This
provision is contained in the first
paragraph of Sec. 20 of the
Indian Partnership Act, which
states that “the implied authority
of the partners may also be
restricted by an agreement
between them. However, the firm
will be liable for such restricted
acts, if the person dealing with
the firm has no knowledge of
such restrictions”
PARTNERSHIP ACT, 1932 67
EXPULSION OF A PARTNER
PARTNER’S AUTHORITY
IN EMERGENCY 1. The power of expulsion must be available to the
partners by an express contract between them
2. the power to expel should be exercised by majority of
According to Sec. 21, a partner
the partners prescribed in the contract.
has an authority in emergency; to
3. It should be exercised in absolute good faith.
do all such acts for the purpose of
The test of good faith implies that :
protecting the firm from the loss
• Expulsion must be in the interest of the partnership.
as would be done by a person of
• The partner to be expelled must be served with a notice.
ordinary prudence, in his own
• The expelled partner should be given a change to defend
case in the same situation.
himself.
The firm will be liable only if the
following conditions are satisfied
• The act must be done in an MODES OF DISSOLUTION OF A FIRM
emergency.
1) Dissolution without the intervention of Court [i.e. voluntary
• The act must be done to
dissolution]
protect the firm from the loss
threatened by the emergency. 2) Dissolution with the intervention of the Court [i.e. by Court
• The act must be reasonable in order]
the circumstances.

RELATIONSHIP OF A FIRM AND ITS PARTNERS TO A THIRD
PARTY
Notice to an active partner : Notice
or information given to an active
partner is a constructive notice to
the firm.
Notice to an active partner : Notice
or information given to an active
partner is a constructive notice to
the firm
Representation or admission
made by the firm : When a
partner of the partnership firm
makes an admission or
representation of certain affairs
of the firm to a third party then it
is constructed that such
admission or representation is
made by the firm.
PARTNERSHIP ACT, 1932
Liability for wrongful acts of partners : A firm is liable
to the third parties for all the wrongful acts of a partner.
However, the firm is liable if such acts are done in the
ordinary course of business of the firm. The term
‘wrongful’ act includes fraud, negligence or tort.
o In the ordinary course of business of the firm, or
o With the authority of all the other partners
Liability for misapplication of money or property by a
partner : This provision is contained in Sec. 27 of the
Indian Partnership Act which lays down the following
two rules in this regard :
• When money or property is received by a partner and
then misapplied by the same partner
• When money or property is received by the firm and
then misapplied by any of the partners.
68
INSOLVENCY OF A
PARTNER
1) partner is declared insolvent, he is
no more a partner in the firm
2) ordinary circumstances, the firm is
automatically dissolved as one of its
members ceases to be a partner due
to his insolvency.
3) partners specifically provide in the
agreement that the firm shall not be
dissolved and the remaining
partners continue the firm’s
business, the firm is not dissolved.
4) insolvent person is not liable for the
acts of the firm which are done after
the order of insolvency.
5) The firm is also not liable for any act
of the insolvent partner done after
the date of the order of insolvency
 PARTNERSHIP ACT, 1932 69

DEATH OF A
ADMISSION OF A PARTNER
PARTNER
• A firm has a right to admit a new partner at any time
during its life time. C) AN INCOMING PARTNER CAN 1 )When a partner dies, his status
• A newly admitted partner is known as an ‘incoming BE HELD LIABLE TO THE as a partner automatically comes
partner’. CREDITORS FOR THE PAST to an end
DEBTS, IF THE FOLLOWING
2) The firm may or may not be
A) CASE WHERE CONSENT OF ALL THE PARTNES IS NOT TWO CONDITIONS ARE
dissolved on the death of a
REQURED : SATISFIED
partner depending upon the
1) When the minor already admitted to the benefit of the firm
• assumed the liability for agreement among the partners.
contract already entered into between the existing partners.
the past debts of the old
3) The estate of the deceased
firm.
B. LIABILITY OF AN INCOMING PARTNER : partner will not remain liable for
• The creditors have been
• Incoming partner is not liable for the past debts of the any act of the firm done after his
informed of this new
firm done before his admission in the firm. death.
arrangement, and they
• The liability of an incoming partner starts from the date of
have accepted the new 4) No public notice is necessary
his admission into the firm.
firm as their debtor and to terminate the liability of the
• However, by an agreement with the old partners, an
discharge the old firm of deceased partner.
incoming partner may also agree to be liable to the past
its liability.
debts of the firm.

DISSOLUTION WITHOUT THE INTERVENTION OF COURT
1) Dissolution by consent
of all the partners : A
partnership firm may be
dissolved with the consent
of all the partners at any
point of time during its
life. This principle applies
to all the cases whether
the firm is for a fixed
period or at will.
2) Dissolution by contract
between the partners : A
firm may also be dissolved
in accordance with the
contract between the
partners in the same way
as a firm is formed with
the contract between the
partners
PARTNERSHIP ACT, 1932 70
• Expiry of the fixed term : When a firm is constituted
3) Dissolution on 4) Compulsory Dissolution
for a fixed term, the firm is dissolved on the expiry of
the happening of In the following cases,
certain such term. If the firm continues it will be partnership
partnership will be
contingencies : A at will.
compulsorily dissolved :
firm would be
• On completion of particular venture : Sometimes, a • Insolvency of all
automatically
firm is constituted for a particular venture or partners or all but one
dissolved on the
undertaking. In such case, the firm is dissolved on the partner : When all
happening of any
completion of such venture. This is however subject partners or all but one,
of the following
to contract to contrary. If the firm continues, it will be have been declared as
certain
contingencies. partnership at will. insolvent, the firm shall
This is, however, be compulsorily
• Death of a Partner : Sometimes, one of the partners
subject to a dissolved even if the
of the firm may die during the continuance of the
contract to partnership agreement
contrary and the firm. In such a case, the firm is dissolved on the death
provides that the firm
partners may of the partner.
shall not be dissolved
decide that the Note : When there are only two partners, the death of on insolvency of any
firm shall not be one partner automatically dissolves the firm since there partner.
dissolved in such must be at last two partners to carry on the business.
cases.

Business of the firm becomes unlawful :
When the happening of any event makes it
unlawful for the business of the firm to be
carried on or for the partners to carry it on
as a partnership, the firm has to dissolve.
5) Dissolution by notice :
• When the partnership is at will, its
dissolution can be brought about by any
partner by giving a notice to that effect.
• The notice should clearly state the
partners intention to dissolve the firm.
• The dissolution by notice takes effect
from the date mentioned in the notice or
if no date is mentioned, from the date of
communication of notice.
• If the firm is not at will, then it cannot be
dissolved by a notice of dissolution.
PARTNERSHIP ACT, 1932 71
DISSOLUTION WITH THE INTERVENTION OF THE
COURT
1) Sometimes, a partner or few partners believe that the firm needs to be dissolved, but
the other partners do not think in the same way.
2) In such a situation, he can go to the Court and file a suit for dissolution of the firm.
3) The Court will take up the matter only on an application by a partner and on hearing
the matter; the Court may or may not allow the dissolution of the firm.
4) The Court may order the dissolution of the firm on any of the following grounds on the
application by the partners :
A) Insanity of a Partner :
• When a partner has become of unsound mind, a firm may be dissolved by an agreement
among the partners or under a clause to this effect in the partnership deed.
• If there is no agreement in this regard, then the partners may approach the Court.
• The suit for dissolution of a firm may be filed by any partner other than the partner who
has become insane.
• The suit may also be filed by the legal representative of the insane partner.
• In this case, the firm is not automatically dissolved; it is dissolved by an order of the
Court.
 PARTNERSHIP ACT, 1932 72

B) Permanent Incapacity : D) Persistent breach of F) Continuous Losses : Where the

agreement : A partner
• When a partner becomes permanently incapable of willfully or frequently
performing his right or duties, the Court allows the commits a breach of
partnership to be dissolved. agreement relating to the
• The suit for dissolution of a firm may be filed by any management of affairs of the
partner other than the partner who has become incapable. firm and the other partners
• In this case, the firm is not automatically dissolved; it is find it difficult to carry on the
dissolved by an order of the Court. business with him. In this
case, the court may allow the
C) Misconduct : dissolution of the firm.
• Where the partner is guilty of misconduct, the court may
allow the dissolution of the firm. E) Transfer of Interest : When
• It is not necessary that the misconduct should relate to the partner transfers the
business operation of the firm. whole or part of his share to a
• It is sufficient if the misconduct is capable of damaging third party without the
the reputation of future prospect of the firm. consent of other partners, the
• This suit for dissolution of a firm may be filed by any court may allow the
partner other than the partner who is guilty of dissolution of the firm at the
misconduct. instance of any other partner
prospect of the business have
gone down so substantially, for
whatever reasons, and it is clear
that the business of a firm cannot
be carried on, except at losses, the
court may be approached by any
of the partners seeking
dissolution of the firm, and the
court may allow dissolution of the
firm.
G) Just and Equitable Grounds : In
addition to the above, the court
may order dissolution of a firm on
just and equitable grounds. A ‘just
and equitable ground’ is a ground
which is fair and reasonable
according to the opinion of the
court
 PARTNERSHIP ACT, 1932
CONSEQUENCES OF
DISSOLUTION
Dissolution of a firm does not by
itself bring the partnership
business to a close. It is the
beginning of a long process to bring
the firm to an end. During the long
process of winding up of firm, there
will be plenty of consequences
which may be discussed as under :
1) Rights of a partner after
dissolution of a firm.
2) Continuing authority of a partner
for the purpose of winding up.
3) Modes of settlement of accounts.
4) Sale of goodwill after dissolution.
RIGHTS OF PARTNERS ON
DISSOLUTION OF A FIRM :
1) Right to have a business wound up after
dissolution
2) Right to earn personal profits by using
the firm’s name
3) Right to have the premium returned on
premature dissolution of a firm
4) Rights when the partnership contract is
rescinded for fraud or
misrepresentation
5) Right of lien or retention of surplus
6) Right of suborgation
7) Right to be indemnified
8) Right to restrain partners from the use
of firm name or firm property
73
LIABILITIES OF A
PARTNER AFTER
DISSOLUTION OF A FIRM
1) Liabilities for the acts done after
dissolution : A public notice is necessary to
terminate the liability of the partners
2) Liability to share personal profit : A
partnership may be dissolved by the death of
a partner
INSPECTION OF REGISTER
OF FIRMS AND GRANT OF
COPIES
Inspection of register of firms [sec. 66]:
Grant of copies [sec. 68]:
Rules of Evidence [sec. 68]:
 PARTNERSHIP ACT, 1932 74

MODE OF SETTLEMENT OF 2) Utilization of assets : The assets of the firm, including any
CONTINUING ACCOUNT sums contributed by the partners to make up the deficiencies
of capital shall be utilized in following manner :
AUTHORITY
o It will be utilized to pay the debt of the firm.
OF 1) Payment of losses : If the assets of the firm o Then, if there is any surplus, it will be utilized to pay
PARTNERS are insufficient to discharge the debts and partners’ loan and advances to the firm other than the capital
liabilities of the firm including deficiencies of proportionally.
FOR capital, then it is a loss and such loss shall be o Then in case of surplus, it will be paid towards capital
WINDING UP paid in the following order : proportionally.
o The losses shall be paid out of profits. o Then, if surplus remains it will be divided among the
: partners in proportion to their share in the profits of the firm
o If profits are not sufficient, then the balance
On dissolution of of losses shall be paid out of capital.
the firm, the o If shall some balance of loss remains, then it 3) Sale of Goodwill : The term goodwill may be defined as the
authority of the will be paid by the partners individually in the value of reputation of the business of a firm and it is an
partners for the proportion in which are entitled to share intangible asset. On the dissolution of a firm, the goodwill
profits. may be sold separately or along with the other properties of
purpose of winding
the firm.
up the affairs of the
business is not
4) Public Notice : A public notice is a method of a public proclamation [announcement] by any person to bring an
terminated important fact to the knowledge of the general public who may be interested in that information.
 PARTNERSHIP ACT, 1932 75

Appointment of registration of firms EXEMPTION FROM APPLICATION [SECTION. 56]:

1. Firms can be exempted from the registration provision
1. The state government appoints the register of 2. The state government shall grant such exemption by way of notification
firms for the purpose of this act. in the official gazette.
2. It defines the areas within which they shall 3. The exemption shall apply to that state or to any part of the state as
exercise their power and perform their duties. specified in the notification.
3. Every registrar is deemed to be a public servant.

Particulars Description

CONSEQUENCES OF NOT Suit between A partner of an unregistered firm cannot sue the firm or any other
partners and firm partner of the firm to enforce right (1) arising from a contract, or (2)
REGISTERING A conferred by the partnership Act
PARTNERSHIP WITH THE Suit between firm An unregistered firm cannot file a suit against a third party to enforce
REGISTRAR OF FIRMS and Third party any right arising from a contract

Registration of firms is not compulsory, but Claim of set – off An unregistered firm or a partner thereof cannot claim a set off- or
an unregistered firm suffers the following other proceeding to enforce a right arising from a contract.
disabilities as mentioned u/s 69
 PARTNERSHIP ACT, 1932 76

EXCEPTION I.E,. NON – REGISTRATION NOT PENALTY FOR FURNISHING FALSE

TO AFFECT THE FOLLOWING – [SECTION. 69] PARTICUALRS TO THE REGISTER
1. Right of third to sue the firm or any partner.
2. Right of partners to sue for – (a) dissolution of the firm, or (b)
• Where any person sings any
settlement of accounts of a dissolve firm, or (c) realizing the
property of a dissolved firm. (a)statements,
3. Power of an official assignee, receiver or court to realize the
(b) Amending Statements,
property of an insolvent partner and to bring an action on behalf of
the insolvent partner. (c) Notice,
4. Rights of the firm or the partners of the firm which has (a) no place (d) Intimation
of business in the territories to which the Act applies, or (b) whose
places of business are in such territories to which the chapter does • Containing any particulars which he knows – (a) to
not apply. be false or (b) does not belive to be true or (c)
5. Right of the firm to institute a suit or claim of set off not exceeding containing particulars which he knows to be
Rs. 100. incomplete or (d) does not believe to be complete
6. Right of an unregistered firm to bring a suit against third parties to • Shall be liable with (a) imprisonment extending to
enforce a right arising otherwise than out of a contract, e.g. for three months, or (b) with fine, or (c) with both.
enforcing a trademark.

Competition Act, 2002 was
enacted, which aims at doing
away with the rigidly
structured MRTP Act, of
1969.
Acquisition
Acquisition means, directly or
indirectly, acquiring or
agreeing to acquire
1. Share of any enterprise
2. Voting rights of any
enterprise
3. Assets of any enterprise
4. Control over management
of any Enterprise
5. Control over assets of any
enterprise.
COMPETITION ACT 2002
Relevant Market, Relevant Geographic
Market, and Relevant Product Market
Relevant Market means the
market, which may be
determined by the
Competition Commission of
India with reference to both
the markets
Relevant Product Market
means a market comprising
of all those products or
services, which are regarded
as interchangeable or
substitutable by the
consumer, by reasons of
characteristics of products
or services, their prices and
intended use
77
Anti Competitive
Agreements
Any Agreement for goods or services,
which has an appreciable adverse effect
Relevant on competition in India, is prohibited.
Geographic Market These kinds of the agreement are
means a market known as anti-competitive agreements.
comprising the area
in which the
conditions of Prohibition on Agreements
competition for
supply of goods or
having Appreciable
provision of Adverse Effect on
services or demand
of goods or services
Competition
are distinctly a. Tie-in arrangement
b. Exclusive supply agreement
homogeneous, can
c. Refusal to deal
be distinguished
from conditions d. Resale price maintenance
prevailing in
neighbouring areas
 COMPETITION ACT 2002
Horizontal Agreements
Horizontal agreements referred to
agreements among competitors.
Horizontal agreements relating to
prices, quantities, bids and market
sharing are particularly anti-
competitive
Here horizontal agreements are
those agreements among
competitors operating at the same
level in the economic process i.e.
enterprises engaged in the same
activity.
Horizontal agreements between
enterprises that are at the same
stage of the production chain and in
the same market.
Vertical Agreements
Vertical agreements are like tie in arrangements;
agreement has an ‘appreciable
exclusive supply or distribution agreements and adverse effect’ on competition
refusal to deal are also generally anti-competitive.
a.
Vertical agreements are those agreements
between Non-competition undertakings b.
operating at different levels of manufacturing and
distribution process.
c.
Vertical agreements are agreements between
d.
enterprises that are at different stages or levels of
the production change and therefore in different e.
markets.
This includes, Tie in arrangements, Exclusive f.
Supply Agreements, Exclusive Distribution
Agreements, Refusal to Deal and Resale Price
Maintenance (RPM).
78
Important Factors while
determining whether an
Creation of barriers to new entrants
in the market;
Driving existing competitors out of
the market;
Foreclosure of competition by
hindering entry into the market;
Accrual of benefits to consumers;
Improvements in production or
distribution of goods or provision of
services; and
Promotion of technical, scientific and
economic development by means of
production or distribution of goods
or provision of services.
 COMPETITION ACT 2002

Bid rigging Regulation of ABUSING DOMINANT POSITION

Combination WHAT IS ❑ Enterprise or group shall not abuse its
Bid rigging means
any agreement
DOMINANT dominant position.
❑ Agreement by enterprise or group abusing its
between Regulation of Combination POSITION? dominant position is prohibited.
enterprises or is one of the core provisions ❑ An enterprise or group is said to have abused
of the Competition Act, • “Dominant
persons engaged in its dominant position if it directly or indirectly;
2002. Section 5 of the Position” means
identical or similar • imposes unfair condition or price
Competition Act, 2002 a position of
production or • Predatory pricing
provides that acquisition of strength, enjoyed
trading of goods or • Limits or restricts:
one or more enterprises by by an enterprise
provision of 1. Production of goods or provision of services or
one or more persons or or group, in the
services, which has market
merger or amalgamation of relevant market,
the effect of 2. Technical or scientific development relating to
enterprises shall be a in India, which
eliminating or goods or services
combination of such enables it to:
reducing enterprises and persons or • Creating barriers to entry
competition for • Operate
enterprises which are above • Denying of market access
bids or adversely independently
the certain prescribed size ❑ Applies dissimilar conditions to similar
affecting or in terms of (a) assets or (b) • Affect its transactions
manipulating the turnover as provide under competitors or ❑ Uses its dominant position in one market to
process for bidding. section 5. consumers gain advantages in other market.
79
 COMPETITION ACT 2002
• Act provides assets or turnover as the basis of
the parties to determine combination.
• The limit of assets or turnover are set out
below:
COMPETITION COMMISSION
OF INDIA
1. Section 7 empowers the Central Government
to establish a Commission to be known as
“Competition Commission of India.
2. The Commission shall consist of a Chairman
and other members, which shall not be less
than 2 and more than 10. The Chairman and
all the members shall be appointed by the
Central Government.
3. The term of office of Chairman shall be 5 years
or up to the age of 67 years, whichever is
earlier
RESIGNATION-
➢ Chairperson or Member may
resign on the following
conditions:
➢ Resignation should be in
writing.
➢ Resignation should be
addressed to the Central
Government.
➢ Chairman or Member who has
resigned his office is required
to continue to hold office until:
➢ He is permitted by the Central
Government.
➢ The expiry of 3 months from
the date of receipt of notice.
➢ A person duly appointed in his
place.
➢ The expiry of his term of office,
whichever is the earliest
80
Vacancy
➢ Vacancy caused by the resignation,
removal, or death or otherwise of the
Chairperson or member is filled by fresh
appointment.
➢ The senior-most Member shall act as the
Chairperson, until a new Chairperson is
appointed as per Act in the event of
vacancy in the office of chairman.
➢ When the Chairperson is unable to
discharge his functions due to absence,
illness or any other reason,
Removal of Chairperson and other
Members [Section 11]
a. Where he is adjudged as an insolvent;
b. Where he has been engaged in any paid
employment;
 COMPETITION ACT 2002

Removal of Chairperson Powers of CCI ACCOUNTS OF

and other Members 1. To inquire into anti-competitive agreements COMMISSION
and abuse of dominant position;
[Section 11]
2. To determine whether an agreement has an ➢ Commission shall maintain
a. Where he is adjudged as an appreciable adverse effect on competition; proper accounts and other
insolvent; relevant records.
3. Enquire whether a combination has cause
b. Where he has been engaged in any or likely to cause an appreciable adverse ➢ It shall prepare an annual
paid employment; effect on competition; statement of accounts as per
format prescribed by the Central
c. Where he has been convicted of an 4. To issue “cease and desist” orders;
offence which involved moral ➢ Government in consultation
5. To grant such interim relief as would be
turpitude; with the Comptroller & Auditor-
necessary in a particular case;
General of India.
d. Where he has acquired such 6. To award compensation;
financial or other interest as is likely ➢ The accounts of the Commission
7. To impose fines; shall be audited by the C & AG of
to affect prejudicially his functions;
8. To order division of dominant India at such interval as may be
e. Where he has abused his position;
undertakings; specified by him.
and
9. To order demerger; ➢ Expenses of audit is payable by
f. Where he has become physically or
10. To order cost for frivolous complaints. the Commission to the C & AG
mentally incapable
81
 COMPETITION ACT 2002
Appeal to CAT - Section 53B
• CG shall establish competition
appellate tribunal by
notification.
• Any person aggrieved by the
order of the Commission may
appeal to CAT within 60 days.
• CAT may accept the petition
after 60 days if it is satisfied
that there was sufficient cause
for not filing appeal with in
specified time.
• CAT may confirm or modify or
setting aside decision of the
Commission after giving
opportunity to both parties.
• CA T shall send copy of order to
parties to the appeal.
• CAT shall dispose the appeal
within 6 months.
COMPETITION APPELLATE TRIBUNAL (CAT)
2 Composition Section 53 C
• CAT shall consist Chairperson
and not more than two other
Members.
• Central Government appoints
Chairperson and Members
from names recommended by
Selection Committee.
• Chairperson and Member shall
be a person who is or has been
judge of Supreme Court or
Chief Justice of High Court.
• Chairperson and Members hold
office for period of 5 years and
eligible for re-appointment.
• Central Government shall fill
any casual vacancy in the office
of Chairman or person as per
act.
82
Resignation of
3 Removal of chairperson
chairperson and and members of
members - Section 53-1 4 commission - Section
53K
• Unless he is
permitted by the
➢ Central Government after
Central Government
consulting Chief Justice, remove
• Until the expiry of 3 Chairperson or Member who has:
months from the
• Been declared as insolvent.
date of receipt of
such notice • Engaged in any paid employment
during his term of office.
• Until a person duly
• Convicted any offence involving
appointed his moral turpitude.
successor
• Physically or mentally incapable to
• Until the expiry of act.
his term of office,
• Acquired financial interest, likely
whichever is the
to adversely affect his functions.
earliest.
 SPECIFIC RELIEF ACT,1963
Under this Act, various benefit are provided to
the aggrieved party to the contract in case of
breach of contract
The Specific Relief Act, 1963 gives discretion
to the courts to pass decree of specific
performance.
A right without remedy is of no use. The term
Relief means remedy granted by the court for
some wrong done. Court may grant following
types of remedies to the aggrieved parties:
- Specific Relief: Under Specific Relief, the
aggrieved party obtains the same rights which
he is entitled to obtain. It is also known as
equitable relief.
- Compensatory Relief: Under Compensatory
Relief the aggrieved party do not obtain the
same rights which he is entitled to but he obtains
compensation for the loss or damages.
SECTION-1 SHORT TITLE, EXTENT AND COMMENCEMENT
1. It extends to the whole of India except the State of Jammu and Kashmir.
2. It shall come into force on such date as the Central Government may, by
notification in the Official Gazette, appoint.
SCOPE OF THE ACT:- SECTION 20C:-
Expeditious disposal of
1) Recovering possession of property
(Sections 5-8) Suits
2) Specific performance of contracts A new section has been inserted
(Sections 9-25) providing that the suits field under
3) Rectification of Instruments (Section 26) the Act shall have to be disposed of
4) Rescission of contracts (Sections 27-30) within a period of 12 months from
5) Cancellation of Instruments (Section 31- the date of service of summons
33) which can further be extended for
6) Declaratory decrees (Sections 34-35) period of 6 months for a reason to
7) Injunctions (Sections 36-42) be recorded in writing
83
 SPECIFIC RELIEF ACT,1963
SECTION 5:-RECOVERY
OF SPECIFIC IMMOVABLE
PROPERTY ON THE BASIS
possession of specific immovable
property may recover the same in
the manner provided by the Code
of Civil Procedure, 1908
person’ includes company or
association or body of individuals
claim is made on the basis of “title”
possession on the basis of title can
be filed within 12 years from the
date of dispossession
Suit can be filed by owner of
property
SECTION 6: RECOVERY OF SPECIFIC IMMOVABLE
PROPERTY ON THE BASIS OF POSSESSION
1. is disposed from some property without his consent he can file suit to recover
possession on the basis of possession
2. filed within 6 months from the date of dispossession
3. No suit can be filed against Government
4. filed against the owner
5. No appeal or revision lies against such decree or order
6. voluntary dispossession
1. recover the possession of specific movable property in the
manner provided by the Code of Civil Procedure, 1908
SECTION 7:- 2. The property under dispute is identified and ascertained
RECOVERY 3. Person having temporary right of possession
Eg:- A deposits books and papers for safe custody with B. B
OF MOVABLE
losses them and C finds them, but refuses to deliver them to B
PROPERTY when demanded. B may recover them from C
84
 SPECIFIC RELIEF ACT,1963

Sec 8:-LIABILITY OF SECTION 14:-

SECTION 15:-WHO
PERSON IN POSSESSION, CONTRACTS WHICH
MAY OBTAIN SPECIFIC
NOT AS OWNER TO CANNOT BE
PERFORMANCE OF
DELIVER TO PERSONS SPECIFICALLY
CONTRACT:-
ENTITLED TO IMMEDIATE ENFORCED:-
POSSESSION 1. Parties to contract 1. Where compensation in form
2. Representative in Interest:- of money is an adequate relief
1. Person entitled to immediate
possession of property 3. contract is a settlement on marriage, or a 2. A contract which depends
2. Suit can be filed against the person the compromise of doubtful rights between upon personal qualification of
possession without having ownership members of the same family , any person the party
beneficially entitled thereunder 3. A contract which involves the
4. Remainderman:- performance of continue duty
Conditions:- 5. Reversioner: which court cannot supervise
6. Resultant company in case of 4. A contracts in which material
1. The person against whom suit if filed is
amalgamation
not the owner of property but has the terms are absent
7. Resultant LLP in case of amalgamation
control over the property 5. A contract which is in its
8. company after its incorporation may
2. The person filing the suit has right to obtain specific performance of contracts nature determinable contract
immediate possess the property
85
 SPECIFIC RELIEF ACT,1963

1. Who has incapable of performing

SECTION 16:- SPECIFIC 2. violates any essential terms of the contract that on his part remain to be performed
PERFORMANCE CANNOT 3. Who acts in a fraudulent manner
BE ENFORCED IN 4. A person who fails to show his willingness to perform a contract
5. Who has obtained substituted performance of the contract under section 20.
FAVOUR WHICH PERSON 6. A person who varies any essential term of the contract in a wrongful manner

SECTION 10: CONTRACTS WHICH Exception:-

CAN BE SPECIFICALLY ENFORCED 1. Article is not of ordinary
nature in commerce
2. When goods are not
• no standard for ascertaining the actual damage
easily available in the
• The compensation in money is not an adequate relief
market
• court shall presume the following:-
3. Special Value for the
Plaintiff
1) Breach for contract of transfer of Immovable Property 4. Property is held by the
2) Breach of contract of transfer of Movable Property:- defendant as a trustee or
Money can be treated as adequate relief an agent of the plaintiff
SECTION 11:- Specific
Performance connected
with trust enforceable
1. enforced when the act agreed to be
done is in the performance wholly
or partly of a trust
2. But if a trustee enters into a
contract in excess of his powers
then such a contract cannot be
specifically enforced
86
 SPECIFIC RELIEF ACT,1963
SECTION 12:- Specific
Performance connected for
the part of contract
General Rule( Sec 12(1))- The court
generally do not grant specific
performance of only a part of the
contract.
SECTION 20-
SUBSTITUTED
PERFORMANCE OF
CONTRACT
Notice to be served by aggrieved
party to the party who breached
the contract
Effect of availing the option of
substituted performance by the
aggrieved party
1. If part unperformed is only a small portion
• The part unperformed is only a small portion to the whole part.
Exception rule
• Compensation in money is admitted by the parties for the unperformed part.
• Either of the 2 parties can file a suit for demanding performance.
2. If part unperformed is considerable part of the whole
• The part unperformed is considerable portion to the whole par.
• The party who failed to perform cannot demand specific performance in this case.
3. Separate & Independent parts:
• Engage experts on specific issued as may be required.
SECTION 14A:- • Direct persons to give documents, information and access
POWER OF COURT for inspection, to the expert.
TO ENGAGE • Examine the expert or the expert’s report in open court.
EXPERTS • Direct disputing parties to bear the fee payable to such
expert, as it may appoint in relation to such proceedings
•
SECTION 31-33: CANCELLATION OF INSTRUMENTS
The written instrument is void or voidable and who has a reasonable apprehension that such
instruments if left outstanding may cause him serious
a) Registered then the court shall also send a copy of its to the registrar
b) direct plaintiff to restore benefits taken or grant compensation to defendant 87
 SPECIFIC RELIEF ACT,1963
SECTION 16:-PERSON AGAINST
WHOM SPECIFIC PERFORMANCE
CANNOT BE ENFORCED:-
• Who has obtained substituted performance of contract
under section 20.
• Person who has became incapable of performing –
• Person who himself has failed to perform his part of
contract.
• person who violates any essential term of the contract
on his part – If he himself has violated some conditions
he has no right to demand specific performance.
• A person who varies any essential term of the contract
in wrongful manner.
• A person who acted fraudulently.
• fails to prove that he has performed or has always been
ready and willing to perform the essential terms of the
contract which are to be performed by him, other than
terms of the performance of which has been prevented
or waived by the defendant.
SECTION 17:-CONTRACT TO SELL OR LEASE
PROPERTY BY A PERSON WHO HAS NO TITLE
1. a contract to sell or hire property cannot be specifically enforced in
favour of a seller or lessor if he had no title to the property.
2. no title to the property but still enters into a contract with regard to that
property, he cannot have the remedy of specific performance
SECTION 39:- MANDATORY INJUNCTION
prevent the breach of an obligation, it is necessary to compel the
performance of certain acts which the court is capable of enforcing, the
court may grant an injunction to prevent the breach complained of , and
also to compel performance of the requisite acts.
SECTION 20B : Special Courts for
Infrastructural projects
A new section has been inserted giving direction to the State Governments
to set-up special courts in consultation with the Chief Justice of the High
Courts for speedy disposal of suits pertaining to infrastructural projects.
88
 SPECIFIC RELIEF ACT,1963
SECTION 36:- PREVENTIVE
RELIEF HOW GRANTED
Temporary Injunction [SEC 37(1)]:
a) Temporary injunctions, as the name
suggests, are the injunctions that are given
for a specific period of time or until the court
gives further order regarding the matter in
concern.
b) They can be obtained during any stage of
the trial and are regulated by the Code of Civil
Procedure (CPC), 1908.
c) The underlying object of granting
temporary injunction is to maintain and
preserve status quo and to prevent any
change till the suit is decided finally.
Perpetual Injunction [Sec 37(2)]:-
A Perpetual injunction can be made only
after full trial or hearing and it is made
upon the merits of the case.
SECTION 18:- NON ENFORCEMENT EXCEPT WITH
VARIATION
a) where by fraud, mistake of fact or
misrepresentation, the written 1. The original contract should be in
E
contract of which performance is writing.
sought is L 2. Defendant sets up variation.
E 3. Plaintiff have option either to get the
b) where the object of the parties was to specific performance done with the
produce a certain legal result which M
variations or to get the specific
the contract as framed is not E
performance dismissed.
calculated to produce, N 4. If the plaintiff does not accept the
T
c) where the parties have subsequently variations, he cannot get the specific
S
to the execution of the contract, performance carried out but he can
varied its terms still have the remedy for damages.
Difference between Specific Performance & Injunction
a) Normally specific performance deals with contracts, while injunction deals with torts.
b) If a contract is positive in its nature , it calls for the relief of specific performance, on
the other hand, if it negative in its nature, it call for relief of injunction.
89
 SPECIFIC RELIEF ACT,1963

SECTION 42 :-INJUNCTION TO PERFORM

NEGATIVE AGREEMENT
1. there may be affirmative agreement to do certain act, tied with
a Negative Covenant, express or implied, not to do a certain
other act

2. specific performance of the affirmative part does not mean

that it cannot grant an injunction in respect of negative part.

3. Essentials for this Injunctions:

1. The contract should comprise of two agreements, one
affirmative and another negative.
2. Both the agreements must be divisible.
3. The negative agreement must relate to a specific a
covenant may be expressed or implied.
4. The court should be unable to compel specific
performance of the affirmative agreement.
5. The plaintiff must not have failed to perform the
contract, so far as it is binding upon him.
90
 TRANSFER OF PROPERTY ACT,1882

INTRODUCTION IMMOVABLE
PROPERTY
• Act was enacted with the object to amend
Object of Act law relating to transfer of property by act of Transfer of Property Act
parties Defined in the negative sense as “the immovable
property does not include standing timber, growing
• Scope of Act is limited crops, or grass”
Scope of the • It covers transfer inter Vivos
Act • It excludes testamentary succession( General Clauses Act
transfer by will) Immovable property shall include land, benefits to arise
out of land and things attached to the earth, or
1. Instrument permanently fastened to anything attached to the earth
Instrument means a non-testamentary instrument.
2. Attached to the earth
Registration Act
Attach to the earth means:
The immoveable property the benefits to arise out of
• Rooted in the earth, as in the case of trees and shrubs;
the land, hereditary allowances, rights of way, lights,
• Imbedded in the earth, as in the case of walls or buildings; or
ferries, and fisheries
• Attached to what is so imbedded for the permanent beneficial
enjoyment of that to which it is attached.
91
 TRANSFER OF PROPERTY ACT,1882

NOT A IMMOVABLE PROPERTY MOVABLE PROPERTY REVERSION AND

REMAINDER
1. Right of workshop
General Clauses Act, 1897

.
2. Government Promissory notes Meaning of Meaning of
3. Royalty Property of every description reversion Remainder
4. A right to recover maintenance and except immovable property
A “reversion” is The owner of the
allowance the residue of an property grants a
5. Copyright Registration Act original interest limited interst in
6. A decree for sale on mortgage-deed Moveable property to include that is left after favour of a
7. A decree for arrears of rent property of every description the grantor has person or
excluding immovable property but granted the persons and gives
including standing timber, lessee a small the remaining to
estate. others, it is called
ABSOLUTE INTEREST growing crops, and grass.
a “remainder

1. Meaning Machinery fixed to land

When a person owns the property, he has an
“absolute interest” in the property
2) Meaning of Ownership
Ownership consists of a bundle of rights, the
right to possession, right to enjoyment, and right
to do anything such as selling, mortgaging or
making gift of the property.
• If the machinery is fixed on the
land permanently then it becomes
immovable property, whereas if
the machinery or engine or any
other thing is fixed on a
temporary basis, then it will be
regarded as moveable property.
CONTINGENT INTEREST
A contingent interest is an interest that takes
effect after the condition is satisfied.
Contingent interest is subject to a condition
precedent
92
 TRANSFER OF PROPERTY ACT,1882

SECTION 5: RULES RELATING

VESTED INTEREST SECTION 7: WHO CAN
TO TRANSFER OF PROPERTY
The word “vested” is used in two TRANSFER THE PROPERTY
different senses. Transfer inter-Vivos
• Vested in possession The transfer must ve inter vivos (i.e., between
• Vested in interest. living persons) alone is contemplated by the
Act. A transfer by means of a will is not a Any person Minor as
transfer according to the Act, because it is not a • Competent to transferee
Vested in Possession
transfer between two living persons. contract • Minor is not
A right is said to be “vested in
• Entitled to competent to be a
possession” when it is a right to
The transfer may be in the present or future transfer transferor yet a
present possession of the property
The words inpresent or in future qualify the (ownership of transfer to a
words ‘conveys’, and not the word ‘property’. A property) minor is valid
transfer of property not in existence operates as mortgage
Vested in Interest
Vested in interest is when it is not a contract to be performed in the future which • A can be validly
a right to present possession but a may be especially enforced as soon as the executed in favor
present right to future possession. property comes into existence. of a minor who
has paid the
Living Person consideration
A vested interest is transferable Living person” includes a company or
and heritable association or body of individuals whether
incorporated or not. 93
 TRANSFER OF PROPERTY ACT,1882
General Rule -Property of any kind may
SECTION 6:PROPERTIES THAT CAN NOT BE TRANSFERRED be transferred

Chance of an heir Right of Re-entry Transfer of Easement Restricted interest Right of future
apparent or ‘Spes The right which the lessor has maintenance
• Meaning or personal interest
Successionis against the lessee for breach of An easement is a right • Personal rights in
An interest restricted
The chance of an an express condition which enjoyed by the owner of the property which
in enjoyment to the
heir-apparent provides that on its breach the land over the land of the law says that
owner personally is by
succeeding in the lessor may re-enter is called the another: such as, right cannot be
its very nature not
estate of a deceased right of re-entry. of way, right of light, transferred
transferable
person cannot be Not transferrable right of support, right to • The right of pre- • The right of a
transferred. Right of re-entry being a right a flow of air or water. emption given under Hindu widow to
Gift of future for the personal benefit of any • Dominant tenement the Mohammedan maintenance is a
property Person party cannot be transferred The land owned by the Law. personal right
wants to make a possessor of the land is • The office of a which cannot be
Exception known as the dominant Shebait of a Temple or transferred
gift of the property
A transfers the whole of his tenement mohunt of a mutt or • The arrears of past
that is to come into
interest in the land including the • Servient Tenement mutuwalli of a wakf. maintenance can
his hands in the
right of re-entry to C, there the Land over which the • Emoluments be transferred, but
future, he cannot
right to re-entry is a legal right is enjoyed is attached to a priestly not the right to
transfer it
incident of property and can be known as the servient office. future
A gift of future
validly transferred along with tenement. • Service tenures. maintenance
property is void
the property 94
 TRANSFER OF PROPERTY ACT,1882
Mere right to sue and actional
claim
• A mere right to sue cannot be
transferred
• The right refers to a right to
damages arising both out of
contracts as well as torts.
SECTION 10:RESTRAINT ON TRANSFER OR RULE AGAINST INALIENABILITY
• The transferee should not be
restrained absolutely from
alienating the property
• Transfer can be subject to
condition but the condition
should not be one that
absolutely prevents the
transferee from alienating
property
Transfer of Public Offices and salaries, stipends etc
• Allowances, pensions, and stipends are given on a personal basis, the law does not allow these
types of property to be transferred
• It is against public policy for a public officer to transfer the salary of his office, for the salary is
given for the purpose of upholding its dignity and the proper performance of its duties.
• Civil and military pensions are not transferable, but as soon as it is paid to the pensioner or his
legal representatives, it can be transferred
Consequences of Absolute prevention
• Transfer takes effect and is valid
• Condition not to alienate the property is void.
Exception: Absolute restraint
There are two exceptions to the rule
• The lessor can impose a condition that the lessee shall not sublet the property or sell his leasehold
interest
• In respect of a woman who is not a Hindu, Buddhist or Muslim. In such a case, a condition to the
effect that she shall not have power during her marriage to transfer the property is valid 95
 TRANSFER OF PROPERTY ACT,1882

FORMALITIES OF TRANSFER
Attestation Registration
Each witness must see Transfer can take place only Types of
1. Meaning • The executant sign or affix
• “Attest” means to testify a factor, to by registered agreement constructive notice
his mark to the instrument, where value of one hundred A person is deemed
bear witness to a fact. or rupees and upwards of the in the eye of law to
• Attestation, in relation to a • some other person signs the following have constructive
document, signifies the fact of instrument in the presence • Tangible asset notice of a fact
authentication of the signature of and by the direction of the • Intangible asset when
the executant of that document by executant, or • Reversion • Willful
the attestator by putting down his • Receive from the executant absentation
own signature on the document in a personal acknowledgment Notice from an inquiry
testimony of the fact of its execution. of his signature or mark or • Actual or search which
of the signature of such • Constructive he ought
Attestation is valid and complete when other person If a person knows about a reasonably to
two witnesses sign the instrument fact, he has an actual notice. have made; or
Attestation cannot take place In certain circumstances
Each witness must sign the instrument law treats a man who ought
before the execution of the deed. • Gross negligence
It is not necessary that both attesting to have known a fact even on his part, he
witnesses should be present at the same The Act does not insist on any though he did not in fact would have
time particular form of attestation. know itis called constructive known it
notice 96
 TRANSFER OF PROPERTY ACT,1882

SECTION 11:RESTRAINT ON ENJOYMENT SECTION 12: INTEREST

DETERMINABLE ON INSOLVENCY
Restraint on the If a property is transferred to any person adding a condition
enjoyment of the Exception
that if such person becomes insolvent he ceases to hold that
property is invalid. • Partial restriction is valid
property. Such a condition is not recognised as valid in law.
• If a person transfers a plot of
land keeping another plot for Exception Landlord leases his property he can impose a
himself, he can impose certain condition on the lessee that if the lessee becomes insolvent the
conditions which may interfere lease should come to an end
Land is transferred by
with the right of enjoyment of
one to another, the
the transferee
transferor should not SECTION 13:TRANSFER TO
impose conditions as to
how and in what manner
UNBORN PERSON
Partial restriction valid
the transferee should Conditions to transfer to an unborn person
• Absolute restraints are bad in
enjoy the property. If a property is given to an unborn person, two conditions
law, partial restraints are valid
should be satisfied:
• Whenever there are conditions
• It should be preceded by life estate in favor of a living
in a family settlement whereby
person
the members are not allowed
• It should comprise the whole of the remaining interest of
to sell their shares to a
the transferor so that there can be no further interest in
stranger, such conditions are
favor of others
valid 97
 TRANSFER OF PROPERTY ACT,1882

SECTION 14: RULE AGAINST PERPETUITY

Example:- A transfer may be made to A

The rule against perpetuities Any number of successive estates for life and then to B for life and then to
applies to both moveable and can be created between the C for life and so on, provided that A, B
immoveable property transferees who are living and C are all living persons at the date of
persons the transfer

If the ultimate beneficiary is some

one who is not in existence at the If he is not born till the If he is born before the termination of
date of the transfer, the whole termination of the last the last prior estate, he takes a vested
residue of the estate should be prior estate, the transfer interest at birth and takes possession on
transferred to him. to him fails the termination of the last prior estate

The rule against perpetuity contains two propositions Exception-Section 18

• Transfer remains in effect only during the lifetime of an existing person Where the transfer of property is for the
• Transfer can be extended to the person who is not in existence but if he is in benefit of the public in the advancement
existence at the time of termination of the period of last transfer of religion, knowledge, commerce, health,
Barring these two conditions, a restriction on alienation of a property is void safety, or any other object beneficial to
mankind
98
 TRANSFER OF PROPERTY ACT,1882

SECTION 17: ACCUMULATION OF

SECTION 35:DOCTRINE OF ELECTION
INCOME
Accumulation of income from the land for an unlimited
period is not allowed without the income being enjoyed Principles of Doctrine
by owner of the property • The doctrine of election is based
on the principle of equity.
• The principle of the doctrine of
The period for which such accumulation is valid is : election was explained by the
• Life of the transferor, or House of Lords in the leading case
• Eighteen years from the date of transfer of Cooper vs. Cooper
Exception Condition for doctrine of election
In the following cases, accumulation beyond the period • The question of Election arises
of accumulation may be allowed only when a transfer is made by
• Payment of the debts of the transferor or any other the same document.
person taking any interest under the transferor, • If the transferor makes a gift of
• Portions for children or any other person taking any property by one deed and by
interest in the property under the transfer, and another asks the donee to part
• For the preservation and maintenance of the with his own property then there
property transferred. is no question of election.
Meaning
• Election may be expressed
or implied by conduct.
• Election means ―the
choice
• A person can't accept part
of the agreement that is
beneficial and reject
another part that is
burdensome.
• The person taking benefit
of the instrument must
also bear the burden
99
 TRANSFER OF PROPERTY ACT,1882
SECTION 35:DOCTRINE
OF ELECTION
Rejection by Person of Choice
• In case the person upon whom, a
benefit is conferred rejects it, the
property which was attempted to
be transferred to him will revert to
the transferor and it is the
transferor who will compensate
the disappointed transferee.
If the transferor dies before the
transferee makes the election,
then the legal heirs of the
transferor will compensate the
disappointed transferee out of the
inherited assets.
SECTION 41: TRANSFER BY OSTENSIBLE OWNER
OR DOCTRINE OF HOLDING OUT
Meaning
Where owner of property permits
(expressly or impliedly) another
person who is not owner of the
property to hold himself as owner of
property and third party deal in good
faith with person so permitted, such
third party acquire good title as against
true owner
Exception
to general rule The section makes an
exception to the rule that a person
cannot confer a better title than he has.
Conditions
• Transferor is the ostensible
owner.
• He is ostensible owner by way
of express or implied consent
of true owner of property.
• Transfer is for consideration.
• Transferee has acted in good
faith and has taken necessary
care about who has power to
transfer of property.
100
 TRANSFER OF PROPERTY ACT,1882

SECTION 43: DOCTRINE OF FEEDING THE SECTION 52: DOCTRINE

GRANT BY ESTOPPEL OF LIS PENDENS

Conditions Lis means dispute

Where person who • There was fraudulent or erroneous
purport to grant presentation of ownership by transferor
interest in property, • it was to the effect that transferor is entitled
which he did not at the to transfer immovable property
time possess but • The transferor must subsequently acquire
subsequently acquires, title upon the property transferred on the
benefit of subsequent basis of fraudulent or erroneous
acquisition goes representation of ownership.
automatically to • The transfer should be for consideration.
earlier grantee. It is • The transferee has not cancelled contract.
known as feeds • The transferee acted in good faith for
estoppel. consideration and without notice of the
rights under the prior transfer.
Lis pendens means a pending suit, action,
petition or the like
• During the pendency of a suit in a
Court of Law, property which is
subject to a litigation cannot be
transferred.
• Property may be transferred but
this transfer is subject to the rights
that are created by a Court’s
decree

101
 TRANSFER OF PROPERTY ACT,1882
SECTION 52: DOCTRINE OF LIS PENDENS
Elements
• There must be suit or
proceedings in a Court of
competent jurisdiction
• The suit or proceedings must
not be collusive
• The litigation must be one in
which right to immovable
property is directly and
specifically in question
• There must be transfer of or
otherwise dealing with the
property in dispute by any
party to the litigation
• Such transfer must effect the
rights of the other party that
may ultimately accrue under
the terms of the decree of
order.
Consequences and Effect
• If parties are completely
prevented from
transferring the property
it would cause
unnecessary delay and
hardship
• The effect of this doctrine
is not to invalidate or
avoid the transfer but to
make it subject to the
decision of the case
• Even if transferee have no
notice of the pending suit
at the time of transfer still
this rule is applicable
SECTION 53: DOCTRINE OF
FRAUDULENT TRANSFER
1
• Where an owner of the property contracts a
debt and then transfers his property to
someone so that the creditor cannot
proceed against the property to realise his
debt, such a transfer is voidable at the
option of the creditor
• This doctrine discourage fraudulent
transfer of property.
• This doctrine gives right to defraud
creditor to challenge transfer of property
in court and get order from court that
transfer is invalid
102
 TRANSFER OF PROPERTY ACT,1882
SECTION 53: DOCTRINE OF
FRAUDULENT TRANSFER
Preference of one creditor over another
creditor
• General Rule
A mere preference of one creditor over the
others is not fraudulent under the Section,
even if the whole property is so transferred
and nothing is left for the other creditors
• Remedy for another creditor
The other creditors may file a petition in the
Court within three months of the transfer
praying that the debtor be declared
insolvent. If the debtor is adjudicated an
insolvent, their interest will be protected
and the transfer will be declared as a
fraudulent preference
SECTION 53A: DOCTRINE OF PART PERFORMANCE
Conditions
2 • There must be a contract to transfer immoveable
property.
Transferor can‘t take back • It must be for consideration.
the property only on • The contract should be in writing and signed by
ground of non- the transferor himself or on his behalf.
registration of documents, • The terms necessary to constitute the transfer
if the transferee has must be ascertainable with reasonable certainty
performed his part of from the contract itself.
contract and has also • The transferee should have taken the possession
taken possession of of the property in part performance of the
property or part of it. contract. In case he is already in possession, he
Doctrine prohibits must have continued in possession in part
transferor from taking performance of the contract and must have done
back property. something in furtherance of the contract.
• The transferee must have fulfilled or be ready to
fulfill his part of the obligation under the contract
103
 TRANSFER OF PROPERTY ACT,1882
PROVISION RELATING TO
SPECIFIC TRANSFER
1) Sale (Section 54)
2) Exchange (Section 118-121)
3) Gift (Section 122-128)
4) Lease
5) Actionable Claim (Section
130-137)
6) Mortgages (Section 58-104)
7) Charges
SECTION 107: FORMALITIES OF
LEASE
Registered DocumentA lease
from year to year or for any
Lease is for a term
term exceeding one year
RIGHTS OF LESSEE TYPES OF TENANCY
Tenancy from year to year
Expenses related to repairs
Tenancy for more than If the tenancy is for a year to start
one year- six months with but after the expiration of one
Government dues paid notice must be given year the lessee continues to be in
Tenancy from month to possession and pays the rent to the
Remove Fixtures month- fifteen days landlord, the tenancy is regarded as
notice to quit a year-to-year tenancy
Avoid lease Tenancy-at-will
When the tenant is in possession after expiry of the period, if the
Rights are transferable tenant stays with the consent of the landlord till such time as
further period is fixed or a fresh contract is made, the tenant is
called a tenant-at-will Tenancy by sufferance A tenant continues
to be in possession after the determination of the period of the
lease without the consent of the landlord, he becomes a tenant
by sufferance.
Oral Agreement
DUTIES OF Disclose Possession of Convenant for
Property quiet enjoyment
below one year LESSOR material defect
104
 TRANSFER OF PROPERTY ACT,1882

SECTION 111: DETERMINATION OF LEASE ACTIONABLE

By efflux of time or lapse of time
• A lease for a definite
period(for a year or term of
the year) expires on the last
day of the term
• Lessor or any person entitled
to get back the property may •
enter without notice or any
other formality • A forfeiture occurs when
By happening of a special event
• When a lease is granted subject
to the happening of an event, it
comes to an end when the event
takes place
Merger
• A lease comes to an end
when the lessee buys the
property of the lessor or
when the lessee takes the
By forfeiture lessor’s interest by
A lease also comes to an succession
end by forfeiture. • Lessee becomes owner of
property so there is no
there is a breach of a more lease
condition in a lease
contract by the lessee
• Surrender may be either
express or implied.
• Express surrender arises
when the lessee yields up his
interest under a lease by
mutual consent.
• implied surrender
CLAIM
A claim to any debt, other than
a debt secured by mortgage of
immoveable property or by
hypothecation or pledge of
moveable property, or to any
beneficial interest in moveable
property not in the possession,
either actual or constructive, of
the claimant, which the Civil
courts recognize as affording
grounds for relief, such debt or
beneficial interest be existent,
accruing, conditional or
contingent.
Actionable claims are claims,
to unsecured debts
105
 TRANSFER OF PROPERTY ACT,1882

DUTIES OF THE KINDS OF MORTGAGE

LESSEE
SIMPLE MORTGAGE BY
Permanen MORTGAGE CONDITIONAL SALE
Pay No injury t structure
Ordinary with
premium to
prudence lessors
or rent property 1. There should be a 1. If loan is repaid, sale becomes void.
consent personal obligation on 2. If loan is not repaid at specific time,
the part of the mortgagor sale will become absolute and binding.
to pay the debt. 3. If loan or debt is paid off within specific
Communic 2. An express or implied time, mortgaged property is re-
Handover
ate details
property power is given to the transferred to the mortgagor.
to lessor
mortgagee to cause the 4. The possession of the mortgaged
Property to be sold property is required to be delivered
through the intervention 5. There is no personal covenant,
Disclose
any fact of the Court. mortgagor in this case does not bind
3. There is no transfer of himself personally to repay the debt.
ownership

106
 TRANSFER OF PROPERTY ACT,1882

KINDS OF MORTGAGE

USUFRUCTUARY MORTGAGE ENGLISH MORTGAGE

1) Characteristics
• Possession of property must be delivered to the mortgagee; • Personal Liability The mortgagor binds
• There is no personal liability on the part of the mortgagor to pay; himself to repay the mortgage money on
• The mortgagee is entitled to rents and profits in lieu of interest or principal or both; a certain day. In other words, there
and should be a personal undertaking to pay.
• The mortgagee however is not entitled to foreclose the mortgagee or to sue for sale • Ownership transferred The mortgaged
property is absolutely transferred to the
2) Time is specified mortgagee.
If in a usufructuary mortgage a time is mentioned during which the mortgagee should • Condition to reconvey property Such
recover the debt, etc., then after the time is over, the mortgagee should deliver back the absolute transfer is subject to a proviso
property to the mortgagor that the mortgagee will reconvey the
3) No Personal Liability property to the mortgagor upon payment
The usufructuary mortgagee has to look only to the profits that arise out of the by him of the mortgage money on the
property for realising his debt; there is no personal liability on the part of the fixed day.
mortgagor • Remedy The remedy of the mortgagee is
sale of the property to recover the debt.
4) Remedy to Mortgagee 107
107
 TRANSFER OF PROPERTY ACT,1882

MORTGAGE BY DEPOSIT OF TITLE DEEDS COMMON TERMS USED IN

CONNECTION OF
Meaning
A person delivers to the creditor or his agent
Elements MORTGAGE
• A debt
documents of title of his immoveable property • Deposit of title deeds
with an intention to create a security, and • Intention that the deeds shall be Where the mortgagee transfers by
obtains a loan security for the debt mortgage his interest in the mortgaged
property, or creates a mortgage of a
mortgage the transaction is known as a
The term ‘documents of title’ or title deeds Delivery of title deeds sub-mortgage.
means such documents as will show prima facie • It need not be registered
or apparent title to the property of the person • Oral agreement
who is borrowing money • Delivery of the documents of
title to the property is enough Puisne Mortgage
• Meaning Where the mortgagor, having
mortgaged his property, mortgages it to
another person to secure another loan,
SECTION 58(g): ANOMALOUS MORTGAGE the second mortgage is called a puisne
A mortgage that is not a simple mortgage, a mortgage by conditional sale, mortgage.
usufructuary mortgage, an English mortgage, or a mortgage by deposit of title
deeds within the meaning of this section is called an anomalous mortgage
An anomalous mortgage is a combination of various other mortgages
108
 TRANSFER OF PROPERTY ACT,1882

RIGHTS OF A floating charge becomes fixed or crystallizes in the following cases:

MORTGAGOR
• Right of Redemption
• Right against clod on equity
of redemption
• Right of partial redemption
Crystallisation • When the money becomes payable under a condition in the
debenture and the debenture holder, (i.e., the creditor) takes some
of floating steps to enforce the security;
charge • When the company ceases to carry on business; and
• When the company is being wound-u

SECTION 58: DEFINITION AND

C “Where immoveable property of one person is by the act of parties or
operation of law made security for the payment of money to another,
NATURE OF MORTGAGE
H and the transaction does not amount to a mortgage, the latter person
A “mortgage” is the transfer of an interest in specific
is said to have a charge on the property”.
A immoveable property for the purpose of securing the
payment of money advanced or to be advanced by way of
R Mode of Creation Types of Charge
loan, an existing or future debt or the performance of an
of Charge • Fixed Charge-
G • Act of parties or A fixed charge is a charge on specific property. engagement which may give rise to pecuniary liability

E • Operation of law • Floating Charge-

Essential of Mortgage
S Assets of the company are constantly undergoing a change but the • Transfer of interest
creditors will not normally interfere with the assets of the company • Specific immovable property
unless there is breach of some condition • To secure the payment of loan