PARTNERSHIP ACT

The Indian Partnership Act 1932 defines a partnership as a relation between two
or more persons who agree to share the profits of a business run by them all or by
one or more persons acting for them all. As we go through the Act we will come
across five essential elements that every partnership must contain. Let us have a
look at Indian Partnership Act in detail.

Elements of a Partnership

The Indian Partnership Act 1932 defines a partnership as a relation between two
or more persons who agree to share the profits of a business run by them all or by
one or more persons acting for them all. As we go through the Act we will come
across five essential elements that every partnership must contain. Let us take a
look at them.

1] Contract for Partnership

A partnership is contractual in nature. As the definition states a partnership is an
association of two or more persons. So a partnership results from a contract or an
agreement between two or more persons. A partnership does not arise from the
operation of law. Neither can it be inherited. It has to be a voluntary agreement
between partners.

A partnership agreement can be written or oral. Sometimes such an agreement is

even implied by the continued actions and mutual understanding of the partners.

] Association of Two or More Persons

A partnership is an association between two or more persons. And persons by law
only include individuals, not other firms. The law also prohibits minors from being
partners. But minors can be admitted to the benefits of a partnership.

The Act is actually silent on the maximum number of partners. But this has been
covered under the Companies Act 2013. So a partnership can only have a
maximum of 10 partners in a banking firm and 20 partners in all other kinds of
firms.

3] Carrying on of Business
There are two aspects of this element. Firstly the firm must be carrying on some
business. Here the business will include any trade, profession or occupation. Only
that some business must exist and the partners must participate in the running of
such business.

Also, the business must be run on a profit motive. The ultimate aim of the
business should be to make gains, which are then distributed among the partners.
So a firm carrying on charitable work will not be a partnership. If there is no
intention to earn profits, there is no partnership.

4] Profit Sharing
The sharing of profits is one of the essential elements of a partnership. The profit
sharing ratio or the manner of sharing profits is not important. But one partner
cannot be entitled to the entire profits of the firm.

However, the sharing of losses is not of any essence. It is up to the partners

whether the losses will be shared by all the partners. If nothing is said then the
losses are also split in the profit sharing ratio.

Say for example two individuals are operating out of the same warehouse. So
they agree to divide the rent amongst themselves. This is not a partnership since
there is no profit sharing between the two.

5] Mutual Agency
The definition states that the business must be carried out by the partners, or any
partner/s acting for all of them. This is a contract of mutual agency another one of
the five elements of a partnership.
This means that every partner is both a principle as well as an agent for all the
other partners of the firm. An act done by any of the partners is binding on all the
other partners and the firm as well. And so every partner is bound by the acts of
all the other partners. This is one of the most important aspects of a partnership.
It is, in fact, the truest test of a partnership.

Types of Partners
A partnership is when two or more people work together and share the profits
from the business or profession. However, one must not always assume that all
partners participate in the work or profits or even liabilities of the firm equally.
In fact, there are various types of partners based on the extent of their liability,
or their participation in the firm – like an active partner or dormant partner etc.
1] Active Partner/Managing Partner
An active partner is also known as Ostensible Partner. As the name suggests he
takes active participation in the firm and the running of the business. He carries
on the daily business on behalf of all the partners. This means he acts as
an agent of all the other partners on a day to day basis and with regards to all
ordinary business of the firm.

Hence when an active partner wishes to retire from the firm he must give a public
notice about the same. This will absolve him of the acts done by other partners
after his retirement. Unless he gives a public notice he will be liable for all acts
even after his retirement.

2] Dormant/Sleeping Partner
This is a partner that does not participate in the daily functioning of
the partnership firm, i.e. he does not take an active part in the daily activities of
the firm. He is however bound by the action of all the other partners.

He will continue to share the profits and losses of the firm and even bring in his
share of capital like any other partner. If such a dormant partner retires he need
not give a public notice of the same.
3] Nominal Partner
This is a partner that does not have any real or significant interest in the
partnership. So, in essence, he is only lending his name to the partnership. He will
not make any capital contributions to the firm, and so he will not have a share in
the profits either. But the nominal partner will be liable to outsiders and third
parties for acts done by any other partners.

4] Partner by Estoppel
If a person holds out to another that he is a partner of the firm, either by his
words, actions or conduct then such a partner cannot deny that he is not a
partner. This basically means that even though such a person is not a partner he
has represented himself as such, and so he becomes partner by estoppel or
partner by holding out.

5] Partner in Profits Only

This partner will only share the profits of the firm, he will not be liable for any
liabilities. Even when dealing with third parties he will be liable for all acts of
profit only, he will share none of the liabilities.

6] Minor Partner
A minor cannot be a partner of a firm according to the Contract Act. However, a
partner can be admitted to the benefits of a partnership if all partner gives their
consent for the same. He will share profits of the firm but his liability for the
losses will be limited to his share in the firm.

Such a minor partner on attaining majority (becoming 18 years of age) has six
months to decide if he wishes to become a partner of the firm. He must then
declare his decision via a public notice. So whether he continues as a partner or
decides to retire, in both cases he will have to issue a public notice.
 Rights and Duties of Partners in a Partnership

Rights of a Partner
The following are the rights of a partner in a partnership firm.

Section 12(a): Right to take part in the conduct of the Business

All the partners of a partnership firm have the right to take part in the business
conducted by the firm as a partnership business is a business of the partners, and
their management powers are generally coextensive. If the management power
of a particular partner is interfered with and the individual has been wrongfully
precluded from participating, the Court of Law can intervene under such
circumstances. The Court can, and will, restrain the other partner from doing so
by injunction. Other remedies are a suit for dissolution, a suit for accounts
without seeking dissolution and so on for a partner who has been wrongfully
deprived of the right to participate in the management.

The previously mentioned provisions of the law will be applicable unless there is
no existing contract to the contrary among the partners. It is common to find a
term in partnership agreements that gives only a limited power of management
to a specific partner or a term that the control of the partnership will remain
vested with one or more partners to the exclusion of others. In such a case, the
Court of Law would generally be unwilling to interpose with the management
with such partner (s), unless it is proven that something was done illegally or in
the breach of trust among the partners.

Section 12(c): Right to be consulted

When a difference of any sorts arises between the partners of a firm concerning
the business of the firm, it shall be decided by the views of the majority among
the partners. Every partner in the firm shall have the right to express his opinion
before the decision is made. However, there can be no changes like the business
of the firm without the consent of all the partners involved. As a routine matter,
the opinion of the majority of the partners will prevail. Although, the majority rule
would not apply when there is a change like the firm itself. In such situations, the
unanimous consent of the partners is required.

Section 12(d): Right of access to books

Every partner of the firm, regardless of being an active or a sleeping partner, is
entitled to have access to any of the books of the partnership firm. The partner
has the right to inspect and take a copy of the same if required. However, this
right must be exercised bonafide.

Section 13(a): Right to remuneration

No partner of the firm is entitled to receive any remuneration along with his share
in the profits of the business by the firm as a result of taking part in the business
of the firm. Although, this rule may always vary by an express agreement, or by a
course of dealings, in which case the partner will be entitled to remuneration.
Thus, a partner may claim remuneration even in the absence of a contract, when
such remuneration is payable under the continued usage of the firm. In simpler
words, where it is customary to pay remuneration to a partner for conducting the
business of the partnership firm, the partner may claim it even in the absence of a
contract for the payment of the same.

It is common for partners to agree that a managing partner will receive over and
above his share, salary or commission for the trouble that he will take while
conducting the business of the firm.

Section 13(b): Right to share profits

Partners are entitled to share all the profits earned in the business equally.
Similarly, the losses sustained by the partnership firm is also equally contributed.
The amount of a partner’s share must be ascertained by inquiring whether there
is an agreement in that behalf among the partners. If there is no agreement, then
it can be presumed that the share of profit is equal and the burden of proving that
the shares are unequal, will lie on the party alleging the same.
The is no relation between the proportion in which the partners shall share the
profits and the percentage in which they have contributed to the capital of the
partnership firm.

Section 13(c): Interest on capital

If a partner subscribes interest on capital is payable to the partner under the
partnership deed, then the interest will be payable out of the profits only in such
a case. In a general rule, the interest on a capital subscribes by partners is not
permitted unless there is an agreement or a usage to that effect. The underlying
principle in this provision of law is that with concern to the capital brought by a
partner in the business, the partner is not a creditor of the firm but an
adventurer.

The following elements must be ensured before a partner can be entitled to

interest on the capital brought by the partner in the business.

1. An express agreement to the same effect or the practice of a particular

partnership.
2. Any trade custom to that effect; or
3. A statutory provision which entitles him to such interest on the capital.

Section 13(d): Interest on advances

If a partner makes an advance to the partnership firm in addition to the amount
of capital to be contributed by him, the partner is entitled to claim interest
thereon at 6 per cent per annum. While the interest on capital account ceases to
run on dissolution, the interest on advances keeps running even after dissolution
and up to the date of payment. It can be noted that the Partnership Act makes a
distinction between the capital contribution of a partner and the advance made
by him to the firm. The advance by the partner is regarded as loans which should
bear interest while the capital interest takes interest only when there is an
agreement to this effect.
Section 13(e): Right to be indemnified
All the partners of the firm have the right to be repaid by the firm in respect of
the payments made and the liabilities incurred by him in the ordinary and proper
conduct of the business of the firm. This also includes the performance of an act
in an emergency for protecting the firm from a loss, if the payments, liability and
action are such as a prudent man would make, incur or perform in his case, under
similar circumstances.

Section 31: Right to stop the admission of a new partner

All the partners of a partnership firm have the right to prevent the introduction of
a new partner in the firm without the consent of all the existing partners.

Section 32(1): Right to retire

Every partner of a partnership firm has the right to withdraw from the business
with the consent of all the other partners. In the case of a partnership formed at
will, this may be done by giving a notice to that effect to all the other partners.

Section 33: Right not to be expelled

Every partner of a partnership firm has the right to continue in the business. A
partner cannot be dismissed from the firm by any majority of the partners unless
conferred by a partnership agreement and exercised in good faith and for the
advantage of the partnership firm.

Section 36(1): Right of outgoing partner to carry on a competing business

A partner outgoing from the partnership firm may carry on a business competing
with that of the firm. The partner may even advertise such activity but has to do
so without using the firm’s name or representing himself as carrying on the
business of the firm or soliciting the clients who were dealing with the firm before
the partner ceased to be a part of the partnership firm.
Section 37: Right of outgoing partner to share subsequent profits
If a partner has passed away or ceased to be a partner and the existing partners
carry on the business of the firm with the property of the firm without any final
settlement of accounts as between them and the outgoing partner or his estate,
the outgoing partner or his estate has, at his or his representative’s option, the
right to such share of profit made since he ceased to be a partner as may be
attributable to the use of his share of the property of the firm or interest at 6 per
cent per annum on the amount of the partner’s share in the property of the firm.

Section 40: Right to dissolve the firm

A partner of a partnership firm has the right to dissolve the partnership with the
consent of all the other partners. However, where the partnership is at will, the
firm may be dissolved by any partner by giving notice in writing to all the other
partners of his intention to dissolve the firm.

Duties of a Partner
The following are the duties of a partner in a partnership firm.

Section 9: General duties of a partner

Partners are legally bound to carry on the business of the partnership firm. The
general responsibilities of a partner are listed below.

1. A partner is required to carry on the business to the highest common

advantage.
2. A partner is required to be just and faithful to each other
3. A partner has to render to any other partner or his legal representative
about the true account and all the information of all the things affecting the
partnership firm.
Section 10: To indemnify for fraud
According to Section 10, a partner of the partnership firm is liable to compensate
the firm for any damages caused to its business or the firm because of a partner’s
fraud in the conduct of the business of the firm.

Section 13(f): To indemnify for willful neglect

According to the Section, a partner of a partnership firm must compensate the
firm for any damages or loss caused to it by willful neglect in the conduct of the
business of the firm.

Section 12(b) & Section 13(a): To attend duties diligently without remuneration
According to Section 12(b) of the Indian Partnership Act, every partner is legally
bound to attend to his duties diligently to his duties relating to the conduct of the
firm’s business. Moreover, Section 13(a) enumerates that a partner is not,
however, generally entitled to remuneration for participating in the conduct of
the business. A partner is also bound to let his partners have the advantage of his
knowledge and skill.

Section 13(b): To share losses

All the partners of a partnership firm are liable to contribute equally to the injury
sustained by the firm.

Section 16(a): To account for any profit

If a partner of a partnership firm derives any profit for himself for any transaction
of the firm or from the use of the property or business connection of the firm or
firm’s name, then the partner is bound to account for that profit and refund it to
the firm.
Section 16(b): To account and pay for profits of competing for business
If a partner carries on a company of the same nature as the firm and competes
with that of the firm, the partner must be accountable for and pay to the firm all
the profits made in the business by the partner. The partnership firm will not be
held liable for any losses caused in the business.

Dissolution of Partnership

A partnership is a kind of business where a formal agreement between two or

more people is made and agreed to be the co-owners, distribute responsibilities
for running an organisation and share the income or losses that the business
generates.
In India, all the aspects and functions of the partnership are administered under
‘The Indian Partnership Act 1932’. This specific law explains that partnership is an
association between two or more individuals or parties who have accepted to
share the profits generated from the business under the supervision of all the
members or behalf of other members.
In this agreement, all the rights and responsibilities of each partner who has set
up the business. The partnership agreement features the names of both the
parties or partners, the purpose for which the partnership is founded, place of
business, each partners investment amount, and sharing of profits between the
partners.
However, this partnership can be dissolved only when some predefined
provisions, according to the Partnership Act of 1932 are matched, such as:

1. Dissolution by Agreement
2. Dissolution by Notice
3. Dissolution by the Court
4. Compulsory Dissolution
5. Conditional Dissolution

Dissolution of Partnership
Dissolution of partnership and dissolution of the partnership firm are two
different concepts. The dissolution of a partnership means a change of business
relationship between partners whereas the dissolution of a firm means dissolving
of the firm along with the relation between partners. In this case, all the assets
and liabilities are settled and appropriately disposed.
Dissolution of partnership is said to take place when one of the partners
associated with the business, ceases to be a part of the business going forward. It
is very different from the termination of partnership. Dissolution can be defined
as the process that ultimately leads to the termination of partnership. After
dissolution, the remaining partners carry on the partnership but, this partnership
is a completely new and different partnership.

Reasons for Dissolution of partnership

There can be several reasons for the dissolution of a partnership, which are
mentioned below:

1. Death of a partner.
2. Admission of a new partner.
3. Insolvency of an existing partner.
4. Early retirement of a partner.
5. Due to expiry of a partnership period after a certain time as mutually
agreed upon by all partners.

Students can also refer to Basic Concepts of Accounting for Partnership

How is a partnership dissolved?

Generally, a partnership terminates or dissolved when a partner discontinues
participating in the business operation. The dissolution can happen in three
different ways.

● By an act of the partners- When a partner agrees to dissolves partnership

at a particular time. For instance, partners can come to an agreement that a
partnership should continue for a span of five years. The partners can
dissolve the agreement at the end of the five (5) years. Sometimes, it can
be mentioned that a partner can be suspended under a specific condition. If
a partner breaks a rule, then this can dissolve the partnership.
 ● By operation of law- A Partnership is a consequence of an agreement
which is governed by the law. Therefore, any hindrance to the agreement
or unlawful operating of business can cancel the partnership contract. For
instance; you cannot make a valid partnership for selling illegal things.

Do you know? Accounting treatment for a partnership

● By court’s decree- A partner can demand partnership dissolution, and the

law will allow the dissolution only under this conditions: a partner’s
incapability to work; breach of the agreement by a partner; when a partner
is mentally unstable; and the misbehavior of a partner that impacts the
partnership.
● Statement of Dissolution – This is done by filing the statement to the
state’s secretary. The form can be taken from the website of the secretary
of state. The form must have the partnership name, date and reason of
dissolution.
● Personal Notification- This can be done by giving personal notice to the
partnership’s creditors. Also, inform who is associated with the partnership
by publishing the notification in a newspaper.

Limited Liability Partnership (LLP)

Limited liability partnerships (LLPs) are a flexible legal and tax entity that allows
partners to benefit from economy
Understanding a Limited Liability Partnership (LLP)
To understand an LLP, it is best to start with the general partnership. A general
partnership is a for-profit entity that is created by a mutual understanding
between two or more parties. This is a very technical way of describing two or
more people working together to make money. A general partnership can be
quite informal. All it takes is a shared interest, perhaps a written contract (though
not necessarily), and a handshake.

Of course, with the informal nature of a general partnership, there is a downside.

The most obvious risk is that of legal liability. In a general partnership, all partners
share liability for any issue that may arise.
For example, if Joan and Ted are partners in a cupcake venture and a bad batch
results in people getting sick, then they can both be personally sued for damages.
For this reason, many people quickly turn general partnerships into formal legal
entities to protect personal assets from being part of any lawsuit.

The actual details of an LLP depend on where you create it. In general, however,
your personal assets as a partner are protected from legal action. Basically, the
liability is limited in the sense that you may lose assets in the partnership, but not
those outside of it (your personal assets). The partnership is the first target for
any lawsuit, although a specific partner could be held liable if they personally did
something wrong.

Economies of scale: by working together while also reducing their liability for the
actions of other partners.

Benefits of an LLP
Professionals who use LLPs tend to rely heavily on reputation. Most LLPs are
created and managed by a group of professionals who have a lot of experience
and clients among them. By pooling resources, the partners lower the costs of
doing business while increasing the LLP’s capacity for growth. They can share
office space, employees, and so on. Most important, reducing costs allows the
partners to realize more profits from their activities than they could individually.

The partners in an LLP may also have a number of junior partners in the firm who
work for them in the hopes of someday making full partner. These junior partners
are paid a salary and often have no stake or liability in the partnership. The
important point is that they are designated professionals who are qualified to do
the work that the partners bring in.

This is another way that LLPs help the partners scale their operations. Junior
partners and employees take away the detail work and free up the partners to
focus on bringing in new business.

Another advantage of an LLP is the ability to bring partners in and let partners
out. Because a partnership agreement exists for an LLP, partners can be added or
retired as outlined by the agreement. This comes in handy, as the LLP can always
add partners who bring existing business with them. Usually, the decision to add
requires approval from all of the existing partners.
Nature of Limited Liability Partnership
The Limited Liability Partnership consists of the features mentioned below:
1. Distinct Legal Entity
The Limited Liability Partnerships, unlike the traditional partnership firms, are
considered as separate legal entities. LLPs may own assets and incur the liabilities
in their names. Also, they can enter into the contracts and can sue and be sued in
their names.
2. Limited Liability of the Partners Involved
The liabilities of the partners in an LLP are limited and separate. Their personal
assets are not liable to the attachment if the LLP is suffering or winding up legal
consequences of debt or repayments.
However, the liability of the partners could become unlimited in certain offensive
cases like frauds, illegal and wrongful acts, or commission of offences.
3. Profit Sharing
All the partners of the Limited Liability Partnership would share business profit
similar to the partners of the traditional firms. However, they are free to decide
the profit ratios amongst themselves.
4. Partners of Limited Liability Partnerships
The partners of the LLPs can be either body corporations or individuals. Also, an
individual cannot be a partner in an LLP in case he or she is insolvent or does not
have a sound mind.
The LLPs should have at least two partners during all the times. Furthermore, the
number of the partners that can be involved is unlimited, whereas in the regular
partnership firms the partners are restricted to a number of 50 people. If, in case,
the number of LLP partners, get less than two and if the sole partner carries the
business for over six months, then under these circumstances, their liability
towards the business’s firm would be unlimited.
 Right to Information Act, 2005: brief background
The full form of RTI is the right to information, and it is a basic right guaranteed by the Indian
constitution under Article 19.1. Each individual does have the right to speak freely and express,
according to article 19.1. The Supreme Court decided in 1976 that persons cannot communicate
or articulate themselves until they know. As a result, the Right to Information is a basic right that
is glorified in article 19.1. In a similar case, the court stated that because India is a democratic
and the citizens are the owners, the owners or citizens get a right to be informed about how the
government intends to provide service to them. Furthermore, because each citizen pays income
tax, they have a right to be informed about how their cash is used.

Objectives of the Right to Information Act, 2005

1. To provide for a practical framework that allows the citizens to access

the information under the control of public authorities.
2. To promote transparency and accountability in the working of
governments and their instrumentalities.
3. To provide for the constitution of Information Commissions at state and
national level for discharging the functions and exercising the powers
under the Act.
4. To develop an informed citizenry.
5. To contain corruption.
6. To lay down the exemptions to disclosure of information when such
disclosure is likely to conflict with other public interests and to
harmonise these conflicting interests while preserving the paramountcy
of the democratic ideal.
Features of Right to Information Act
2005
Below are all the features of the Right to Information Act 2005:

● People can examine government records and operations and request each detail from the
government under the right to information Act.
● You can get data from every govt, including the state and federal governments, the Panchayati
Raj, and even from some other state or federally managed, controlled, and sponsored entity.
● A minimum of one official has been appointed as a public information officer (PIO), which
receives application forms and provides the details requested by the public.
● Assistant public information officials are stationed throughout every district/divisional stage,
receiving inquiries for information and then appealing the PIO judgments. Section 5(1) requires
them to forward the petitions to the proper authorities.
● Each individual seeking information should submit a request in Hindi or English, either
electronically or handwritten.
● In the event that the application cannot be submitted in writing, the PIO will provide all
necessary help in making the application verbally in order to reduce the request’s length in
composing (Section 6(1)).
● If the petitioner cannot hear, blind, or visually impaired, the public body shall provide assistance
to ensure that all pertinent information is available (Section 7(4)).
● The petitioner is not needed to provide any justifications for seeking the information or indeed
any private details aside from their contact numbers.
● If the public information officer fails to provide data in a timely manner, the petitioner has the
right to submit a grievance against PIO.
● An ordinary man can never be refused facts that the legislative council or legislature cannot
forbid.
● If a public information officer fails to provide requested information underneath the Act, the
public information officer may be fined Rs. 250 for each day and for each delay. According to
Section 20 (2), the information commissioner can also suggest disciplinary measures against the
responsible public information officer.

Consumer Protection Act, 2019

The new Consumer Protection Act was passed by Parliament in 2019. It came into
force in July 2020 and replaced the Consumer Protection Act, 1986.
Read about the important acts in India from the linked article.
Given below is a gist of the Consumer Protection Act, 2019:
Need for the new act:

● The Digital Age has ushered in a new era of commerce and digital branding,
as well as a new set of customer expectations. Digitisation has provided
easy access, a large variety of choices, convenient payment mechanisms,
improved services and shopping as per convenience. However, there are
also associated challenges related to consumer protection.
 ● To help address the new set of challenges faced by consumers in the digital
age, the Indian Parliament passed the landmark Consumer Protection Bill,
2019 which aims to provide timely and effective administration and
settlement of consumer disputes.
Details:

● Consumer Protection Act, 2019 is a law to protect the interests of the

consumers. This Act provides safety to consumers regarding defective
products, dissatisfactory services, and unfair trade practices.
● The basic aim of the Consumer Protection Act, 2019 is to save the rights of
the consumers by establishing authorities for timely and effective
administration and settlement of consumers’ disputes.
Rights of the consumers:

● Consumers have the right to information on various aspects of goods and

services. This could be information about the quantity, quality, purity,
potency, price, and standard of goods or services.
● To be protected from hazardous goods and services. Right to protection
against goods and services that can be dangerous to life and property.
● To be protected from unfair or restrictive trade practices.
● Consumers have the right to access a variety of goods and services at
competitive prices.
● Consumers should have the right to redressal.

Salient Provisions of the Consumer Protection Act

New definition of consumer:

● The new Act has widened the definition of ‘consumer’.

Definition of consumer:

● As per the Act, a person is called a consumer who avails the services and
buys any good for self-use. Worth to mention that if a person buys any
good or avails any service for resale or commercial purposes, he/she is not
considered a consumer. This definition covers all types of transactions i.e.
 offline and online through teleshopping, direct selling or multi-level
marketing.
Central Consumer Protection Authority:

● The Act proposes the establishment of the Central Consumer Protection

Authority (CCPA) as a regulatory authority.
● The CCPA will protect, promote and enforce the rights of consumers and
regulate cases related to unfair trade practices, misleading advertisements,
and violation of consumer rights.
● CCPA would be given wide-ranging powers.

● The CCPA will have the right to take suo-moto actions, recall
products, order reimbursement of the price of goods/services, cancel
licenses, impose penalties and file class-action suits.
● The CCPA will have an investigation wing to conduct independent
inquiry or investigation into consumer law violations.
Consumer Disputes Redressal Commission:

● The Act has the provision of the establishment of Consumer Disputes

Redressal Commissions (CDRCs) at the national, state and district levels to
entertain consumer complaints.
● As per the notified rules, the State Commissions will furnish information to
the Central Government on a quarterly basis on vacancies, disposal, the
pendency of cases and other matters.
● The CDRCs will entertain complaints related to:

● Overcharging or deceptive charging

● Unfair or restrictive trade practices
● Sale of hazardous goods and services which may be hazardous to life.
● Sale of defective goods or services
As per the Consumer Disputes Redressal Commission Rules, there will be no
fee for filing cases up to Rs. 5 lakh.
E-Filing of Complaints:
 ● The new Act provides flexibility to the consumer to file complaints with the
jurisdictional consumer forum located at the place of residence or work of
the consumer. This is unlike the earlier condition where the consumer had
to file a complaint at the place of purchase or where the seller has its
registered office address.
● The new Act also contains enabling provisions for consumers to file
complaints electronically and for hearing and/or examining parties through
video-conferencing.
● Consumers will also not need to hire a lawyer to represent their cases.
Product Liability & Penal Consequences:

● The Act has introduced the concept of product liability.

● A manufacturer or product service provider or product seller will now

be responsible to compensate for injury or damage caused by
defective products or deficiency in services.
This provision brings within its scope, the product manufacturer, product
service provider and product seller, for any claim for compensation. The term
‘product seller’ would also include e-commerce platforms.
Penalties for Misleading Advertisement:

● The CCPA may impose a penalty on a manufacturer or an endorser, for a

false or misleading advertisement. The CCPA may also sentence them to
imprisonment.
Provision for Alternate Dispute Resolution:

● The new Act provides for mediation as an Alternate Dispute Resolution

mechanism. For mediation, there will be a strict timeline fixed in the rules.
● As per the recently notified rules, a complaint will be referred by a
Consumer Commission for mediation, wherever scope for early settlement
exists and parties agree for it. The mediation will be held in the Mediation
Cells to be established under the aegis of the Consumer Commissions.
There will be no appeal against settlement through mediation.
Unfair Trade Practices:
 ● The new Act has armed the authorities to take action against unfair trade
practices too.
● The Act introduces a broad definition of Unfair Trade Practices, which also
includes the sharing of personal information given by the consumer in
confidence unless such disclosure is made in accordance with the
provisions of any other law.
The Central Consumer Protection Council:

● The Consumer Protection Act empowers the Central Government to

establish a Central Consumer Protection Council. It will act as an advisory
body on consumer issues.

● As per the notified Central Consumer Protection Council Rules, the

Central Consumer Protection Council would be headed by the Union
Minister of Consumer Affairs, Food and Public Distribution with the
Minister of State as Vice Chairperson and 34 other members from
different fields.
● The Council, which has a three-year tenure, will have a Minister-in-
charge of consumer affairs from two States from each region –
North, South, East, West, and NER. There is also a provision for
having working groups from amongst the members for specific tasks.
Applicability:

● This Act is applicable to all the products and services, until or unless any
product or service is especially debarred out of the scope of this Act by the
Central Government.

RIGHTS

Right to Equality Right to Freedom

Right to Life (Article 21) Right against Exploitation

Right to Freedom of Religion Cultural and Educational Rights

Right to Constitutional Remedies (Article 32) –

Right to Equality

Article Brief description

Article 14 The State shall not deny to any person equality before the law or the
equal protection of the laws within the territory of India, on grounds of
religion, race, caste, sex or place of birth

Article 15 The State shall not discriminate against any citizen on grounds only of
religion, race, caste, sex, place of birth or any of them.

Article 16 There shall be equality of opportunity for all citizens in matters relating
to employment or appointment to any office under the State.

Article 17 Abolition of untouchability

Article 18 Abolition of all titles except military and academic

Equality before the law (Article 14)

Article 14 treats all people the same in the eyes of the law.

● This provision states that all citizens will be treated equally before the law.

● The law of the country protects everybody equally.

● Under the same circumstances, the law will treat people in the same
manner.

Prohibition of discrimination (Article 15)

This article prohibits discrimination in any manner.

 ● No citizen shall, on grounds only of race, religion, caste, place of birth, sex
or any of them, be subject to any liability, disability, restriction or condition
with respect to:

● Access to public places

● Use of tanks, wells, ghats, etc. that are maintained by the State or
that are meant for the general public

The article also mentions that special provision can be made for women,
children and the backward classes notwithstanding this article.

Equality of opportunity in matters of public employment (Article 16)

Article 16 provides equal employment opportunities in State service for all

citizens.

● No citizen shall be discriminated against in matters of public employment

or appointment on the grounds of race, religion, caste, sex, place of birth,
descent or residence.

● Exceptions to this can be made for providing special provisions for the
backward classes.

Abolition of untouchability (Article 17)

Article 17 prohibits the practice of untouchability.

● Untouchability is abolished in all forms.

● Any disability arising out of untouchability is made an offence.

Abolition of titles (Article 18)

Article 18 abolishes titles.

● The State shall not confer any titles except those which are academic or
military titles.
 ● The article also prohibits citizens of India from accepting any titles from a
foreign State.

● The article abolishes the titles that were awarded by the British
Empire such as Rai Bahadur, Khan Bahadur, etc.

● Awards like Padma Shri, Padma Bhushan, Padma Vibhushan, Bharat Ratna
and military honours like Ashok Chakra, Param Vir Chakra do not belong to
this category.

Right to Freedom
The right to freedom guarantees freedom for citizens to live a life of dignity
among other things. These are given in Articles 19, 20, 21A and 22 of the Indian
Constitution. We shall take up the articles one by one in this section.

Article Brief description

Article 19 Protection of 6 rights concerning the freedom of:

1. Speech and expression

2. Assembly
3. Association
4. Movement
5. Residence
6. Profession

Article 20 Protection with respect to conviction for offences

Article 21 Right to life and personal liberty

Article 21A Right to elementary education

Article 22 Protection against arrest and detention in certain cases

Article 19

Article 19 guarantees six freedoms. They are:

1. Freedom of speech and expression: The State guarantees freedom of

speech and expression to every person of India. However, the State can
impose restrictions on the freedom of speech and expression in the
interests of the integrity, security and sovereignty of the country, friendly
relations with foreign nations, for public order, with respect to defamation,
incitement to offence or contempt of court. Read more about the Freedom
of Speech and Expression here.
2. Freedom to assemble: The State guarantees every person the freedom to
assemble peacefully without arms. However, as above, reasonable
restrictions can be imposed in the interests of the sovereignty and integrity
of the country and public order.
3. Freedom to form associations/unions/cooperative societies: Again, the
State can impose restrictions in the interests of the integrity, security and
sovereignty of the country, friendly relations with foreign nations, for public
order, with respect to defamation, incitement to offence or contempt of
court. This freedom gives workers the right to form trade union, which is
thus a fundamental right.
1. The Police Forces (Restriction of Rights) Act, 1966 prohibits police
personnel from forming trade unions.
2. The Constitution also allows the Parliament to pass a law restricting
the right to form political association to members of the armed
forces, intelligence bureaus, persons employed with
telecommunication system.
4. Freedom to move freely: A citizen of India can move freely throughout the
territory of India. But this right can also be restricted on the grounds of
security, public order or for protecting the interests of the Scheduled
Tribes.
5. Freedom of residence: Citizens of India have the right to reside in any part
of the country. Although restrictions can be imposed on the grounds of
 security, public order or for protecting the interests of the Scheduled
Tribes.
6. Freedom of profession: All citizens have the right to carry on any trade or
profession/occupation, provided the trade or occupation is not illegal or
immoral. Also, the law does not prevent the State from making laws related
to technical or professional qualifications required for practicing the
occupation or trade.

Right to Life

According to Article 21:

“Protection of Life and Personal Liberty: No person shall be deprived of his life or
personal liberty except according to procedure established by law.”

● This fundamental right is available to every person, citizens and foreigners

alike.
● Article 21 provides two rights:

● Right to life
● Right to personal liberty
The fundamental right provided by Article 21 is one of the most important
rights that the Constitution guarantees.
The Supreme Court of India has described this right as the ‘heart of
fundamental rights’.
The right specifically mentions that no person shall be deprived of life and
liberty except as per the procedure established by law. This implies that this right
has been provided against the State only. State here includes not just the
government, but also, government departments, local bodies, the Legislatures,
etc.
Any private individual encroaching on these rights of another individual
does not amount to a violation of Article 21. The remedy for the victim, in this
case, would be under Article 226 or under general law.
The right to life is not just about the right to survive. It also entails being
able to live a complete life of dignity and meaning.
 The chief goal of Article 21 is that when the right to life or liberty of a
person is taken away by the State, it should only be according to the prescribed
procedure of law.

Interpretation of Article 21

Right against Exploitation

There are two articles of the Constitution which guarantee the right against
exploitation. They are described below:

Article 23 – Prohibition of traffic in human beings and forced labour

Article 23(1): Traffic in human beings and the beggar and other similar forms of
forced labour are prohibited and any contravention of this provision shall be an
offence punishable in accordance with the law.

Article 23(2): Nothing in this article shall prevent the State from imposing
compulsory service for public purposes, and in imposing such service the State
shall not make any discrimination on grounds only of religion, race, caste or class
or any of them.

● Exploitation implies the misuse of others’ services by force and/or labour

without payment.
● There were many marginalized communities in India who were forced to
engage in manual and agricultural labour without any payment.
● Labour without payment is known as begar.
● Article 23 forbids any form of exploitation.
● Also, one cannot be forced to engage in labour against his/her will even if
remuneration is given.
● Forced labour is forbidden by the Constitution. It is considered forced
labour if the less-than-minimum wage is paid.
● This article also makes ‘bonded labour’ unconstitutional.
 ● Bonded labour is when a person is forced to offer services out of a
loan/debt that cannot be repaid.
● The Constitution makes coercion of any kind unconstitutional. Thus, forcing
landless persons into labour and forcing helpless women into prostitution is
unconstitutional.
● The Article also makes trafficking unconstitutional.
● Trafficking involves the buying and selling of men and women for illegal and
immoral activities.
● Even though the Constitution does not explicitly ban ‘slavery’, Article 23 has
a wide scope because of the inclusion of the terms ‘forced labour’ and
‘traffic’.
● Article 23 protects citizens not only against the State but also from private
citizens.
● The State is obliged to protect citizens from these evils by taking punitive
action against perpetrators of these acts (which are considered crimes),
and also take positive actions to abolish these evils from society.
● Under Article 35 of the Constitution, the Parliament is authorized to enact
laws to punish acts prohibited by Article 23.
● Clause 2 implies that compulsory services for public purposes (such as
conscription to the armed forces) are not unconstitutional.
● Laws passed by the Parliament in pursuance of Article 23:

● Suppression of Immoral Traffic in Women and Girls Act, 1956

● Bonded Labour System (Abolition) Act, 1976

Article 24 – Prohibition of employment of children in factories, etc.

Article 24 says that “No child below the age of fourteen years shall be employed
to work in any factory or mine or engaged in any other hazardous employment.”

● This Article forbids the employment of children below the age of 14 in any
hazardous industry or factories or mines, without exception.
 ● However, the employment of children in non-hazardous work is allowed.
Read about important articles in the Indian Constitution in the linked article.

Laws that were passed in pursuance of Article 24 in India.

The Factories Act, 1948

This was the first act passed after independence to set a minimum age limit for
the employment of children in factories. The Act set a minimum age of 14 years.
In 1954, this Act was amended to provide that children below the age of 17 could
not be employed at night.

The Mines Act of 1952

This Act prohibits the employment of people under the age of 18 years in mines.

The Child Labour (Prohibition and Regulation) Act, 1986

This was a landmark law enacted to curb the menace of child labour prevalent in
India. It described where and how children could be employed and where and
how this was forbidden. This Act designates a child as a person who has not
completed his/her 14th year of age. The 1986 Act prohibits the employment of
children in 13 occupations and 57 processes.

Child Labour (Prohibition & Regulation) Amendment Act, 2016

This Act completely forbids the employment of children below 14 years of age. It
also bans the employment of people between the ages of 14 and 18 in hazardous
occupations and processes. Punishments to violators of this law were made
stricter by this amendment act. This Act allows children to be employed in certain
family occupations and also as artists.

Child Labour (Prohibition and Regulation) Amendment Rules, 2017

The government notified the above Rules in 2017 to provide a broad and specific
framework for prevention, prohibition, rescue, and rehabilitation of child and
adolescent workers. The Rules clarified on issues concerning the employment of
family enterprises and also provides safeguards for artists in that the working
hours and conditions are specified.
Significance of the Act:
Empowering consumers:

● The new Act will empower consumers and help them in protecting their
rights through its various rules and provisions. The new Act will help in
safeguarding consumer interests and rights.

● Consumer-driven businesses such as retail, e-commerce would need

to have robust policies dealing with consumer redressal in place.
● The new Act will also push the consumer-driven businesses to take
extra precautions against unfair trade practices and unethical
business practices.
Inclusion of the e-commerce sector:

● The earlier Act did not specifically include e-commerce transactions, and
this lacuna has been addressed by the new Act.

● E-commerce has been witnessing tremendous growth in recent

times. The Indian e-commerce market is expected to grow to US$
200 billion by 2026.
The Act also enables regulations to be notified on e-commerce and direct
selling with a focus on the protection of interest of consumers. This would involve
rules for the prevention of unfair trade practices by e-commerce platforms.
● As per the notified rules, every e-commerce entity is required to
provide information relating to return, refund, exchange, warranty
and guarantee, delivery and shipment, modes of payment, grievance
redressal mechanism, payment methods, the security of payment
methods, charge-back options, etc. including country of origin which
are necessary for enabling the consumer to make an informed
decision at the pre-purchase stage on its platform.
● The e-commerce platforms will have to acknowledge the receipt of
any consumer complaint within forty-eight hours and redress the
complaint within one month from the date of receipt under this Act.
 This will bring e-commerce companies under the ambit of a
structured consumer redressal mechanism.
● E-commerce entities that do not comply will face penal action.
Time-bound redressal:

● A large number of pending consumer complaints in consumer courts have

been common across the country. The new Act by simplifying the
resolution process can help solve the consumer grievances speedily.
● A main feature of the Act is that under this, the cases are decided in a
limited time period.
Responsible endorsement:

● The new Act fixes liability on endorsers considering that there have been
numerous instances in the recent past where consumers have fallen prey to
unfair trade practices under the influence of celebrities acting as brand
ambassadors.
● This will make all stakeholders – brands, agencies, celebrities, influencers
and e-commerce players – a lot more responsible. The new Act would force
the endorser to take the onus and exercise due diligence to verify the
veracity of the claims made in the advertisement to refute liability claims.
Upholding consumer interests:

● For the first time, there will be an exclusive law dealing with Product
Liability.
● Product liability provision will deter manufacturers and service providers
from delivering defective products or deficient services.
● The new legislation empowers the National Consumers Dispute Redressal
Committee as well as the State Commission to declare null and void any
terms of a contract while purchasing a product. This will go a long way in
protecting consumers, who are often subject to contract conditions that
favour a seller or manufacturer.
Alternate dispute redressal mechanism:
 ● The provision of Mediation will make the process of dispute adjudication
simpler and quicker.
● This will provide a better mechanism to dispose of consumer complaints in
a speedy manner and will help in the disposal of a large number of pending
cases in consumer courts across the nation.
Simplified process for grievance redressal:

● The new Act would ease the overall process of consumer grievance
redressal and dispute resolution process. This will help reduce
inconvenience and harassment for the consumers.
● The enhanced pecuniary jurisdiction and provisions providing statutory
recognition to mediation processes, enabling filing of complaints from any
jurisdiction and for hearing parties through video-conferencing will increase
accessibility to judicial forums and afford crucial protection in times when
international e-commerce giants are expanding their base.