You are on page 1of 26

Business Legislation

Q 1. Explain the meaning & various Characteristics of a Company under The Companies Act 1956? Ans: A company is a voluntary association of individuals formed to carry on business to earn profits or for non profit purposes. These persons contribute towards the capital by buying its shares in which it is divided. A company is an association of individuals incorporated as a company possessing a common capital i.e. share capital contributed by the members comprising it for the purpose of employing it in some business to earn profit. As per Companies Act 1956, a company is formed and registered under the Companies Act or an existing company registered under any other Act.

Characteristics of a Company
Following are the main characteristics of a company: 1. Artificial legal person A company is an artficial person as it is created by law. It has almost all the rights and powers of a natural person. It can enter into contract. It can sue in its own name and can be sued. 2.Incorporated body A company must be registered under Companies Act. By virtue of this, it is vested with corporate personality. It has an identity of its own. Although the capital is contributed by its members called shareholders yet the property purchased out of the capital belongs to the company and not to its shareholders. 3.Capital divisible into shares The capital of the company is divided into shares. A share is an indivisible unit of capital. The face value of a share is generally of a small denomination which may be of Rs 10, Rs 25 or Rs 100. 4.Transferability of shares The shares of the company are easily transferable. The shares can be bought and sold in the stock market. 5.Perpetual existence A company has an independent and separate existence distinct from its share holders. Changes in its membership due to death, insolvency etc. does not affect its existence and its continuity.

6.Limited Liability The liablity of the shareholders of a company is limited to the extent of face value of shares held by them. No shareholder can be called upon to pay more than the face value of the shares held by them. At the most the shareholders may be asked to pay the unpaid value of shares. 7.Representative Management The number of shareholders is so large and scattered that they cannot manage the affairs of the company collectively. Therefore they elect some persons among themselves to manage and administer the company. These elected representatives of shareholders are individually called the directorsof the company and collectively the Board of Directors. 8.Common seal A common seal is the official signature of the company. Any document bearing the common seal of the company is legally binding on the company.

Q 2. What are the various types of Companies under The Companies Act 1956? Ans: Companies can be classified under the following heads: 1. On the basis of formation. 2. On the basis of liability. 3. On the basis of ownership.

1. On the basis of formation. On the basis of formation companies can be categorised as: (a) Statutory Company A company formed by a Special Act of parliament or state legislature is called a Statutory Company. Reserve Bank of India, Industrial Financial Corporation of India, Life Insurance Corporation of India, Delhi State Finance Corporation are some of its examples. (b) Registered Company A company formed and registered under the Companies Act, 1956 or earlier Companies Acts is called a Registered Company. The working of such companies is regulated by the provisions of the Companies Act.

2. On the basis of liability On the basis of liability, companies can be categorized as: (a) Company limited by shares The liability of the member of such company is limited to the face value of its shares. (b) Company limited by guarantee The liability of each member of such company is limited to the extent of guarantee undertaken by the member. It may arise in the event of its being wound up. (c) Unlimited Company The company not having any limit on the liability of its members, is called an unlimited company. Liability in such a case extends to the personal property of its shareholders. Such companies do not use the word limited at the end of their name. (d) Company under section 25 A company created under section-25 is to promote art, culture and societal aims. Such companies need not use the term limited at the end of their name. 3. On the basis of ownership On the basis of ownership, companies can be categorized as : (a) Private Company A private company is one which by its Articles of Association : (i) restricts the right of members to transfer its shares; (ii) limits the number of its members to fifty (excluding its past and present employees); (iii) prohibits any invitation to the public to subscribe to its shares, debentures. (iv) The minimum paid up value of the company is one lakh rupees (Rs 100000). The minimum number of shareholders in such a company is two and thecompany is to add the words private limited at the end of its name. Private companies do not involve participation of public in general. (b) Public Copmpany A company which is not a private company is a public company. Its Articles of association does not contain the above mentioned restrictions.

Main features of a public company are : (i) The minimum number of members is seven. (ii) There is no restriction on the maximum number of members. (iii) It can invite public for subscription to its shares. (iv) Its shares are freely transferable. (v) It has to add the word Limited at the end of its name. (vi) Its minimum paid up capital is five lakhs rupees (Rs 500,000). (c) Government Company A Government company is one in which not less than 51% of its paid up capital is held by (1) Central Government or (2) State Government, or (3) partly by Central Government and partly by State Governemt. Example of a Government company is Hindustan Machine Tools Limited, (HMT) State Trading Corporation (STC). Minerals as metals training corporation (MMTC). (d) Foreign company A foreign company is one which is incorporated outside India but has a place of business in India, for example Philips, L.G, etc. standard materials. (e) Holding company and Subsidiary company A holding company is a company which controls another company (called subsidiary company) either by acquiring more than half of the equity sharesof another company or by controlling the composition of Baord of Directors of another company or by controlling a holding company which controls another company. (f) Listed company and unlisted company A company is required to file an application with stock exchange for listing of its securities on a stock exchange. When it qualifies for the admission and continuance of the said securities upon the list of the stock exchange, it is known as listed company.

Q 3.Explain Share Capital & its types ? Ans: A joint stock company estimates its future capital requirements. The amount of the capital is mentioned in the capital clause of the Memorandum of Association registered with the Registrar of the Companies. Total capital is divided into a number of small indivisible units of fixed amount and each such unit is called a share. A share is nothing but a share in the capital of

the company. As the total capital of the company is divided into shares, the capital of the company is called share capital. Share capital of the company is divided into following categories : Dividend on these shares is paid after payment of dividend made to preference shareholders. On winding up of the company equity share holders get refund of capital only after preference share holders have been paid off. Shareholders have voting rights in all matters. Shares cannot be redeemed during the life of the company. Dividend on these shares is paid before payment of dividend made to equity shareholders. Preference shareholders have a preference over equity shareholders in regard to refund of capital in case of winding up of the company. Shareholders can vote only in special circumstances. Shares can be redeemed as per terms of issue.

Types of Share Capital are as follows: 1.Nominal/Authorised/Registered capital It refers to the maximum amount of share capital which a company is authorized to issue as per its Memorandum of Association. 2.Issued capital Issued capital is that part of the authorized capital which the company offers to public, that may include vendors, for subscription or purchase. A company may issue its entire authorized capital or may issue it in parts from time to time as per the needs of the company. It means and includes the nominal value of shares issued by the company for (a) cash, and (b) consideration other than cash to (i) promoters of a company, and (ii) others. 3.Subscribed capital It is that part of issued capital which is taken up or subscribed by those who are offered for subscription. Company may receive application for equal to, more than or less than shares issued. This capital can be equal to or less than the issued capital. The portion of nominal value of the issued share capital which is actually paid (or subscribed) by the shareholders forms part of the subscribed capital. 4.Called up capital

It is that part of the issued/subscribed capital which is called up by company to pay on the allotted shares and is to be paid by the shareholders. The portion of the issue price of the shares which a company has demanded or called from shareholders is known as called up capital 5.Uncalled capital Uncalled Capital is that portion of the issued/subscribed capital that is not called up by the company on the shares allotted. 6.Paid up capital It is the portion of called up capital which is paid by the shareholders, to calculate the paid up capital, the amount of instalments in arrears is deducted from the called up capital. 7.Unpaid capital That part of the called up capital which is called but is not paid by the shareholders is called unpaid capital. i.e. calls-in-arrears. 8.Reserve capital Company may keep some part of its share capital uncalled and kept in reserve to be called only in case of need at the time of its winding up. This is known as Reserve capital. For this, a special resolution will have to be passed by the company. Thus it is that portion of the uncalled capital which a company has decided to call only in case of liquidation of the company.

Q 4.Explain in detail Winding up of a Company ? Ans: Winding up of a company is the process whereby its life is ended and its property is administered for the benefit of its creditors and members. The court appoints an administrator, called a liquidator, who takes control of the company, takes possession of its assets and finally distributes any surplus among the shareholders in accordance with their respective rights. The objective behind the winding up of a company is to realize the assets, pay off the liabilities and distribute the surplus as expeditiously as possible.

Under section 425 of the Act, a company may be wound up in any one of the following three ways: (a) by the court2 making a winding-up order (compulsory winding up); (b) by passing of an appropriate resolution for voluntary winding up at a general meeting of

members (voluntary winding up); and (c) voluntary winding up subject to supervision of the court.

Q 5. Define Contract under Indian Contract Act 1872. Also explain Essential elements of a valid contract. Ans: Definition Section 2(h) of the Act defines the term contract as "any agreement enforceable by law". There are two essentials of this act, agreement and enforceability. Section 2(e) defines agreement as "every promise and every set of promises, forming the consideration for each other." Again Section 2(b) defines promise in these words: "when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. Proposal when accepted, becomes a promise." And other words Say Agreement is Sum of Promise and offer Essential Elements of a Valid Contract According to Section 10, "All agreements are contracts, if they are made by the free consent of the parties, competent to contract, for a lawful consideration with a lawful object, and not hereby expressly to be void." Essential Elements of a Valid Contract are: 1.Proper offer and proper acceptance. there must be an agreement based on a lawful offer made by person to another and lawful acceptance of that offer made by the latter. section 3 to 9 of the contract act, 1872 lay down the rules for making valid acceptance 2.Lawful consideration: An agreement to form a valid contract should be supported by consideration. Consideration means something in return (quid pro quo). It can be cash, kind, an act or abstinence. It can be past, present or future. However, consideration should be real and lawful. 3.Competent to contract or capacity: In order to make a valid contract the parties to it must be competent to be contracted. According to section 11 of the Contract Act, a person is considered to be competent to contract if he satisfies the following criterion: The person has reached the age of maturity. The person is of sound mind.

The person is not disqualified from contracting by any law. 4.Free Consent: To constitute a valid contract there must be free and genuine consent of the parties to the contract. It should not be obtained by misrepresentation, fraud, coercion, undue influence or mistake. 5.Lawful Object and Agreement: The object of the agreement must not be illegal or unlawful. 6. Agreement not declared void or illegal: Agreements which have been expressly declared void or illegal by law are not enforceable at law; hence they do not constitute a valid contract. 7. Intention To Create Legal Relationships:-when the two parties enter in to an agreement ,there must be intention must be to create a legal relationship between them ...if there is no such intention on the part of the parties ..there is no contract between them ..agreements of a social or domestic nature do not contemplate legal relationship;as such they are not contracts. 8. Certainty, Possibility Of Performance 9. Legal Formalities

Q 6. What are the various types of contracts? Explain in detail. Ans: On the basis of validity: 1. Valid contract: An agreement which has all the essential elements of a contract is called a valid contract. A valid contract can be enforced by law. 2. Void contract [Section 2(j)]: A void contract is a contract which ceases to be enforceable by law. A contract when originally entered into may be valid and binding on the parties. It may subsequently become void. -- There are many judgments which have stated that where any crime has been converted into a "Source of Profit" or if any act to be done under any contract is opposed to "Public Policy" under any contract -- than that contract itself cannot be enforced under the law3. Voidable contract [Section 2(i)]: An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of other or others, is a voidable contract. If the essential element of free consent is missing in a contract, the law confers right on the aggrieved party either to reject the contract or to accept it. However, the contract continues to be good and enforceable unless it is repudiated by the aggrieved party. 4. Illegal contract: A contract is illegal if it is forbidden by law; or is of such nature that, if permitted, would defeat the provisions of any law or is fraudulent; or involves or implies injury

to a person or property of another, or court regards it as immoral or opposed to public policy. These agreements are punishable by law. These are void-ab-initio. All illegal agreements are void agreements but all void agreements are not illegal. 5. Unenforceable contract: Where a contract is good in substance but because of some technical defect cannot be enforced by law is called unenforceable contract. These contracts are neither void nor voidable. On the basis of formation: 1. Express contract: Where the terms of the contract are expressly agreed upon in words (written or spoken) at the time of formation, the contract is said to be express contract. 2. Implied contract: An implied contract is one which is inferred from the acts or conduct of the parties or from the circumstances of the cases. Where a proposal or acceptance is made otherwise than in words, promise is said to be implied. 3. Tacit contract: Tacit contracts are Implied contract in itself. e.g., taking ticket in the bus, during journey. 4. Quasi contract: A quasi contract is created by law. Thus, quasi contracts are strictly not contracts as there is no intention of parties to enter into a contract. It is legal obligation which is imposed on a party who is required to perform it. A quasi contract is based on the principle that a person shall not be allowed to enrich himself at the expense of another. On the basis of performance: 1. Executed contract: An executed contract is one in which both the parties have performed their respective obligation. 2. Executory contract: An executor contract is one where one or both the parties to the contract have still to perform their obligations in future. Thus, a contract which is partially performed or wholly unperformed is termed as executory contract. 3. Unilateral contract: A unilateral contract is one in which only one party has to perform his obligation at the time of the formation of the contract, the other party having fulfilled his obligation at the time of the contract or before the contract comes into existence. 4. Bilateral contract: A bilateral contract is one in which the obligation on both the parties to the contract is outstanding at the time of the formation of the contract. Bilateral contracts are also known as contracts with executory consideration.

Q 7. Explain the Types of Liquidation.

Ans: There are two main types of winding up: compulsory, under and order of the court; and voluntary, under resolution of the company: 211. The former occurs when the occurs when the directors or those in control do not want the company to be liquidated, whereas the latter occurs when they do. Winding Up by the Court (Compulsory Liquidation) The company, any creditor or any member may petition the court to wind up the company on any of the grounds, only two need particular mentioned section 218(e) - the company is unable to pay its debts (the most common ground); and section 218(i) - the court is of the opinion that it is just and equitable that the company be wound up (which, as we have seen, may be useful in the event on unfairness or deadlock or if the substratum of the company has been destroyed). For example, in Ng Eng Hiam v Ng Kee Wei & Ors (1965) 1 MLJ 238, winding up of a private company was petitioned where there was a deadlock between managing directors. In Re Chi Liang & Son Ltd, Tong Chong Fah v Tong Lee Hwa & Ors (1968) 1 MLJ 97, a winding up petitioned was filed where there had been oppression of the petitioner both as a member of the company and as director. This case followed the English case of Re H R Harmer Ltd (1958) 3 All ER 689; (1959) 1 WLR 62, where it was held that once it was shown that the acts complained of were oppressive to the petitioners as members of the company, it was irrelevant that the petitioners were also directors, for oppressed members who were also directors were not, by virtue of holding such office, disqualified from obtaining relief. In Re Long Thai Sawmill (Miri) Sdn Bhd; Kong Thai Sawmill (Miri) Sdn Bhd & Ors v Ling Beng Sung (1974) 2 MLJ 227, the Privy Council pointed out that for a case to be brought within section 181 (1((a) at all, the complainant must identify and prove "oppression" or "disregard". The mere fact that one or more of those managing the company possessed the majority of the voting power and, in reliance upon the power, made policy or executive decisions, with which the complainant did not agree, was not enough. There must be a visible departure from the standards of the fair dealing and a violation of the conditions of fair play which a shareholder is entitled to expect before a case of oppression can be made out. Similarly, "disregard" involved something more than a failure to take into account minority interest. There must be awareness of that interest and an evident decision to override it or brush it aside or to set at naught the proper company procedure. The Privy Council continued that although the grant of winding up was at the discretion of the court, the court must bear in mind the character of the remedy, if sought to apply to a company which was a going concern. It would take into account inter alia:

the gravity of the case under section 181(1) the possibility of remedying proved in other ways than by winding up the company the interest of the applicant in the company the interests of other members of the company not involved in the proceedings. The petition for winding up is normally brought by a creditor. Rarely can it be brought by a shareholder: 217. Such a shareholder may be a past or present member of the company: Re Consolidated Goldfields of New Zealand (1953) Ch 689; (1953) 2 WLR 584. Section 218(2) provides that it is proven that the company cannot pay its debts if the company defaults in complying within three weeks with a written demand for payment served by the creditor to whom more than RM 500 is due or if unsatisfied execution has been levied. In Teck Yow Brothers Hand-Bag Trading Co v maharani Supermarket Sdn Bhd (1989) 1 MLJ 101, defined "unable to pay its debts" as meaning "insolvency in the commercial sense" i.e., inability to meet current demands irrespective of whether the company is possessed of assets, which, if realised, would unable it to discharge its liabilities in full. The meaning and scope of the phrase "unable to pay its debts" in section 218(e) was clearly explained by Justice Siti Norma Yaakob in the case as follows: Voluntary Winding Up Under section 254, voluntary liquidation of a company occurs if it passes a special resolution to take effect or when the period fixed for the duration of the company expires and a resolution of the general meeting requiring the voluntary winding up of the company is passed. Winding up commences at the time of the passing of the resolution for voluntary winding up. Where it is proposed to winding up voluntarily, the majority of the directors may at a board meeting make a statutory declaration that having made full inquiry into the affairs of the company, they have formed the opinion that the affairs of the company will be able to pay its debts in full within a period not exceeding 12 months after the commencement of the winding up: 257(1). The company at a general meeting would then proceed to appoint its liquidators. There would not be any supervision by the creditors: 258. However, should the company be unable to pay its debts within the period stated in the aforesaid declaration, the directors would have to make a financial report to the creditors and the creditors themselves may appoint the liquidator. It then becomes a Creditors' Voluntary Winding Up. Obviously directors would prefer members' winding up as this meansa that, through their de facto control, their nominee is likely to be appointed liquidator and therefore their past conduct may not be examined too closely.

Q 8. Write a detail note on the Overview of Intellectual Property Act.

Ans: Intellectual property law protects the property rights in creative and inventive endeavours and gives creators and inventors certain exclusive economic rights, generally for a limited time, to deal with their creative works or inventions. This legal protection is designed as a reward to creators to encourage further intellectual creativity and innovation, as well as enabling access by the community to the products of intellectual property. Because intellectual property protects rights, rather than physical property, intellectual property is an intangible form of property. It is property which cannot be seen or touched. . Patents The Patents Act 1990 grants monopoly rights to inventors of new inventions such as improved products or devices, substances and methods or industrial processes, provided that the invention is a manner of manufacture, is new, is not obvious and is useful. A registered patent provides exclusive rights to the owner to exploit the invention for the life of the patent, which is 20 years. The innovation patent provides protection for incremental and lower level inventions for a period of 8 years. Trade Marks The Trade Marks Act 1995 grants protection to a letter, word, phrase, sound, smell, shape, logo, picture, aspect of packaging or combination of these, used by traders on their goods and services to indicate their origin and to distinguish such goods and services from those of other traders. Initial registration lasts for 10 years, with the possibility for further renewals for as long as the mark is used. Designs The Designs Act 2003 grants protection to the visual appearance or design of a manufactured article if it is new or original. It protects the features of shape, pattern or ornamentation applied to an article. Protection is based on a system of registration and can last for up to 10 years. Some designs for articles may qualify for both designs and copyright protection. Before registering a design of an artistic work under the Designs Act, you should seek legal advice on whether registration would affect copyright protection of any articles related to the design. Q 9. State the procedure for Registering a Patent. Ans: LEGISLATION The Patent system in India is governed by the Patents Act, 1970 (No 39 of 1970) & The Patents Rules 1972, effective from April 20,1972. Subsequently The Patents Act, 1970 is amended

effective from January 1, 1995 & The Patents Rules, 1972 is amended effective from June 2, 1999.

Administration The Patent Office, under the Ministry of Commerce & Industry, Department of Industrial Policy & Promotion, has been established to administer the various provisions of the Patents Law relating to the grant of Patents & The Designs Law, relating to the registration of Industrial Designs.

MEMBERSHIP OF INTERNATIONAL TREATIES India is member of the following treaties governing patents: Convention establishing World Intellectual Property Organization (WIPO) Trips Agreement under the World Trade Organization. Paris Convention for the protection of Industrial Property with effect from Dec. 7, 1998. Patent Cooperation Treaty (PCT) with effective from Dec. 7, 1998. TYPES OF PATENTS y y y Ordinary Patent Patents of addition Convention

WHO CAN APPLY Application may be made, either alone or jointly with another, by the inventor, assignee, legal representative of deceased inventor or assignee. The inventor is entitled to be mentioned in the patent if he applies to do so. Application may be made jointly by two or more corporations as assignees. DOCUMENTS REQUIRED FOR FILING AN APPLICATION y y Application form in triplicate. Provisional or complete specification in triplicate. If the provisional specification is filed it must be followed by complete specification within 12 months (15 months with extension). Drawing in triplicate (if necessary). Abstract of the invention (in triplicate). Information and undertaking listing the number, filing date and current status of each foreign patent application in duplicate.

y y y

y y y y

Priority document (if priority date is claimed). Declaration of inventorship where provisional specification is followed by complete specification or in case of convention application. Power of attorney (if filed through Patent Agent). Fee in cash/by local cheque/by demand draft.

APPROPRIATE OFFICE FOR FILING AN APPLICATION Application is required to be filed according to the territorial limits where the applicant or the first mentioned applicant in case of joint applicants for a patent normally resides or has domicile or has a place of business or the place from where the invention actually originated .If the applicant for the patent or party in a proceeding having no business, place or domicile in India., the appropriate office will be according to the address of service in India given by the applicant or party in a proceeding. EXAMINATION & PUBLICATION All the applications for patent accompanied by complete specification are examined substantively. A first examination report stating the objection(s) is communicated to the applicant or his agents. Application or complete specification may be amended in order to meet the objection(s). Normally all the objections must be met within 15 months from the date of first examination report. Extension of time for three months is available, but application for extension therefore must be made before the expiry of normal period of 15 months. If all the objections are not complied with within the normal period or within the extended period the application will be deemed to have been abandoned. When the application is found to be suitable for acceptance it is published in the gazette of India (Part III, Section2). It is deemed laid open to the public on the date of publication in the gazette of India. OPPOSITION Notice of opposition must be filed within four months of notification in the Gazette. Extension of one month is available, but must be applied for before expiry of initial four month period. GRANT OR SEALING OF PATENT If the application is not opposed or the opposition is decided in favour of the applicant or is not refused the patent is granted or sealed on payment of sealing fee within 6 months from the date of advertisement. However, it is extendable by three months. REGISTER OF PATENTS The Register of Patents will be kept in the Patent Office and its branch offices. Register of Patents can be inspected or extract from it can be obtained on payment of prescribed fee. Register of Patents contains full details of the Patent which include Patent number, the names

and addresses of the patentee; notification of assignment etc.; renewals, particulars in respect of proprietorship of patent etc. Q 10. Discuss the various Rights of a Patentee ? Ans: RIGHTS OF PATENTEE A patent grant gives the patentee the exclusive right to make or use the patented article or use the patented process. He can prevent all others from making or using the patented process. A patentee has also the right to assign the patent, grant licenses under, or otherwise deal with it for any consideration. These rights created by statute are circumscribed by various conditions and limitations. RENEWAL FEE Renewal fees are payable every year. The first renewal fee is payable for third year of the patents life, and must be paid before the patents second anniversary. If the patent has not been issued within that period, renewal fees may be accumulated and paid immediately after the patent is sealed, or within three months of its recordal in the Register of the Patents. Date of payment of Renewal fees is measured from the date of the patent. Six months grace is available with Extension fee. No renewal fees are payable on patents of addition, unless the original patent is revoked and the patent of addition is converted into an independent patent; renewal fees then become payable for the remainder of the term of the main patent. No renewal fees are payable during the pendency of the application for a patent; renewal fees that become overdue during pendency are payable upon sealing within three months of recordal in the Patent Register. WORKING Annual reports as to the extent of working, by every patentee and licensee, are a statutory requirement and must be submitted by March, 31 each year for the previous year ending December, 31. COMPULSORY LICENSE AND LICENSE OF RIGHT On failure to work a patent within three years from the date of its sealing, an interested party may file petition for grant of a compulsory license. Every patent for an invention relating to a method or process for manufacture of substances intended for use, or capable of being used, as food, medicines, or drugs, or relating to substances prepared or produced by chemical process (including alloys, optical glass, semi-conductors and inter-metallic compounds) shall be deemed to be endorsed "Licenses of Right" from the date of expiry of three years from the date of sealing the patent.

ASSIGNMENT Applications must be filed on the prescribed form with the Controller for the registration of assignments and any other documents creating an interest in a patent in order for them to be valid. In order to be valid, an assignment must be recorded within six months from the date of the document. A six-months extension may be obtained. LICENSE Applications must be filed on the prescribed form with the Controller for the registration of licenses and any other documents creating an interest in a patent in order for them to be valid. A license must be recorded within six months from the date of the document. DURATION A patent lasts for 14 years from the date of filing the complete specification (if an application is filed with provisional specification on January 1, 1989, and a complete specification is filed on January 1, 1990, the duration is counted from January 1, 1990). However, for food, drug and insecticide patents, the life is seven years from the date of complete specification, or five years from date of sealing, whichever is shorter. RESTORATION Application for restoration of a patent that lapses due to nonpayment of renewal fees must be made within one year of lapse. If an overdue annuity is not paid within the extension period, the one-year period for seeking restoration commences from the date of recordal. INFRINGEMENT Infringement can consist of taking away essential features of the patented invention; utilizing claimed features; copying patented substances; mechanical equivalence; taking part of the invention. while the patent is in force. Use by the government or for government purposes is not infringement. Such use must be paid for on terms to be agreed upon before or after use. Accidental or temporary use, use for research, use on foreign vessels, do not constitute infringement. Q 11. What are the different types of Cyber Crimes ? Ans: The categories of cyber-crime are: Financial - crimes which disrupt businesses' ability to conduct 'e-commerce' (or electronic commerce).

Piracy - the act of copying copyrighted material. The personal computer and the Internet both offer new mediums for committing an 'old' crime. Online theft is defined as any type of 'piracy' that involves the use of the Internet to market or distribute creative works protected by copyright. Hacking - the act of gaining unauthorized access to a computer system or network and in some cases making unauthorized use of this access. Hacking is also the act by which other forms of cyber-crime (e.g., fraud, terrorism, etc.) are committed. Cyber-terrorism - the effect of acts of hacking designed to cause terror. Like conventional terrorism, `e-terrorism' is classified as such if the result of hacking is to cause violence against persons or property, or at least cause enough harm to generate fear. Online Pornography - There are laws against possessing or distributing child pornography. Distributing pornography of any form to a minor is illegal. The Internet is merely a new medium for this `old' crime, but how best to regulate this global medium of communication across international boundaries and age groups has sparked a great deal of controversy and debate. In Schools - While the Internet can be a unique educational and recreational resource for children, it is important that they are educated about how to safely and responsibly use this powerful tool. The founding goal of B4USurf is to encourage empowering children through knowledge of the law, their rights, and how best to prevent misuse of the Internet. TYPES OF CYBERCRIME Financial :

Public confidence in the security of information processed and stored on computer networks and a predictable environment of strong deterrence for computer crime is critical to the development of 'e-commerce' (or electronic commerce) , or commercial transactions online. Companies' ability to participate in e-commerce depends heavily on their ability to minimize e-risk. Risks in the world of electronic transactions online include viruses, cyber attacks (or distributed denial of service (DDOS) attacks) such as those which were able to bring Yahoo, eBay and other websites to a halt in February 2000, and e-forgery. There also have been other highly publicized problems of 'e-fraud' and theft of proprietary information in some cases even for ransom ('e-extortion'). Piracy :

The software industry plays a leading role in creating products that have vastly improved our lives and work environment. Unfortunately, software theft, or piracy, has had a negative impact on the global marketplace and the ability to create new products. Copying in the workplace, counterfeiting and various forms of illegal distribution cost the Asia Pacific region US$11.6 billion in 2006 (Fourth Annual BSA and IDC Global Software Piracy Study. This study covers all packaged software that runs on personal computers, including desktops, laptops, and ultraportables, including operating systems, systems software such as databases and security packages, business applications, and consumer applications such as PC games, personal finance, and reference software. The study does not include other types of software such as that which runs on servers or mainframes or software sold as a service.). Furthermore, the unauthorized electronic distribution and sale of copyrighted works over the Internet threatens to make these problems seem almost quaint by comparison. Legal and cultural frameworks to protect creative works online, including computer software, must be identified and built to encourage creativity and growth. Hacking :

Modern-day graffiti has moved beyond scribbles on monuments and subway cars and now takes the form of defacing websites. This may be done for personal notoriety, the challenge, or a political message just as with traditional defacement of property, but this new form of exploit is no joking matter. In addition to the obvious economic threats of hacking there is also real physical danger which can be caused by hacking into computer networks. Cyber-Terrorism :

Cyber-terrorism is distinguished from other acts of commercial crime or incidents of hacking by its severity. Attacks against computer networks or the information stored therein which result in "violence against persons or property, or at least cause enough harm to generate fear" are to be considered cyber-terrorism attacks according to congressional testimony from Georgetown University professor Dorothy Denning. "Attacks that disrupt nonessential services or that are mainly a costly nuisance" are not classified as cyber-terrorist attacks by her definition. Pornography :

Children's exposure to pornography while online has become a political topic with various family-oriented groups seeking to prevent children's access to such sites.

Q 12. Explain the Concept of Digital Signature with relevance to IT Act. Ans: A digital signature scheme typically consists of three algorithms: A key generation algorithm that selects a private key uniformly at random from a set of possible private keys. The algorithm outputs the private key and a corresponding public key. A signing algorithm that, given a message and a private key, produces a signature. A signature verifying algorithm that, given a message, public key and a signature, either accepts or rejects the message's claim to authenticity. Two main properties are required. First, a signature generated from a fixed message and fixed private key should verify the authenticity of that message by using the corresponding public key. Secondly, it should be computationally infeasible to generate a valid signature for a party who does not possess the private key. Digital signatures are often used to implement electronic signatures, a broader term that refers to any electronic data that carries the intent of a signature, but not all electronic signatures use digital signatures In some countries, including the United States, India, and members of the European Union, electronic signatures have legal significance. However, laws concerning electronic signatures do not always make clear whether they are digital cryptographic signatures in the sense used here, leaving the legal definition, and so their importance, somewhat confused. Digital signatures employ a type of asymmetric cryptography. For messages sent through a nonsecure channel, a properly implemented digital signature gives the receiver reason to believe the message was sent by the claimed sender. Digital signatures are equivalent to traditional handwritten signatures in many respects; properly implemented digital signatures are more difficult to forge than the handwritten type. Digital signature schemes in the sense used here are cryptographically based, and must be implemented properly to be effective. Digital signatures can also provide non-repudiation, meaning that the signer cannot successfully claim they did not sign a message, while also claiming their private key remains secret; further, some nonrepudiation schemes offer a time stamp for the digital signature, so that even if the private key is exposed, the signature is valid nonetheless. Digitally signed messages may be anything representable as a bitstring: examples include electronic mail, contracts, or a message sent via some other cryptographic protocol Q 13. Write Salient features of Consumer Protection Act 1986. Ans: Salient features of the Act are: 1) The Act aims to provide better and all-round protection to consumers. 2) In terms of geographical application, it applies to the whole of India except the State of Jammu and Kashmir.

3) It applies to all goods and services unless otherwise expressly notified by the Central Government. 4) It is indeed a very unique and highly progressive piece of social welfare legislation and is acclaimed as the magna carta of Indian consumers. The Act has made the consumer movement really going and more powerful, broad-based and effective and peopleoriented. In fact, the Act and its Amendment in 1993 have brought fresh hopes to the beleaguered Indian consumer. This is the only law which directly pertains to market place and seeks to redress complaints arising from it. Even prior to 1986, there were in force number of laws which could be interpreted in favour of the consumers. But, this Act is most powerful piece of legislation the consumer has had before 1986. Its provisions are For very comprehensive and highly efficacious. In fact, it provides more effective protection to consumers than any corresponding legislation in force even in countries which are considered to be much more advanced. It provides effective safeguards to the consumers against different types of exploitation such as defective goods, unsatisfactory (or deficient) services and unfair trade practices.

Q 14. Who are the Settlement Machinery in the Consumer Protection Act ? Ans: For enforcement of the rights of the consumers, the Act has created special consumer Courts. As Act provides for a three-tier consumer grievance redressal machinery with the District Forums at the base, the Slate Commission at the middle level and the National Commission at the apex level. The State and national level bodies also function as appellate authorities. Any verdict given by the National Commission can be challenged in the Supreme Court. The cost of goods or services and compensation asked for is the criterion for filing the complaint with the above Redressal Fora. The Redressal Fora constitute a quasi-judicial machinery to provide speedy and simple redress to consumers. The Redressal Foras are not trammeled by any technicalities or rules of complicated or eleborate procedure. They are merely to observe the basic rules of natural justice. No court fee or any other charge is to be paid in respect of any complaint or petition of appeal or revision, however high be the value of its subject matter. Thus, the Act provides a simple, speedy and inexpensive redressal of consumer grievances

Q 15.Who is a Consumer under The Consumer Protection Act ?

Ans: S.2 (1) (d) defines the term consumer. It means miy of the following persons: i) A person who huys any goods for a consideration. It also includes any user of such goods when such use is made with the approval of the buyer. But it does not include a person who obtains such goods for re-sale or for any commercial purpose. The Amendement Act, 1993 has added the following Explanation: "Commercial purpose" does not include use by a consumer of goods bought and used by him exclusively for the purpose of earning his livelihood, by means of a self-employment. ii) A person who hires or avails of any services for a consideration. It also includes any beneficiary of such services other than the person who hires or avails of the services for consideration when such services are availed of with the approval of the first mentioned person. The consideration for the purchase of goods or hiring or availing of the services may have been paid or promised or partly paid and partly promised, or under any system of deferred payment.

Therefore, to be a 'consumer' under the Act i) the goods or services must have been purchased or hired or availed of for consideration which has been paid in full or in part or under a system of deferred payment, i.e., in respect of hirepurchase transactions; ii) goods purchased should not be meant for re-sale or for a commercial puypose. Thus, where I a vehicle has been purchased for the purpose of running it as a taxi, the purpose being commercial the buyer shall not be a 'consumer' under the Act [Western India State Motors v. Subhag Ma1 Meena and Others (1989)l. However, if the taxi is used by the buyer to earn his livelihood, the buyer will be considered as a consumer. Any economic activity or transaction carried on with the motive of making profit would fall under the term commercial purpose, irresp&fiCe of the scale of operations In S. Pattahhiraman v. SP. ST. Palaniappan (Order dt. 3.5.1994), the National Commission ruled that a chartered accountant who is in practice and who purchased a computer for being installed in his office, cannot be regarded as a consumer under the Consumer Protection Act.

Q 16. What are the consequences of Breach of Contract under Indian Contract Act ? Ans: When a contract has been broken, the party who suffers by such breach is entitled to receive, form the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.

Such compensation is not to be given for any remote and indirect loss of damage sustained by reason of the breach. Compensation for failure to discharge obligation resembling those created by contract : When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it and had broken his contract. Explanation : In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by non-performance of the contract must be taken into account.

Q 17. What is Cyber Stalking ? Ans: Cyber Stalking can be defined as the repeated acts harassment or threatening behavior of the cyber criminal towards the victim by using Internet services. Stalking in General terms can be referred to as the repeated acts of harassment targeting the victim such as y y y y y Following the victim Making harassing phone calls Killing the victims pet Vandalizing victims property Leaving written messages or objects

Stalking may be followed by serious violent acts such as physical harm to the victim and the same has to be treated and viewed seriously. It all depends on the course of conduct of the stalker. Cyber-stalking refers to the use of the Internet, e-mail, or other electronic communications device to stalk another person. It is a relatively new form of harassment, unfortunately, rising to alarming levels especially in big cities like Mumbai.

Q 18. Explain The Doctrine of Ultra Vires. Ans: A company has the power to do all such things as are-

y y y y y y

Authorized to be done by the Companies Act, 1956; Essential to the attainment of its objects specified in the Memorandum; Reasonably and fairly incidental to its objects Everything else is ultra vires the company Ultra means beyond and vires means powers It means that the doing of the act is beyond the legal power and authority of the company.

The purpose of these restrictions is to protectInvestors in the company so that they may know the objects in which their money is to be employed; Creditors in the by ensuring that the companys funds are not wasted in unauthorized activities Ultra vires act is void: If an act is ultra vires the company, it does not create any legal relationship It is not necessary that an act to be considered ultra vires must be illegal; it may or may not be The main feature of the doctrine of ultra vires is that a company being a corporate person should not be (fined or punished) for its own acts or acts of its agents Whether a particular act on the part of a company is within its powers is a question of fact and is decided on the construction of the terms of the Memorandum Ultra vires the directors: If an act transaction is ultra vires the directors (i.e., beyond their powers but within the powers of the company), the shareholders can ratify it by a resolution in a general meeting If an act is within the powers of the company, any irregularities may be cured by the consent of the shareholders Ultra vires the articles: If an act or transaction is ultra vires the articles, the company can ratify it by altering the articles by a special resolution

Q 19. Define Memorandum of Association. Name & Explain its Contents in detail. Ans: Memorandum of association is a fundamental document. It is the charter of the company and defines its reason for existence. It regulates the external affairs of the company in relation to outsiders. Its purpose is to enable shareholders to know what its permitted range of enterprise is. It is the area beyond which the actions of the company cannot go. Following are the contents of Memorandum of Association : 1.Nameclause: The Name(identity)of the company should be clearly mentioned. The company whether Public

limited or Private limited should be mentioned. The name should not be relevent/resembling the existing company.

2.Place clause: The place(s) where the company is actually located should be mentioned. The location of Headquarter of the company and its existing branches should be clearly titled. The locations of new branches where the the company will be incorated should be mentioned.

3.Object clause: The company is restricted within the objectives of itself,prescribed in MoA. The company should mention its Main objectives, Incidental or Ancilliary objectives and Other objectives. The main objects enlists the core purposes of the company.The Ancilliary objects enlists the objects that determine the attainment of the main objects.The Other objects enlists the subsidiary objects or the objects for which the company will be incorparated in future.

4.Liability clause: The Liability of the company whether limited or unlimited *to its members , to its shareholders, to the Board of directors* should be mentioned.

5.Capital clause: The Authorised Capital of the company including the value of all Assets(acquired or to be acquired by the company in future) should be mentioned in the MoA.The types of shares into which the capital would be divided and treatment of those shares in case of Capital Appreciation or Depreciation.

6.Association clause: The company in its Association clause enlists the Names, Addresses & Descriptions of the subscibers to its shares(Equity only),Number of equity shares held by each of them and the Signatures of the respective Shareholders. It ensures the Bond between the company and its owners.

Q 20. Distinguish between Shares & Debentures. Ans: The following are the main difference between a debenture and a share: A person having the debentures is called debenture holder whereas a person holding the shares is called shareholder.

Debenture holder is a creditor of the company and cannot take part in the management of the company while a shareholder is the owner of the company. It is the basic distinction between a debenture and a share. Debenture holders will get interest on debentures and will be paid in all circumstances, whether there is profit or loss will not affect the payment of interest on debentures. Shareholder will get a portion of the profits called dividend which is dependent on the profits of the company. It can be declared by the directors of the company out of profits only. Shares cannot be converted into debentures whereas debentures can be converted into shares. Debentures will get priority is getting the money back as compared to shareholder in case of liquidation of a company. There are no restriction on issue of debentures at a discount, whereas shares at discount can be issued only after observing certain legal formalities. Convertible debentures which can be converted into shares at the option of debenture holder can be issued whereas shares convertible into debentures cannot be issued. There can be mortgage debentures i.e. assets of the company can be mortgaged in favor of debenture holders. But there can be no mortgage shares. Assets of the company cannot be mortgaged in favor of shareholders.