Session – 1

EPGP -13
2020-21
Business has only two functions -
marketing and innovation.
Law and Business
Contd..
Applicable to business owners, managers, and other
professionals while taking business decisions.

Plethora of laws apply to people, similarly, there is a huge

body of law that applies to business. 

- to define unacceptable behavior,

- to provide certainty and stability,
- to protect the public, and
- to provide a mechanism for businesses to resolve disputes.
Legally Astute Manager
Legally astute managers could serve as a:
(i) good citizen by honoring the letter and spirit of
law,
(ii) strong competitors by respecting positive
economic force of a level playing field,
(iii) forward-thinking executives by taking steps to
harness and shape law,
(iv) prudent business people they manage risk by
ensuring that their companies comply with the
laws applicable to their business.
Public Policy Objectives

 Promoting economic growth through:

protecting property rights
enforcing contracts
facilitating capital markets (choice of business entity, taxes,
bankruptcy laws, etc..,)
Allocate risks (product liability, environmental liability,
liability for ultrahazardous activities, respondent superior)
create incentives for innovation, promote liquid and skilled
labour markets
provide subsidies, tax incentives and infrastructure
promote free trade
Business Decision Making & Law
 Applying law while taking major business decisions by
managers are very essential

 Relevance of Law in all the Five stages of business

development –
(i) evaluating the opportunity and defending the value proposition
(ii) assembling the team
(ii) raising capital
(iv) developing, producing and marketing their product and service
(v) harvesting the opportunity through sale of the venture, and initial
public offering of stock, etc.,
Implications in Business Entities

Internal organization
- the choice of business entity and the internal relationships
with employees, officers, directors, and investors.
-It affects the firm’s resources, whether physical, human, or
organizational that have the potential of providing sustained
competitive advantage.

External relationships
with customers, suppliers, competitors, and commentators,
that is, players who cause customers to value another firm’s
products and services more.
While in corporate hierarchy
Spotting legal issues before becoming legal problems.

Legal nomenclatures and principles most relevant to their

business as much as lawyers must sufficiently understand
the business model and its execution.

Lawyers and Engineers have lots of commonalities

because Lawyers design social structures and devices in a
way that parallels engineers’ designs of physical structures
and devices.
Contracts, companies, trusts, constitutions, and statutes are the
buildings, bridges, machinery, roads, and railways of social life, etc.,
 Law as a social phenomenon, is socially omnipresent, it affects all
of us one way or the other

 Ignorantia juris non excusat - legal maxim which simply means

ignorance of law is not an excuse.

 State which is sovereign has a duty to maintain and enforce law an

order in a society

 reason - people surrender their rights to the state based on “social

contract” theory

 The best example is the Preamble of the Constitution of India, 1950

Law and Indian Constitution

 The Architect and Father of Indian Constitution - Dr. B R

Ambedkar - opined that:
- “Law and order are the medicine of the body politic
and when the body politic gets sick, medicine must be
administered.”

 “Constitution is not a mere lawyers document, it is a

vehicle of Life, and its spirit is always the spirit of Age.”
What is “Law" in India?

 Definition of Law as per Article 13 of the Constitution of

India, 1950:
- Law includes any ordinance, order, bye-law, rule,
regulation, notification, custom or usage having in the
territory of India the force of law”

 Article 141: The law declared by the Supreme Court shall

be binding on all courts within the territory of India
Objective of Law

 Object of law is order

- In the Indian Context it is to establish Socio - Economic
Justice and remove existing imbalance in the socio-
economic structure.

 Sources of Law:
(i) Constitution and Statutes or Legislations,
(ii) Judicial Decisions (Judges make law in India – Article 141 of
the Constitution),
(iii) Regulations (Administrative orders) reflects society’s
definition of acceptable behaviour that is necessary for economic
prosperity
Jurisdiction of Courts
Indian courts have power, right and authority to
interpret and apply existing law

Original Jurisdiction (Article 32 and 226 of the

Constitution of India, 1950) and Appellate Jurisdiction
(Appeal provisions)

Constitutional Law, Civil Law, Criminal Law and

Mercantile Law

Based on territorial, subject-matter, pecuniary and

personal jurisdiction.
Locus Standi
 Who can come before the Court?
 Persons including natural, legal and juridical person.
-A company is a legal person.
 Public Interest Litigation/Socio-Action Litigation

 Cases are decided based on Principles of natural justice

(i) audi alteram partem (hear the other side)
(ii) nemo debbet esse judex in propria causa (no one shall be a judge
of his own cause)
(iii) Rule against Bias (All decisions must be reasoned which
means speaking orders)
Rule of Law
The concept of rule of law is generally associated with:
(a) presumption of innocence - all individuals are innocent until
proven guilty;
(b) double jeopardy - individuals should not be punished twit for
the same offence committed;
(c) legal equality - all individuals are given the same rights without
distinction to their social stature, religion, political opinions,
etc.; (Article 14 of the Constitution of India, 1950) and
(d) habeas corpus - term meaning 'you must have the body'.
What we Learn in Business Laws
Business Business Business Protecting Brand
Contracts Transactions Organizations Equity
Between Individuals Commodities/Goods/ Partnerships Goodwill among
and entities Products Customers – Product
Liability
-Indian Partnership Act,
-Indian Contract Act, - Sale of Goods Act, 1930 1932
1872 -Limited Liability - Consumer Protection Act,
Partnership Act, 2008 1986
Between companies Mode of transactions Companies & Sole Brand Values and Ideas
(Cash/online) Proprietorship
- Intellectual Property Laws
- Competition Act, - Negotiable - Companies Act, 2013 (Patents, trademark, design,
2002 Instruments Act, 1881 copyright, geographical
indications, trade secrets,
etc..)