revised proof - amazon s3 · 2016-11-03 · revised proof modification date: march 20, 2014 5:53 pm...

Revised ProofModification date: March 20, 2014 5:53 PMBook name: Business LawBook author: Avtar Singh

Edition & Year: 10th edn, 2013Current page no.: ix; Last page no.: lviChap No. & File: 1, 07_content; 14'2'20; 16'46'02©/Rights of Publication: EBC Publishing Pvt. Ltd.

Contents

Section-wise Contents . . . . . . . . . . . . . . . . . . lvii

Part IC O N T R A C T

1. Agreement, Contract, Proposal and Acceptance . . . . . . . . . . . . . . . . . . . . . . . . 3Definition of Contract . . . . . . . . . . . . . . 3

Agreement . . . . . . . . . . . . . . . . . . . . . . . 3Enforceable by Law . . . . . . . . . . . . . . . 3Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Proposal or Offer . . . . . . . . . . . . . . . . . 4

Communication of proposal . . . . . . 4Implied proposals . . . . . . . . . . . . . . . 4

Intention to Contract . . . . . . . . . . . . . . 5Family and social matters . . . . . . . . 6Objective test of “intention” . . . . . . 6Business matters . . . . . . . . . . . . . . . . 6

General Offers . . . . . . . . . . . . . . . . . . . . 7Proposals acceptable by conduct . . 7General offer of continuing

nature . . . . . . . . . . . . . . . . . . . . . . . 8Offer and Invitation to Treat . . . . . . . . 8

Catalogues and display of goods . . 8Announcement to hold auction . . . 9Definiteness of proposal . . . . . . . . . 9Free distribution of articles . . . . . . 10Voluntary retirement scheme

(VRS) . . . . . . . . . . . . . . . . . . . . . . . 10Offers in Standard Form Contracts . 10

1. Reasonable notice of terms . . . . 112. Notice should be

contemporaneous with contract . . . . . . . . . . . . . . . . . . . . . 12

3. Theory of fundamental breach . 124. Strict construction . . . . . . . . . . . 135. Liability in tort . . . . . . . . . . . . . . 146. Unreasonable terms . . . . . . . . . . 14

Power of removal simpliciter in contract of employment . . . . . . . 14

7. Exemption clauses and third parties . . . . . . . . . . . . . . . . . . . . . . 15

Acceptance . . . . . . . . . . . . . . . . . . . . . . . . 16Communication of Acceptance . . . . 16

By external manifestation or overt act . . . . . . . . . . . . . . . . . . . . 16

Acceptance by conduct . . . . . . . . . 16Communication to offeror . . . . . . . 16Communication from acceptor . . 17When communication not

necessary . . . . . . . . . . . . . . . . . . . 17Mode of communication—

Acceptance should be in prescribed manner . . . . . . . . . . . 17

Where no manner prescribed . . . . 18When Contract Concluded? . . . . . . . 18

Communication complete when posted . . . . . . . . . . . . . . . . . . . . . . 18

When parties in direct communication . . . . . . . . . . . . . . 19

Supreme Court approval of Entores ruling . . . . . . . . . . . . . . . 20

Absolute and Unconditional . . . . . . . 20Counter proposals . . . . . . . . . . . . . 20Partial acceptance . . . . . . . . . . . . . . 20Inquiry into terms of proposal . . . 21Acceptance with condition

subsequent . . . . . . . . . . . . . . . . . . 21Acceptance of counter-proposal . 21Provisional acceptance . . . . . . . . . 21

Acceptance and Withdrawal of Tenders . . . . . . . . . . . . . . . . . . . . . . . 22No obligation to accept lowest

tender . . . . . . . . . . . . . . . . . . . . . . 23Lapse of Offer . . . . . . . . . . . . . . . . . . . 23

1. Notice of revocation . . . . . . . . . . 23


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x BUSINESS LAW

Revocation of time-bound proposals . . . . . . . . . . . . . . . . . . . 24

Withdrawal of general proposals . 24Revocation of a bid . . . . . . . . . . . . . 242. Lapse of time . . . . . . . . . . . . . . . . 253. By failure to accept condition

precedent . . . . . . . . . . . . . . . . . . . 254. By death or insanity of offeror . 25

Revocation of Acceptance . . . . . . . . . 25

2. Consideration . . . . . . . . . . . . . . . . . . . . . 26Definition . . . . . . . . . . . . . . . . . . . . . . . . . 26

At the desire of the promisor . . . . 27Act done at request . . . . . . . . . . . . . 27Promises of charitable nature . . . . 27Unilateral agreements . . . . . . . . . . 27Revocation of unilateral

promises . . . . . . . . . . . . . . . . . . . . 28Promissory Estoppel and

Government Agencies . . . . . . . . . . 28Privity of Contract and of

Consideration . . . . . . . . . . . . . . . . . 28Promisee or any other person . . . 28Position of non-party beneficiary . 29Privity of consideration . . . . . . . . . 29Privity of contract . . . . . . . . . . . . . . 30Position in India . . . . . . . . . . . . . . . 30Exceptions to “privity rule” . . . . . 311. Trust or charge . . . . . . . . . . . . . . 312. Marriage settlement, partition

or other family arrangements . . 323. Acknowledgement or estoppel . 32

“ … Has Done or Abstained from Doing … ” . . . . . . . . . . . . . . . . . . . . . 33Past consideration . . . . . . . . . . . . . . 331. Past voluntary service . . . . . . . . 332. Past service at request . . . . . . . . 33Past and executed consideration . 34Executory consideration . . . . . . . . 34

Such act, Abstinence or Promise is Called Consideration . . . . . . . . . . . . . 34

Consideration Must be of Some Value . . . . . . . . . . . . . . . . . . . . . . . . . 34But need not be adequate . . . . . . . 34Inadequacy as evidence of

imposition . . . . . . . . . . . . . . . . . . 35Forbearance to sue . . . . . . . . . . . . . 35

Performance of Existing Duties . . . . 35Performance of legal obligations . 35

Performance of contractual obligations . . . . . . . . . . . . . . . . . . 36Pre-existing contract with

promisor . . . . . . . . . . . . . . . . . . 36Promise to pay less than

amount due . . . . . . . . . . . . . . . 361. Part-payment by third party . 372. Composition . . . . . . . . . . . . . . 373. Payment before time . . . . . . . 374. Promissory estoppel . . . . . . . . 37Pre-existing contract with

third party . . . . . . . . . . . . . . . . 37Exceptions to Consideration . . . . . . . 38

1. Natural love and affection . . . . . 382. Past voluntary service . . . . . . . . 383. Time-barred debt . . . . . . . . . . . . 39Gift actually made [S. 25

Explanation I] . . . . . . . . . . . . . . . 39Inadequacy of Consideration [S. 25

Explanation II] . . . . . . . . . . . . . . . . 39

3. Capacity to Contract . . . . . . . . . . . . . . 40Minor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Age of majority . . . . . . . . . . . . . . . . 40Nature of Minor’s Agreement . . . . . 40Effects of Minor’s Agreement . . . . . . 41

No estoppel against minor . . . . . . 41No liability in contract or in tort

arising out of contract . . . . . . . . 41Doctrine of restitution . . . . . . . . . . 41Relief under Specific Relief Act . . 42Beneficial contracts . . . . . . . . . . . . . 43Contracts of marriage . . . . . . . . . . 44Contracts of apprenticeship . . . . . 45Ordinary trade contracts not

included in beneficial contracts . . . . . . . . . . . . . . . . . . . . 45

Option to retire from beneficial contracts on majority . . . . . . . . . 45

Ratification . . . . . . . . . . . . . . . . . . . . 45Liability for necessaries [S. 68] . . . 46Meaning of necessaries . . . . . . . . . 46Nature of liability . . . . . . . . . . . . . . 47

Persons of Unsound Mind [S. 12] . . . . . 47

4. Free Consent . . . . . . . . . . . . . . . . . . . . . . 48Coercion . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Acts forbidden by Indian Penal Code . . . . . . . . . . . . . . . . . . . . . . . 48


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CONTENTS xI

Detention of property . . . . . . . . . . 49Undue Influence [S. 16] . . . . . . . . . . . 49

Ability to dominate will of other . 49Relations of dominion over

others . . . . . . . . . . . . . . . . . . . . . . 49Real or apparent authority . . . . . . 50Fiduciary relation . . . . . . . . . . . . . . 50Mental distress . . . . . . . . . . . . . . . . 50Urgent need of money, no

distress . . . . . . . . . . . . . . . . . . . . . 51Statutory compulsion, no

distress . . . . . . . . . . . . . . . . . . . . . 51Burden of proof . . . . . . . . . . . . . . . . 51Presumption of undue influence . 511. Unconscionable bargains . . . . . . 51Unconscionableness in money-

lending transactions . . . . . . . . . . 522. Inequality of bargaining

power or economic duress . . . . 523. Contracts with pardanashin

women . . . . . . . . . . . . . . . . . . . . . 52Rescission [S. 19-A] . . . . . . . . . . . . . . . 52Misrepresentation [S. 18] . . . . . . . . . . 53

1. Unwarranted statements . . . . . . 532. Breach of duty . . . . . . . . . . . . . . . 533. Inducing mistake about

subject-matter . . . . . . . . . . . . . . . 54Suppression of material and

vital facts . . . . . . . . . . . . . . . . . . . 54Inducement . . . . . . . . . . . . . . . . . . . 55Expression of opinion . . . . . . . . . . 55Means of discovering truth with

ordinary diligence . . . . . . . . . . . 56Fraud [S. 17] . . . . . . . . . . . . . . . . . . . . . 56

Assertion of facts without belief in their truth [S. 17(1)] . . . . . . . . . 56

Active concealment [S. 17(2)] . . . . . 56Concealment by mere silence is

no fraud . . . . . . . . . . . . . . . . . . . . 56When silence is fraud . . . . . . . . . . . 571. Duty to speak—Contracts

uberrima fides. . . . . . . . . . . . . . . 572. Where silence is deceptive . . . . 573. Change of circumstances . . . . . 574. Half truths . . . . . . . . . . . . . . . . . . 57Promise made without intention

of performing [S. 17(3)] . . . . . . . . 57Any other act fitted to deceive

[S. 17(4)] . . . . . . . . . . . . . . . . . . . . . 58

Any act or omission specially declared to be fraudulent [S. 17(5)] . . . . . . . . . . . . . . . . . . . . . 58

Distinction Between Fraud and Misrepresentation . . . . . . . . . . . . . 58

Right of Rescission and Its Limits [S. 19] . . . . . . . . . . . . . . . . . . . . . . . . . 581. By affirmation . . . . . . . . . . . . . . . 592. By lapse of time . . . . . . . . . . . . . . 593. Rights of third parties . . . . . . . . 59

Method of Rescinding Contract [S. 66] . . . . . . . . . . . . . . . . . . . . . . . . . 59Restitution . . . . . . . . . . . . . . . . . . . . 59

Damages for Innocent Misrepresentation . . . . . . . . . . . . . 59

Mistake . . . . . . . . . . . . . . . . . . . . . . . . . 60Definition of consent . . . . . . . . . . . 60Definition of mistake . . . . . . . . . . . 60What constitutes an essential

fact . . . . . . . . . . . . . . . . . . . . . . . . . 60Mistake as to identity—

Assumption of false name . . . . 60Mistake of identity caused by

fraud . . . . . . . . . . . . . . . . . . . . . . . 61Mistake as to subject-matter . . . . . 611. Non-existent subject-matter . . . 612. Mistake as to title or rights . . . . 623. Different subject-matters in

mind . . . . . . . . . . . . . . . . . . . . . . . 624. Mistake as to substance of

subject-matter . . . . . . . . . . . . . . . 62Mistake as to quality of subject-

matter . . . . . . . . . . . . . . . . . . . . . . 63Mistake as to nature of promise . . 63Where contract fails to express

parties’ intention . . . . . . . . . . . . . 63Documents mistakenly signed

or non est factum . . . . . . . . . . . . 63Limitations . . . . . . . . . . . . . . . . . . . . . . 64

1. Mistake of both parties . . . . . . . 642. Erroneous opinion . . . . . . . . . . . 653. Mistake of fact and not of law . 65

5. Legality of Object . . . . . . . . . . . . . . . . . 66Unlawful Agreements . . . . . . . . . . . . . . 66

Object and consideration . . . . . . . . 661. Forbidden by law . . . . . . . . . . . . 662. Defeat any law . . . . . . . . . . . . . . . 673. Fraudulent . . . . . . . . . . . . . . . . . . 67


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4. Injurious to person or property . . . . . . . . . . . . . . . . . . . . 67

5. Immoral . . . . . . . . . . . . . . . . . . . . 68Dealings with sex workers . . . . . . 68Illegal cohabitation . . . . . . . . . . . . . 68Dancing girls . . . . . . . . . . . . . . . . . . 686. Public policy . . . . . . . . . . . . . . . . 68Heads of public policy—1.

Trading with enemy . . . . . . . . . . 692. Trafficking in public offices . . . . 693. Interference with

administration of justice . . . . . . 69(a) Interference with the course

of justice . . . . . . . . . . . . . . . . . . . . 69(b) Stifling prosecution . . . . . . . . . . 69(c) Maintenance and

“Champerty” . . . . . . . . . . . . . . . . 704. Marriage brokerage contracts . . 705. Unfair or unreasonable

dealings . . . . . . . . . . . . . . . . . . . . 70Void Agreements . . . . . . . . . . . . . . . . 71

Agreements unlawful in part [S. 24] . . . . . . . . . . . . . . . . . . . . . . . 71

Agreements without consideration [S. 25] . . . . . . . . . . 71

Restraint of marriage [S. 26] . . . . . 71Restraint of trade [S. 27] . . . . . . . . . 72Profession, trade or business . . . . 72Collusion between bidders and

tenderers . . . . . . . . . . . . . . . . . . . 73Freedom of press . . . . . . . . . . . . . . . 73Restrictions in lease . . . . . . . . . . . . 73Exceptions . . . . . . . . . . . . . . . . . . . . 73Statutory exceptions—1. Sale of

goodwill . . . . . . . . . . . . . . . . . . . . 732. Partnership Act . . . . . . . . . . . . . . 74Under judicial interpretation—1.

Trade combinations . . . . . . . . . . 742. Solus or exclusive dealing

agreements . . . . . . . . . . . . . . . . . . 753. Restraints upon employees:

During employment . . . . . . . . . . 76After termination of

employment . . . . . . . . . . . . . . . . . 76Protection of trade secrets . . . . . . . 77Restraint of legal proceedings

[S. 28] . . . . . . . . . . . . . . . . . . . . . . . 77Enforcement of contractual

rights not to be restrained . . . . . 78Limitation of time . . . . . . . . . . . . . . 78Effect of amendment . . . . . . . . . . . 78

Forfeiture and surrender of rights . . . . . . . . . . . . . . . . . . . . . . . 78

“Absolutely”: Partial Restriction as to jurisdiction . . . . . . . . . . . . . 79

Exceptions—1. Reference of future disputes to arbitration . . 80

2. Reference of existing questions to arbitration . . . . . . . 81

Uncertain agreements [S. 29] . . . . 81Agreement to agree or negotiate . 81Preliminary negotiations taking

definite shape . . . . . . . . . . . . . . . 81Partial uncertainty: “capable of

being made certain” . . . . . . . . . . 82Lock-out agreement . . . . . . . . . . . . 82Option for renewal of tenancy . . . 82Wagering agreements [S. 30] . . . . . 82Definition of “Wager” . . . . . . . . . . 831. Uncertain event . . . . . . . . . . . . . . 832. Mutual chances of gain or loss . 833. Neither party to have control

over the event . . . . . . . . . . . . . . . 834. No other interest in the event . . 83Speculative transactions . . . . . . . . 83Effects of wagering transactions . 84Collateral transactions . . . . . . . . . . 84

Exceptions . . . . . . . . . . . . . . . . . . . . . . 841. Horse-race . . . . . . . . . . . . . . . . . . 842. Crossword competitions . . . . . . 84

Illegal and Void Agreements . . . . . . 85Unenforceable . . . . . . . . . . . . . . . . . 85Exceptions—1. Where contract

still executory . . . . . . . . . . . . . . . 852. Parties not “in pari delicto” . . . 853. Where recovery possible

without relying on illegal agreement . . . . . . . . . . . . . . . . . . 86

4. Collateral transactions . . . . . . . . 865. Severance . . . . . . . . . . . . . . . . . . . 87

6. Discharge of Contract . . . . . . . . . . . . . 88Modes of Discharge . . . . . . . . . . . . . . . . 88

Discharge by Performance . . . . . . . . 88Performance of contingent

contracts . . . . . . . . . . . . . . . . . . . . 88Where enforcement depends

upon the happening of an event [S. 32] . . . . . . . . . . . . . . . . . 89


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When Performance Depends Upon the Non-happening of an Event [S. 33] . . . . . . . . . . . . . . . . . . . . . . . . . 89

Event Linked with Human Conduct [S. 34] . . . . . . . . . . . . . . . . . 89

Time-bound Contingency . . . . . . . . . 90Impossible Events . . . . . . . . . . . . . . . . 90Parties’ Duty to Perform or Offer

to Perform . . . . . . . . . . . . . . . . . . . . 901. Offer must be unconditional

[S. 38(1)] . . . . . . . . . . . . . . . . . . . . . 912. Proper time and place and

ability to do the whole [S. 38(2)] . . . . . . . . . . . . . . . . . . . . . 91

Who should perform [S. 40] . . . . . 91Performance of Joint Promises . . . . . 92Joint Promisees [S. 45] . . . . . . . . . . . . 93

Either or survivor savings bank account . . . . . . . . . . . . . . . . . . . . . 93

Time and Place for Performance [Ss. 46–50] . . . . . . . . . . . . . . . . . . . . . 93Debtor to seek his creditor . . . . . . 93

Performance of Reciprocal Promises [Ss. 51–54] . . . . . . . . . . . . 94Effect of one party’s default . . . . . 95Alternative promise [S. 58] . . . . . . 96

Time for Performance [S. 55] . . . . . . . 96Time is of essence in commercial

transactions . . . . . . . . . . . . . . . . . 96Construction contracts . . . . . . . . . 96Sale transactions . . . . . . . . . . . . . . . 97Time for reporting . . . . . . . . . . . . . 97Right to seek extension of time . . 97Land and property dealings . . . . . 97Agreement for reconveyance . . . . 98Sale of shares . . . . . . . . . . . . . . . . . . 98Non-commercial matters . . . . . . . . 98Consequences of failure . . . . . . . . 98

Impossibility of Performance and Frustration . . . . . . . . . . . . . . . . . . . . 99Initial impossibility [S. 56] . . . . . . 99Subsequent impossibility [S. 56] . . 99Impossible ab-initio [S. 56] . . . . . . 99Commercial hardship . . . . . . . . . 100

Specific Grounds of Frustration . . . 1001. Destruction of subject-matter . 1012. Change of circumstances . . . . 101Escalation . . . . . . . . . . . . . . . . . . . . 1013. Non-occurrence of

contemplated event . . . . . . . . . 1024. Death or incapacity of party . . 102

5. Government or legislative intervention . . . . . . . . . . . . . . . . 102

6. Intervention of war . . . . . . . . . . 103Effects of Frustration . . . . . . . . . . . . 103

1. Frustration should not be self-induced . . . . . . . . . . . . . . . . . . . . 103

2. Frustration operates automatically . . . . . . . . . . . . . . . 104

3. Adjustment of rights (restitution) . . . . . . . . . . . . . . . . 104

Discovered to be void . . . . . . . . . 104Quantum meruit claims . . . . . . . 104Becomes void . . . . . . . . . . . . . . . . . 105

Appropriation of Payments . . . . . . 1051. Appropriation by debtor . . . . . 1052. Appropriation by creditor . . . . 1063. Appropriation by law . . . . . . . . 106

Discharge by Agreement . . . . . . . . . 106Contracts which need not be

performed [S. 62] . . . . . . . . . . . . 106Novation . . . . . . . . . . . . . . . . . . . . . 1061. Change of parties . . . . . . . . . . . 1072. Substitution of new

agreement . . . . . . . . . . . . . . . . . 107Facilities for Performance [S. 67] . . 108

Interdependent promises . . . . . . 108Rescission and restoration . . . . . 108Remission of performance

[S. 63] . . . . . . . . . . . . . . . . . . . . . . 108Acceptance of less sum . . . . . . . . 108Waiver . . . . . . . . . . . . . . . . . . . . . . . 109Extension of time . . . . . . . . . . . . . 109Accord and satisfaction . . . . . . . . 109Estoppel: Acceptance of final

bill . . . . . . . . . . . . . . . . . . . . . . . . 110Abandonment . . . . . . . . . . . . . . . . 110Material alteration . . . . . . . . . . . . 110

Quasi-contracts or Certain Relations Resembling those Created by Contract . . . . . . . . . . . 110

Rationale . . . . . . . . . . . . . . . . . . . . . . 1111. Supply of necessaries [S. 68] . . 1112. Payment by interested person

[S. 69] . . . . . . . . . . . . . . . . . . . . . . 111Payer must be interested in

making payment . . . . . . . . . . . . 111But should not be bound to pay . 112Defendant should be under legal

obligation to pay . . . . . . . . . . . . 112Payment by one to another . . . . . 112


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3. Liability to pay for non-gratuitous acts [S. 70] . . . . . . . . 112

Not intending to act gratuitously . . . . . . . . . . . . . . . . 112

Service should have been rendered without request . . . . 113

“Lawfully does” . . . . . . . . . . . . . . 114Contract void under Article 299

or otherwise . . . . . . . . . . . . . . . . 114Non-gratuitous acts . . . . . . . . . . . 114Payment for work already done . 115“Enjoys the benefit” . . . . . . . . . . . 115Provision for refund of price . . . 115

4. Finder of Goods [S. 71] . . . . . . . . . 1155. Mistake or Coercion [S. 72] . . . . . 115

Mistake of fact or of law . . . . . . . 115Mistaken payment of taxes . . . . . 116Change of position by payee in

reliance on payment . . . . . . . . . 117Coercion . . . . . . . . . . . . . . . . . . . . . 117Mistake in pay fixation . . . . . . . . 117

Discharge by Breach . . . . . . . . . . . . . . . 117Anticipatory Breach . . . . . . . . . . . . . 117

Acceptance of repudiation by aggrieved party . . . . . . . . . . . . . 118

Consequences of not accepting repudiation . . . . . . . . . . . . . . . . 118

Failure to Perform Promise Wholly . . . . . . . . . . . . . . . . . . . . . . 119Termination by notice . . . . . . . . . 120

Damages for Breach . . . . . . . . . . . . . . . 120Remoteness of Damage . . . . . . . . . . 120

Rules in “Hadley v Baxendale” . 120Special damages only when

party had knowledge of special circumstances . . . . . . . 121

Special circumstances already known . . . . . . . . . . . . . . . . . . . . . 121

Re-examination of the two rules . . . . . . . . . . . . . . . . . . . . . . 122

House of Lords restored original vitality of the two rules . . . . . . 122

Section 73, Contract Act—Section 73 declaratory of “Hadley v Baxendale” rules . . 122

No clause needed to provide for right to compensation . . . . . . . 123

Meaning of market price . . . . . . . 123Agreement to provide finance . . 124Building contracts . . . . . . . . . . . . 124

Measure of Damages . . . . . . . . . . . . 125

Damages are compensatory, not penal . . . . . . . . . . . . . . . . . . . . . . 125

Inconvenience caused by breach . . . . . . . . . . . . . . . . . . . . . 125

Loss caused by misrepresentation . . . . . . . . . . . 125

Nominal damages, no loss situation . . . . . . . . . . . . . . . . . . . 126

Mental Pain and Suffering . . . . . . . 126Photographer’s failure to appear

at wedding . . . . . . . . . . . . . . . . . 127Holiday cases . . . . . . . . . . . . . . . . . 127Solicitor’s failure to take

appropriate steps to protect client’s interest . . . . . . . . . . . . . 127

Loss of pets due to carrier’s negligence . . . . . . . . . . . . . . . . . 127

Demotion of employee without reasonable cause . . . . . . . . . . . . 128

Mental distress caused by negligent professional advice . 128

Contracts for providing peace of mind or preventing mental distress . . . . . . . . . . . . . . . . . . . . 128

Failure by band to attend wedding reception . . . . . . . . . . 128

Refusal to provide motel booked for wedding reception . . . . . . . 129

Damages for breach of confidence . . . . . . . . . . . . . . . . . 129

Injunction for restraining breach of contract . . . . . . . . . . . . . . . . . 129

Writ remedy against termination of dealership . . . . . . . . . . . . . . . 129

Withdrawal of letter of intent and writ remedy . . . . . . . . . . . . 130

Duty to Mitigate . . . . . . . . . . . . . . . . 130Duty of mitigation in auction

sales . . . . . . . . . . . . . . . . . . . . . . . 130Contract of employment . . . . . . . 131Stigma compensation . . . . . . . . . . 131Transactions concerning

property . . . . . . . . . . . . . . . . . . . 131Clause for revision of price . . . . . 132

Liquidated Damages and Penalty [S. 74] . . . . . . . . . . . . . . . . . . . . . . . . 132English Law . . . . . . . . . . . . . . . . . . 132Court’s power to reduce

specified amount . . . . . . . . . . . 132Application to hire-purchase

transactions . . . . . . . . . . . . . . . . 132


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CONTENTS xV

Heavy amount as evidence of penalty . . . . . . . . . . . . . . . . . . . . 133

Fixed figure constitutes ceiling . 133Section 74, Contract Act . . . . . . . . 133Forfeiture of earnest money or

deposit . . . . . . . . . . . . . . . . . . . . 134Where no loss caused . . . . . . . . . . 135Where profit follows . . . . . . . . . . . 135Forfeiture of earnest money only

when reasonable to do so . . . . 135No forfeiture where extra costs

otherwise recovered . . . . . . . . . 135Security money under other

contracts . . . . . . . . . . . . . . . . . . . 136Effect of partial breach . . . . . . . . . 136Minimum charges . . . . . . . . . . . . 136Remedy by way of writ . . . . . . . . 136Reinstatement . . . . . . . . . . . . . . . . 137Statutory Compensation . . . . . . . 137

Assignment of Contracts . . . . . . . . . 137Assignment of liabilities . . . . . . . 137Assignment of rights . . . . . . . . . . 138

Effect and Formalities of Assignment . . . . . . . . . . . . . . . . . . 139Consideration . . . . . . . . . . . . . . . . 139Subject to equities . . . . . . . . . . . . . 139Notice of assignment . . . . . . . . . . 139

7. Contract of Indemnity . . . . . . . . . . . . 140Indemnity . . . . . . . . . . . . . . . . . . . . . . . . 140

Definition and Nature [S. 124] . . . . 140Definition in English Law . . . . . . 140Definition in Section 24

narrower . . . . . . . . . . . . . . . . . . . 140Extent of Liability [S. 125] . . . . . . . . 141Commencement of Liability . . . . . . 141

Specified time for notice . . . . . . . 142Indemnity and public policy . . . 142

8. Guarantee . . . . . . . . . . . . . . . . . . . . . . . 144Contract of Guarantee . . . . . . . . . . . . 144

Definition [S. 126] . . . . . . . . . . . . . . . 144Economic functions of

guarantee . . . . . . . . . . . . . . . . . . 144Parties . . . . . . . . . . . . . . . . . . . . . . . 144Collateral liability . . . . . . . . . . . . . 144

Essential Features of Guarantee . . . 1451. Principal debt . . . . . . . . . . . . . . 145Guarantee for void debt . . . . . . . . 145

Guarantee of minor’s debt . . . . . . 1452. Consideration [S. 127] . . . . . . . 145Benefit of principal debtor,

enough consideration . . . . . . . . 1463. There should be no

misrepresentation or concealment [Ss. 142–143] . . . . 146

4. Writing not necessary [S. 126] . 147Extent of Surety’s Liability . . . . . . . 147

Co-extensive . . . . . . . . . . . . . . . . . 147Condition precedent to liability . 148Surety’s right to limit his

liability . . . . . . . . . . . . . . . . . . . . 149Liability under continuing

guarantee . . . . . . . . . . . . . . . . . . 149Liability under bank guarantee . 150Letters of credit and bank

guarantees . . . . . . . . . . . . . . . . . 152No arbitration about bank

guarantee . . . . . . . . . . . . . . . . . . 153Joint-Debtors and Suretyship

[S. 132] . . . . . . . . . . . . . . . . . . . . . . . 153Discharge of Surety from

Liability . . . . . . . . . . . . . . . . . . . . . 1531. By revocation [S. 130] . . . . . . . . 1532. By death of surety [S. 131] . . . . 1543. By variance [S. 133] . . . . . . . . . . 154Effect of decree against surety . . 1554. Release or discharge of

principal debtor [S. 134] . . . . . . 155(I) Release of principal debtor . . 156Effect of Debt Relief Acts . . . . . . . 156Application of insolvency laws . 156(II) Act or omission . . . . . . . . . . . . 1565. Composition, extension of

time and promise not to sue [S. 135] . . . . . . . . . . . . . . . . . . . . . 157

Composition . . . . . . . . . . . . . . . . . 157Promise to give time . . . . . . . . . . 157Promise not to sue . . . . . . . . . . . . 157Forbearance to sue . . . . . . . . . . . . 157Promise to give time made with

third person . . . . . . . . . . . . . . . . 1586. By impairing surety’s remedy

[S. 139] . . . . . . . . . . . . . . . . . . . . . 158Creditor’s duty in realising

security . . . . . . . . . . . . . . . . . . . . 159Duty when security is

hypothecation . . . . . . . . . . . . . . 159Rights of Surety . . . . . . . . . . . . . . . . 159Rights Against Principal Debtor . . 159


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xVI BUSINESS LAW

1. Right of subrogation [S. 140] . . 159Rights before payment . . . . . . . . . 1592. Right to indemnity [S. 145] . . . 160

Rights Against Creditor . . . . . . . . . . 1601. Right to securities [S. 141] . . . . 1602. Right of set off . . . . . . . . . . . . . . 162

Right Against Co-sureties . . . . . . . . 1621. Effect of releasing a surety

[S. 138] . . . . . . . . . . . . . . . . . . . . . 1622. Right to contribution

[Ss. 146–147] . . . . . . . . . . . . . . . . 162Indemnity and Guarantee

Distinguished . . . . . . . . . . . . . . . . 162

9. Bailment . . . . . . . . . . . . . . . . . . . . . . . . . 164Contract of Bailment . . . . . . . . . . . . . 164

Definition and Essentials . . . . . . . . 1641. Delivery of possession . . . . . . . 164Actual or constructive delivery . 165Bank locker . . . . . . . . . . . . . . . . . . 1652. Delivery upon contract . . . . . . 166Non-contractual bailments . . . . . 166Contract, express or implied . . . . 1673. Conditional delivery . . . . . . . . 167

Duty of Bailor . . . . . . . . . . . . . . . . . . 168Duty of gratuitous bailor

[S. 150] . . . . . . . . . . . . . . . . . . . . . 168Duty of bailor for reward

[S. 150] . . . . . . . . . . . . . . . . . . . . . 168Duties of Bailee . . . . . . . . . . . . . . . . . 168

1. Duty of reasonable care [S. 151] . . . . . . . . . . . . . . . . . . . . . 168

Loss by theft . . . . . . . . . . . . . . . . . 169Burden of proof . . . . . . . . . . . . . . . 169Loss due to act of bailee’s

servant . . . . . . . . . . . . . . . . . . . . 170Bailee’s own goods lost with

those of bailor . . . . . . . . . . . . . . 170Involuntary or non-contractual

bailee . . . . . . . . . . . . . . . . . . . . . . 170Contract to contrary . . . . . . . . . . . 171

2. Duty Not to Make Unauthorised Use [S. 154] . . . . . . . . . . . . . . . . . . . 172

3. Duty Not to Mix [Ss. 155–157] . . . 1724. Duty to Return

[Ss. 160 and 165] . . . . . . . . . . . . . . 173Termination of gratuitous

bailment . . . . . . . . . . . . . . . . . . . 1735. Duty Not to Set Up Jus Tertii

[Ss. 166–167] . . . . . . . . . . . . . . . . . . 173

Transfer of shipping documents . . . . . . . . . . . . . . . . . 174

6. Duty to Return Increase [S. 163] . 174Finder [Ss. 168 and 169] . . . . . . . . . . 174Rights of Bailee . . . . . . . . . . . . . . . . . 175

1. Right to compensation [S. 164] . . . . . . . . . . . . . . . . . . . . . 175

2. Right to necessary expenses or remuneration [S. 158] . . . . . . 175

3. Right of lien [Ss. 170–171] . . . . . 175Particular lien [S. 170] . . . . . . . . . 176Exercise of labour and skill . . . . . 176General lien [S. 171] . . . . . . . . . . . 176(a) Bankers . . . . . . . . . . . . . . . . . . . 177(b) Factors . . . . . . . . . . . . . . . . . . . . 178(c) Wharfingers . . . . . . . . . . . . . . . 179(d) Attorneys of High Court. . . . . 179(e) Policy-brokers . . . . . . . . . . . . . . 179Time-barred debts and Lien . . . . 179Types of lien covered by the

Act . . . . . . . . . . . . . . . . . . . . . . . . 1794. Right to Sue [Ss. 180 and 181] . 180

10. Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . 181Definition and Essentials . . . . . . . . . . 181

1. Delivery of possession . . . . . . . . . 181Pledge by way of hypothecation . . 1822. In Pursuance of contract . . . . . . . 182

Rights of Pawnee . . . . . . . . . . . . . . . . . . 1821. Right of retainer [Ss. 173

and 174] . . . . . . . . . . . . . . . . . . . . 182Special and paramount interest

of pledgee . . . . . . . . . . . . . . . . . . 183Hypothecatee has no direct

right of seizure . . . . . . . . . . . . . 1832. Right to extraordinary

expenses [S. 175] . . . . . . . . . . . . 1833. Right of sale [S. 176] . . . . . . . . . 183

Requirement of Notice . . . . . . . . . . . 184Loss of security due to pledgee’s

negligence . . . . . . . . . . . . . . . . . 185Sale by hypothecatee . . . . . . . . . . 185

Pawnor’s Right to Redeem [S. 177] . 185Heritable right . . . . . . . . . . . . . . . . 186Premature redemption . . . . . . . . 186Legal heir’s right to redeem . . . . 186Statutory right . . . . . . . . . . . . . . . . 186

Who Can Pledge . . . . . . . . . . . . . . . . 1861. Pledge by mercantile agent

[S. 178] . . . . . . . . . . . . . . . . . . . . . 187


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Mercantile agent . . . . . . . . . . . . . . 187Possession with owner’s

consent . . . . . . . . . . . . . . . . . . . . 187In the course of business . . . . . . . 187Good faith . . . . . . . . . . . . . . . . . . . 187Pledge by documents of title

[S. 178] . . . . . . . . . . . . . . . . . . . . . 1882. Person in possession under

voidable contract [S. 178-A] . . . 1883. Pledge by pledgee [S. 179] . . . . 188

Additional Exceptions Under Sale of Goods Act . . . . . . . . . . . . . . . . . 189

11. Agency . . . . . . . . . . . . . . . . . . . . . . . . . . 190Definition of “Agent” . . . . . . . . . . . . . 190

Essentials of Agency . . . . . . . . . . . . 191Principal should be competent

to contract [S. 183] . . . . . . . . . . . 191Agent need not be competent

[S. 184] . . . . . . . . . . . . . . . . . . . . . 191Consideration for appointment

not necessary [S. 185] . . . . . . . . 191Agent and servant . . . . . . . . . . . . 191Agent and bailee . . . . . . . . . . . . . . 192Agent and buyer . . . . . . . . . . . . . . 193

Kinds of Agent . . . . . . . . . . . . . . . . . 193Factor . . . . . . . . . . . . . . . . . . . . . . . 193Broker . . . . . . . . . . . . . . . . . . . . . . . 193Del credere agent . . . . . . . . . . . . . 193

Creation of Agency . . . . . . . . . . . . . . 194Express appointment . . . . . . . . . . 194

Implied Agencies . . . . . . . . . . . . . . . 194Estoppel . . . . . . . . . . . . . . . . . . . . . 194Husband and wife . . . . . . . . . . . . 195Husband not implied agent of

wife . . . . . . . . . . . . . . . . . . . . . . . 195Agencies of necessity . . . . . . . . . . 195Marine adventures . . . . . . . . . . . . 196Pre-existing relationship not

necessary . . . . . . . . . . . . . . . . . . 196Relief of injured persons . . . . . . . 197Conditions for application of the

principle . . . . . . . . . . . . . . . . . . . 197Inability to communicate with

principal . . . . . . . . . . . . . . . . . . . 197Act should be reasonably

necessary . . . . . . . . . . . . . . . . . . 197Bona fide in the interest of party

concerned . . . . . . . . . . . . . . . . . . 198Relations of Principal and Agent . . 198

Duties of agent . . . . . . . . . . . . . . . 1981. Duty to execute mandate . . . . . 1982. Duty to follow instructions or

customs [S. 211] . . . . . . . . . . . . . 1983. Duty of reasonable care and

skill [S. 212] . . . . . . . . . . . . . . . . 198Duty to maintain confidence . . . 1994. Duty to avoid conflict of

interest [S. 215] . . . . . . . . . . . . . . 2005. Duty not to make secret profit

[S. 216] . . . . . . . . . . . . . . . . . . . . . 2006. Duty to remit sums . . . . . . . . . 2017. Duty to maintain accounts

[S. 213] . . . . . . . . . . . . . . . . . . . . . 2018. Duty not to delegate [S. 190] . . 201(a) Nature of work . . . . . . . . . . . . . 201(b) Trade custom . . . . . . . . . . . . . . 202(c) Ministerial action . . . . . . . . . . . 202(d) Principal’s consent . . . . . . . . . 202Effects of delegation . . . . . . . . . . . 2021. Improper delegation [S. 193] . . 2022. Proper delegation [S. 192] . . . . 202Principal represented by

sub-agent . . . . . . . . . . . . . . . . . . 202Agent’s responsibility for

sub-agent . . . . . . . . . . . . . . . . . . 203Sub-agent’s liability to principal 2033. Substituted agent [Ss. 194

and 195] . . . . . . . . . . . . . . . . . . . 203Principal’s Remedies Against

Agent’s Breach of Duty . . . . . . . . 203Rights of Agent . . . . . . . . . . . . . . . . . 204

1. Right to remuneration [S. 219] . . . . . . . . . . . . . . . . . . . . . 204

Jurisdiction . . . . . . . . . . . . . . . . . . 205Effect of misconduct [S. 220] . . . . 2052. Right of retainer [S. 217] . . . . . 2053. Right of lien [S. 221] . . . . . . . . . 205Effect of lien . . . . . . . . . . . . . . . . . . 206Loss of lien . . . . . . . . . . . . . . . . . . . 2064. The right to indemnity

[Ss. 222 and 223] . . . . . . . . . . . . 206Non-liability of employer of

agent for criminal act [S. 224] . 2075. Right to compensation

[S. 225] . . . . . . . . . . . . . . . . . . . . . 207Relations of Principal With Third

Parties . . . . . . . . . . . . . . . . . . . . . . . 208Agent’s authority . . . . . . . . . . . . . 208Actual authority [Ss. 186–187] . . . 2081. Express authority [S. 186] . . . . 208


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xVIII BUSINESS LAW

2. Implied authority [S. 187] . . . . 209Scope of authority . . . . . . . . . . . . . 209Authority of special agents—

Factor . . . . . . . . . . . . . . . . . . . . . 210Broker . . . . . . . . . . . . . . . . . . . . . . . 210Estate or house agent . . . . . . . . . . 210Auctioneer . . . . . . . . . . . . . . . . . . . 211

Ostensible or Apparent Authority [S. 237] . . . . . . . . . . . . . . . . . . . . . . . 211Employer’s undertaking to pay

insurance premia . . . . . . . . . . . 212Statutory provision about

apparent authority . . . . . . . . . . 213Actual or constructive notice of

lack of authority . . . . . . . . . . . . 213Agent’s authority in emergency

[S. 189] . . . . . . . . . . . . . . . . . . . . . 213Where agent exceeds authority

[Ss. 227–228] . . . . . . . . . . . . . . . . 213Effect of notice to agent . . . . . . . . 214

Liability for Agent’s Wrongful Acts [S. 238] . . . . . . . . . . . . . . . . . . 214Misrepresentations and frauds . 214Agent’s torts . . . . . . . . . . . . . . . . . . 214

Rights and Liabilities of Undisclosed Principal . . . . . . . . . 215Where principal disclosed . . . . . 215Unnamed principal . . . . . . . . . . . 215Undisclosed principal . . . . . . . . . 215Third party’s right against

undisclosed principal . . . . . . . 217Personal Liability of Agent

[S. 230] . . . . . . . . . . . . . . . . . . . . . . . 217Presumption of contract to

contrary . . . . . . . . . . . . . . . . . . . 2171. Foreign principal [S. 230(1)] . . . 2182. Principal unnamed [S. 230(2)] . 2183. Non-existent or incompetent

principal [S. 230(3)] . . . . . . . . . . 219Election by third party [S. 232] . . 2194. Pretended agent [S. 235] . . . . . . 2195. Breach of warranty of

authority . . . . . . . . . . . . . . . . . . . 220Liability of dealer under

Consumer Protection Act . . . . 220Ratification . . . . . . . . . . . . . . . . . . . . . 220Conditions of Ratification . . . . . . . . 221

1. On behalf of another . . . . . . . . 2212. Competence of principal . . . . . 2213. What acts can be ratified

[S. 200] . . . . . . . . . . . . . . . . . . . . . 221

Acts done on behalf of Government . . . . . . . . . . . . . . . . 222

4. Knowledge of facts [S. 198] . . . 2225. Whole transaction [S. 199] . . . . 2226. Within reasonable time . . . . . . 222Effects of ratification . . . . . . . . . . 222Doctrine of relation back . . . . . . . 223

Determination of Agency . . . . . . . . 2231. By revocation [S. 203] . . . . . . . . 223(a) Revocation operates

prospectively [S. 204] . . . . . . . . 224(b) Notice precedent to

revocation [S. 206] . . . . . . . . . . . 224(c) Liability to compensate

[Ss. 205–206] . . . . . . . . . . . . . . . . 224(d) Agency coupled with interest

[S. 202] . . . . . . . . . . . . . . . . . . . . . 2252. By renunciation by agent

[S. 206] . . . . . . . . . . . . . . . . . . . . . 2263. Completion of business

[S. 201] . . . . . . . . . . . . . . . . . . . . . 2264. Death or insanity [S. 201] . . . . . 2265. Principal’s insolvency [S. 201] . 2266. On expiry of time . . . . . . . . . . . 227

Effects of Termination [S. 208] . . . . 227Agent’s Duty on Termination

[S. 209] . . . . . . . . . . . . . . . . . . . . . . . 227

Part IIPA R T N E R S H I P

12. Law of Partnership . . . . . . . . . . . . . . . 231Definition and Essentials of

Partnership . . . . . . . . . . . . . . . . . . . . . 2311. Agreement . . . . . . . . . . . . . . . . . . . 231

Deed of partnership . . . . . . . . . . . 2322. Business . . . . . . . . . . . . . . . . . . . . . 2323. Sharing of Profits . . . . . . . . . . . . . 2344. Mutual Agency . . . . . . . . . . . . . . . 234Persons Other Than Partners

Sharing Profits . . . . . . . . . . . . . . . . 2351. Joint-owners sharing gross

returns . . . . . . . . . . . . . . . . . . . . 236Joint venture . . . . . . . . . . . . . . . . . 2362. Lender of money receiving

profits . . . . . . . . . . . . . . . . . . . . . 2373. Servant or agent receiving

profits . . . . . . . . . . . . . . . . . . . . . 2374. Widow or child of deceased

partner . . . . . . . . . . . . . . . . . . . . 238


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5. Seller of goodwill . . . . . . . . . . . 238Maximum Number of Partners . . . 238Meaning and Nature of Firm . . . . . 238Firm Name . . . . . . . . . . . . . . . . . . . . . 240Partnership and Co-ownership . . . 240Partnership and Joint Family . . . . . 241Partnership and Company . . . . . . . 241Duration of Firm . . . . . . . . . . . . . . . . 241

Where no duration fixed . . . . . . . 241Continuation after expiry of

term . . . . . . . . . . . . . . . . . . . . . . . 242Fixed duration necessary for

certainty . . . . . . . . . . . . . . . . . . . 242Partnership in Single or Brief

Business Venture . . . . . . . . . . . . . 242Relations of Partners to One

Another . . . . . . . . . . . . . . . . . . . . . . . . 243Mutual Relations . . . . . . . . . . . . . . . . . 243Duties of Partners . . . . . . . . . . . . . . . . 244

1. Duty of Good Faith [S. 9] . . . . . . . 2442. Duty Not to Compete [S. 16(b)] . . 2453. Due Diligence [Ss. 12(b)

and 13( f)] . . . . . . . . . . . . . . . . . . . . 2464. Duty to Indemnify for Fraud

[S. 10] . . . . . . . . . . . . . . . . . . . . . . . . 2475. Duty to Render True Accounts

[S. 9] . . . . . . . . . . . . . . . . . . . . . . . . . 2476. Proper Use of Property [S. 15] . . . 248

Duty to use property for firm purposes . . . . . . . . . . . . . . . . . . . 248

Nature of liability for misappropriation . . . . . . . . . . . 248

7. Duty to Account for Personal Profits [S. 16] . . . . . . . . . . . . . . . . . 249Information received as

partner . . . . . . . . . . . . . . . . . . . . 249Rights of Partners . . . . . . . . . . . . . . . . 250

1. Right to Take Part in Business [S. 12(a)] . . . . . . . . . . . . . . . . . . . . . . 250

2. Majority Rights [S. 12(c)] . . . . . . . 2503. Access to Books [S. 12(d)] . . . . . . . 2514. Right to Indemnity [S. 13(e)] . . . . 2515. Right to Profits [S. 13(b)] . . . . . . . . 2526. Right to Interest [S. 13(c)

and (d)] . . . . . . . . . . . . . . . . . . . . . . 2527. Right to Remuneration [S. 13(a)] . 253

Continuance of Partnership [S. 17] . . 2531. Change in constitution . . . . . . . . 2542. Continuation after expiry of

term . . . . . . . . . . . . . . . . . . . . . . . . . 254

3. Where additional undertakings are carried out . . . . . . . . . . . . . . . . 254

Partnership Property [S. 14] . . . . . . . . 254Concept and Nature of

Partnership Property . . . . . . . . . . 255What Constitutes Partnership

Property . . . . . . . . . . . . . . . . . . . . . 2551. Property Originally Brought In . 255

Goodwill and trade marks . . . . . 2562. Property Subsequently

Acquired . . . . . . . . . . . . . . . . . . . . 256Property acquired in breach of

duty . . . . . . . . . . . . . . . . . . . . . . . 2573. Partner’s Property in Firm’s

Use . . . . . . . . . . . . . . . . . . . . . . . . . . 257Partner’s personal trade marks . 258Partner’s house property in

firm’s use . . . . . . . . . . . . . . . . . . 258Partner’s personal licence . . . . . . 258Partner’s tenancy rights . . . . . . . . 258Partner’s personal experience . . 259

4. Conversion of Joint into Separate Property . . . . . . . . . . . . . . . . . . . . . 259

Relations of Partners to Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . 259

Liability of Partners for Acts of Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259

Act of the Firm . . . . . . . . . . . . . . . . . 260Doctrine of Implied Authority . . . . . 260

Scope of Implied Authority [S. 19] . 261Trading and professional firms

and borrowing power . . . . . . . 261Joint venture . . . . . . . . . . . . . . . . . 262Legal proceedings . . . . . . . . . . . . 263Some examples of implied

authority . . . . . . . . . . . . . . . . . . . 263Criminal prosecution for

dishonour of cheques . . . . . . . . 264Partner acting in self-interest . . . 264

Restrictions on Implied Authority [Ss. 19 and 20] . . . . . . . . . . . . . . . . 264Statutory restrictions . . . . . . . . . . 264Restrictions by agreement . . . . . . 265

Authority in Emergency [S. 21] . . . . 266Mode of Exercising Authority

[S. 22] . . . . . . . . . . . . . . . . . . . . . . . . 266Admissions by Partner [S. 23] . . . . . 267Effect of Notice to Partner [S. 24] . . 267

Liability for Torts and Other Wrongs [S. 26] . . . . . . . . . . . . . . . . . . . 268


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xx BUSINESS LAW

Liability for Misappropriation [S. 27] . . . . . . . . . . . . . . . . . . . . . . . . . . . 269

Liability for Holding Out [S. 28] . . . . 2711. Representation . . . . . . . . . . . . . . . 2722. Knowledge of Representation . . 273

Application of the doctrine to retirement of partner . . . . . . . . 273

(a) Deceased partner . . . . . . . . . . . 274(b) Insolvent partner . . . . . . . . . . . 274(c) Dormant partner . . . . . . . . . . . 274

Transferee of Partner’s Interest [S. 29] . . . . . . . . . . . . . . . . . . . . . . . . . . . 274

Minor as Partner [S. 30] . . . . . . . . . . . . 275Admission of Minor to Benefits of

Firm . . . . . . . . . . . . . . . . . . . . . . . . . 276Incoming and Outgoing Partners . . . 277Incoming Partner . . . . . . . . . . . . . . . . . 277

Liability of New Partner [S. 31(2)] . 278Outgoing Partner . . . . . . . . . . . . . . . . . 279

Modes of Retirement . . . . . . . . . . . . 2791. By consent [S. 31] . . . . . . . . . . . . 2792. By agreement [S. 32] . . . . . . . . . 2793. By notice [S. 32] . . . . . . . . . . . . . 2804. By insolvency [S. 34] . . . . . . . . . 2805. By death [S. 35] . . . . . . . . . . . . . 2806. By expulsion [S. 33] . . . . . . . . . . 281

Liability of Retired Partner . . . . . . . 282Liability for acts done before

retirement [S. 32(2)] . . . . . . . . . . 282Liability for acts done after

retirement [S. 32(3)] . . . . . . . . . . 283Rights of Outgoing Partner . . . . . . . 284

1. Right to compete [S. 36] . . . . . . 2842. Right to share subsequent

profits [S. 37] . . . . . . . . . . . . . . . 285Revocation of Continuing

Guarantee [S. 38] . . . . . . . . . . . . . . . . 287Dissolution . . . . . . . . . . . . . . . . . . . . . . . 287Modes of Dissolution . . . . . . . . . . . . . . 288

1. By Consent [S. 40] . . . . . . . . . . . . . 2882. By Agreement [S. 40] . . . . . . . . . . 288

Reconstitution after dissolution . 2883. Compulsory Dissolution [S. 41] . 288

(a) Insolvency . . . . . . . . . . . . . . . . . 289(b) Illegality of business . . . . . . . . 289

4. Contingent Dissolution [S. 42] . . 289(a) Expiry of term . . . . . . . . . . . . . 290(b) Completion of business . . . . . 290(c) Death of partner . . . . . . . . . . . . 291(d) Insolvency of partner . . . . . . . 292

5. Dissolution of Firm at Will by Notice [S. 43] . . . . . . . . . . . . . . . . . 292

6. Dissolution by Court [S. 44] . . . . 293(a) Insanity . . . . . . . . . . . . . . . . . . . 294(b) Permanent incapacity . . . . . . . 294(c) Misconduct . . . . . . . . . . . . . . . . 294(d) Persistent breach of

agreement . . . . . . . . . . . . . . . . . 295(e) Transfer of interest . . . . . . . . . . 295( f) Perpetual losses . . . . . . . . . . . . 295(g) Just and equitable . . . . . . . . . . 295

Whether Right to Apply for Dissolution Can Be Excluded . . . 296

Suit for Accounts Without Seeking Dissolution . . . . . . . . . . . . . . . . . . . 297

Property Situate Out of Territory . . 297Consequences of Dissolution . . . . . . . 297

Public Notice and Liability for Acts Done After Dissolution [S. 45] . . . . . . . . . . . . . . . . . . . . . . . . 297

Where public notice not necessary . . . . . . . . . . . . . . . . 298

Civil and criminal liability for dishonour of cheque . . . . . . 298

Authority of Partners in Winding Up [S. 47] . . . . . . . . . . . . . . . . . . . . 298Restraining misuse of authority

by partner . . . . . . . . . . . . . . . . . 299Liability to Share Personal Profits

[S. 50] . . . . . . . . . . . . . . . . . . . . . . . . 299Winding Up [S. 46] . . . . . . . . . . . . . . 300Mode of Settlement of Accounts

[S. 48] . . . . . . . . . . . . . . . . . . . . . . . . 302First . . . . . . . . . . . . . . . . . . . . . . . . . 302Second . . . . . . . . . . . . . . . . . . . . . . 302Third . . . . . . . . . . . . . . . . . . . . . . . . 302Fourth . . . . . . . . . . . . . . . . . . . . . . . 302

Subject to Agreement . . . . . . . . . . . . 303Advances and Loans by Partners . 304Refund of Premium [Ss. 51

and 52] . . . . . . . . . . . . . . . . . . . . . . 304Agreements in Restraint of Trade

[Ss. 53 and 54] . . . . . . . . . . . . . . . . 305Restraining use of firm

property . . . . . . . . . . . . . . . . . . . 306Sale of Goodwill [S. 55] . . . . . . . . . . 307Modification by Agreement . . . . . . 308

Registration of Firms . . . . . . . . . . . . . . 309Procedure of Registration . . . . . . . . 309Change of Particulars [S. 60] . . . . . . 310


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CONTENTS xxI

Penalty for False Particulars [S. 70] . . . . . . . . . . . . . . . . . . . . . . . . 311

Rules of Evidence [S. 68] . . . . . . . . . 311Effects of Non-registration [S. 69] . . 312

Registration Not Compulsory . . . . 3121. Suits Between Partners and Firm

[S. 69(1)] . . . . . . . . . . . . . . . . . . . . . . 3122. Suits Between Firm and Third

Parties [S. 69(2)] . . . . . . . . . . . . . . . 3133. Set-off and Other Proceedings

[S. 69(3)] . . . . . . . . . . . . . . . . . . . . . . 314Change in Constitution of

registered firm . . . . . . . . . . . . . 315Exceptions . . . . . . . . . . . . . . . . . . . . . 315

Actions for dissolution and accounts . . . . . . . . . . . . . . . . . . . 315

Recovery of insolvent’s share . . . 316Value of suit Rs 100 . . . . . . . . . . . . 316Statutory and non-contractual

rights . . . . . . . . . . . . . . . . . . . . . . 316Criminal proceedings . . . . . . . . . 317Suits by third parties . . . . . . . . . . 317Non-partnership matters . . . . . . . 317

Supplemental . . . . . . . . . . . . . . . . . . . . . 317Public Notice . . . . . . . . . . . . . . . . . . . . . 317

Comments . . . . . . . . . . . . . . . . . . . . . 317

13. Limited Liability Partnership Act, 2008 . . . . . . . . . . . . . . . . . . . . . . . . 319Statement of Objects and Reasons . . 319

Salient Features of LLP Act . . . . . . . 320[Chap. 1] Preliminary . . . . . . . . . . . . . . 320[Chap. 2] Nature of Limited Liability

Partnership . . . . . . . . . . . . . . . . . . . . . 321Limited Liability Partnership to be

Body Corporate [S. 3] . . . . . . . . . . 321Non-applicability of the Indian

Partnership Act, 1932 [S. 4] . . . . . 321Partners [S. 5] . . . . . . . . . . . . . . . . . . . 321Minimum Number of Partners

[S. 6] . . . . . . . . . . . . . . . . . . . . . . . . . 321Designated Partners [S. 7] . . . . . . . . 321Liabilities of Designated Partners

[S. 8] . . . . . . . . . . . . . . . . . . . . . . . . . 322Changes in Designated Partners

[S. 9] . . . . . . . . . . . . . . . . . . . . . . . . . 322[Chap. 3] Incorporation of Limited

Liability Partnership and Incidental Matters . . . . . . . . . . . . . . 322

Incorporation Document [S. 11] . . . 322

Incorporation by Registration [S. 12] . . . . . . . . . . . . . . . . . . . . . . . . 323

Registered Office of LLP and Change of It [S. 13] . . . . . . . . . . . . 323

Effect of Registration [S. 14] . . . . . . . 323Name [S. 15] . . . . . . . . . . . . . . . . . . . . 323Reservation of Name [S. 16] . . . . . . 323Change of Name of LLP Under

Direction [S. 17] . . . . . . . . . . . . . . . 324Application for Direction to

Change Name in Certain Circumstances [S. 18] . . . . . . . . . . 324

Change of Registered Name [S. 19] . . . . . . . . . . . . . . . . . . . . . . . . 324

Publication of Name and Limited Liability [S. 21] . . . . . . . . . . . . . . . . 324

[Chap. 4] Partners and Their Relations . . . . . . . . . . . . . . . . . . . . . . . 324

Eligibility to Be Partners [S. 22] . . . 324Relationship of Partners [S. 23] . . . . 325

Whether partner can be employee . . . . . . . . . . . . . . . . . . 326

Cessation of Partnership Interest [S. 24] . . . . . . . . . . . . . . . . . . . . . . . . 326

Registration of Changes in Partners [S. 25] . . . . . . . . . . . . . . . . 327

[Chap. 5] Extent and Limitation of Liability of LLP and Its Partners . . 327

Partner as Agent [S. 26] . . . . . . . . . . 327Extent of Liability of LLP [S. 27] . . . 327Extent of Liability of Partner

[S. 28] . . . . . . . . . . . . . . . . . . . . . . . . 327Holding Out [S. 29] . . . . . . . . . . . . . . 328Unlimited Liability in Case of

Fraud [S. 30] . . . . . . . . . . . . . . . . . . 328Whistle Blowing [S. 31] (Waiver of

Penalty) . . . . . . . . . . . . . . . . . . . . . . 328[Chap. 6] Contributions . . . . . . . . . . . . 328

Form of Contribution [S. 32] . . . . . . 328Obligation to Contribute [S. 33] . . . 329

[Chap. 7] Financial Disclosures . . . . . 329Maintenance of Books of Account,

Other Records and Audit [S. 34] . 329Inspection of Documents by

Partners . . . . . . . . . . . . . . . . . . . . . 329Annual Return [S. 35] . . . . . . . . . . . 330Inspection of Documents Kept by

Registrar [S. 36] . . . . . . . . . . . . . . . 330Penalty for False Statement [S. 37] . 330Power of Registrar to Obtain

Information [S. 38] . . . . . . . . . . . . 330


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xxII BUSINESS LAW

Compounding of Offences [S. 39] . . 330Destruction of Old Records [S. 40] . 331Enforcement of Duty to Make

Returns, etc [S. 41] . . . . . . . . . . . . . 331[Chap. 8] Assignment and Transfer

of Partnership Rights . . . . . . . . . . . . 331Partner’s Transferable Interest

[S. 42] . . . . . . . . . . . . . . . . . . . . . . . . 331[Chap. 9] Investigation . . . . . . . . . . . . . 331

Investigation of the Affairs of LLP [S. 43] . . . . . . . . . . . . . . . . . . . . . . . . 331

Application by Partners for Investigation [S. 44] . . . . . . . . . . . 332

Power of Inspectors [S. 46] . . . . . . . 332Production of Documents and

Evidence [S. 47] . . . . . . . . . . . . . . . 332Seizure of Documents by

Inspector [S. 48] . . . . . . . . . . . . . . . 333Inspector’s Report [S. 49] . . . . . . . . . 333Prosecution [S. 50] . . . . . . . . . . . . . . 334Application for Winding Up of

LLP [S. 51] . . . . . . . . . . . . . . . . . . . . 334Proceedings for Recovery of

Damages or Property [S. 52] . . . . 334Expenses of Investigation and

Report as Evidence [Ss. 53 and 54] . . . . . . . . . . . . . . . . . . . . . . 334

[Chap. 10] Conversion into Limited Liability Partnership . . . . . . . . . . . . . 335

Registration and Effect of Conversion [S. 58] . . . . . . . . . . . . . 335

[Chap. 11] Foreign Limited Liability Partnerships . . . . . . . . . . . . . . . . . . . . 335

[Chap. 12] Compromise, Arrangement or Reconstruction of LLP . . . . . . . . . 336

Power of Tribunal to Enforce Compromise or Arrangement [S. 61] . . . . . . . . . . . . . . . . . . . . . . . . 336

Provisions for Facilitating Reconstruction or Amalgamation [S. 62] . . . . . . . . . . 336

[Chap. 13] Winding Up and Dissolution . . . . . . . . . . . . . . . . . . . . . 337

Circumstances in Which LLP May Be Wound Up by Tribunal [S. 64] . . . . . . . . . . . . . . . . . . . . . . . . 337

[Chap. 14] Miscellaneous . . . . . . . . . . . 338Business Transactions of Partner

With Limited Liability Partnership [S. 66] . . . . . . . . . . . . . 338

Applications of Provisions of the Companies Act [S. 67] . . . . . . . . . 338

Electronic Filing of Documents [S. 68] . . . . . . . . . . . . . . . . . . . . . . . . 338

Payment of Additional Fee [S. 69] . 338Enhanced Punishment [S. 70] . . . . . 338Application of Other Laws Not

Barred [S. 71] . . . . . . . . . . . . . . . . . 339Jurisdiction of Tribunal and

Appellate Tribunal [S. 72] . . . . . . 339Penalty for Non-compliance of

Tribunal’s Order [S. 73] . . . . . . . . 339General Penalties [S. 74] . . . . . . . . . . 339Power of Registrar to Strike Off

Defunct LLP [S. 75] . . . . . . . . . . . . 339Offences by LLPs [S. 76] . . . . . . . . . . 339Jurisdiction of Court [S. 77] . . . . . . . 339Power to Alter Schedules [S. 78] . . . 340Power to Make Rules [S. 79] . . . . . . 340Power to Remove Difficulties

[S. 80] . . . . . . . . . . . . . . . . . . . . . . . . 341Transitional Provisions [S. 81] . . . . . 341

The First Schedule . . . . . . . . . . . . . . . . 342The Second Schedule . . . . . . . . . . . . . . 343The Third Schedule . . . . . . . . . . . . . . . . 345The Fourth Schedule . . . . . . . . . . . . . . 348

Part IIIS A L E O F G O O D S A N D

C O M P E T I T I O N L AW

14. Sale of Goods Act, 1930 . . . . . . . . . . . 353Contract of Sale . . . . . . . . . . . . . . . . . . 353

Definition and Essentials of Sale [S. 4] . . . . . . . . . . . . . . . . . . . . . . . . . 3531. Bilateral contract . . . . . . . . . . . . 3532. Money consideration . . . . . . . . 3543. Sale and contract of work and

material . . . . . . . . . . . . . . . . . . . 3544. Goods . . . . . . . . . . . . . . . . . . . . . 356

Sale and Agreement to Sell . . . . . . . 357When agreement to sell becomes

sale [S. 4(4)] . . . . . . . . . . . . . . . . . 358Agreement to Sell and Hire-

purchase . . . . . . . . . . . . . . . . . . . . . 358Formalities of Sale [S. 5] . . . . . . . . . . 359Subject-matter of Contract [S. 6] . . . 360Effect of Destruction of Goods

[S. 7] . . . . . . . . . . . . . . . . . . . . . . . . . 360


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Goods Perishing After Agreement to Sell [S. 8] . . . . . . . . . . . . . . . . . . . 361

The Price [S. 9] . . . . . . . . . . . . . . . . . . 362Fixing of price . . . . . . . . . . . . . . . . 362Agreement to sell at valuation

[S. 10] . . . . . . . . . . . . . . . . . . . . . . 362Conditions and Warranties . . . . . . . . 363Implied Conditions . . . . . . . . . . . . . . . . 364

1. Condition as to Title [S. 14] . . . . . 3642. Sale by Description [S. 15] . . . . . . 365

Purchase on basis of description . . . . . . . . . . . . . . . . . 365

Packing as description . . . . . . . . . 366Meaning of correspondence

with description . . . . . . . . . . . . 3663. Sale by Description As Well As

by Sample [S. 15] . . . . . . . . . . . . . . 3674. Exceptions to Principle of

Caveat Emptor [S. 16] . . . . . . . . . . 368Statement of caveat emptor . . . . . 368

Exceptions . . . . . . . . . . . . . . . . . . . . . 369(a) Fitness for buyer’s purpose

[S. 16(1)] . . . . . . . . . . . . . . . . . . . . 370Sale under trade name

[Proviso to S. 16(1)] . . . . . . . . 372(b) Merchantable quality

[S. 16(2)] . . . . . . . . . . . . . . . . . . . . 372Meaning of merchantable

quality . . . . . . . . . . . . . . . . . . 373(i) Marketability . . . . . . . . . . . . 374(ii) Reasonable fitness for

general purposes . . . . . . . . . 374Defective packing . . . . . . . . . . . 375Partly defective . . . . . . . . . . . . . 375Satisfactory quality . . . . . . . . . 375Examination by buyer . . . . . . . 376

(c) Conditions implied by trade usage [S. 16(3)] . . . . . . . . . . . . . . 376

(d) Express terms [S. 16(4)] . . . . . . 3775. Sale by Sample [S. 17] . . . . . . . . . . 377

Bulk to correspond with sample . . . . . . . . . . . . . . . . . . . . . 378

Opportunity to compare bulk with sample . . . . . . . . . . . . . . . . 378

Free from defects rendering goods unmerchantable . . . . . . 378

Buyer’s State of Knowledge About Goods . . . . . . . . . . . . . . . . . . . . . . . 379

Implied Warranties . . . . . . . . . . . . . . . 3801. Quiet Possession [S. 14(b)] . . . . . . 380

2. Free from Encumbrance [S. 14(C)] . . . . . . . . . . . . . . . . . . . . . 380

Condition Reduced to Warranty [S. 13] . . . . . . . . . . . . . . . . . . . . . . . . 3801. Waiver by buyer . . . . . . . . . . . . 3812. Acceptance of goods by

buyer . . . . . . . . . . . . . . . . . . . . . . 381Condition reduced to warranty

only for remedial purposes . . . 382Exclusion of Implied Terms [S. 62] . 383

1. By express contract . . . . . . . . . . 3832. Course of dealing . . . . . . . . . . . 3853. Trade usage . . . . . . . . . . . . . . . . 385

Consumer Sales . . . . . . . . . . . . . . . . . 386Duration of Implied Terms . . . . . . . 386Stipulations as to Time [S. 11] . . . . . 386

Time of payment . . . . . . . . . . . . . . 386Other stipulations as to time . . . 387

Passing of Property . . . . . . . . . . . . . . . . 388Significance of Passing of Property 388

Property passes when intended to pass [S. 19] . . . . . . . . . . . . . . . 389

Sale of specific goods [Ss. 20–22] . . 390Specific goods in deliverable

state [S. 20] . . . . . . . . . . . . . . . . . 390(a) Specific goods . . . . . . . . . . . . 390(b) Deliverable state . . . . . . . . . 391(c) Unconditional contract . . . . 392Property passes at the time of

contract . . . . . . . . . . . . . . . . . . 392Goods to be put in deliverable

state [S. 21] . . . . . . . . . . . . . . . . . 392Goods to be weighed or

measured [S. 22] . . . . . . . . . . . . 393Sale of Approval [S. 24] . . . . . . . . . . 394

1. By acceptance [S. 24(1)] . . . . . . . 3942. By failure to return [S. 24(2)] . . 395

Sale of Unascertained Goods [Ss. 18 & 23] . . . . . . . . . . . . . . . . . . 396Ascertainment . . . . . . . . . . . . . . . . 396Appropriation . . . . . . . . . . . . . . . . 397

Property does not pass till appropriation . . . . . . . . . . . . 397

Appropriation with mutual assent . . . . . . . . . . . . . . . . . . . 398

Appropriation without buyer’s assent, ineffective . . 398

Buyer’s assent express or implied . . . . . . . . . . . . . . . . . . 398


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Appropriation should be unconditional and of goods of contract quality . . . . . . . . 399

Intention of parties . . . . . . . . . . 399Delivery to carrier [S. 23(2)] . . . . . 399

Acknowledgement by bailee . . 400Delivery to post office . . . . . . . 401

Reservation of right of disposal [S. 25] . . . . . . . . . . . . . . . . . . . . . . 401Property passes on

compliance with seller’s conditions . . . . . . . . . . . . . . . 402

Transfer of Risk [S. 26] . . . . . . . . . . . . . 402Risk and Property Go Together . . . 402Separation of Risk from Property . 403

Delay in delivery of goods . . . . . 403Trade customs . . . . . . . . . . . . . . . . 404Express agreement . . . . . . . . . . . . 404

Transfer of Title . . . . . . . . . . . . . . . . . . 404Nemo Dat Quod Non Habet . . . . . . 404Exceptions . . . . . . . . . . . . . . . . . . . . . 405

1. Estoppel [S. 27] . . . . . . . . . . . . . 405Estoppel by negligence . . . . . . 406

2. Sale by mercantile agent [S. 27, Proviso] . . . . . . . . . . . . . . . . . . . 406(a) Mercantile agent . . . . . . . . . 407(b) In possession as mercantile

agent . . . . . . . . . . . . . . . . . . . . 407(c) With owner’s consent . . . . . 408(d) Must sell while acting as

mercantile agent . . . . . . . . . . 408(e) Buyer should act in good

faith and without notice . . . 4083. Sale by joint owner [S. 28] . . . . 4094. Sale by person in possession

under voidable contract [S. 29] . . . . . . . . . . . . . . . . . . . . . . 409Sale after avoidance of

contract does not pass title . 4105. Seller in possession after sale

[S. 30(1)] . . . . . . . . . . . . . . . . . . . . 4106. Buyer in possession before

sale [S. 30(2)] . . . . . . . . . . . . . . . . 411Performance of Contract . . . . . . . . . . 412

Delivery [S. 33] . . . . . . . . . . . . . . . . . 412Part delivery [S. 34] . . . . . . . . . . . . 413

Duty of buyer to ask for delivery [S. 35] . . . . . . . . . . . . 413

Rules as to Delivery [S. 36] . . . . . . . 4131. Place of delivery . . . . . . . . . . 4142. Time for delivery . . . . . . . . . 414

3. Delivery by attornment . . . . 4144. Time for tender of delivery . 4145. Expenses of delivery . . . . . . 414

Delivery of wrong quantity [S. 37] . . . . . . . . . . . . . . . . . . . . . . 4141. Short delivery . . . . . . . . . . . . 4142. Excess delivery . . . . . . . . . . . 4153. Delivery of mixed goods . . . 415

Instalment deliveries [S. 38] . . . . 416Delivery to carrier or wharfinger

[S. 39] . . . . . . . . . . . . . . . . . . . . . . 417Seller’s duty [S. 39(2)] . . . . . . . . . . 417Sea transit [S. 39(3)] . . . . . . . . . . . . 418

Contracts Involving Sea Routes . . . 4181. FOB contracts . . . . . . . . . . . . . . 4182. CIF contracts . . . . . . . . . . . . . . . 4183. Ex ship contracts . . . . . . . . . . . . 421

Deterioration During Transit [S. 40] . . . . . . . . . . . . . . . . . . . . . . . . 422

Acceptance [S. 42] . . . . . . . . . . . . . . . 422Right of Examination [S. 41] . . . . . . 423Duty After Rejection [S. 43] . . . . . . . 424Liability of Buyer for Refusing to

Receive Goods [S. 44] . . . . . . . . . . 424Rights of Unpaid Seller Against

Goods . . . . . . . . . . . . . . . . . . . . . . . . . . 425Definition of Unpaid Seller [S. 45] . 425Rights of Unpaid Seller . . . . . . . . . . 4261. Unpaid Seller’s Lien [S. 47] . . . . . 426

Effect of part delivery [S. 48] . . . . 427Termination of lien [S. 49] . . . . . . 428

1. By delivery to carrier . . . . . . 4282. By delivery to buyer . . . . . . . 4283. By waiver . . . . . . . . . . . . . . . . 4294. By tender of price . . . . . . . . . 429

2. Stoppage in Transit . . . . . . . . . . . . 429Lien and stoppage in transit

distinguished . . . . . . . . . . . . 429Requirements of stoppage in

transit [S. 50] . . . . . . . . . . . . . . . 430Commencement and end of

transit [S. 51] . . . . . . . . . . . . . . . 4301. Delivery to buyer [S. 51(1)] . . 4302. Interception by buyer

[S. 51(2)] . . . . . . . . . . . . . . . . . . 4313. Acknowledgement to buyer

[S. 51(3)] . . . . . . . . . . . . . . . . . . 4314. Rejection by buyer [S. 51(4)] . 4325. Delivery to ship chartered

by buyer [S. 51(5)] . . . . . . . . . 432


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CONTENTS xxV

6. Wrongful refusal to deliver [S. 51(6)] . . . . . . . . . . . . . . . . . . 432

7. Part delivery [S. 51(7)] . . . . . . 433How Stoppage is Effected [S. 52] . . 433Effect of Sub-sale [S. 53] . . . . . . . . . . 433

1. Seller’s consent [S. 53(1)] . . . . . . 4342. Transfer of documents of title

[S. 53 Proviso] . . . . . . . . . . . . . . 4343. Right of resale [S. 54] . . . . . . . . 436

Remedies for Breach of Contract . . . 437Seller’s Remedies Against Buyer . . . . 437

1. Suit for Price [S. 55] . . . . . . . . . . . . 4372. Damages for Non-acceptance

[S. 56] . . . . . . . . . . . . . . . . . . . . . . . . 438Suit against carrier for losing

goods . . . . . . . . . . . . . . . . . . . . . 439Buyer’s Remedies Against Seller . . . . 439

1. Damages for Non-delivery [S. 57] . . . . . . . . . . . . . . . . . . . . . . . . 439Duty of mitigation . . . . . . . . . . . . 439

2. Remedy for Breach of Warranty [S. 59] . . . . . . . . . . . . . . . . . . . . . . . . 440

Notice to seller of defective condition . . . . . . . . . . . . . . . . 440

Jurisdiction . . . . . . . . . . . . . . . . . . 4403. Specific Performance [S. 58] . . . . 441Anticipatory Breach [S. 60] . . . . . . . 442Recovery of Interest [S. 61] . . . . . . . 442Exclusion of Implied Terms [S. 62] . 442Reasonable Time [S. 63] . . . . . . . . . . 443

Auction Sales [S. 64] . . . . . . . . . . . . . . . 443Incidence of Taxation [S. 64-A] . . . . 444

Competition Act, 2002 . . . . . . . . . . . . . 444Replacement of MRTP Act, 1969 . . . 444Extent of Application and

Enforcement . . . . . . . . . . . . . . . . . 445Substantive Provisions . . . . . . . . . . . . . 445

Enterprise, Person, or Their Associations [S. 3] . . . . . . . . . . . . . 445

Enterprise [S. 2(h)] . . . . . . . . . . . . . . . 445Person [S. 2(l)] . . . . . . . . . . . . . . . . . . 446Service [S. 2(u)] . . . . . . . . . . . . . . . . . 446Presumption of Anti-competitive

Activity [S. 3(3)] . . . . . . . . . . . . . . . 446Agreements Which are Likely

to Have Adverse Effect on Competition [S. 3(4)] . . . . . . . . . . . 447

Explanation [S. 3] . . . . . . . . . . . . . . . 447Tie-in arrangement . . . . . . . . . . . . 447Exclusive supply agreement . . . . 448

Exclusive distribution agreement . . . . . . . . . . . . . . . . . 448

Refusal to deal . . . . . . . . . . . . . . . . 448Resale price maintenance

(RPM) . . . . . . . . . . . . . . . . . . . . . 448Cartels—Anti competitive

behaviour . . . . . . . . . . . . . . . . 448Exceptions [Sub-s (5)] . . . . . . . . . . . . 449

Protection of intellectual property rights . . . . . . . . . . . . . 449

Protection of export rights . . . . . 449Prohibition of Abuse of Dominant

Position [S. 4] . . . . . . . . . . . . . . . . . . . . 450Identification of Abusive Use of

Dominant Position [Sub-s (2)] . . . 450(a) Unfair or discriminatory

trade practices . . . . . . . . . . . . . . 450(b) Limiting production

or technical or scientific development . . . . . . . . . . . . . . . 450

(c) Denial of access to market . . . 450(d) Imposition of supplementary

obligations . . . . . . . . . . . . . . . . . 450(e) Protection of other markets . . 450

Meaning of Dominant Position [S. 4 (Explanation)] . . . . . . . . . . . . 450

Predatory Price [S. 4, Explanation (b)] . . . . . . . . . . . . . . . 451Group [S. 4, Explanation (c)] . . . . 451

Combinations . . . . . . . . . . . . . . . . . . . . . 451Definition of Combination [S. 5] . . . 451

Acquisition, merger, amalgamation . . . . . . . . . . . . . . 451

Measured in terms of value of assets [cl. (a)] . . . . . . . . . . . . . . . 451A. Value where acquisition by

a group . . . . . . . . . . . . . . . . . . 451B. Acquisition of enterprise by

person having control over another enterprise [S. 5(b)] . . 451

C. Merger or Amalgamation [S. 5(C)] . . . . . . . . . . . . . . . . . . 452

Definitions of terms: Explanation [S. 5] . . . . . . . . . . . 452

Control . . . . . . . . . . . . . . . . . . . . . . 452Group . . . . . . . . . . . . . . . . . . . . . . . 452Value of assets . . . . . . . . . . . . . . . . 452

Regulation of Combinations [S. 6] . 453Ban on combinations [Sub-s (1)] . 453Approval of competition

commission [S. 6(2)] . . . . . . . . . 453


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xxVI BUSINESS LAW

Disposal of notice by the commission [S. 6(3)] . . . . . . . . . 453

Exemption for loans or investment agreements [S. 6(4)] . . . . . . . . . . . . . . . . . . . . . 453

Explanation [S. 6] . . . . . . . . . . . . . 454Competition Commission of India . . . 454

Establishment of the Commission [S. 7] . . . . . . . . . . . . . . . . . . . . . . . . . 454

Chairperson and Membership [S. 8(1)] . . . . . . . . . . . . . . . . . . . . . . . 454Qualifications [S. 8(2)] . . . . . . . . . 454Selection procedure [S. 9] . . . . . . 454

Term of Office [S. 10] . . . . . . . . . . . . . 455Five-year term [S. 10(1)] . . . . . . . . 455Vacancy [S. 10(2)] . . . . . . . . . . . . . . 455Oath of office and secrecy

[S. 10(3)] . . . . . . . . . . . . . . . . . . . . 455Casual vacancy in the office of

chairperson [S. 10(4)] . . . . . . . . 455Resignation, Removal, Suspension

[S. 11] . . . . . . . . . . . . . . . . . . . . . . . . 456Resignation [S. 11(1)] . . . . . . . . . . . 456Removal [S. 11(2)] . . . . . . . . . . . . . 456

Administrative Powers of Chairperson [S. 13] . . . . . . . . . . . . 456

Terms and Condition of Services, Salary and Allowances [S. 14] . . . 457

Vacancy Not to Invalidate Proceedings [S. 15] . . . . . . . . . . . . 457

Appointment of Director General [S. 16] . . . . . . . . . . . . . . . . . . . . . . . . 457

Secretary, Experts, Professionals, Officers and Employees [S. 17] . . 457

Duties, Powers and Functions of Commission . . . . . . . . . . . . . . . . . . 457Duties of commission [S. 18] . . . . 457Inquiry into agreements and

dominant position [S. 19] . . . . . 458Anti-competitive factors . . . . . 458Factors as to dominant

position [S. 19(4)] . . . . . . . . . . 458Relevant market [S. 19(5)] . . . . 459Geographic market [S. 19(6)] . . 459Relevant product market

[S. 19(7)] . . . . . . . . . . . . . . . . . 459Arbitration agreement, no bar 459

Inquiry into Combination [S. 20] . . 459Variation in value of assets or

turnover [S. 20(3)] . . . . . . . . . . . 459

Determining factors for anti-competitiveness [S. 20(4)] . . . . . 460

Reference by Statutory Authority [S. 21] . . . . . . . . . . . . . . . . . . . . . . . . 460

Reference by Commission to Statutory Authority [S. 21-A] . . . 460

Meetings of Commission [S. 22] . . . 461Distribution of Business Amongst

Benches [S. 23] . . . . . . . . . . . . . . . . 461Difference of Opinion [S. 24] . . . . . . 461Procedure for Inquiry Under

Section 19 [S. 26] . . . . . . . . . . . . . . 461Order of investigation

[Sub-s (1)] . . . . . . . . . . . . . . . . . . 461Closing inquiry where no prima

facie case [Sub-s (2)] . . . . . . . . . 461Report of Director General . . . . . 461Direction for further

investigation or inquiry . . . . . . 462Orders of Commission After

Finding of Contravention or Abuse of Dominance [S. 27] . . . . 462

Division of Enterprise Enjoying Dominant Position [S. 28] . . . . . . 462

Procedure for Investigation of Combinations [S. 29] . . . . . . . . . . . 463

Procedure in Case of Notice Under Section 6(2) [S. 30] . . . . . . . . . . . . . 463

Orders of the Commission on Certain Combinations [S. 31] . . . 463Approval of combinations

[S. 31(1)] . . . . . . . . . . . . . . . . . . . . 463Acts Outside India But With Effect

on Competition in India [S. 32] . . 464Power to Pass Interim Orders

[S. 33] . . . . . . . . . . . . . . . . . . . . . . . . 464S. 34 [Omitted by 2007

Amendment] . . . . . . . . . . . . . . . . . 465Appearance Before Commission

[S. 35] . . . . . . . . . . . . . . . . . . . . . . . . 465Power to Regulate Procedure

[S. 36] . . . . . . . . . . . . . . . . . . . . . . . . 465Appeals to the Supreme Court

[S. 53-T] . . . . . . . . . . . . . . . . . . . . . . 466Unfair Trading and English Law . . 467

The Trade Descriptions Acts, 1968 and 1972 . . . . . . . . . . . . . . . 467


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CONTENTS xxVII

Part IVN E G O T I A B L E I N S T R U M E N T S

15. Negotiable Instruments Act, 1881 . 471Definition of Negotiable

Instrument . . . . . . . . . . . . . . . . . . . . . . 471Object of the Act . . . . . . . . . . . . . . . . 472

Kinds of Negotiable Instrument . . . . 472Promissory Note [S. 4] . . . . . . . . . . . 473

1. Writing . . . . . . . . . . . . . . . . . . . . 4742. Promise to pay . . . . . . . . . . . . . 4743. Unconditional . . . . . . . . . . . . . . 4744. Money only . . . . . . . . . . . . . . . . 4755. Certain parties . . . . . . . . . . . . . 4766. Signature . . . . . . . . . . . . . . . . . . 477

Bill of Exchange [S. 5] . . . . . . . . . . . . 4771. Writing . . . . . . . . . . . . . . . . . . . . 4772. Order to pay . . . . . . . . . . . . . . . 4773. Unconditional . . . . . . . . . . . . . . 4784. Money and money only . . . . . . 4785. Three parties . . . . . . . . . . . . . . . 4786. Indication of drawee with

reasonable certainty . . . . . . . . . 478Ambiguous instruments . . . . . . . 4797. Signature . . . . . . . . . . . . . . . . . . 479

Acceptance [S. 7] . . . . . . . . . . . . . . . . 479Cheque [S. 6] . . . . . . . . . . . . . . . . . . . 480

Bill of exchange and cheque compared . . . . . . . . . . . . . . . . . . 481

Pay Order . . . . . . . . . . . . . . . . . . . . . . 481Holder [S. 8] . . . . . . . . . . . . . . . . . . . . 482Holder in Due Course [S. 9] . . . . . . 483

1. Consideration . . . . . . . . . . . . . . 4832. Before maturity . . . . . . . . . . . . . 4843. Complete and regular . . . . . . . 4854. Good faith . . . . . . . . . . . . . . . . . 486

Rights and Privileges of Holder in Due Course . . . . . . . . . . . . . . . . . . 4881. Presumptions [S. 118] . . . . . . . . 4882. Privilege against inchoate

stamped instruments [S. 20] . . 4883. Fictitious drawer or payee

[S. 42] . . . . . . . . . . . . . . . . . . . . . . 4894. Prior defects [S. 58] . . . . . . . . . . 4905. Indorsee from a holder in due

course [S. 53] . . . . . . . . . . . . . . . 490Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . 491

Minor [S. 26] . . . . . . . . . . . . . . . . . . . . 491Corporation [S. 26] . . . . . . . . . . . . . . 491Agency [S. 27] . . . . . . . . . . . . . . . . . . 491

Legal representative [S. 29] . . . . . . . 491Negotiation and Liability . . . . . . . . . . 492

Assignment and Negotiation Distinguished . . . . . . . . . . . . . . . . 4921. Subject to equities . . . . . . . . . . . 4922. Notice of assignment . . . . . . . . 4923. Presumptions . . . . . . . . . . . . . . 492Stamp Duty . . . . . . . . . . . . . . . . . . 492

Negotiation by Delivery [Ss. 46 and 47] . . . . . . . . . . . . . . . . . . . . . . 492

Negotiation by Indorsement [S. 48] 493Who May Indorse [S. 51] . . . . . . . . . 494Kinds of Indorsement . . . . . . . . . . . 494

1. Indorsement in blank [Ss. 16 & 54] . . . . . . . . . . . . 494

2. Indorsement in full [S. 16] 4943. Restrictive indorsement

[S. 50] . . . . . . . . . . . . . . . . . . 4954. Indorsement sans

recourse [S. 52] . . . . . . . . . . 4955. Conditional indorsement

[S. 52] . . . . . . . . . . . . . . . . . . 4966. Partial indorsement [S. 56] 496

Liability of Parties . . . . . . . . . . . . . . . . 496Liability of Acceptor or Maker

[S. 32] . . . . . . . . . . . . . . . . . . . . . . . . 496Liability of Drawer [S. 30] . . . . . . . . 497

Drawer of a bill . . . . . . . . . . . 497Drawer of a cheque [S. 30] . . 497

Liability of Drawee of Cheque . . . . 497Banker’s Liability for Unjustified

Dishonour of Cheque [S. 31] . . . . 498When justified in refusing . 4991. Where cheque post-dated 4992. Where cheque outdated . . 4993. When funds insufficient . 4994. When customer

countermands payment . . 4995. Where cheque mutilated . 4996. Where cheque of

doubtful validity . . . . . . . . 4997. Where customer’s

signature does not agree . 5008. Where customer has

countermanded payment 5009. Where customer has died 50010. Where customer has

become insolvent . . . . . . . 50011. Where customer has

become a person of unsound mind . . . . . . . . . 500


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xxVIII BUSINESS LAW

12. Where garnishee order has been issued . . . . . . . . . 500

Criminal Liability of Drawer for Issuing Cheques Without Fund [Ss. 138–147] . . . . . . . . . . . . . . . . . . 500

Fine and compensation . . . . 503Compounding of offence

[S. 147] . . . . . . . . . . . . . . . . . 504Complaint involving

complicated facts . . . . . . . 504Mitigation of sentence . . . . . 504

Cognizance of Offences and Jurisdiction [S. 142] . . . . . . . . . . . . 504

Summary trial and sentence [S. 143] . . . . . . . . . . . . . . . . . 505

Service of summons [S. 144] . . . . 505Evidence on affidavits [S. 145] . . . 505Evidentiary value of bank’s slip

[S. 146] . . . . . . . . . . . . . . . . . . . . . 506Raising of Amount . . . . . . . . . . . . . . 506Forgery of Signature . . . . . . . . . . . . 507

Estoppel against forgery . . . . . . . 507Forgery in Indorsement [S. 85] . . . . 508Travellers’ Cheques . . . . . . . . . . . . . 509Liability of Transferor by Delivery 509

1. Warranty of genuineness 5102. Right to transfer . . . . . . . . 5103. Not to be valueless within

knowledge of transferor . 510Position of Transferee . . . . . . . . . . . . 510Liability of Indorser [S. 35] . . . . . . . 510Liability Under Accommodation

Bills [Ss. 43–45] . . . . . . . . . . . . . . . 511Instrument without

consideration [S. 43] . . . . . 511Partial absence or failure of

consideration [S. 44] . . . . . 511Holder’s Right to Duplicate [S. 45-

A] . . . . . . . . . . . . . . . . . . . . . . . . . . . 511Presentment . . . . . . . . . . . . . . . . . . . . . . 512

Presentment for Acceptance [S. 61] 512Time for presentment for

sight [S. 62] . . . . . . . . . . . . . 512Place of presentment [S. 61] . 512

Presentment for Payment [S. 64] . . . 513Time for presentment . . . . . . 513Place for presentment . . . . . 513

Maturity [Ss. 21–25] . . . . . . . . . . . . . 514Days of grace [S. 22] . . . . . . . 514

Instruments payable so many months after date or sight [S. 23] . . . . . . . . . . 515

Instrument payable after some days [S. 24] . . . . . . . . 515

Provisions Applicable to Presentment for Acceptance and Payment . . . . . . . . . . . . . . . . . . . . . 515

Presentment to agent, etc [S. 75] . . . . . . . . . . . . . . . . . . 515

Delay when excused . . . . . . 515When Presentment Unnecessary . . 516

Discharge from Liability . . . . . . . . . . . 5171. By Cancellation [S. 82] . . . . . . . . . 5172. By Release [S. 82(b)] . . . . . . . . . . . . 5183. By Payment [S. 82(c)] . . . . . . . . . . . 5184. By Allowing More Than 48

Hours to Accept [S. 83] . . . . . . . . . 5205. By Qualified Acceptance [S. 86] . 5206. By Delay in Presenting Cheque

[S. 84] . . . . . . . . . . . . . . . . . . . . . . . . 5207. By Material Alteration [Ss. 87–89] 521

(a) Intentional alteration . . . 521(b) Material alteration . . . . . . 521(c) Apparent alteration [S. 89] 523Extinction of debt [S. 87] . . . 523

8. By Negotiation Back [S. 90] . . . . . 524Miscellaneous Provisions . . . . . . . . . . 524

Notice of Dishonour . . . . . . . . . . . . . 5241. Dishonour by non-

acceptance [S. 91] . . . . . . . . 5242. Dishonour by non-

payment [S. 92] . . . . . . . . . 524Mode of giving notice [S. 94] . . . . 524

Duty to transmit [S. 95] . . . . 525When dispensed with [S. 98] 525

Noting [S. 99] . . . . . . . . . . . . . . . . . . . 525Protest [S. 100] . . . . . . . . . . . . . . . . . . 525

Protest for better security [S. 100, para 2] . . . . . . . . . . 525

Contents of protest [S. 101] . 526Notice of protest [S. 102] . . . 526Protest of foreign bills

[S. 104] . . . . . . . . . . . . . . . . . 526Noting equivalent to protest

[S. 104-A] . . . . . . . . . . . . . . . 526Reasonable Time [Ss. 105–107] . . . . 526

Generally . . . . . . . . . . . . . . . . 526For notice of dishonour

[S. 106] . . . . . . . . . . . . . . . . . 526Acceptance and Payment for Honour 527


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CONTENTS xxIx

Acceptance for Honour [S. 108] . . . 527Liability of acceptor for

honour [S. 111] . . . . . . . . . . 527Payment for Honour [S. 113] . . . . . . 527

Right of payer for honour [S. 114] . . . . . . . . . . . . . . . . . 527

Drawee in Case of Need [S. 115] . . . 527Compensation [S. 117] . . . . . . . . . . . . . . 528

Interest When Rate Specified [S. 79] 528Interest When No Rate Specified

[S. 80] . . . . . . . . . . . . . . . . . . . . . . . . 529Special Rules of Evidence . . . . . . . . . . 529

Presumptions [S. 118] . . . . . . . . . . . . 5291. Presumption as to

consideration . . . . . . . . . . . 5292. Presumption as to date . . 5293. Time of acceptance . . . . . . 5294. Time of transfer . . . . . . . . . 5295. Order of indorsements . . . 5306. As to stamp . . . . . . . . . . . . 5307. Holder in due course . . . . 5308. Proof of protest [S. 119] . . 530

Estoppels . . . . . . . . . . . . . . . . . . . . . . 5301. Against denial of validity

[S. 120] . . . . . . . . . . . . . . . . . 5302. Against denial of payee’s

capacity [S. 121] . . . . . . . . . 5303. Against indorser [S. 122] . 530

Bills in Sets [S. 132] . . . . . . . . . . . . . . 531International Law [Ss. 134–137] . . . 531

Liability on foreign instruments [S. 134] . . . . . . . . . . . . . . . . . . . . . 531

Law in respect of dishonour [S. 135] . . . . . . . . . . . . . . . . . . . . . 531

Foreign instruments made in accordance with Indian law [S. 136] . . . . . . . . . . . . . . . . . . . . . 531

Presumption as to foreign law [S. 137] . . . . . . . . . . . . . . . . . . . . . 532

Crossed Cheques . . . . . . . . . . . . . . . . . . 532Kinds of Crossing . . . . . . . . . . . . . . . 532General Crossing [S. 123] . . . . . . . . . 532Special Crossing [S. 124] . . . . . . . . . 532Account Payee Only . . . . . . . . . . . . . 533“Not Negotiable” Crossing [S. 130] 533Who May Cross [S. 125] . . . . . . . . . . 534

1. By drawer . . . . . . . . . . . . . . 5342. The holder . . . . . . . . . . . . . 5343. The banker . . . . . . . . . . . . . 534

Payment of Crossed Cheques [S. 126] . . . . . . . . . . . . . . . . . . . . . . . 534

Protection of Collecting Banker [S. 131] . . . . . . . . . . . . . . . . . . . . . . . 534

1. For customer . . . . . . . . . . . 5352. As agent . . . . . . . . . . . . . . . 5353. Crossed cheque . . . . . . . . . 5364. Good faith and without

negligence . . . . . . . . . . . . . 536

Part VC O M PA N Y L AW

16. Company Law . . . . . . . . . . . . . . . . . . . . 541Chapter 1: Preliminary . . . . . . . . . . . . 541

Title and Commencement [S. 1] . . . 541Extend of Application [S. 1(4)] . . . . . 541Definitions [S. 2] . . . . . . . . . . . . . . . . 541

Chapter II: Corporate Personality and Advantages of Incorporation . 541

1. Independent corporate existence . . . . . . . . . . . . . . . 541

2. Limited liability . . . . . . . . 5423. Perpetual succession . . . . 5424. Transferable shares . . . . . . 5425. Separate property . . . . . . . 5426. A company can sue and

be sued in its corporate name. . . . . . . . . . . . . . . . . . 543

7. A company attracts professional management. 543

8. A company gets the privilege of collecting interest-free money from the public for its business by making a public issue or through private placement of shares and other securities. . . . . . . . . . 543

Disadvantages . . . . . . . . . . . . . . . . . . 5431. Lifting the corporate veil . 543(a) When it becomes

necessary to determine the legal character of a corporation . . . . . . . . . . . . 543

(b) For benefit of revenue . . . 543(c) When company

conceived and brought forth for fraudulent purposes . . . . . . . . . . . . . . . 543


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xxx BUSINESS LAW

(d) Agency or trust and Government company . . . 544

(e) Under statutory provisions . . . . . . . . . . . . . 544

2. Formality and expense . . 5453. Company is not citizen . . 545

Registration and Incorporation . . . . 545Formation of Company [S. 3] . . . . . 545

(a) Public company . . . . . . . . 545(b) Private company . . . . . . . 545(c) One man company . . . . . 545Punishment for false

particulars . . . . . . . . . . . . . 546Certificate of Incorporation [S. 7] . . 547Pre-incorporation Contracts . . . . . . 548Commencement of Business [S. 11] 548

Memorandum of Association [S. 4] . . 5491. Name Clause . . . . . . . . . . . . . . . . . 549

Advance reservation of name . . . . . . . . . . . . . . . . . . 549

2. Registered Office Clause . . . . . . . 5493. Objects Clause . . . . . . . . . . . . . . . . 5504. Liability Clause . . . . . . . . . . . . . . . 5505. Capital Clause . . . . . . . . . . . . . . . . 550

Subscription . . . . . . . . . . . . . . 550Objects, Powers and Ultra Vires . . . 550Alteration of Memorandum [S. 13] 552

Alteration of name [S. 13(2)(3)] . . . . . . . . . . . . . . . . . . . . 552

Alteration of registered office clause [S. 13(4)] . . . . 552

Change of objects [S. 13(8)] . 552Formation of Companies with

Charitable Objects [S. 8] . . . . . . . . 553Articles of Association [S. 5] . . . . . . . 554

Provisions for entrenchment 554Articles in Relation to

Memorandum . . . . . . . . . . . . . . . . 554Binding Force of Memorandum

and Articles [S. 10] . . . . . . . . . . . . 5551. Members bound to the

company . . . . . . . . . . . . . . . 5552. Company to members . . . 5553. Neither company, nor

members bound to outsiders . . . . . . . . . . . . . . . 555

4. Members inter se . . . . . . . 555Alteration of Articles [S. 14] . . . . . . 556

Alteration of memorandum and articles to be noted on every copy [S. 15] . . . . . 557

Rectification of Name of Company [S. 16] . . . . . . . . . . . . . . . . . . . . . . . . 557

Copies of Memorandum, etc to be given to Members [S. 17] . . . . . . . 557

Constructive Notice of Memorandum and Articles . . . . . 557

Indoor Management . . . . . . . . . . . . . 5581. Knowledge of irregularity 5592. Suspicion of irregularity . 5593. Forgery . . . . . . . . . . . . . . . . 5594. Representation through

articles . . . . . . . . . . . . . . . . 559Act to Override Memorandum and

Articles [S. 6] . . . . . . . . . . . . . . . . . 560Registered Office of Company

[S. 12] . . . . . . . . . . . . . . . . . . . . . . . . 560Change of registered office

situation . . . . . . . . . . . . . . . 560Conversion of Companies Already

Registered [S. 18] . . . . . . . . . . . . . . 561Chapter III: Prospectus and

Allotment of Securities . . . . . . . . . . 561Definition . . . . . . . . . . . . . . . . . . . . . . 561Application Forms [S. 33] . . . . . . . . . 561Public Offer [S. 23] . . . . . . . . . . . . . . 562SEBI’s Power to Regulate Issue and

Transfer of Securities, etc [S. 24] . 562Documents Containing Offer of

Securities for Sale, Deemed Prospectus [S. 25] . . . . . . . . . . . . . 562

Contents of Prospectus (Matters to be Stated in Prospectus) [S. 26] . . 563

(b) Reports . . . . . . . . . . . . . . . 564(4) Filing of copy with

Registrar . . . . . . . . . . . . . . . 564(5) Statement of

independent expert . . . . . 565Statement that copy

has been delivered to Registrar [S. 26(6)] . . . . . . . 565

Registration of prospectus by Registrar [S. 26(7)] . . . . 565

Date of issue after registration [S. 26(8)] . . . . . 565

Penalty for contravention [S. 26(9)] . . . . . . . . . . . . . . . . 565

Variation in Terms of Contract or Objects Stated in Prospectus [S. 27] . . . . . . . . . . . . . . . . . . . . . . . . 565

Offer of Sale of Shares to Certain Members [S. 28] . . . . . . . . . . . . . . . 565


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CONTENTS xxxI

Members’ responsibility in the matter of sale [S. 28(3)] 566

Public Offer of Securities to be in Dematerialised Form [S. 29] . . . . 566

Advertisement of Prospectus [S. 30] . . . . . . . . . . . . . . . . . . . . . . . . 566

Shelf Prospectus [S. 31] . . . . . . . . . . 566Information Memorandum

[S. 31(2)] . . . . . . . . . . . . . . . . 566Red Herring Prospectus [S. 32] . . . . 567Remedies for Misrepresentation . . 567

1. Damages for deceit . . . . . . 5672. Compensation under

Section 35 . . . . . . . . . . . . . . 5673. Rescission for

misrepresentation . . . . . . . 5681. By affirmation . . . . . . . . . . 5682. By unreasonable delay . . . 5693. By commencement of

winding up . . . . . . . . . . . . 569When Statement Deemed to be

Untrue . . . . . . . . . . . . . . . . . . . . 569Criminal Liability for

Misstatements in Prospectus [S. 34] . . . . . . . . . . . . . . . . . . . . . . . . 569

Fraudulently Inducing Persons to Invest Money [S. 36] . . . . . . . . . . . 569

Who can sue under Sections 34, 35 and 36 [S. 37] . . . . . . . . . . . . . . . . . 570

Personation for Acquisition of Securities [S. 38] . . . . . . . . . . . . . . 570

Acceptance of Deposits by Companies [S. 73] . . . . . . . . . . . . . . . . . . . . . . . . . . . 570

Deposits from members [S. 73(2)] . . . . . . . . . . . . . . . . 570

Repayment deposits accepted before the Act [S. 74] . . . . . . . . . . . 571

Tribunal may extend time [S. 74(2)] . . . . . . . . . . . . . . . . 571

Penal provision [S. 74(3)] . . . 571Damages for fraud [S. 75] . . . . . . . . 572Acceptance of deposits from

public [S. 76] . . . . . . . . . . . . . . . . . . 572Registration of Charges [S. 77] . . . . . 572

Application for Registration of Charge by Charge-holder [S. 78] 573

Matters to Which Section 77 Applies [S. 79] . . . . . . . . . . . . . . . . 573

Deemed Notice of Charge and Its Date [S. 80] . . . . . . . . . . . . . . . . . . . 573

Register of Charges to be kept by Registrar [S. 81] . . . . . . . . . . . . . . . 573

Company to Report Satisfaction of Charge [S. 82] . . . . . . . . . . . . . . . . . 573

Power of Registrar to enter Satisfaction without intimation from Company [S. 83] . . . . . . . . . . 574

Intimation of Appointment of Receiver or Manager [S. 84] . . . . . 574

Company’s Register of Charges [S. 85] . . . . . . . . . . . . . . . . . . . . . . . . 574

Inspection of Register [S. 85(2)] . . . . . . . . . . . . . . . . 574

Penalty provision [S. 86] . . . 574Rectification by Central

Government in Register of Charges [S. 87] . . . . . . . . . . . . . . . . 574

Promoters . . . . . . . . . . . . . . . . . . . . . . . . 576Duty and Liability: Fiduciary

Relation . . . . . . . . . . . . . . . . . . . . . 577Securities . . . . . . . . . . . . . . . . . . . . . . . . 577

Allotment of Securities [S. 39] . . . . . 5771. Minimum subscription

[S. 39(1)] . . . . . . . . . . . . . . . . 5772. Application money

[S. 39(2)] . . . . . . . . . . . . . . . . 5783. Shares to be dealt in on

stock exchange [S. 40] . . . . 578Return as to allotment

[S. 39(4)] . . . . . . . . . . . . . . . . 578General principles . . . . . . . . 579

Global Depository Receipt [S. 41] . . 579Private Placement [S. 42] . . . . . . . . . 579

Consequences of default [S. 42(10)] . . . . . . . . . . . . . . . 580

Numbering of Shares . . . . . . . . . . . . 580Certificate of Shares [S. 46] . . . . . . . 580

Estoppel as to title . . . . . . . . 580Estoppel as to payment . . . . 581

Duplicate Certificate [S. 46(2)] . . . . . 581Duplicate with intent to

defraud [S. 46(5)] . . . . . . . . 581Shareholders’ voting rights [S. 47] . 581Variation of Shareholders’ Rights

[S. 48] . . . . . . . . . . . . . . . . . . . . . . . . 582Calls on Shares [S. 49] . . . . . . . . . . . 582Company to Accept Payment on

Uncalled Share Capital [S. 50] . . . 582Payment of Dividend in

Proportion to Amount Paid [S. 51] . . . . . . . . . . . . . . . . . . . . . . . . 582


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xxxII BUSINESS LAW

Transfer and Transmission of Securities [S. 56] . . . . . . . . . . . . . . 583

Statutory remedy against refusal [S. 58] . . . . . . . . . . . 584

Penalty provision [S. 58(6)] . 584Procedure of Transfer [S. 56] . . . . . . 585

Transfer of partly paid shares [S. 56(3)] . . . . . . . . . 585

Delivery of certificates of securities allotted, transferred or transmitted [S. 56(4)] . . . . . . . . . . . . . . . . 585

Transfer by legal representative [S. 56(5)] . . 586

Penalty provision [S. 56(6)(7)] . . . . . . . . . . . . . . . . . . . . 586

Forgery in transfer . . . . . . . . 586Rights of transferor and

transferee . . . . . . . . . . . . . . 586Priority between transferees 586

Transmission of Shares [S. 56(2)] . . 587Mortgage or Pledge of Shares . . . . . 587Punishment for Personation of

Shareholder [S. 57] . . . . . . . . . . . . 587Prohibition of Issue at Discount

[S. 53] . . . . . . . . . . . . . . . . . . . . . . . . 587Underwriting Commission

[S. 40(6)] . . . . . . . . . . . . . . . . . . . . . 588Brokerage . . . . . . . . . . . . . . . . . . . . . . 588Issue of Shares at Premium [S. 52] . 588Sweat Equity Shares [S. 54] . . . . . . . 588

Shareholders or Members . . . . . . . . . . 589Who May be Member . . . . . . . . . . . 590Calls on Shares . . . . . . . . . . . . . . . . . 590

Payment in kind . . . . . . . . . . 590Forfeiture of Shares . . . . . . . . . . . . . 591

Surrender of shares . . . . . . . 591Register of Members, etc [S. 88] . . . 591

Depository’s register . . . . . . 592Foreign register [S. 88(4)] . . . 592Penalty provision [S. 88(5)] . 592

Declaration of Beneficial Interest in Share [S. 89] . . . . . . . . . . . . . . . . 592

Noting of declaration and filing of return [S. 89(6–8)] 592

Investigation of Beneficial Ownership of Shares [S. 90] . . . . 593

Power to Close Register of Members, Debenture Holders and Security Holders [S. 91] . . . . 593

Register prima facie evidence [S. 95] . . . . . . . . . 593

Rectification of Register of Members [S. 59] . . . . . . . . . . . . . . . 593

Penalty provision [S. 59(5)] . 594Civil Remedy Not Barred . . . . . . . . 594Shares in Demat Form . . . . . . . . . . . 595Notice of Trust [S. 153] . . . . . . . . . . . 595Lien on Shares . . . . . . . . . . . . . . . . . . 595Annual Return [S. 92] . . . . . . . . . . . . 596

Penalty provisions [S. 92(5)(6)] . . . . . . . . . . . . . . . . . . . . 597

Return to be Filed When Promoters’ Stake Changes [S. 93] 597

Place of Keeping Registers, Returns and Inspection [S. 94] . . 597

Inspection [S. 94(2–5)] . . . . . 597Chapter IV: Share Capital and

Debentures . . . . . . . . . . . . . . . . . . . . . . 598Kinds of Share Capital [S. 43] . . . . . 598

Cumulative preference shares . . . . . . . . . . . . . . . . . 598

Participating preference shares . . . . . . . . . . . . . . . . . 598

Redeemable preference shares [S. 55] . . . . . . . . . . . 599

Irredeemable preference shares . . . . . . . . . . . . . . . . . 599

Inability to redeem [S. 55(3)] 599Issue of bonus shares

[S. 55(4)] . . . . . . . . . . . . . . . . 600Infrastructure projects

[Explanation] . . . . . . . . . . . 600Ordinary and Preference

Shareholder Compared . . . . . . . . 600Publication of Authorised,

Subscribed and Paid-up Capital [S. 60] . . . . . . . . . . . . . . . . . . . . . . . . 600

Alteration of Capital [S. 61] . . . . . . . 600Notice to Registrar on Alteration

of Capital [S. 64] . . . . . . . . . . . . . . 600Unlimited Company Becoming

Limited Company, Provision for Reserve Capital [S. 65] . . . . . . . . . 601

Reduction of Capital [S. 66] . . . . . . . 601Approval of Tribunal

[S. 66(2)] . . . . . . . . . . . . . . . . 601Liability to creditor omitted

from list of creditors [S. 66(8)] . . . . . . . . . . . . . . . . 602

Penal provisions [S. 66(10)] . 602


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CONTENTS xxxIII

Further Issue of Capital [S. 62] . . . . 603Power to convert loans into

capital [S. 62] . . . . . . . . . . . 604Purchase by Company of Its Own

Shares [S. 67] . . . . . . . . . . . . . . . . . 604Penalty provision [S. 67(5)] . 605

Buy-back of Shares [S. 68] . . . . . . . . 606Declaration of solvency

[Sub-s (6)] . . . . . . . . . . . . . . 606Physical destruction of

securities [S. 68(7)] . . . . . . 607Further issue after buy-back

[S. 68(8)] . . . . . . . . . . . . . . . . 607Register of bought back

securities [S. 68(9)] . . . . . . 607Return of buy-back

[S. 68(10)] . . . . . . . . . . . . . . . 607Penalty [S. 68(11)] . . . . . . . . . 607Transfer of money to capital

redemption reserve account [S. 69] . . . . . . . . . . 607

Prohibition of buy-back in certain circumstances [S. 70] . . . . . . . . . . . . . . . . . . 607

Appointment of Nominee by Security Holder [S. 72] . . . . . . . . . 608

Chapter V: Acceptance of Deposits [Dealt with earlier] . . . . . . . . . . . . . . 608

Chapter VI: Registration of Charges [Dealt with earlier] . . . . . . . . . . . . . . 608

Chapter xI, xII, xIII: Directors . . . . . 608Company to Have Board of

Directors [S. 149] . . . . . . . . . . . . . . 608Independent directors

[S. 149(4)] . . . . . . . . . . . . . . . 609Manner of Election of Independent

Directors and Maintenance of Data Bank [S. 150] . . . . . . . . . . . . . 610

Appointment of Directors Elected by Small Shareholders [S. 151] . . 610

Position of Directors . . . . . . . . . . . . . 610Directors as agents . . . . . . . . 611Directors as trustees . . . . . . . 611Directors as organs . . . . . . . . 612

Appointment of Directors [S. 152] . 612Retirement by rotation

[S. 152(6)] . . . . . . . . . . . . . . . 612Director Identification Number

[S. 153] . . . . . . . . . . . . . . . . . . . . . . . 613

Obligation to mention Director Identification Number [S. 158] . . . . . . . . . 613

Right of any other Person than retiring Director to Stand for Directorship [S. 160] . . . . . . . . . . . 613

Appointment of Additional, Alternate and Nominee Director [S. 161] . . . . . . . . . . . . . . . . . . . . . . . 613

Nominee director [S. 161(3)] 614Appointment of Directors to be

voted Individually [S. 162] . . . . . . 614Option to adopt System of

Proportional Representation [S. 163] . . . . . . . . . . . . . . . . . . . . . . . 614

Casual Vacancies [S. 161(4)] . 614Disqualifications [S. 164] . . . 614

Number of Directorships [S. 165] . . 615Vacation of Office [S. 167] . . 615

Removal of Directors . . . . . . . . . . . . 616Removal by shareholders . . 616Removal by Tribunal [S. 242] 616Resignation [S. 168] . . . . . . . . 616

Register of Directors, Key Managerial Personnel and their Shareholding [S. 170] . . . . . . . . . . 617

Inspection of registers [S. 171] . . . . 617Punishment [S. 172] . . . . . . . . . . . . . 617Meetings of Board [S. 173] . . . . . . . . 617Quorum for Meetings of Board

[S. 174] . . . . . . . . . . . . . . . . . . . . . . . 618Passing of Resolution by

Circulation [S. 175] . . . . . . . . . . . . 618Defects in Appointment of

Directors not to Invalidate Actions Taken [S. 176] . . . . . . . . . 619

Audit Committee [S. 177] . . . . . . . . . 619Nomination and Remuneration

Committee and Stakeholders Relationship Committee [S. 178] . 620

Nomination and Remuneration Committee [S. 178(1)–(4)] . . . . . . . . . . . 620

Stakeholders Relationship Committee [S. 178(5)–(6)] . 620

Procedure and penalty [S. 178(7) & (8)] . . . . . . . . . . 620

Powers of Directors [S. 179] . . . . . . . 6211. Mala fide . . . . . . . . . . . . . . . 6212. Board incompetent . . . . . . 6213. Deadlock . . . . . . . . . . . . . . 621


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xxxIV BUSINESS LAW

4. Residuary powers . . . . . . . 621Statutory Provisions . . . . . . . . . . . . . 622

Power exercisable with resolution of Board of Directors . . . . . . . . . . . . . . . 622

Power exercisable with general body resolution [S. 180] . . . . . . . . . . . . . . . . . 622

Company to Contribute to Bona fide Charitable and other Funds etc [S. 181] . . . . . . . . . . . . . . . . . . . . 623

Power to Make Political Contributions [S. 182] . . . . . . . . . . 623

Contributions to National Defence Fund etc [S. 183] . . . . . . . . . . . . . . 623

Duties of Directors [S. 166] . . . . . . . 6231. Duty to act according to

articles [S. 166(1)] . . . . . . . . . . . . 6242. Duty of good faith: Liability

for breach of trust [S. 166(2)] . . 624Trading in corporate control

[S. 195] . . . . . . . . . . . . . . . . . 624Misuse of corporate

information . . . . . . . . . . . . 625Competition by directors . . 625

3. Duty of care: Liability for negligence [S. 166(3)] . . . . . . . . . 625

Attendance at Board meetings: Liability for non-attendance . . . . . . . . . 626

4. Duty to disclose interest and to avoid conflict of interests [S. 166(4)] . . . . . . . . . . . . . . . . . . 626

5. Duty not to make undue gain . 6276. Duty not to delegate or assign

his office: Liability for co-director’s defaults [S. 166(6)] . . 627

Loans to Directors [S. 185] . . . . . . . . 628Related Party Transactions [S. 188] 628

Related Party [S. 2(76)] . . . . . 629Register of Contracts or

Arrangements in Which Directors Are Interested [S. 189] . 629

Contract of Employment With Managing or Whole-time Director [S. 190] . . . . . . . . . . . . . . . 630

Payment to Director for Loss of Office, etc [S. 191] . . . . . . . . . . . . . . 630

Restriction on Non-cash Transactions Involving Directors [S. 192] . . . . . . . . . . . . . . . . . . . . . . . 631

Contract by One Person Company [S. 193] . . . . . . . . . . . . . . . . . . . . . . . 631

Prohibition on Forward Dealings in Securities of Company by Director or Key Managerial Personnel [S. 194] . . . 631

Prohibition of Insider Trading of Securities [S. 195] . . . . . . . . . . . . . 632

Appointment and Remuneration of Managerial Personnel . . . . . . . . . . . 632

Managing or Whole-time Director or Manager [S. 196] . . . . . . . . . . . . 632

Disqualifications [S. 196(3)] . 633Overall Maximum Managerial

Remuneration: Effect of Inadequacy of Profits [S. 197] . . . 634

Insurance premium against liability for default by managerial personnel [S. 197(13)] . . . . . . . . . . . . . . 635

Receipt of commission from holding or subsidiary company [S. 197(14)] . . . . . 635

Penalty [S. 197(15)] . . . . . . . . 635Calculation of Profits [S. 198] . . . . . 636Recovery of Remuneration in

Certain Cases [S. 199] . . . . . . . . . . 637Central Government or Company

to fix Limit with regard to Remuneration [S. 200] . . . . . . . . . 637

Compensation for Loss of Office to Managing, Whole-time Director or Manager [S. 202] . . . . . . . . . . . . 637

Appointment of Key Managerial Personnel [S. 203] . . . . . . . . . . . . . 638

Manager . . . . . . . . . . . . . . . . . . . . . . . 639Secretarial Audit for Bigger

Companies [S. 204] . . . . . . . . . . . . 639Functions of Company Secretary

[S. 205] . . . . . . . . . . . . . . . . . . . . . . . 639Secretary . . . . . . . . . . . . . . . . . . . . . . 639Officer Who Is in Default [S. 2(60)] . 640

Chapter xIV: Inspection, Inquiry and Investigation . . . . . . . . . . . . . . . . . . . . 641

Power to Call for Information, Inspect Books and Conduct Enquiries [S. 206] . . . . . . . . . . . . . 641

Conduct of Inspection and Inquiry [S. 207] . . . . . . . . . . . . . . . . . . . . . . . 642

Penalty and vacation of office [S. 207(4)] . . . . . . . . . 642


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CONTENTS xxxV

Report on Inspection [S. 208] . . . . . 642Search and Seizure [S. 209] . . . . . . . 643Investigation Into Affairs of

Company [S. 210] . . . . . . . . . . . . . . 643Establishment of Serious Fraud

Investigation Office [S. 211] (SFIO) . . . . . . . . . . . . . . . . . . . . . . . 644

Investigation Into Affairs of Company by SFIO [S. 212] . . . . . . 645

Right to bail of persons charged [S. 212(6)(7)] . . . . . 645

Arresting guilty person [S. 212(8)(9)(10)] . . . . . . . . . 645

Report of investigation [S. 212(11)–(17)] . . . . . . . . . 645

Investigation Into Company’s Affairs in Other Cases [S. 213] . . 646

Security for Payment of Costs and Expenses of Investigation [S. 214] 646

Investigation of Ownership of Company [S. 216] . . . . . . . . . . . . . . 646

Procedure, Powers, etc, of Inspectors [S. 217] . . . . . . . . . . . . . 646

Inspector’s Report [S. 223] . . . . . . . . 647Action in Terms of Report [S. 224] . 648

Disgorgement of benefits obtained by director, etc [S. 224(5)] . . . . . . . . . . . . . . 648

Miscellaneous Matters . . . . . . . . . . . 648Chapter xV: Compromises,

Arrangements and Amalgamations 649Power to Compromise or Make

Arrangements With Creditors and Members [S. 230] . . . . . . . . . . 649

Powers of Tribunal to Enforce Compromise or Arrangement [S. 231] . . . . . . . . . . . . . . . . . . . . . . . 650

Merger and Amalgamation of Companies [S. 232] . . . . . . . . . . . . 651

Merger or Amalgamation of Certain Companies [S. 233] . . . . . 653

Merger or Amalgamation of Company With Foreign Company [S. 234] . . . . . . . . . . . . . 654

Power to Acquire Shares of Shareholders Dissenting From Scheme or Contract Approved By Majority [S. 235] . . . . . . . . . . . . 654

Purchase of Minority Shareholding [S. 236] . . . . . . . . . . 655

Amalgamation in Public Interest [S. 237] . . . . . . . . . . . . . . . . . . . . . . . 655

Registration of Offers of Schemes Involving Transfer of Shares [S. 238] . . . . . . . . . . . . . . . . . . . . . . . 656

Preservation of Books and Papers of Amalgamated Companies [S. 239] . . . . . . . . . . . . . . . . . . . . . . . 656

Liability for Offences Before Merger [S. 240] . . . . . . . . . . . . . . . . 656

Chapter xVII: Registered Valuers . . . 656Valuation by Registered Valuers

[S. 247] . . . . . . . . . . . . . . . . . . . . . . . 656Penalty provision [S. 247(3)

(4)] . . . . . . . . . . . . . . . . . . . . 657Chapter VII: Meetings . . . . . . . . . . . . . 657

Annual General Meeting [S. 96] . . . 657Extraordinary General Meeting

[S. 100] . . . . . . . . . . . . . . . . . . . . . . . 657Power of Tribunal to call Meetings

of Members [S. 98] . . . . . . . . . . . . . 658Procedure of Meetings . . . . . . . . . . . 658

To be called by Board of Directors . . . . . . . . . . . . . . . 658

Notice [S. 101] . . . . . . . . . . . . 658Contents of notice [S. 101(2)] 658Benefits of non-disclosure

[S. 102(4)] . . . . . . . . . . . . . . . 659Penal consequences of

default [S. 102(5)] . . . . . . . . 660Quorum [S. 103] . . . . . . . . . . 660Chairman [S. 104] . . . . . . . . . 660Voting rights [S. 106] . . . . . . 661Postal Ballot [S. 110] . . . . . . . 662Circulation of Members’

Resolution [S. 111] . . . . . . . 662Proxies [S. 105] . . . . . . . . . . . . . . . . . . 662Representation of President and

Governors at Meetings [S. 112] . . 663Representation of Corporations

at Meetings of Companies and Creditors [S. 113] . . . . . . . . . . . . . . 663

Kinds of Resolution [S. 114] . . . . . . . 663Resolutions requiring Special

Notice [S. 115] . . . . . . . . . . . . . . . . 664Resolution passed at adjourned

Meeting [S. 116] . . . . . . . . . . . . . . . 664Resolutions and Agreements to be

Filed [S. 117] . . . . . . . . . . . . . . . . . . 664


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xxxVI BUSINESS LAW

Resolutions and Agreements to be Filed [S. 117(3)] . . . . . . . . . . . . . . . 664

Minutes of Proceedings of General Managers, Board of Directors’ Meetings and other Meetings and Resolutions passed by Postal Ballot [S. 118] . . . . . . . . . . . 665

Default provisions [S. 118(11)] . . . . . . . . . . . . . . 665

Liability for tampering with minutes [S. 118(12)] . . . . . . 665

Inspection of Minutes Book of General Meeting [S. 119] . . . . . . . 666

Maintenance and Inspection of Documents in Electronic Form [S. 120] . . . . . . . . . . . . . . . . . . . . . . . 666

Report on AGM [S. 121] . . . . . . . . . . 666Applicability of Provisions to One

Person Companies [S. 122] . . . . . . 666Service of Documents on Members

[S. 20] . . . . . . . . . . . . . . . . . . . . . . . . 667Filing of documents with Registrar

[S. 20(2)] . . . . . . . . . . . . . . . . . . . . . . 667Service of Documents on

Company [S. 20] . . . . . . . . . . . . . . 667Authentication of Documents,

Proceedings and Contracts [S. 21] 668Chapter VIII: Declaration and

Payment of Dividends . . . . . . . . . . . . 668Sources of dividend

payment . . . . . . . . . . . . . . . 668Interim Dividend [S. 123(3)] 668Payment to registered

shareholder only [Sub-s (5)] . . . . . . . . . . . . . . 669

Dividend Fund . . . . . . . . . . . . . . . . . 669Statutory Provisions . . . . . . . . . . . . . 670

Depreciation . . . . . . . . . . . . . 670Compulsory reserves . . . . . . 670Unpaid dividend account

[S. 124] . . . . . . . . . . . . . . . . . 670Effect of declaration . . . . . . . 671Reserve fund . . . . . . . . . . . . . 671Capitalisation of profits . . . . 671Bonus shares [S. 63] . . . . . . . 671

Investor Education and Protection Fund [S. 125] . . . . . . . . . . . . . . . . . 672

Utilisation of Fund [S. 125(3)] 672

Central Government to constitute Authority [S. 125(5)] . . . . . . . . . . . . . . 673

Right to Dividend, Rights and Bonus Shares to be in Abeyance Pending Registration of Transfer of Shares [S. 126] . . . . . . . . . . . . . . 673

Punishment for Failure to Distribute Dividends [S. 127] . . . 673

Chapter Ix: Accounts of Companies . 674Books of Account etc to be kept by

Company [S. 128] . . . . . . . . . . . . . 674Inspection of accounts

[S. 128(3–4)] . . . . . . . . . . . . 674Preservation of books of

account [S. 128(5)] . . . . . . . 674Penalty provision [S. 128(6)] 674

Financial Statement [S. 129] . . . . . . . 675Reopening of Accounts on Court’s

or Tribunal’s Orders [S. 130] . . . . 676Voluntary Revision of Financial

Statements or Board’s Report [S. 131] . . . . . . . . . . . . . . . . . . . . . . . 676

Constitution of National Financial Reporting Authority [S. 132] . . . . 676

Constitution of Authority [S. 132(3)] . . . . . . . . . . . . . . . 677

Powers of Authority [S. 132(4)] . . . . . . . . . . . . . . . 677

Appellate Authority [S. 132(6)] . . . . . . . . . . . . . . . 678

Administration of National Financial Reporting Authority [S. 132 (10)–(15)] 678

Central Government to Prescribe Accounting Standards [S. 133] . . 678

Financial Statement, Board’s Report, etc [S. 134] . . . . . . . . . . . . . 678

Penalty [S. 134(8)] . . . . . . . . . 680Corporate Social Responsibility

[S. 135] . . . . . . . . . . . . . . . . . . . . . . . 680Functions of Committee

[S. 135(3)] . . . . . . . . . . . . . . . 680Right of Members to Copies of

Audited Financial Statement [S. 136] . . . . . . . . . . . . . . . . . . . . . . . 680

Copies of Financial Statements to be Filed With Registrar [S. 137] . 681

Penalty [S. 137(3)] . . . . . . . . . 681Chapter x: Audit and Auditors . . . . . 681

Internal Audit [S. 138] . . . . . . . . . . . 681


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CONTENTS xxxVII

Appointment of Auditors [S. 139] . . 681Term of appointment

[S. 139(2)] . . . . . . . . . . . . . . . 682Rotation of audit team of

firm [S. 139(3)] . . . . . . . . . . 682Auditor of Government

Company [S. 139(5)] . . . . . 682Casual vacancy [S. 139(8)] . . 683Appointment of retiring

auditor [S. 139(9)] . . . . . . . . 683Audit Committee [S. 139(11)] 683

Removal and Resignation of Auditor [S. 140] . . . . . . . . . . . . . . . 683

Fraudulent conduct of auditor [S. 140(5)] . . . . . . . . 684

Eligibility, Qualifications and Disqualifications of Auditors [S. 141] . . . . . . . . . . . . . . . . . . . . . . . 684

Persons who are not eligible [S. 141(3)] . . . . . . . . . . . . . . . 684

Vacation of office on disqualification [S. 141(4)] 685

Remuneration of Auditors [S. 142] . 685Powers and Duties of Auditors

[S. 143] . . . . . . . . . . . . . . . . . . . . . . . 685Additional matters in

auditor’s report [S. 143(3)] 685Government Companies

[S. 143(5)] . . . . . . . . . . . . . . . 686Audit of Branch office

accounts [S. 143(8)] . . . . . . 686Penal provision [S. 143(15)] . 687

Auditor Not to Render Certain Services [S. 144] . . . . . . . . . . . . . . . 687

Auditor to Sign Audit Reports, etc [S. 145] . . . . . . . . . . . . . . . . . . . . . . . 688

Auditors to Attend General Meeting [S. 146] . . . . . . . . . . . . . . . 688

Punishment for Contravention [S. 147] . . . . . . . . . . . . . . . . . . . . . . . 688

Audit of Cost Accounts [S. 148] . . . 689Chapter IV: Debentures . . . . . . . . . . . . 689

Definition of Debenture . . . . . . . . . . 689Statutory Provisions [S. 71] . . . . . . . 690

Prescribing procedure [S. 71(13)] . . . . . . . . . . . . . . . 691

Kinds of Debenture . . . . . . . . . . . . . 6911. Redeemable debentures . . 6912. Perpetual debentures . . . . 691

3. Debentures to registered holder and bearer debentures . . . . . . . . . . . . . 691

Register of Debenture Holders [S. 88] . . . . . . . . . . . . . . . . . . . . . . . . 691

Shareholder compared with Debenture Holder . . . . . . . . . . . . . 691

Floating Charge . . . . . . . . . . . . . . . . 692Chief Characteristics . . . . . . 692Crystallisation of Floating

Charge . . . . . . . . . . . . . . . . 693Remedies of Debenture Holders . . 693Inter-corporate Loans and

Investments [S. 186] . . . . . . . . . . . 694Register of investments,

loans [S. 186(9)(10)] . . . . . . 695Rule-making power . . . . . . . 695Exceptions . . . . . . . . . . . . . . . 695Liability and penalty

provisions [S. 186(13)] . . . . 695Investment in Own Name [S. 187] . 696Execution of Deeds [S. 22] . . . . . . . . 696Authentication of Documents,

Proceedings and Contracts [S. 21] 696Execution of Bill of Exchange and

Promissory Note, etc [S. 22] . . . . 696Chapter xVI: Protection of

Minority Shareholders . . . . . . . . . . . 697Rule in “Foss v Harbottle” . . . . . . . 697

1. Acts ultra vires . . . . . . . . . 6982. Fraud on minority . . . . . . 6983. Acts requiring special

majority . . . . . . . . . . . . . . . 6994. Wrongdoers in control . . . 6995. Individual membership

rights . . . . . . . . . . . . . . . . . . 699Chapter xVI (contd.): Prevention of

Oppression and Mismanagement . . . 700Prevention of Oppression [S. 241] . 700

Who can apply [S. 244] . . . . . 700Meaning of oppression . . . . 700

Powers of Tribunal [S. 242] . . . . . . . 703Class Action [S. 245] . . . . . . . . . . . . . 704

Who can apply [S. 245(3)] . . . 705Factors to be considered by

Tribunal [S. 245(4)] . . . . . . 705Penal clause [S. 245(7)] . . . . . 706

Chapter xVIII: Removal of names of companies from register of companies . . . . . . . . . . . . . . . . . . . . . . . 706


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xxxVIII BUSINESS LAW

Power of Registrar to Remove Name from Register of Companies [S. 248] . . . . . . . . . . . . 706

Restrictions on Making Application Under Section 248 [S. 249] . . . . . . . . . . . . . . . . . . . . . . . 707

Effect of Company Notified as Dissolved [S. 250] . . . . . . . . . . . . . 707

Fraudulent Application for Removal of Name [S. 251] . . . . . . 707

Appeal to Tribunal and Restoration [S. 252] . . . . . . . . . . . . 708

General: Kinds of Company . . . . . . . . 709Unlimited Companies [S. 2(92)] . . . 709Guarantee Companies . . . . . . . . . . . 709Private Companies [S. 2(68)] . . . . . . 709

Advantages of private company . . . . . . . . . . . . . . . 710

When private company becomes public company . . . . . . . . . . . . . . . 710

1. Convention by default [S. 14] . . . . . . . . . . . . . . . . . . 710

2. Conversion by choice [S. 14] . . . . . . . . . . . . . . . . . . 710

Conversion of Public Into Private Company [S. 14(1)] . . . . . . . . . . . . 710

One Person Company [S. 3] . . . . . . . 711Foreign Companies [Ss. 2(42), 379] . 711

Accounts of foreign company [S. 381] . . . . . . . . 712

Prospectus of foreign company [Ss. 387–391] . . . 712

Government Companies [Ss. 394–395] . . . . . . . . . . . . . . . . . . . . . . . . . 712

Holding Company and Subsidiary Company [S. 2(46), (87)] . . . . . . . . 713

Investment in holding company [S. 19] . . . . . . . . . 713

Illegal Associations [S. 464] . . . . . . . 714Chapter xIx: Revival and

Rehabilitation of sick companies . . . 714Determination of Sickness [S. 253] . 714Application for Revival and

Rehabilitation [S. 254] . . . . . . . . . . 715Exclusion of Certain Time in

Calculating Limitation [S. 255] . . 716Appointment of Interim

Administration [S. 256] . . . . . . . . 716Committee of Creditors [S. 257] . . . 716Order of Tribunal [S. 258] . . . . . . . . 716

Appointment of Administrator [S. 259] . . . . . . . . . . . . . . . . . . . . . . . 717

Powers and Duties of Company Administrator [S. 260] . . . . . . . . . 717

Scheme of Revival and Rehabilitation [S. 261] . . . . . . . . . . 717

Sanction of Scheme [S. 262] . . . . . . . 717Scheme to be Binding [S. 263] . . . . . 718Implementation of Scheme [S. 264] 718Winding up of Company

on Report of Company Administrator [S. 265] . . . . . . . . . 719

Power of Tribunal to assess Damages against Delinquent Directors, etc [S. 266] . . . . . . . . . . 719

Punishment for Certain Offences [S. 267] . . . . . . . . . . . . . . . . . . . . . . . 720

Bar of Jurisdiction [S. 268] . . . . . . . . 720Rehabilitation and Insolvency

Fund [S. 269] . . . . . . . . . . . . . . . . . 720Right of a company to take

back its contribution [S. 269(3)] . . . . . . . . . . . . . . . 720

Chapter xx: Winding up . . . . . . . . . . . 720Winding up by Tribunal [S. 271] . . 721

Inability to pay debts . . . . . . 721Just and equitable . . . . . . . . . 722

Petition for Winding up [Who Can Apply] [S. 272] . . . . . . . . . . . . . . . . 723

1. Petition by company . . . . . 7232. Creditor’s petition

[S. 272(1)(b) & (6)] . . . . . . . . 7233. Contributory’s petition . . 7234. Registrar’s petition

[S. 272(4)] . . . . . . . . . . . . . . . 7235. Central Government’s

petition . . . . . . . . . . . . . . . . 724Filing of copy with

Registrar [S. 272(7)] . . . . . . 724Powers of Tribunal on Hearing

Petition [S. 273] . . . . . . . . . . . . . . . 724Commencement of Winding up by

Tribunal [S. 357] . . . . . . . . . . . . . . 724Consequences of Winding up

Order [S. 277] . . . . . . . . . . . . . . . . . 724Statement of affairs [S. 274] . 725

Company Liquidators and their Appointments [S. 275] . . . . . . . . . 726

Removal and Replacement of Liquidator [S. 276] . . . . . . . . . . . . . 726

Jurisdiction of Tribunal [S. 280] . . . 726


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CONTENTS xxxIx

Report of Company Liquidator [S. 281] . . . . . . . . . . . . . . . . . . . . . . . 727

Directions of Tribunal on Report of Liquidator [S. 282] . . . . . . . . . . 727

Custody of Company’s Properties [S. 283] . . . . . . . . . . . . . . . . . . . . . . . 728

Promoters, Directors, etc, to Cooperate [S. 284] . . . . . . . . . . . . . 728

Settlement of List of Contributories, Application of Assets [S. 285] . . . . . . . . . . . . . . . . 728

Obligations of Directors and Managers with Unlimited Liability [S. 286] . . . . . . . . . . . . . . . 728

Advisory Committee [S. 287] . . . . . 729Submission of periodical Reports

to Tribunal [S. 288] . . . . . . . . . . . . 729Stay of Winding up [S. 289] . . . . . . . 729Powers and Duties of Company

Liquidator [S. 290] . . . . . . . . . . . . . 729Professional Assistance to

Company Liquidator [S. 291] . . . . 730Exercise and Control of Company

Liquidator’s Powers [S. 292] . . . . 730Books to be kept by Company

Liquidator [S. 293] . . . . . . . . . . . . . 730Audit of Company Liquidator’s

Accounts [S. 294] . . . . . . . . . . . . . . 731Payment of Debts by Contributory

and extent of Set Off [S. 295] . . . . 731Power of Tribunal to Make Calls

[S. 296] . . . . . . . . . . . . . . . . . . . . . . . 731Power to summon persons

suspected to have Property of Company [S. 299] . . . . . . . . . . . . . 731

Power to Order Examination of Promoters, Directors [S. 300] . . . . 732

Arrest of Person trying to leave India or Abscond [S. 301] . . . . . . . 732

Dissolution of Company [S. 302] . . 732Voluntary Winding up [S. 304] . . . . 733

Declaration of solvency [S. 305] . . . . . . . . . . . . . . . . . 733

Meeting of Creditors [S. 306] . . . . . 733Appointment of Company

Liquidator [S. 310] . . . . . . . . . . . . . 734Power to Remove and fill Vacancy

[S. 311] . . . . . . . . . . . . . . . . . . . . . . . 734Notice of Appointment to be given

to Registrar [S. 312] . . . . . . . . . . . . 734

Cesser of Board’s Powers on Appointment [S. 313] . . . . . . . . . . 734

Powers and Duties of Company Liquidator in Voluntary Winding up [S. 314] . . . . . . . . . . . . 734

Appointment of Committees [S. 315] . . . . . . . . . . . . . . . . . . . . . . . 734

Report on Progress of Winding up [S. 316] . . . . . . . . . . . . . . . . . . . . . . . 735

Report to Tribunal for Examination of Persons [S. 317] . 735

Final Meeting and Dissolution [S. 318] . . . . . . . . . . . . . . . . . . . . . . . 735

Power to accept Shares etc as consideration for Sale of Property [S. 319] . . . . . . . . . . . . . . 735

Distribution of Property of Company [S. 320] . . . . . . . . . . . . . 736

Binding Arrangement [S. 321] . . . . . 736Power to apply to Tribunal for

determination of Questions, etc [S. 322] . . . . . . . . . . . . . . . . . . . . . . . 736

Priority for Costs of Winding up [S. 323] . . . . . . . . . . . . . . . . . . . . . . . 736

Provisions Applicable to Every Mode of Winding up . . . . . . . . . . . . . . . . . . . 736

Payment of Liabilities [S. 324] . . . . . 736Application of insolvency

rules [S. 325] . . . . . . . . . . . . 737Preferential Payments [S. 327] . . . . 737Other Payments . . . . . . . . . . . . . . . . 738Antecedent and Other

Transactions . . . . . . . . . . . . . . . . . 738Fraudulent preference

[S. 328] . . . . . . . . . . . . . . . . . 738Effect of Floating Charge

[S. 332] . . . . . . . . . . . . . . . . . 739Avoidance of voluntary

transfer . . . . . . . . . . . . . . . . 739Transfer of shares [S. 334] . . 739Avoidance of attachment etc

[S. 335] . . . . . . . . . . . . . . . . . 739Disclaimer of onerous

property [S. 333] . . . . . . . . 740Proceedings Against Delinquent

Officers . . . . . . . . . . . . . . . . . . . . . . 740Liability for fraudulent

conduct of business [S. 339] . . . . . . . . . . . . . . . . . 740

Falsification of books [S. 338] 741Frauds by officers [S. 337] . . 741


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xL BUSINESS LAW

Misfeasance proceedings [S. 340] . . . . . . . . . . . . . . . . . 741

Prosecution of Delinquent Officers and Members [S. 342] . . . . . . . . . . 742

Power of court to grant relief in certain cases: Special statutory protection [S. 463] . . . . . . . 743

Wrongful Withholding of Property [S. 452] . . . . . . . . . . . . . . . . . . . . . . . 744

Annulment of Dissolution [S. 356] . 744Winding up of Unregistered

Companies [Ss. 375–378] . . . . . . . 745Period of Limitation [S. 358] . . . . . . 746Registration Offices [S. 396] . . . . . . . 746Inspection, Production and

Evidence of Documents [Ss. 397–398] . . . . . . . . . . . . . . . . . . . . . . . . . 746

Application of Information Technology Act [S. 402] . . . . . . . . 747

Chapter xxVII: National Company Law Tribunal and Appellate Tribunal . . . . . . . . . . . . . . . . . . . . . . . . 747

Constitution of National Company Law Tribunal [S. 408] . . . . . . . . . . 747

Constitution of Appellate Tribunal [S. 410] . . . . . . . . . . . . . . . . . . . . . . . 747

Selection of Members [S. 412] . . . . . 748Term of Office [S. 413] . . . . . . . . . . . . 748Salary, Terms, etc [S. 414] . . . . . . . . . 748Removal of Members [S. 417] . . . . . 748Orders of Tribunal [S. 420] . . . . . . . 749Appeal from Orders of Tribunal

[S. 421] . . . . . . . . . . . . . . . . . . . . . . . 749Expeditious Disposal by Tribunal

and Appellate Tribunal [S. 422] . 749Appeals to Supreme Court [S. 423] 749Procedure before Tribunal and

Appellate Tribunal [S. 424] . . . . . 749Chapter xxVIII: Special Courts . . . . . 750

Establishment of Special Courts [S. 435] . . . . . . . . . . . . . . . . . . . . . . . 750

Offences triable by Special Courts [S. 436] . . . . . . . . . . 750

Appeal and revision [S. 437] 751Application of CrPC . . . . . . . 751Offences to be non-

cognizable [S. 439] . . . . . . 751Compounding of certain

offences [S. 441] . . . . . . . . . 751

Mediation and Conciliation Panel [S. 442] . . . . . . . . . . . . . . . . . . . . . . . 751

Appointment of Company Prosecutors [S. 443] . . . . . . . . . . . . 752

Appeal Against Acquittal [S. 444] . 752Compensation for Accusation

Without Reasonable Cause [S. 445] . . . . . . . . . . . . . . . . . . . . . . . 752

Application of Fines [S. 446] . . . . . . 752Chapter xxIx: Miscellaneous . . . . . . 752

Punishment for Fraud [S. 447] . . . . 752Adjudication of Penalties [S. 454] . . 753Dormant Company [S. 455] . . . . . . . 753

Part VII N T E L L E C T U A L

P R O P E R T Y R I G H T S

17. Trade Marks Act, 1999 . . . . . . . . . . . . 757[Chap. 1] Meaning of Trade Mark . . . 757[Chap. 2] Register and Conditions

for Registration . . . . . . . . . . . . . . . . . 757Appointment of Registrar and

Other Officers [S. 3] . . . . . . . . . . . 757Power of Registrar to Withdraw or

Transfer Cases, etc [S. 4] . . . . . . . . 758Trade Marks Registry and Offices

[S. 5] . . . . . . . . . . . . . . . . . . . . . . . . . 758Register of Trade Marks [S. 6] . . . . . 758Classification of Goods and

Services [S. 7] . . . . . . . . . . . . . . . . . 759Publication of Alphabetical Index

[S. 8] . . . . . . . . . . . . . . . . . . . . . . . . . 759Absolute Grounds for Refusal of

Registration [S. 9] . . . . . . . . . . . . . 759Limitation as to Colour [S. 10] . . . . 760Relative Grounds for Refusal of

Registration [S. 11] . . . . . . . . . . . . 760Test of Well-known Trade Mark

[S. 11(6)] . . . . . . . . . . . . . . . . . . . . . . 761Registration in Case of Honest

Concurrent Use [S. 12] . . . . . . . . . 762Prohibition of Registration of

Names of Chemical Elements or International Non-proprietary Names [S. 13] . . . . . . . . . . . . . . . . . 762


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CONTENTS xLI

Use of Names and Representations of Living Persons or Persons Recently Dead [S. 14] . . . . . . . . . . 763

Registration of Parts of Trade Marks and of Marks as a Series [S. 15] . . . . . . . . . . . . . . . . . . . . . . . . 763

Registration of Trade Marks as Associated Trade Marks [S. 16] . . 763Dissolving associateship

[S. 16(5)] . . . . . . . . . . . . . . . . . . . . 764Effect of Registration of Parts of a

Mark [S. 17] . . . . . . . . . . . . . . . . . . 764[Chap. 3] Procedure and Duration of

Registration . . . . . . . . . . . . . . . . . . . . 764Application for Registration [S. 18] 764Withdrawal of Acceptance [S. 19] . . 765Advertisement of Application

[S. 20] . . . . . . . . . . . . . . . . . . . . . . . . 765Opposition to Registration [S. 21] . . 766Correction and Amendment [S. 22] 766Registration [S. 23] . . . . . . . . . . . . . . 766Jointly Owned Trade Marks [S. 24] 767Duration, Renewal, Removal and

Restoration of Registration [S. 25] 767Effect of Removal from Register

for Failure to Pay Fee for Renewal [S. 26] . . . . . . . . . . . . . . . 768

[Chap. 4] Effect of Registration . . . . . 768No Action for Infringement of

Unregistered Trade Mark [S. 27] 768Passing off action for

unregistered marks . . . . . 768Disparagement of rival’s goods . 769

Rights Conferred by Registration [S. 28] . . . . . . . . . . . . . . . . . . . . . . . . 769

Infringement of Registered Trade Marks [S. 29] . . . . . . . . . . . . . . . . . 769

Deceptive similarity, colourable difference . . . . 771

Defence of acquiescence . . . 773No infringement before

registration . . . . . . . . . . . . 773Limitation . . . . . . . . . . . . . . . 773

Limits on Effect of Registered Trade Mark [S. 30] . . . . . . . . . . . . . 774

Right acquired through use 775Registration as Prima Facie

Evidence of Validity [S. 31] . . . . . 775Protection of Registration on

Ground of Distinctiveness in Certain Cases [S. 32] . . . . . . . . . . . 775

Effect of Acquiescence [S. 33] . . . . . 775Saving for Vested Rights [S. 34] . . . 776

Personal nouns . . . . . . . . . . . 776Prior user . . . . . . . . . . . . . . . . 776

Saving for Use of Name, Address or Description of Goods or Services [S. 35] . . . . . . . . . . . . . . . . 776

Saving for Words Used as Name or Description of Goods or Services [S. 36] . . . . . . . . . . . . . . . . . . . . . . . . 776

[Chap. 5] Assignment and Transmission . . . . . . . . . . . . . . . . . . . . 777

Proprietor’s Power to Assign and Give Receipts [S. 37] . . . . . . . . . . . 777

Assignability and Transmissibility of Registered Trade Marks [S. 38] 778

Assignability and Transmissibility of Unregistered Trade Marks [S. 39] . . . . . . . . . . . . . . . . . . . . . . . . 778

Restriction on Assignment or Transmission Creating Multiple Exclusive Rights [S. 40] . . . . . . . . 778

Restriction on Assignment, Transmission for Exclusive Rights to be Created in Different Parts of India [S. 41] . . . . . . . . . . . 779

Conditions for Assignment Without Goodwill [S. 42] . . . . . . . 779

Assignability and Transmissibility of Certification Trade Marks [S. 43] . . . . . . . . . . . . . . . . . . . . . . . . 780

Assignment and Transmission of Associated Trade Marks [S. 44] . . 780

Registration of Assignments and Transmissions [S. 45] . . . . . . . . . . 780

[Chap. 6] Use of Trade Marks and Registered Users . . . . . . . . . . . . . . . . . 780

Proposed Use of Trade Mark by Company to be Formed [S. 46] . . 780

Removal from Register and Limitations on Non-use [S. 47] . . 781

Prevention of trafficking in trade marks . . . . . . . . . . . . 782

Registered Users [S. 48] . . . . . . . . . . 782Registration as Registered User

[S. 49] . . . . . . . . . . . . . . . . . . . . . . . . 782Cancellation of Registration as

Registered User [S. 50] . . . . . . . . . 783Power to Call for Information

Regarding Registered Users [S. 51] . . . . . . . . . . . . . . . . . . . . . . . . 784


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xLII BUSINESS LAW

Right of Registered User for Proceedings Against Infringement [S. 52] . . . . . . . . . . . 784

No Right of Permitted User to Take Proceeding Against Infringement [S. 53] . . . . . . . . . . . 784

Registered User Not to Have Right of Assignment or Transmission [S. 54] . . . . . . . . . . . . . . . . . . . . . . . . 784

Use of One Associated or Substantially Identical Trade Marks Equivalent to Use of Another [S. 55] . . . . . . . . . . . . . . . . 785

Use for Export Trade and Use When Form of Trade Connection Changes [S. 56] . . . . . . . . . . . . . . . 785

[Chap. 7] Rectification and Correction of Register . . . . . . . . . . . 785

Power to Cancel or Vary Registration and to Rectify the Register [S. 57] . . . . . . . . . . . . . . . . 785

Correction of Register [S. 58] . . . . . 786Alteration of Registered Trade

Marks [S. 59] . . . . . . . . . . . . . . . . . 786Adaptation of Entries in Register

to Amended or Substituted Classification of Goods or Services [S. 60] . . . . . . . . . . . . . . . . 786

[Chap. 8] Collective Marks . . . . . . . . . 787Special Provisions for Collective

Marks [S. 61] . . . . . . . . . . . . . . . . . . 787Collective Mark not to be

Misleading as to Character or Significance [S. 62] . . . . . . . . . . . . 787

Application to be Accompanied by Regulations Governing Use of Collective Marks [S. 63] . . . . . . . . 787

Acceptance of Application and Regulations by Registrar [S. 64] . 787

Infringement Proceedings by Registered Proprietor [S. 67] . . . . 787

Additional Grounds for Removal of Registration of Collective Trade Mark [S. 68] . . . . . . . . . . . . . 788

[Chap. 9] Certification Trade Marks . 788Definition [S. 2(E)] . . . . . . . . . . . . . . . 788Provisions Which Are Not

Applicable to Certification Trade Marks [S. 69] . . . . . . . . . . . . . . . . . 788

Registration of Certification Trade Marks [S. 70] . . . . . . . . . . . . . . . . . 788

Applications for Registration [S. 71] 788Consideration Applicable to

Registration [S. 72] . . . . . . . . . . . . 789Opposition to Registration of

Certification Trade Marks [S. 73] 789Filing of Regulations Governing

Use of Certification Trade Mark [S. 74] . . . . . . . . . . . . . . . . . . . . . . . . 789

Infringement of Certification Trade Mark [S. 75] . . . . . . . . . . . . . 790

Acts Not Constituting Infringement [S. 76] . . . . . . . . . . . 790

Cancellation or Varying of Registration of Certification Trade Marks [S. 77] . . . . . . . . . . . . 790

Rights Conferred by Registration of Certification Trade Marks [S. 78] . . . . . . . . . . . . . . . . . . . . . . . . 791

[Chap. 10] Special Provisions for Textile Goods . . . . . . . . . . . . . . . . . . . 791

[Chap. 11] Appellate Board . . . . . . . . . 791Establishment of Appellate Board

[S. 83] . . . . . . . . . . . . . . . . . . . . . . . . 791Composition of Appellate Board

[S. 84] . . . . . . . . . . . . . . . . . . . . . . . . 791Qualifications for Appointment as

Chairman, Vice-Chairman or Other Members [S. 85] . . . . . . . . . 792

Term of Office [S. 86] . . . . . . . . . . . . 792Officiating Functions [S. 87] . . . . . . 792Salaries, Allowances and Other

Terms [S. 88] . . . . . . . . . . . . . . . . . . 793Resignation and Removal [S. 89] . . 793

Removal . . . . . . . . . . . . . . . . . 793Staff of Appellate Board [S. 90] . . . . 793Appeals to Appellate Board [S. 91] 793Procedure and Powers of

Appellate Board [S. 92] . . . . . . . . . 793Bar of Jurisdiction of Courts, etc

[S. 93] . . . . . . . . . . . . . . . . . . . . . . . . 794Bar to Appear Before Appellate

Board [S. 94] . . . . . . . . . . . . . . . . . . 794Interim Orders [S. 95] . . . . . . . . . . . . 794Transfer of Cases from One Bench

to Another [S. 96] . . . . . . . . . . . . . 794Procedure for Rectification [S. 97] . 794Appearance of Registrar in Legal

Proceedings [S. 98] . . . . . . . . . . . . 794Costs of Registrar in Proceedings

Before Appellate Board [S. 99] . . 795


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CONTENTS xLIII

[Chap. 12] Offences, Penalties and Procedure . . . . . . . . . . . . . . . . . . . . . . . 795

Meaning of applying trade marks and trade descriptions [S. 101] . . . . . . . . . . . . . . . . . . . . . 795

Injunction Against Breach of Confidentiality . . . . . . . . . . . . . . . 796

[Chap. 13] Miscellaneous Provisions . 797Passing Off, Test of Deceptive

Similarity . . . . . . . . . . . . . . . . . . . . 798Jurisdiction for Passing-off Action 801Special Provisions for Applications

for Registration from Citizens of Convention Countries [S. 154] . . 801

Geographical Indications of Goods (Registration and Protection) Act, 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 801

[Chap. 2] Register and Conditions for Registration . . . . . . . . . . . . . . . . . 801

Registrar of Geographical Indications [S. 3] . . . . . . . . . . . . . . 801

Registry and Offices for Geographical Indications [S. 5] . . 801

Register of Geographical Indications [S. 6] . . . . . . . . . . . . . . 802

Part A and Part B of the Register [S. 7] . . . . . . . . . . . . . . . . . . . . . . . . . 802

Registration in Respect of Particular Goods and Area [S. 8] 802

Prohibition of Registration of Certain Geographical Indications [S. 9] . . . . . . . . . . . . . . 802

Registration of Homonymous Geographical Indications [S. 10] . 803

[Chap. 3] Procedure and Duration of Registration . . . . . . . . . . . . . . . . . . . . 803

Application for Registration [S. 11] 803Withdrawal of Acceptance [S. 12] . . 803Advertisement of Application

[S. 13] . . . . . . . . . . . . . . . . . . . . . . . . 804Opposition to Registration [S. 14] . . 804Correction and Amendment [S. 15] 804

Registration [S. 16] . . . . . . . . . . . . 804Application for Registration as

Authorised User [S. 17] . . . . . . . . 805Duration, Renewal, Removal and

Restoration of Registration [S. 18] 805Effect of Removal from Register

on Failure to Pay Renewal Fee [S. 19] . . . . . . . . . . . . . . . . . . . . . . . . 805

[Chap. 4] Effect of Registration . . . . . 805

No Action for Infringement of Unregistered Geographical Indication [S. 20] . . . . . . . . . . . . . . 805

Rights Conferred by Registration [S. 21] . . . . . . . . . . . . . . . . . . . . . . . . 806

Infringement of Registered Geographical Indications [S. 22] . 806

Registration Prima Facie Evidence of Validity [S. 23] . . . . . . . . . . . . . . 807

Prohibition of Assignment, Transmission etc [S. 24] . . . . . . . . 807

[Chap. 5] Special Provisions Relating to Trade Marks and Prior Users . . 807

Prohibition of Registration of Geographical Indication as Trade Mark [S. 25] . . . . . . . . . . . . . 807

Protection of Certain Trade Marks [S. 26] . . . . . . . . . . . . . . . . . . . . . . . . 807

[Chap. 6] Rectification and Correction of Register . . . . . . . . . . . 807

Power to Cancel or to Vary Registration and to Rectify Register [S. 27] . . . . . . . . . . . . . . . . 807

Suo motu order . . . . . . . . . . . 807Direction to registrar for

carrying out rectification . 807Correction of Register [S. 28] . . . . . 808Alteration of Registered

Geographical Indications [S. 29] . 808Adaptation of Entries in Register

to Amend or Substitute Classification of Goods [S. 30] . . 808

[Chap. 7] Appeals to Appellate Board 809Appeals to Appellate Board [S. 31] . 809Procedure of Appellate Board

[S. 33] . . . . . . . . . . . . . . . . . . . . . . . . 809Appearance of Registrar in Legal

Proceedings [S. 35] . . . . . . . . . . . . 809[Chap. 8] Offences, Penalties and

Procedure . . . . . . . . . . . . . . . . . . . . . . . 810Meaning of Applying

Geographical Indications [S. 37] 810Falsifying and Falsely Applying

Geographical Indications [S. 38] . 810Penalty for Applying False

Geographical Indications [S. 39] . 810Penalty for Selling Goods Under

False Geographical Indication [S. 40] . . . . . . . . . . . . . . . . . . . . . . . . 811

Forfeiture of Goods [S. 46] . . . . . . . . 811Exemption of Employees [S. 47] . . . 811


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xLIV BUSINESS LAW

Accused Pleading Invalidity of Registration [S. 48] . . . . . . . . . . . . 811

Offences by Companies [S. 49] . . . . 812Cognizance and Police Powers

[S. 50] . . . . . . . . . . . . . . . . . . . . . . . . 812[Chap. 9] Miscellaneous Provisions . . 813

Protection of Action taken in Good Faith [S. 55] . . . . . . . . . . . . . . . . . . . 813

Stay of Proceedings Where Validity of Registration is Questioned [S. 57] . . . . . . . . . . . . . 813

When Application for Rectification to be Made to Appellate Board [S. 58] . . . . . . . . . . . . . . . . . . . . . . . . 813

Implied Warranty on Sale of Indicated Goods [S. 59] . . . . . . . . 813

Powers of Registrar [S. 60] . . . . . . . . 813Exercise of Discretionary Power by

Registrar [S. 61] . . . . . . . . . . . . . . . 814Death of Party to Proceeding [S. 63] 814Jurisdiction for Infringement Suits

[S. 66] . . . . . . . . . . . . . . . . . . . . . . . . 814Relief in Suit for Infringement or

Passing Off [S. 67] . . . . . . . . . . . . . 814Injunction . . . . . . . . . . . . . . . . . . . . 814Damages . . . . . . . . . . . . . . . . . . . . . 815

Impleadment of Authorised User [S. 68] . . . . . . . . . . . . . . . . . . . . . . . . 815

Evidence of Entries and Things Done by the Registrar [S. 69] . . . . 815

Registrar and Officers Not Compellable to Produce Register [S. 70] . . . . . . . . . . . . . . . . . . . . . . . . 815

Power to Require Goods to Show Indication of Origin [S. 71] . . . . . 815

Trade Usages [S. 75] . . . . . . . . . . . . . 816Indexes [S. 77] . . . . . . . . . . . . . . . . . . 816Documents Which Are Open to

Public Inspection [S. 78] . . . . . . . . 816Rule-making Power [S. 87] . . . . . . . 816

18. Copyright Act, 1957 . . . . . . . . . . . . . . 817Objects . . . . . . . . . . . . . . . . . . . . . . . . 817

[Chap. 1] Preliminary . . . . . . . . . . . . . . 817Publication [S.3] . . . . . . . . . . . . . . . . 817Disputes to be Decided by

Copyright Board [S. 6] . . . . . . . . . 818Nationality of Author in Case of

Unpublished Work [S. 7] . . . . . . . 818Domicile of Corporations [S. 8] . . . 818

[Chap. 2] Copyright Office and Board 818Copyright Office [S. 9] . . . . . . . . . . . 818Registrar and Deputy Registrars of

Copyrights [S. 10] . . . . . . . . . . . . . 818Copyright Board [S. 11] . . . . . . . . . . 818Powers and Procedure of

Copyright Board [S. 12] . . . . . . . . 818Works in Which Copyright

Subsists [S. 13] . . . . . . . . . . . . . . . . 819Reports of judgments . . . . . . . . . . 820Question papers . . . . . . . . . . . . . . 822Literary work . . . . . . . . . . . . . . . . . 822Classes of literary work . . . . . . . . 824

Headlines and extracts from newspaper articles [S. 13] . . . . . . . . . . . . . . . . . . 824

No copyright in “facts” per se . . 824Bequeath of copyright works . . . 825

Meaning of Copyright [S. 14] . . . . . 825Copyright akin to human right . 827

Copyright in Design [S. 15] . . . . . . . 827Sculpture . . . . . . . . . . . . . . . . . . . . 827

Copyright Can Exist Only Under the Act [S. 16] . . . . . . . . . . . . . . . . . 828

[Chap. 4] Ownership of Copyright and Rights of Owner . . . . . . . . . . . . . 828

First owner of copyright [S. 17] . 828Author an Employee [Proviso (a) to

S. 17] . . . . . . . . . . . . . . . . . . . . . . . . 828Work Created for Valuable

Consideration [Proviso (b) to S. 17] . . . . . . . . . . . . . . . . . . . . . . . . 828Copyright of employee-author

[Proviso (c) to S. 17] . . . . . . . . . . 829Address or speech [Proviso (cc)] . 829Government work [Proviso (d)] . 829Public undertaking [Proviso (dd)] 830Software put on medium and

marketed . . . . . . . . . . . . . . . . . . 831Assignment of Copyright [S. 18] . . 831Mode of Assignment [S. 19] . . . . . . . 832Period of Assignment [S. 18] . . . . . . 832

Breach of agreement by assignee [S. 18] . . . . . . . . . . . . . . . . . . . . . . 832

Revocation of and Disputes About Assignment [S. 19-A] . . . . . . . . . . 833

Transmission of Copyright in Manuscript by Testamentary Disposition [S. 20] . . . . . . . . . . . . . 833

Right of Author to Relinquish Copyright [S. 21] . . . . . . . . . . . . . . 833


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CONTENTS xLV

[Chap. 5] Term of Copyright . . . . . . . . . 834Term of Copyright in Published

Work [S. 22] . . . . . . . . . . . . . . . . . . 834Term of Copyright When Work is

Anonymous and Pseudonymous [S. 23] . . . . . . . . . . . . . . . . . . . . . . . . 834

Term of Copyright in Posthumous Works [S. 24] . . . . . . . . . . . . . . . . . 834

Term of Copyright in Photographs [S. 25] . . . . . . . . . . . . . . . . . . . . . . . . 835

Term of Copyright in Cinematographic Films [S. 26] . . 835

Term of Copyright in Government Works [S. 28] . . . . . . . . . . . . . . . . . 835

Works of International Organisations [S. 29] . . . . . . . . . . 835

[Chap. 6] Licences . . . . . . . . . . . . . . . . . . 835Licences by Owners of Copyright

[S. 30] . . . . . . . . . . . . . . . . . . . . . . . . 835Compulsory Licencing in Works

Withheld from Public [S. 31] . . . . 835Manner of exercising power

[S. 31(1)] . . . . . . . . . . . . . . . . . . . . 836Refusal by copyright owner . . . . 837Compulsory licencing after

grant of voluntary licencing . . 837Entitlement of infringer . . . . . . . . 837

No interim compulsory licence . . . . . . . . . . . . . . . . . 838

Compulsory Licence in Unpublished Indian Work [S. 31-A] . . . . . . . . . . . . . . . . . . . . . . . . . . . 838

Licence to Produce and Publish Translations [S. 32] . . . . . . . . . . . . 839Application by broadcasting

authority [S. 32(5)] . . . . . . . . . . . 840Explanatory clarification [S. 32

Explanation] . . . . . . . . . . . . . . . 840Developed country . . . . . . . . 840Developing country . . . . . . . 840Purposes of research . . . . . . 841Purposes of teaching,

research or scholarship . . 841Reproduction and Publication of

Works for Certain Purposes [S. 32-A] . . . . . . . . . . . . . . . . . . . . . . 841

Termination of Licence Issued Under Compulsory Licencing Provisions [S. 32-B] . . . . . . . . . . . . 842

[Chap. 7] Copyright Societies . . . . . . . 842

Registration of Copyright Society [S. 33] . . . . . . . . . . . . . . . . . . . . . . . . 842

Administration of Rights of Owner by Copyright Society [S. 34] . . . . . . . . . . . . . . . . . . . . . . . . 843Agreement with foreign society

[S. 34(2)] . . . . . . . . . . . . . . . . . . . 843Functions of Society [S. 34(3)] . . . 843

Payment of Remunerations by Copyright Society [S. 34-A] . . . . . 844

Control Over Copyright Society by Owner of Rights [S. 35] . . . . . . . . 844Institution of proceeding for

infringement . . . . . . . . . . . . . . . 844Submission of Returns and

Reports [S. 36] . . . . . . . . . . . . . . . . 844Rights and Liabilities of

Performing Rights Societies [S. 36-A] . . . . . . . . . . . . . . . . . . . . . 844

[Chap. 8] Rights of Broadcasting Organisation and of Performers . . 845

Broadcast Reproduction Right [S. 37] . . . . . . . . . . . . . . . . . . . . . . . . 845

Performer’s Rights [S. 38] . . . . . . . . . 845Acts Not Constituting

Infringement [S. 39] . . . . . . . . . . . 845Other Applicable Provisions [S. 39-

A] . . . . . . . . . . . . . . . . . . . . . . . . . . . 846[Chap. 9] International Copyright . . 846

Power to extend copyright to foreign works [S. 40] . . . . . . . . . 846

Power of Central Government to Apply Chapter 8 to Broadcasting Organisations and Performers in Certain Other Countries [S. 40-A] . . . . . . . . . . . . . . . . . . . . . . . . . . . 847

Provisions as to Works of Certain International Organisations [S. 41] . . . . . . . . . . . . . . . . . . . . . . . . 847

Power to Restrict Rights in Works of Foreign Authors First Published in India [S. 42] . . . . . . . 848

Power to Restrict Rights of Foreign Broadcasting Organisations and Performers [S. 42-A] . . . . . . . . . . . 848

Orders to be Laid Before Parliament [S. 43] . . . . . . . . . . . . . 848

[Chap. 10] Registration of Copyright 848Register of Copyrights [S. 44] . . . . . 848Application for Entries in Register

[S. 45] . . . . . . . . . . . . . . . . . . . . . . . . 849


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xLVI BUSINESS LAW

Inspection of Register [S. 47] . . . . . . 849Register Prima Facie Evidence

[S. 48] . . . . . . . . . . . . . . . . . . . . . . . . 849Correction of Entries in Register of

Copyrights by Registrar [S. 49] . . 849Rectification of Register by

Copyright Board [S. 50] . . . . . . . . 849Publication of Entries [S. 50-A] . . . . 850

[Chap. 11] Infringement of Copyright 850When Copyright Infringed [S. 51] . 850

Judicial pronouncements . . . . . . . 851Basis of copyright law . . . . . 851Test for infringement . . . . . . 851Infringement of copyright . . 851Similar mistakes . . . . . . . . . . 852Common source . . . . . . . . . . 852

Communication to Public [S. 51(a)(ii)] . . . . . . . . . . . . . . . . . . . . . . . . . . 853

Acts Which Do Not Constitute Infringement [S. 52] . . . . . . . . . . . 854Common source principle and

law reports [S. 52(Q)(iv)] . . . . . . 858Particulars to be Included in

Sound Recording and Video Films [S. 52-A] . . . . . . . . . . . . . . . . 858

Accounts and Audit [S. 52-B] . . . . . 859Punishment for Contravention of

Section 52-A [S. 68-A] . . . . . . . . . . 859Importation of Infringing Copies

[S. 53] . . . . . . . . . . . . . . . . . . . . . . . . 859Resale Share Right in Original

Copies [S. 53-A] . . . . . . . . . . . . . . . 860[Chap. 12] Civil Remedies . . . . . . . . . . . 860

Definition of Owner of Copyright for Remedial Purposes [S. 54] . . . 860

Civil Remedy for Infringement of Copyright [S. 55] . . . . . . . . . . . . . . 860Remedy where infringer

unaware of infringement [S. 55] . . . . . . . . . . . . . . . . . . . . . . 860

Injunctions . . . . . . . . . . . . . . . . . . . 861“All such remedies” [S. 55] . . . . . 861Difficulty in assessing damages

is no ground for refusal . . . . . . 861Protection of Separate Rights [S. 56] 861Author’s Special Rights [S. 57] . . . . 862Rights of Owner Against Persons

Possessing or Dealing With Infringing Copies [S. 58] . . . . . . . 862

Restriction on Remedies in Case of Works of Architecture [S. 59] . . . 862

Remedy Against Groundless Threat of Legal Proceedings [S. 60] . . . . . . . . . . . . . . . . . . . . . . . . 862

Owner of Copyright to be Party to the Proceeding [S. 61] . . . . . . . . . . 863

Jurisdiction [S. 62] . . . . . . . . . . . . . . . 863Agreement as to jurisdiction . . . 864Section 62 compared with

Section 20 CPC . . . . . . . . . . . . . 864Person instituting suit [S. 62(2)] . 865Jurisdiction for part of relief

sought . . . . . . . . . . . . . . . . . . . . . 865[Chap. 13] Offences . . . . . . . . . . . . . . . . 865

Offence of Infringement [S. 63] . . . . 865Enhanced Penalty on Repetition

[S. 63-A] . . . . . . . . . . . . . . . . . . . . . 865Knowing Use of Infringing Copy

of Computer Programme an Offence [S. 63-B] . . . . . . . . . . . . . . 866

Power of Police to Seize Infringing Copies [S. 64] . . . . . . . . . . . . . . . . . 866

Possession of Plates for Making Infringing Copies [S. 65] . . . . . . . 866

Disposal of Infringing Copies or Plates [S. 66] . . . . . . . . . . . . . . . . . . 866

False Entries in Register etc [S. 67] . 866Making False Statements for

Deceiving or Influencing Authority or Officer [S. 68] . . . . . 866

Penalty for Contravention of Section 52-A [S. 68-A] . . . . . . . . . . 866

Offences by Companies [S. 69] . . . . 867Cognizance of Offences [S. 70] . . . . 867

[Chap. 14] Appeals . . . . . . . . . . . . . . . . . 867Appeals Against Magistrate’s

Orders [S. 71] . . . . . . . . . . . . . . . . . 867Appeal against order of seizure

or sale of infringing copies under Section 64(2) or Section 66 . . . . . . . . . . . . . . . . . . 867

Appeals Against Orders of Registrar of Copyrights and Copyright Board [S. 72] . . . . . . . . 867Appeals against orders of

Registrar of Copyrights [S. 72(1)] . . . . . . . . . . . . . . . . . . . . 867

Appeals against decisions of Copyright Board [S. 72(2)] . . . . 867

Rules for Making Appeals to High Court [S. 73] . . . . . . . . . . . . . . . . . . 868

[Chap. 15] Miscellaneous . . . . . . . . . . . 868


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CONTENTS xLVII

Civil Court Powers Conferred on Registrar of Copyrights and Copyright Board [S. 74] . . . . . . . . 868

19. Patents Act, 1970 . . . . . . . . . . . . . . . . . 869[Chap. 1] Preliminary . . . . . . . . . . . . . . 869

Definition of patent [S. 2(M)] . . . . 869[Chap. 2] Inventions Not Patentable . 869

Inventions Relating to Atomic Energy [S. 4] . . . . . . . . . . . . . . . . . . 870

[Chap. 3] Applications for Patents . . . 871Persons Entitled to Apply [S. 6] . . . 871Form of Application [S. 7] . . . . . . . . 871Information and Undertaking

Regarding Foreign Applications [S. 8] . . . . . . . . . . . . . . . . . . . . . . . . . 871

Provisional and Complete Specifications [S. 9] . . . . . . . . . . . . 871

Contents of Specifications [S. 10] . . 872Priority Dates of Claims of

Complete Specification [S. 11] . . . 872[Chap. 4] Publication

and Examination of Applications . . 873Publication of Applications [S. 11-

A] . . . . . . . . . . . . . . . . . . . . . . . . . . . 873Request for Examination [S. 11-B] . 874Examination of Application [S. 12] 874Search for Anticipation by

Previous Publication and by Prior Claim [S. 13] . . . . . . . . . . . . . 874

Consideration of Examiner’s Report by Controller [S. 14] . . . . . 874

Power of Controller to Refuse or Require Amended Application [S. 15] . . . . . . . . . . . . . . . . . . . . . . . . 874

Power of Controller to Order Division of Application [S. 16] . . 875

Power of Controller to Make Orders Respecting Dating of Application [S. 17] . . . . . . . . . . . . . 875

Powers of Controller in Cases of Anticipation [S. 18] . . . . . . . . . . . . 875

Powers of Controller in Case of Potential Infringement [S. 19] . . . 876

Powers of Controller to Make Orders for Substitution, etc of Applicants [S. 20] . . . . . . . . . . . . . 876

Time for Putting Application in Order for Grant [S. 21] . . . . . . . . . 877

[Chap. 5] Opposition Proceedings to Grant of Patent . . . . . . . . . . . . . . . . . 877

Opposition to the Patent [S. 25] . . . 877Opposition after grant [S. 25(2)] . 878

In Cases of “Wrongful Obtaining” the Controller May Treat Patent as that of Opponent [S. 26] . . . . . 879

Mention of Inventor as Such in Patent [S. 28] . . . . . . . . . . . . . . . . . . 879

[Chap. 6] Anticipation . . . . . . . . . . . . . . 880Anticipation by Previous

Publication [S. 29] . . . . . . . . . . . . . 880Anticipation by Previous

Communication to Government [S. 30] . . . . . . . . . . . . . . . . . . . . . . . . 880

Anticipation by Public Display, etc [S. 31] . . . . . . . . . . . . . . . . . . . . . . . . 880

Anticipation by Public Working [S. 32] . . . . . . . . . . . . . . . . . . . . . . . . 881

Anticipation by Use and Publication After Provisional Specification [S. 33] . . . . . . . . . . . . 881

[Chap. 7] Provisions for Secrecy of Certain Inventions . . . . . . . . . . . . . . 881

Secrecy Directions Relating to Inventions Relevant for Defence Purposes [S. 35] . . . . . . . . . . . . . . . 881

Secrecy Directions to be Periodically Reviewed [S. 36] . . . 882

Consequences of Secrecy Directions [S. 37] . . . . . . . . . . . . . . 882

Revocation of Secrecy Directions and Extension of Time [S. 38] . . . 882

Some Other Provisions [Ss. 40–42] 882[Chap. 8] Grant of Patents

and Rights Conferred Thereby . . . . 883Grant of Patents [S. 43] . . . . . . . . . . . 883Amendment of Patent Granted to

Deceased Applicant [S. 44] . . . . . 883Date of Patent [S. 45] . . . . . . . . . . . . . 883Form, Extent and Effect of Patent

[S. 46] . . . . . . . . . . . . . . . . . . . . . . . . 883Grant of Patent Subject to Certain

Conditions [S. 47] . . . . . . . . . . . . . 883Rights of Patentees [S. 48] . . . . . . . . 884Patent Rights Not Infringed When

Used on Foreign Vessels [S. 49] . . 884Rights of Co-owners of Patents

[S. 50] . . . . . . . . . . . . . . . . . . . . . . . . 885Power of Controller to Give

Directions to Co-owners [S. 51] . 885


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Grant of Patent to True and First Inventor Where Obtained by Another by Fraud [S. 52] . . . . . . . 885

Term of Patent [S. 53] . . . . . . . . . . . . 886[Chap. 9] Patents of Addition . . . . . . . 886

Term of Patents of Addition [S. 55] 887Validity of Patents of Addition

[S. 56] . . . . . . . . . . . . . . . . . . . . . . . . 887[Chap. 10] Amendment of

Applications and Specifications . . . 887Amendment of Specification

Before Appellate Board or High Court [S. 58] . . . . . . . . . . . . . . . . . . 888

Supplementary Provisions as to Amendment of Application or Specification [S. 59] . . . . . . . . . . . . 888

[Chap. 11] Restoration of Lapsed Patents . . . . . . . . . . . . . . . . . . . . . . . . . 888

Applications for Restoration of Lapsed Patents [S. 60] . . . . . . . . . . 888

Procedure for Disposal of Restoration Applications [S. 61] . 889

Rights of Patentees of Lapsed Patent After Restoration [S. 62] . . 889

[Chap. 12] Surrender and Revocation of Patents . . . . . . . . . . . . . . . . . . . . . . . 889

Surrender of Patents [S. 63] . . . . . . . 889Revocation of Patents [S. 64] . . . . . . 890Revocation of Patent Relating to

Atomic Energy [S. 65] . . . . . . . . . . 891Revocation of Patent in Public

Interest [S. 66] . . . . . . . . . . . . . . . . 891[Chap. 13] Register of Patents . . . . . . . 892

Register of Patents and Its Particulars [S. 67] . . . . . . . . . . . . . 892

Assignments to be in Writing and Duly Executed [S. 68] . . . . . . . . . . 892

Registration of Assignments, Transmissions, etc [S. 69] . . . . . . . 892

Power of Registered Grantee or Proprietor to Deal With Patent [S. 70] . . . . . . . . . . . . . . . . . . . . . . . . 893

Rectification of Register by Appellate Board [S. 71] . . . . . . . . . 893

Register to be Kept Open for Inspection [S. 72] . . . . . . . . . . . . . . 894

[Chap. 14] Patent Office and Its Establishment . . . . . . . . . . . . . . . . . . . 894

Controller and Other Officers [S. 73] . . . . . . . . . . . . . . . . . . . . . . . . 894

Patent Office and Its Branches [S. 74] . . . . . . . . . . . . . . . . . . . . . . . . 894

Restriction on Employees of Patent Office as to Right or Interest in Patents [S. 75] . . . . . . . . . . . . . . . . . 894

Officers and Employees Not to Furnish Information [S. 76] . . . . . 894

[Chap. 15] Powers of Controller Generally . . . . . . . . . . . . . . . . . . . . . . . 895

Controller to Have Certain Powers of Civil Court [S. 77] . . . . . . . . . . . 895

Power of Controller to Correct Clerical Errors [S. 78] . . . . . . . . . . 895

Evidence How to be Given and Powers of Controller [S. 79] . . . . . 895

Exercise of Discretionary Powers by Controller [S. 80] . . . . . . . . . . . 896

Disposal by Controller of Applications for Extension of Time [S. 81] . . . . . . . . . . . . . . . . . . . 896

[Chap. 16] Working of Patents, Compulsory Licences and Revocation . . . . . . . . . . . . . . . . . . . . . . 896

Definition of Patented Article and Patentee [S. 82] . . . . . . . . . . . . . . . . 896

General Principles Applicable to Working of Patented Inventions [S. 83] . . . . . . . . . . . . . . . . . . . . . . . . 896

Compulsory Licences [S. 84] . . . . . . 897Revocation of Patents for Non-

working [S. 85] . . . . . . . . . . . . . . . . 898Power of Controller to Adjourn

Applications for Compulsory Licences [S. 86] . . . . . . . . . . . . . . . . 899

Procedure for Dealing With Applications [S. 87] . . . . . . . . . . . . 899

Powers of Controller in Granting Compulsory Licences [S. 88] . . . . 899

General Purposes for Granting Compulsory Licences [S. 89] . . . . 900

Terms and Conditions of Compulsory Licences [S. 90] . . . . 900

Licensing of Related Patents [S. 91] 901Special Provision for Compulsory

Licences by Notifications [S. 92] . 901Compulsory Licence for Export

of Patented Pharmaceutical Products [S. 92-A] . . . . . . . . . . . . . 902

Order for Licence to Operate as a Deed Between Parties Concerned [S. 93] . . . . . . . . . . . . . 902


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CONTENTS xLIx

Termination of Compulsory Licence [S. 94] . . . . . . . . . . . . . . . . 902

Terms and Conditions of Compulsory Licences [S. 95] . . . . 903

Licensing of Related Patents [S. 96] 903Central Government’s Special

Power to Grant Compulsory Licences [S. 97] . . . . . . . . . . . . . . . 903

Order for Licence Operates as a Deed Between Parties Concerned [S. 98] . . . . . . . . . . . . . 904

[Chap. 17] Use of Inventions for Purposes of Government and Acquisition of Inventions by Central Government . . . . . . . . . . . . 904

Meaning of Use of Invention for Purposes of Government [S. 99] . 904

Power of Central Government to Use Invention for Purposes of Government [S. 100] . . . . . . . . . . . 904

Use by non-Government persons . . . . . . . . . . . . . . . . 905

Rights of Third Parties for Use of Invention for Purposes of Government [S. 101] . . . . . . . . . . . 905

Acquisition of Inventions and Patents by Central Government [S. 102] . . . . . . . . . . . . . . . . . . . . . . . 906

Reference to High Court of Disputes as to Use for Government Purposes [S. 103] . . 906

[Chap. 18] Suits Concerning Infringement of Patents . . . . . . . . . . 907

Jurisdiction [S. 104] . . . . . . . . . . . . . . 907Burden of Proof in Cases of

Infringement [S. 104-A] . . . . . . . . 908Injunction against

infringement . . . . . . . . . . . 908Power of Court to Make

Declaration as to Non-infringement [S. 105] . . . . . . . . . . 908

Power of Court to Grant Relief in Cases of Groundless Threats of Infringement Proceedings [S. 106] . . . . . . . . . . . . . . . . . . . . . . . 909

Defences, etc in Suits for Infringement [S. 107] . . . . . . . . . . 909

Certain Acts Not to be Considered as Infringement [S. 107-A] . . . . . . 909

Reliefs in Suits for Infringement [S. 108] . . . . . . . . . . . . . . . . . . . . . . . 910

Right of Exclusive Licensee to Take Proceedings Against Infringement [S. 109] . . . . . . . . . . 910

Right of Licensee to Take Proceedings Under Section 84 Against Infringement [S. 110] . . . 910

Restriction on Power of Court to Grant Damages or Account of Profits [S. 111] . . . . . . . . . . . . . . . . . 911

Certificate of Validity of Specification and Costs for Subsequent Suit for Infringement [S. 113] . . . . . . . . . . 911

Relief for Infringement of Partially Valid Specification [S. 114] . . . . . . 911

Scientific Advisers [S. 115] . . . . . . . . 912[Chap. 19] Appeals to the Appellate

Board . . . . . . . . . . . . . . . . . . . . . . . . . . . 912Appellate Board [S. 116] . . . . . . . . . . 912Staff of Appellate Board [S. 117] . . . 912Appeals to Appellate Board [S. 117-

A] . . . . . . . . . . . . . . . . . . . . . . . . . . . 913Procedure and Powers of

Appellate Board [S. 117-B] . . . . . . 913Bar of Jurisdiction of Courts, etc

[S. 117-C] . . . . . . . . . . . . . . . . . . . . . 913Procedure for Rectification Before

Appellate Board [S. 117-D] . . . . . . 913Appearance of Controller in Legal

Proceedings [S. 117-E] . . . . . . . . . 913Costs of Controller in Proceedings

Before Appellate Board [S. 117-F] 914Transfer of Pending Proceedings

to Appellate Board [S. 117-G] . . . 914Power of Appellate Board to Make

Rules [S. 117-H] . . . . . . . . . . . . . . . 914[Chap. 20] Penalties . . . . . . . . . . . . . . . . 914

Contravention of Secrecy Provisions Relating to Certain Inventions [S. 118] . . . . . . . . . . . . . 914

Falsification of Entries in Register, etc [S. 119] . . . . . . . . . . . . . . . . . . . . 914

Unauthorised Claim of Patent Rights [S. 120] . . . . . . . . . . . . . . . . 914

Wrongful Use of Words “Patent Office” [S. 121] . . . . . . . . . . . . . . . . 915

Refusal or Failure to Supply Information [S. 122] . . . . . . . . . . . 915

Practice by Non-registered Patent Agents [S. 123] . . . . . . . . . . . . . . . . 915

Offences by Companies [S. 124] . . . 915


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[Chap. 21] Patent Agents . . . . . . . . . . . 916Register of Patent Agents [S. 125] . . 916Qualifications for Registration as

Patent Agents [S. 126] . . . . . . . . . . 916Rights of Patent Agents [S. 127] . . . 916Subscription and Verification of

Certain Documents by Patent Agents [S. 128] . . . . . . . . . . . . . . . . 916

Restrictions on Practice as Patent Agent [S. 129] . . . . . . . . . . . . . . . . . 917

Removal from Register of Patent Agents and Restoration [S. 130] . 917

Power of Controller to Refuse to Deal With Certain Agents [S. 131] 917

Savings in Respect of Other Persons Authorised to Act as Agents [S. 132] . . . . . . . . . . . . . . . . 918

[Chap. 22] International Arrangements . . . . . . . . . . . . . . . . . . . 918

Convention Countries [S. 133] . . . . 918Notification as to Countries Not

Providing for Reciprocity [S. 134] 918Convention Application [S. 135] . . . 918Special Provisions Relating to

Convention Applications [S. 136] 919Multiple Priorities [S. 137] . . . . . . . . 919Supplementary Provisions as to

Convention Applications [S. 138] 920Other Provisions of the Act

to Apply to Convention Applications [S. 139] . . . . . . . . . . . 920

[Chap. 23] Miscellaneous . . . . . . . . . . . 921Avoidance of Certain Restrictive

Conditions [S. 140] . . . . . . . . . . . . 921Determination of Certain

Contracts [S. 141] . . . . . . . . . . . . . . 922Fees [S. 142] . . . . . . . . . . . . . . . . . . . . 922Restrictions Upon Publication of

Specification [S. 143] . . . . . . . . . . . 922Reports of Examiners to be

Confidential [S. 144] . . . . . . . . . . . 922Publication of Official Journal

[S. 145] . . . . . . . . . . . . . . . . . . . . . . . 922Power of Controller to Call for

Information from Patentees [S. 146] . . . . . . . . . . . . . . . . . . . . . . . 922

Evidence of Entries, Documents, etc [S. 147] . . . . . . . . . . . . . . . . . . . . 923

Declaration by Infant, Lunatic, etc [S. 148] . . . . . . . . . . . . . . . . . . . . . . . 923

Service of Notices, etc by Post [S. 149] . . . . . . . . . . . . . . . . . . . . . . . 923

Security for Costs [S. 150] . . . . . . . . 923Transmission of Orders of Courts

to Controller [S. 151] . . . . . . . . . . . 923Information Relating to Patents

[S. 153] . . . . . . . . . . . . . . . . . . . . . . . 924Loss or Destruction of Patents

[S. 154] . . . . . . . . . . . . . . . . . . . . . . . 924Reports of Controller to be Placed

Before Parliament [S. 155] . . . . . . 924Patent to Bind Government [S. 156] 924Right of Government to Sell or Use

Forfeited Articles [S. 157] . . . . . . . 924Protection of Security of India

[S. 157-A] . . . . . . . . . . . . . . . . . . . . . 924Power of High Courts to Make

Rules [S. 158] . . . . . . . . . . . . . . . . . 925Power of Central Government to

Make Rules [S. 159] . . . . . . . . . . . . 925

20. Designs Act, 2000 . . . . . . . . . . . . . . . . 926[Chap. 1] Preliminary . . . . . . . . . . . . . . 926

Definition of Design [S. 2(d)] . . . . . . 926Article [S. 2(a)] . . . . . . . . . . . . . . . . . . 926Original [S. 2(g)] . . . . . . . . . . . . . . . . 926

[Chap. 2] Registration of Designs . . . . 927Controller and Other Officers [S. 3] 927Prohibition of Registration of

Certain Designs [S. 4] . . . . . . . . . . 927Application for Registration of

Designs [S. 5] . . . . . . . . . . . . . . . . . 928Registration to be in Respect of

Particular Article [S. 6] . . . . . . . . . 928Publication of Particulars of

Registered Designs [S. 7] . . . . . . . 929Power of Controller Regarding

Substitution of Application, etc [S. 8] . . . . . . . . . . . . . . . . . . . . . . . . . 929

Certificate of Registration [S. 9] . . . 930Register of Designs [S. 10] . . . . . . . . 930

[Chap. 3] Copyright in Registered Designs . . . . . . . . . . . . . . . . . . . . . . . . . 930

Copyright on Registration [S. 11] . . 930Restoration of Lapsed Designs

[S. 12] . . . . . . . . . . . . . . . . . . . . . . . . 931Procedure for Disposal of

Applications for Restoration [S. 13] . . . . . . . . . . . . . . . . . . . . . . . . 931


Edition & Year: 10th edn, 2013Current page no.: li; Last page no.: lviChap No. & File: 1, 07_content; 14'2'20; 16'46'02©/Rights of Publication: EBC Publishing Pvt. Ltd.

CONTENTS LI

Rights of Proprietor of Restored Design [S. 14] . . . . . . . . . . . . . . . . . 931

Requirements Before Delivery on Sales [S. 15] . . . . . . . . . . . . . . . . . . . 931

Effect of Disclosure on Copyright [S. 16] . . . . . . . . . . . . . . . . . . . . . . . . 932

Inspection of Registered Designs [S. 17] . . . . . . . . . . . . . . . . . . . . . . . . 932

Information as to Existence of Copyright [S. 18] . . . . . . . . . . . . . . 932

Cancellation of Registration [S. 19] 932Existence of Design Registered in

Foreign Convention Country . . . 933Designs to Bind Government [S. 20] 933

[Chap. 4] Industrial and International Exhibitions . . . . . . . . 933

Provisions as to Exhibitions [S. 21] 933[Chap. 5] Legal Proceedings . . . . . . . . 934

Piracy of Registered Design [S. 22] 934Injunction against infringement 935

Applications of Certain Provisions as to Patents [S. 23] . . . . . . . . . . . . 935

[Chap. 6] General . . . . . . . . . . . . . . . . . 935Fees [S. 24] . . . . . . . . . . . . . . . . . . . . . 935No Notice of Trust [S. 25] . . . . . . . . . 936Inspection of and Extracts from

Registers [S. 26] . . . . . . . . . . . . . . . 936Privilege of Reports of Controller

[S. 27] . . . . . . . . . . . . . . . . . . . . . . . . 936Prohibition and Publication of

Specification, Drawings, etc, Where Application Abandoned [S. 28] . . . . . . . . . . . . . . . . . . . . . . . . 936

Power of Controller to Correct Clerical Errors [S. 29] . . . . . . . . . . 936

Entry of Assignment and Transmissions in Registers [S. 30] 936

Rectification of Register [S. 31] . . . . 937[Chap. 7] Powers and Duties of

Controller . . . . . . . . . . . . . . . . . . . . . . 937Powers of Controller in

Proceedings Under Act [S. 32] . . 937Exercise of Discretionary Power by

Controller [S. 33] . . . . . . . . . . . . . . 937Power of Controller to Take

Central Government Directions [S. 34] . . . . . . . . . . . . . . . . . . . . . . . . 938

Refusal to Register a Design in Certain Cases [S. 35] . . . . . . . . . . . 938

Appeals to High Court [S. 36] . . . . . 938[Chap. 8] Evidence, etc . . . . . . . . . . . . . 938

Evidence Before Controller [S. 37] . 938Certificate of Controller to be

Evidence [S. 38] . . . . . . . . . . . . . . . 938Evidence of Documents in Patent

Office [S. 39] . . . . . . . . . . . . . . . . . . 938Application and Notices by Post

[S. 40] . . . . . . . . . . . . . . . . . . . . . . . . 939Declaration by Infant, Lunatic, etc

[S. 41] . . . . . . . . . . . . . . . . . . . . . . . . 939Avoidance of Certain Restrictive

Conditions [S. 42] . . . . . . . . . . . . . 939[Chap. 9] Agency . . . . . . . . . . . . . . . . . . . 939[Chap. 10] Powers of Central

Government . . . . . . . . . . . . . . . . . . . . . 940Reciprocal Arrangement With

UK and Other Convention Countries or Group of Countries or Inter-governmental Organisations [S. 44] . . . . . . . . . . 940

Report of Controller to be Placed Before Parliament [S. 45] . . . . . . . 940

Protection of Security of India [S. 46] . . . . . . . . . . . . . . . . . . . . . . . . 940

Power of Central Government to Make Rules [S. 47] . . . . . . . . . . . . . 941

Subject Index . . . . . . . . . . . . . . . . . . . . . . . . 943