PERIYAR UNIVERSITY

(NAAC 'A++' Grade with CGPA 3.61 (Cycle - 3)

State University - NIRF Rank 59 - NIRF Innovation Band of 11-50)
SALEM - 636 011

CENTRE FOR DISTANCE AND ONLINE EDUCATION

(CDOE)

BACHELOR OF BUSINESS ADMINISTRATION

SEMESTER - IV

CORE COURSE: BUSINESS REGULATORY

FRAME WORK
(Candidates admitted from 2024 onwards)
CDOE-OLD B.B.A – SEMESTER - IV Unit 1

PERIYAR UNIVERSITY
CENTRE FOR DISTANCE AND ONLINE EDUCATION (CDOE)

B.B.A 2024 admission onwards

CORE – VIII
Business Regulatory Frame Work

Prepared by:
Dr.V.Ramanithilagam
Assistant professor
Centre for Distance and Online Education (CDOE)
AVS College of Arts and Science (A)
Ramalingapuram
Salem - 636106

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LIST OF CONTENTS

UNIT CONTENTS PAGE

I Brief outline of Indian Contracts Act - Special 4 – 45

contracts Act

II Sale of goods Act - Contract of Agency 46 – 85

III Brief outline of Indian Companies Act 1956.- 86 – 134

kinds-formation-MOA-AOA- Prospectus

Appointment of Directors- Duties-Meeting

Resolutions-Winding up

IV Consumer Protection Act – RTI 135 – 171

V Brief outline of Cyber laws – IT Act 2000 & 172 - 206

2008

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Self-Learning Material Development – STAGE 1

UNIT 1 Indian Contract Act

Brief outline of Indian Contract Act – Special Contract Act

Unit Module Structuring

STAGE – 2 – Modules Sections and Sub-sections structuring

Section Topic Page No

1.1.1 Meaning of Business Law 2

1.1.2 Definition of Business Law 3

1.1.3 Meaning of Law of contract 5

1.1.4 Difference between an Agreement and a Contract 6

1.1.5 Formation of Contract 7

1.1.6 Acceptance (sec(b)) 9

1.1.7 Let‟s sum up 10

1.1.8 Self-assessment 11

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1.2.1 Kind of Contract 12

1.2.2 Essentials of Valid contract 16

1.2.3 Free consent 18

1.2.4 Lawful objects 19

1.2.5 Let‟s sum up 21

1.2.6 Self-assessment 22

1.3.1 Discharge of contract 23

1.3.2 Remedies for Breach of Contract 29

1.3.3 Let‟s sum up 36

1.3.4 Self-assessment 38

1.4.1 Unit Summary 39

1.4.2 Glossary 40

1.4.3 Answers for Self-Assessments 41

1.4.4 Suggested Readings 41

1.4.5 E-Contents/Videos 42

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1.4.6 References 43

Hello Learner….The Contract Act refers to legislation that

governs contracts between parties, including their formation,
enforceability, and breach. Laws regarding contracts vary by
country, but generally, they outline the essential elements of a
valid contract, such as offer, acceptance, consideration, capacity,
and legality of purpose.

1.1.1 Meaning of Law

Law means a ‗set of rules„. Broadly speaking, it may be defined as the rules of
conduct recognized and enforced by the state to control and regulate the conduct of
people, to protect their property and contractual rights with a view to securing justice,
peaceful living and social security.

Since the value system of society keeps on changing, the law also keeps
changing according to the changing requirements of the society.

Meaning of Business Law

Business law may be defined as that branch of law which consists of laws
relating to trade, industry and commerce. It is one of the important branches of Civil
Law. It is also called as ―Commercial Law‖. It includes laws relating to various
contracts, partnership, companies, negotiable instruments, insurance, carriage of
goods, arbitration etc.

1.1.2 DEFINITION OF BUSINESS LAW :

According to Salmond ―Law is the body of principles recognized and applied

by the statein the administration of justice.

According to Black Stone, ―Law is a rule of civil conduct, prescribed by the

supreme power of a state, commanding what is right and prohibiting what is wrong.

According to Holland, ―Law is rule for external human action enforced by

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the sovereign political authority.

(A) English mercantile law

Indian mercantile law is largely based on English mercantile law. In order to, trace
the origin of the legal principles governing commercial transactions In India, it becomes
necessary to know the sources of English mercantile law.

1. The English common law

This law is also known as judge made law. It is based upon customs and practices
handled down from generation to generation. It is the oldest unwritten law. The English
courts developed these over centuries.

Principle of equity

English law of equity is another guideline for Indian courts. It is that branch of
English law which is based on principles of equity. Justice and good conscience. It is
also an unwritten law and developed separately from the common law.

2. Law merchant:

It is also one of the important sources of English mercantile law. A law merchant
consists of legal principles based on customs and usage. They developed first as a
separate system of law and subsequently become part of the common law.

(B) Precedents (past judicial decisions of courts)

Judicial decisions are also called as case law. They referred to as precedents and
are binding on all courts having jurisdiction lower to that the court, which gave the
judgment. The courts in deciding cases involving similar points of law also follow
them.

(C) Statute law

A bill passed by the parliament and signed by the President becomes a ―statute‖
or an act. Most of the Indian laws are embodied in the various acts passed by the
central as well as state legislation.

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For example

 The Indian contract act 1872

 The sale of goods act 1930

 The companies act 1956

 The Indian partnership act 1932

(D). Local customs and usage

Customs and usage plays an important role in regulating business transactions. A

well recognized customs or usage can even over ride the statute law. Most of the
business customs and usages have been already codified and given legal sanctions
in India. Some of them have been rectified by the decision of the competent courts of
law.

1.1.3 MEANING OF LAW OF CONTRACT.

According to Sec 2(h) of the Indian Contract Act, 1872 ― An agreement

enforceable by law is a contract‖. In other words, an agreement which can be
enforced in a court of law is known as a contract. On analyzing this definition, the
contract must have the following two elements

 An agreement, and

 Enforceability of an agreement.

In the equation form, Contract is

Contract = an agreement + Enforceability of an agreement.

Agreement

According to Sec 2(e) of the Indian Contract Act 1872, ―Every Promise and
every set of promise forming the consideration for each other is an agreement‖.

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According to Sec 2(b) of the Indian Contract Act 1872,

―A proposal when accepted becomes a promise‖.

In other words, an agreement consists of an offer by one

party and its acceptance by the other. In the form of an equation.

Agreement = Offer (or Proposal) + Acceptance of offer (or Proposal)

Enforceability of Agreement

An agreement is said to be enforceable by law if it creates some legal obligation.

In other words, the parties to an agreement must be bound to perform their

promises and in case of default by either of them, must intend to sue.

Example: In case of social or domestic agreements, the parties do not intend to create
legal relations.

Example: In Balfour Vs Balfour (1919)

A promise by the husband to pay his wife £ 30 every month was held
unenforceable as the parties never intended it to be attended by legal obligations.

1.1.4 DIFFERENCE BETWEEN AN AGREEMENT AND A

CONTRACT

An Agreement A Contract

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i) Offer and its acceptance constitute an Agreement and its enforceability

constitute a contract.
agreement.

ii) An agreement may or may not create a A Contract necessarily creates a legal

legal obligation. obligation.

iii) Every agreement need not necessarily All Contracts are necessarily agreements.
be a contract.

iv) Agreement is not concluded or a binding Contract is concluded and binding on the

contract. Concerned parties.

1.1.5 FORMATION OF CONTRACT

OFFER (OR) PROPOSAL [ SEC. 2(a)]

When one person signifies to another his willingness to do or to abstain from

doing anything with a view to obtaining the assent of that other to such act or
abstinence, he is said to make a proposal‖.

The person making the proposal or offer is called proposer, offeror or promisor.

The person to whom the offer or proposal is made is called the propose or
offeree. When the offeree accepts the offer, he is called promisee or acceptor. An
offer is synonymous with proposal.

An offer has two parties

 A promisee by the offeror to do or to abstain from doing anything and

 A request by the offer to the offeree to do or to abstain from doing something in

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return.

Essentials of valid offer:

1) The offer must be disclose an intention to create legal relations.

2) The terms of an offer must be clear.

3) Offer may be general or specific.

4) Offer may be express or implied.

5) An offer may be positive or negative.

6) Every offer must be communicated.

1. The offer must be disclose an intention to create legal relations:

The offeror must have the intention of creating legal relations. A social invitation
even if it is accepted does no result in legal relations because it is not intended so.

Example: A accepts an invitation to dinner at B„s place on a certain date. But on

the appointed date A fails to turn up. A cannot be sued for breach of contract because
the contract was without any intention of a legal obligation.

2. The terms of an offer must be clear:

The laws require the parties to make their own contract. It will not make a contract for
them out of terms which are indefinite or illusory.

3. Offer may be general or specific:

General offer is made to the world at large while a specific offer is made to some
specific individual or individuals. It follows that an offer need not be made to an
ascertained person but it must be accepted by a definite person.

4. An offer may be express or implied:

When an offer is expressed by words, spoken or written, it is termed as an

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expressed offer. Implied offer means an offer made by conduct.

5. An offer may be positive or negative [ sec.2(a)]

―When one person signifies his willingness to do or abstain from doing something‖.
Thus an offer may be to do something or not to do something. An offer to do
something is a positive offer. And an offer no to do something is negative offer.

6. Offer must be communicated:

For an offer to be complete, it must be communicated to the person to whom it is

intended.

For example: A write a letter to B offering to sell his house for Rs 2, 00,000. But
never posts the letter. It is not offer and B can never accept it. Acceptance of an offer
in the ignorance of the offer, is not at all an acceptance. Hence does not confer any
right on the acceptor.

1.1.6 ACCEPTANCE [ SEC. 2 (b)]

―When one person to whom the proposal is made signifies his assent thereto,
the proposal is said to be accepted. A proposal, when accepted becomes a promise‖.

Essentials and legal rules for a valid acceptance [ sec. 3]

1. It must be absolute and unqualified:

It must confirm with the offer. An acceptance in order to be binding must be absolute
and unqualified. Sec 7 (1) in respect of all terms of the offer, whether material or
immaterial, major or minor if the parties are not ad idem on all matters concerning
the offer and acceptance, there is no contract.

2. It must be communicated to the offeror:

The acceptance must be in the form specified or in some perceptible form if not
specified. A mere intend of acceptance will not suffice. The offeror cannot frame an
offer in such a way as to tantamount. The silence or inaction of the offeree as an
acceptance. The mode of acceptance may be specified but not the mode of rejection of

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offer.

3. It must be made within reasonable time

If any time limit is specified, the acceptance must be given within that time. If no time
limit is specified, it must be given reasonable time.

4. It must be by the offeree:

An offer can be accepted only by the person or persons to whom it is made. A valid
contract arisen only if acceptance is communicated by a person who has the authority
to accept if it is communicated by any unauthorized person. It will not create any legal
relationship.

5. The acceptance must be in response to offer:

There can be no acceptance without offer. Acceptance cannot precede offer.

6. Acceptance may be express or implied:

An acceptance, which is expressed by words, written or spoken is called express

acceptance. The acceptance, which is expressed by conduct is called an implied
acceptance.

A contract is essentially a legally binding agreement between two or

more parties [US Law | Cornell University Law School Wex definition
of contract]. It lays out specific rights and obligations that each party
involved needs to follow. Think of it as a handshake deal on steroids!

Here's a breakdown of the key ideas behind contracts:

 Agreement: There must be a meeting of the minds, where both parties clearly
understand and accept the terms of the contract.

 Legally enforceable: This iswhat separates a contract from a regular agreement.

If the contract is breached (broken), the law provides ways for the harmed party to
seek compensation or enforce the terms of the agreement.

 Obligations: The contract specifies what each party needs to do (or not do). This

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could involve exchanging goods, services, or money.

For a contract to be valid, there are usually certain elements that need to be present.
These can vary depending on specific situations, but some common ones include:

 Offer and Acceptance: One party makes an offer (like "I'll mow your lawn for
$40"), and the other party clearly accepts it (like saying "Sounds good").

 Consideration: There needs to be a valuable exchange between the parties. This

could be money for a service, a product for payment, or something else of value.

1. A contract is made where:

 X agrees with Y to discover a treasure by magic.

 X bids at a public auction

 A takes a sea

 A sit in a public Omni bus.

2. A Void Contract

 Is void from the very beginning?

 Enforceable at the option of both the parties.

 Enforceable at the option of one party

 Not enforceable in the court of law

3. In case of void agreements, collateral transactions are

 Also void

 Unenforceable

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 Not affected

 Illegal

1.2.1TYPES (OR) KINDS OF CONTRACT.

The following are the different kinds of contract.

1. CONTRACTS ON THE BASIS OF FORMATION

On the basis of creation, the contracts may be classified as under.

a) Express Contract:

Express Contract is one which is made by words spoken or written.

Example: X says to Y ―will you buy my car for Rs.1, 00,000?‖ Y says to X ―I am ready

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to buy your car for Rs.1,00,000‖. It is an express contract made orally.

b) Implied Contract:

An Implied contract is one which is made otherwise than by words spoken or

written. It is inferred from the conduct of a person or the circumstances of the particular
case.

Example: A transport company runs buses on different routes to carry passenger

and X boards a bus. This is an implied offer by the transport 10 and acceptance by X.

II) CONTRACTS ON THE BASIS OF PERFORMANCE.

On the basis of execution, the contracts may be classified as under.

a) Executed Contract:

It is a contract where both the parties to the contract have fulfilled their
respective obligations under the contract.

Example: X offers to sell his car to Y for Rs. 1,00,000. Y accepts X„s offer. X
delivers the car to Y and Y Pays Rs.1,00,000 to X. It is an executed contract.

b) Executory Contract:

It is a contract where both the parties to the contract have still to performed their
respective obligations

Example: X offers to sell his car to Y for Rs. 1,00,000. Y accepts X„s offer. If the
car has not yet been delivered by X and the price has not yet been paid by Y. It is
an executory contract.

c) Partly Executed and partly Executory Contract:

It is a contract where one of the parties to the contract has fulfilled his
obligation and the other party has still to perform his obligation.

Example: X offers to sell his car to Y for Rs. 1,00,000 on credit of one month. Y
accepts X„s offer. X delivers the car to Y. Here, the contract is executed as to X and

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executory as to Y.

III) CONTRACTS ON THE BASIS OF ENFORCEABILITY.

On the basis of enforceability, the contracts may be classified as under.

a) Valid Contract:

A contract which satisfies all the conditions prescribed by law is a valid contract.

Example: X offer to marry Y. Y accepted X„s offer. This is a valid contract.

b) Void Contract:

The term ‗Void Contract’ is a contradiction in terms. A void contract is a

contract which was valid when entered into but which subsequently became void due
to impossibility of performance, change of law or some other reason.

Example: X offers to marry Y. Y accepts X„s offer. Later on Y dies. This contract was
valid at the time of its formation but became void on the death of Y.

c) Void Agreement:

According to Sec 2(g), ―An agreement not enforceable by law is said to be

void‖. Void agreement means that they are unenforceable right from the time they
are made.

Example: An agreement with agreement minor or a person of unsound mind is void

because a minor or a person of unsound mind is incompetent to contract.

d) Voidable Contract:

According to Sec 2(i) of the Indian Contract Act, 1872, an agreement which is
enforceable by law at the option of one or more of the parties there on but not at the
option of the other or others, is a voidable contract.

For Example, A contract is treated as voidable at the option of the party whose
consent has been obtained by coercion or undue influence or fraud or
misrepresentation.

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Example: X threatens to kill Y if he does not sell his house for Rs.1,00,000 to X. Y
sells his house to X and receives payment. Here, Y„s consent has been obtained by
coercion and hence this contract is voidable at the option of Y, the aggrieved party.

e) Illegal Agreement:

An illegal agreement is one the object of which is unlawful. Such an agreement

cannot be enforced by law. Thus, illegal agreements are always void.

Example: X agrees to pay Y Rs.1,00,000 if Y kills Z. Y kills Z and claim Rs.1,00,000. Y

cannot recover from X because the agreement between X and Y is illegal as its object
is unlawful.

f) Unenforceable Contract:

It is a contract which is actually valid but can be enforced because of some

technical defect (Such as not in writing, under stamped). Such contracts can be
enforced if the technical defect involved is removed.

Example: An oral agreement is unenforceable because the law requires that an

agreement must be in writing. It the oral agreement is rectified to writing, it will
become enforceable.

1.2.2 ESSENTIALS OF VALID CONTRACT:

The following are the essential elements of a valid contract.

1. Offers and Acceptance

2. Legal Relationship

3. Lawful Consideration

4. Capacity of Parties

5. Free Consent

6. Lawful Objects

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7. Writting and Registration

8. Certainity

9. Possibility of Performance

10. Not Expressly Declared Void

An agreement becomes enforceable by law when it fulfils essential conditions. These

conditions may be called the essentials of a valid contract, which are as follows:

1. Offers and Acceptance

For an agreement there must be a lawful offer by one and lawful acceptance of
that offer from the other party. The term lawful means that the offer and acceptance
must satisfy the requirements of Contract Act. The offer must be made with the
intention of creating legal relations otherwise, there will be no agreement.

Example:

A say to B that he will sell his cycle to him for Rs.2000. This is an offer. If B accepts this
offer, there is an acceptance.

2. Legal Relationship

The parties to an agreement must create legal relationship. It arises when parties
know that if one for the failure of a contract. Agreements of a social or domestic
nature do not create legal relations and as such cannot give rise to a contract. It is
presumed in commercial agreements that parties intend to create legal relations.

Example:

1. A father promises to pay his son Rs.500 every month as pocket money. Later, he
refuses to pay. The son cannot recover as it is a social agreement and does not
create legal relations.

2. A offers to sell his watch to B for Rs.200 and B agrees to buy it at the same price,
there is a contract as it creates legal-relationship between them.

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3. A husband promised to pay his wife a household allowance of 30 pounds every

month. Later, the parties separated and the husband failed to pay. The wife used for
allowance. Held that the wife was not entitled for the allowance as the agreement
was social and did not create any legal obligations.

3. Lawful Consideration

The third essential of a valid contract is the presence of consideration. Consideration

is ―something in return.‖ It may be some benefit to the party. Consideration has been
defined as the price paid by one party for the promise of the other. An agreement is
enforceable only when both the parties get something and give something. The
something given or obtained is the price of the promise and is called consideration.

Example:

1. A agrees to sell his house to B for Rs.10 Lac is the consideration for A„s promise
to sell the house, and A„s promise to sell the house is the consideration for B„s
promise to pay Rs.10 Lac. These are lawful considerations.

2. A promise to obtain for B employment in the public service, and B promise to pay
10,000 rupees to A. the agreement is void, as the consideration for it is unlawful.

4. Capacity of Parties:

An agreement is enforceable only if it is entered into by parties who possess

contractual capacity. It means that the parities to an agreement must be competent to
contract. According to Section 11, in order to be competent to contract the parties must
be of the age of majority and of sound mind and must not be disqualified from
contracting by any law to which they are subject.

A contract by a person of unsound mind is void ab-initiate (from the beginning).If one
of the parties to the agreement suffers from minority, madness, drunkenness etc., the
agreement is not enforceable at law, except in some cases.

Example:

1. M, a person of unsound mind, enters into an agreement with S to sell his house
for Rs.2 lac. It is not a valid contract because M is not competent to contract.

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2. A, aged 20 promises to sell his car to B for Rs.3 Lac. It is a valid contract
because A is competent to contract.

5. Free Consent:

It is another essential of a valid contract. Consent means that the parties must have
agreed upon the same thing in the same sense. For a valid contract it is necessary that
the consent of parties to the contact must be free.

Example:

1. A compels B to enter into a contract on the point of pistol. It is not a valid contract
as the consent of B is not free.

6. Lawful Objects:

It is also necessary that agreement should be made for a lawful object. The object for
which the agreement has been entered into must not be fraudulent, illegal, immoral, or
opposed to public policy or must not imply injury to the person or property of another.
Every agreement of which the object or consideration is unlawful is illegal and the
therefore void.

Example:

A promise to pay B Rs.5,000 if B beats C. The agreement is illegal as its object is

unlawful.

7. Writing and Registration:

According to Contract Act, a contract may be oral or in writing. Although in practice, it is

always in the interest of the parties that the contract should be made in writing so that it
may be convenient to prove in the court. However, a verbal contract if proved in the
court will not be considered invalid merely on the ground that it not in writing. It is
essential for the validity of a contact that it must be in writing signed and attested by
witness and registered if so required by the law.

Example:

1. A promises to sell his book to Y for Rs.200, it is a valid contract because the law
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does not require it to be in writing.

2. A promises to sell his house to B, it is not a valid contract because the law
requires that the contract of immovable property must be in writing.

8. Certainity:

According to Section 29 of the Contract Act, ―Agreements the meaning of which are
not certain or capable of being made certain are void.‖ In order to give rise to a valid
contract the terms of the agreement, must not be vague or uncertain. For a valid
contract, the terms and conditions of an agreement must be clear and certain.

Example:

1. A promised to sell 20 books to B. It is not clear which books A has promised to

sell. The agreement isvoid because the terms are not clear.

2. A agrees to sell B a hundred tons of oil. It is not clear what is the kind of oil.
The agreement is void because of it uncertainty.

3. O agreed to purchase a van from S on hire-purchase terms. The price was to

be paid over two years. Held there was no contract as the terms were not certain
about rate of interest and mode of payment.

9. Possibilty of Performance:

The valid contract must be capable of performance section 56 lays down that. ―An
agreement to do an act impossible in itself is void.‖ If the act is legally or physically
impossible to perform, the agreement cannot be enforced at law.

Example:

1. A agrees with B to discover treasure by magic, the agreement is not enforceable.

2. A agrees with B to put life into B„s dead brother. The agreement is void
as it is impossible of performance.

10. Not Expressly Declared Void:

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An agreement must not be one of those, which have been expressly declared to be
void by the Act. Section 24-30 explains certain types of agreement, which have been
expressly declared to be void. An agreement in restraint of trade and an agreement by
way of wager have been expressly declared void.

Example:

A promise to close his business against the promise of B to pay him Rs.2 lac is a void
agreement because it is restraint of trade.

[ Discharge of contract – remedies for breach of contract – agreement not

declared void – agreement expressly declared void – wagering agreements ]

The term "special contract act" might be specific to a particular jurisdiction. There isn't a
universally recognized special contract act.

However, there's a concept in contract law called "special

contracts" which refers to specific types of agreements that
have their own set of rules, beyond the general principles of
contract law. These special rules are often outlined in
separate legislation or legal doctrines.

Here are some examples of special contracts:

 Sale of Goods: This is typically governed by a specific Sale of Goods Act, which
details the rights and obligations of buyers and sellers in commercial transactions.

 Partnership: Formation and operation of partnerships are often addressed in a

separate Partnership Act.

 Insurance Contracts: Insurance policies are considered special contracts with

specific rules regarding disclosure, risk, and claims.

 Leases: Landlord-tenant relationships and lease agreements may have specific

regulations depending on the jurisdiction.

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4. Undue influence can be exercised only between

the parties who are

 Related to each other

 Not related to each other

 Friendly to each other

 All of them

5. Which of the following persons can perform the contract?

 Promisor alone

 Legal representative of promisor

 Agent of the promisor

 All of them

6. Which of the following is not a legal requirement of a valid consideration?

 It must move at the desire of the promisor

 It must be lawful

 It must be real and not illusory

 It must be adequate

7. Which of the following persons are not competent to contract?

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 Minor

 Person disqualified by law

 Person of unsound mind

 All of the above

1.3.1MEANING OF DISCHARGE OF CONTRACT

When the rights and obligations arising out of a contract are extinguished, the
contract is said to be discharged or terminated. Thus the discharged of a contract
means that the parties are no more liable under the contract.

VARIOUS METHODS OF DISCHARGE

1. By performance

When the parties to a contract perform their respective promises, the contract is
said to have been performed. This is the normal and natural mode of discharging a
contract . when performance is proper and complete on either side the parties

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become free from any further liability. If only one party perform what he promised he
alone gets a valid discharge and he acquires a right of action against the other for
non performance. There are two types of performance. They are

Actual performance

The contract is said to have been performed if both the parties the contract have
performed their respective promises. It should be according to the terms of the
agreement. Mostly contracts are discharged in this mode only.

b.) Offer to perform or tender

Tender is an offer to perform the obligation under the contract. When one party
offers to perform, it is part of the promise and the other party refuses to accept the
performance, the first party is discharged from; it is obligation provided the offer or
tender to perform the contract was valid.

2. Discharge by mutual agreement

If both the parties to the contract, expressly or implicitly agree to terminate the
contract, the contract is said to have been discharged by mutual consent.

2. MUTUAL DISCHARGE OF A CONTRACT MAY TAKE

PLACE THE ANY OF THE FOLLOWING WAYS.

c.) Novation

Novation means substitution of a new contract in place of the old one. It creates a
new contract in exchange of the old contract. It discharges the old that is the original
contract. New contract have may be either between the same parties or between
different parties. The consideration being mutually the discharge of the old contract.

b.) Alteration

Alteration of a contract means change in one or more of the terms of a contract.

Alteration is valid if it is done with the consent of all the parties to the contract. In
such a case the old contract is discharged.

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c.) Remission :

Every 27romise may dispense with or remit wholly or in part, the performance of the
promise made to him or may extend the time for such performance or may accept
instead of if any satisfaction which he thinks fit

d.) Rescission

Rescission meant cancellation of all or some of the terms of a contract. For example
by mutual consent of the parties.

e.) Waiver

Waiver means abandoning the rights. When a party to the contract abandons or
waiver his rights, the contract is discharged.

f.) Merger

Merger denote coinciding and meeting of an inferior and superior right in one and the
same person. In such a case inferior right available to a party under an agreement will
vanish automatically.

2. DISCHARGE BY IMPOSSIBILITY

If the performance of a contract is impossible, the contract is discharged. This is

because the parties cannot perform their respective obligations. The impossibility of
performance may be two types.

 Impossibility at the time of agreement

 Impossibility arising subsequent to the formation of contract

3. DISCHARGE BY LAPSE OF TIME

A contract is discharged by lapse of time. The limitation act 1940 lays down that a
case of breach of a contract legal action should be taken within a specified period.

Lapse of time terminates a contract the period of limitation for simple contract is three

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years if the three years expire and creditors fails to file a suit to recover his amount,
the debtor is discharged from his liability.

4. BY OPERATION OF LAW

d.) Death

Death of promisor results in termination of the contract in case involving personal skill
or ability. In other cases, the rights and liabilities of the deceased person pass on the
legal representative.

b.) Insolvency

A contract is discharged by the insolvency of one of the parties to it when an insolvency

court passed an

―order of discharge‖ exonerating the insolvent from liabilities on debts incurred prior to
his adjudication.

c.) Merger

Merger takes place when an inferior right accruing to a partly, under a contract merges
into a superior right accruing to the same party either under the same or the other
contract.

5. By breach of contract

The breach of contract means the failure of a party to perform his obligations. The
party who fails to perform his obligations is said to have committed a breach of
contract. Breach of contract discharge the aggrieved party from performing his
obligations. It may arise in any one of the following forms.

e.) Anticipatory breach of contract

Anticipatory breach of contract occur when a party repudiates it before the time fixed for
performance has arrived or when a party by his own act disable himself from performing
the contract. It is the premature destruction of the contract.

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b.) Actual breach of contract

 Actual breach of contract at the time when the performance is due

This type of breach of contract occurs when a person does not perform his part
of the contract at the stipulated time. Here the person who failed to perform his
part will be liable for its breach.

 Breach during the performance of the contract.

Actual breach of contract also occurs when during the performance of the
contract, one party fails or refuses to perform his obligation under the contract.

1.3.2 REMEDIES FOR BREACH OF CONTRACT

Parties to a contract are expected to perform their respective promises. But one
of the parties to a contract may break the contract by refusing to perform his promise.
This is what is called breach of contract.

Remedies for breach of contract

1. Rescission of the contract

Where one of the parties to a contract commits breach, the other party may treat the
contract as rescinded. On the rescission of the contract the aggrieved party is
discharged from all the obligation under the contract.

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2. Damages for the loss suffered

The term damages means monetary compensation payable by the defaulting party to
the aggrieved party in the event of the breach of a contract for the loss suffered by
him.

Types of damages

There are four types of damages which can be claimed by the aggrieved party.

 Ordinary damages or general damages.

Damages that arise in the ordinary course of events from the breach of contract are
called ordinary damages.

 Special damages

Special damages are those damages that are payable for the loss arising on
account of some special or unusual circumstances. That is they are not due to
the natural and probable consequences of the breach of the contract.

They constitute the indirect loss suffered by the aggrieved party on account
of breach of contract. They can be recovered only when the special
circumstance. Responsible for the special loss were made known to the
other party at the time of contract.

 Exemplary or vindictive damages

These damages are awarded against the party who has committed a breach of
the contract with the object of punishing the erring as defaulting party and to
compensate the aggrieved party. Generally these damages are awarded in case
of action on lost or breach of promise.

For example breach of contract to marry, dishonor of customers cheque by the

bank without any proper reason.

 Nominal damages.

Nominal damages are arrived to the aggrieved party when there is only technical

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violation of the legal rights. Here no substantial loss is caused. These damages
are very small in amount. There are awarded simply to recognize the right of the
party to claim damages for the breach of the contract.

3. Suit for the specific performance

Sometimes, the damages are not an adequate remedy for breach of the
contract. In such cases the court may at the suit of the party not in breach, direct the
party in breach to carry out his promises as per the terms of the contract. This is known
as specific performance.

VOID AGREEMENTS

Definition:

Literally: Void means having no legal value and agreement means Arrangement,
promise or contract made with somebody. So void agreement means an agreement
that has no legal value.

Traditionally: ―An agreement not enforceable by law is said to be void‖. [Sec 2(g)]

Example of void agreement: An agreement made by a minor, agreement without

consideration, certain agreements against public policy etc.

EXPRESSLY DECLARED VOID AGREEMENT

There are certain agreements, which are expressly declared to be void. They are as
follows:

(1) Agreement by a minor or a person of unsound mind.[Sec(11)]

(2) Agreement of which the consideration or object is unlawful[Sec(23)]

(3) Agreement made under a bilateral mistake of fact material to the

agreement[Sec(20)]

(4) Agreement of which the consideration or object is unlawful in part and the illegal

Part cannot be separated from the legal part [Sec(24)]

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(5) Agreement made. without consideration.[Sec(25)]

(6) Agreement in restraint of marriage [Sec(26)]

(7) Agreement in restrain of trade [Sec(27)]

(8) Agreement in restrain of legal proceedings[Sec(28)]

(9) Agreements the meaning of which is uncertain [Sec(29)]

(10) Agreements by way of wager [Sec(30)]

(11) Agreements contingent on impossible events [Sec(36)]

(12) Agreements to do impossible acts [Sec(56)]

Some discussions on void agreement are as follows:

(1) Agreement by a Minor Or a Person of Unsound Mind-

A person who has not completed his or her 18 years of age signifies as minor. Law
acts as the guardian of minors and protects their rights, because their mental facilities
are not mature- they do not possess the capacity of judge what is good and what is
bad for them.

A person who does not possess a sound mind or whose mental powers are not
arranged or whose mental condition is not under his or her own control. Any
agreement by person of unsound mind is absolutely void because he has no capacity
to judge, what is good and what is bad for him.

Illustration

(a) A, 15 years old boy, made an agreement with B to give him Rs.1000. This is a void
agreement.

(b) A mentally disordered man made an agreement with X to marry her, but this is not
a valid agreement.

(2) Agreement Made Without Consideration-

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An agreement made without consideration is void, unless

1) it is expressed in writing and registered under the law for the time being enforce
for the registration of(documents), and is made on account of natural love and affection
between parties standing in a near relation to each other; or unless.

2) It is a promise to compensate, wholly or in part, a person who has already

voluntarily done something for the promisor, or something which the promissory was
legally compelling to do, or unless.

Illustrations

a) A promises for no consideration, to give to B Rs. 1000; this is a void agreement.

b) A, for natural, love and affection, promises to give his son, B Rs. 1000. A puts his
promise to B into writing and registers it. This is a contract.

c) A finds be B„s purse and gives it to him. B promises to give A Rs. 50. This is a
contract.

d) A supports B„s infant son. B promises to pay A„s expenses in so doing. This is a
contract.

(3) Agreements in Restraint of Marriage-

Every individual enjoys the freedom to marry and so according to section 26 of the
contract act ―every agreement is restraint of the marriage of any person, other than a
minor, is void.‖ The restraint may be general or partial but the agreement is void, and
therefore, an agreement agreeing not to marry at all, or a certain person or, a class of
persons, or for a fixed period, is void.

Illustrations

An agreement whereby one of the parties agrees to close his business in consideration
of the promise by the other party to pay a certain some of money , is void, being an
agreement is restraint of trade, and the amount is not recoverable, if the other party fails
to pay the promised some of money.

But agreements merely restraining freedom of action necessary for the carrying on of
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business are not void, for the law does not intend to take away the right of a trade to
regulate his business according to his own discretion and choice.

Illustration

An agreement to sell all produce to a certain party, with stipulation that the
purchaser was bound to accept the whole quantity, was held valid because it aimed
to promote business did not restrained it.

But where in a similar agreement the purchaser was free to reject the goods (i.e. was
not bound to accept the whole quantity tendered) it was held that the agreement was
void as being in restraint of trade.

(5) Agreement in restraint of legal proceedings-

Every agreement, by which any party thereto is restricted absolutely from enforcing his
right under or in respect of any contract, by the usual legal proceedings in the ordinary
tribunals, or which limits the time within which he may thus enforce his rights, is void to
that extent. Section 28 declares the following two kinds of agreements void:

(a) An agreement by which a party is restrained absolutely from taking usual legal
Proceeding, in respect of any rights arising from a contract.

(b) An agreement which limits the time within which one may enforce his contract
Rights, without to the time allowed by the limitation act.

Illustration

In a contract of fire insurance, it was provided that if a claim is rejected and a suit is
not filed within three months after such rejection, all benefits under the policy shell be
forfeited. The provision was held valid and binding and the suit filed after three
months was dismissed. (Baroda spinning Ltd. vs. Satyanarayan Marine and Fire Ins.
Com. Ltd.)

Exception 1: This section shell not render illegal a contract by which two or more
persons agree that any dispute which may arise between them in respect of any
subject or class of subjects shell be referred to arbitration and that only the amount
awarded in such arbitration shell be recoverable in respect of the dispute so

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referred.

Exception 2: Nor shell this section render illegal any contract in writing, by which two
or more persons agree to refer to arbitration any question between them which has
already arisen, or affect any provision of any law in force for the time being as to
references to arbitration.

(6) Uncertain Agreements-

―Agreements, the meaning of which is not certain, or capable of being made certain, are
void‖ (Sec-29). Through Sec-29 the law aims to ensure that the parties to a contract
should be aware of the precise nature and scope of their mutual rights and obligation
under the contract. Thus, if the word used by the parties are or indefinite, the law cannot
enforce the agreement.

Illustration

(a) A agrees to sell to B ―a hundred tons of oil.‖ There is nothing whatever to show
what kind of oil was intended. The agreement is void for uncertainty.

(b) A who is dealer in coconut oil only, agrees to sell to B ―a hundred tons if oil.‖ The
nature of A„s trade affords an indication of the meaning of the words, and A has
entered into a contract for the sale of one hundred toms of coconut oil.

Further, an agreement ―to enter into an agreement in future‖ is void for uncertainty
unless all the terms of the proposed agreement are agreed expressly or implicitly.
Thus, an agreement to engage a servant some time next year, at a salary to be
mutually agreed upon is a void agreement.

(7) Wagering Agreement-

Literally the word wager „means a bet„ something stated to be lost or won on the result
of a doubtful issue, and, therefore, wagering agreements are nothing but ordinary
betting agreements. Thus where A and B mutually agree that if it rains today A will pay
B Rs.100 and if it does not rain B will pay A Rs.100 or C and D entered into agreement
that on tossing up a coin, if it fall head upwards C will pay D Rs.50 and if falls tail
upwards D will pay C Rs.50, there is a wagering agreement.

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In Tracker vs. Hardy Cotton, L.J., described a ‗wager„ ad follows: ―The essence of
gaming and wagering is that one party is to win and the other to lose upon a future
event which at the time of the contract is of an uncertain nature- that is to say, if the
event turns out the other way he will win.

(8) Agreement Contingent on Impossible Events-

―Contingent agreements to do or not to do anything if an impossible event happens are

void, whether the impossibility of the event is know on not to the parties to the
agreement at the time when it is made.‖

(Sec. 36)

Illustration

(a) A agrees to pay B Rs.1000 (as a loan) if two straight line should enclosed a space.
The agreement is void.

(b) A agrees to pay B Rs.1000 (as a loan) if B will marry A„s daughter, C. C was dead
at the time of the agreement, the agreement is void.

(9) Agreements to do Impossible Act-

―An agreement to do an act impossible in itself is void.‖ (Sec, 56 Part-1)

Illustration

(a) A agrees with B to discover treasure by magic. The agreement is void. [Section
56].

A agrees with B to run with a speed of 100 Kilometer per hour. The agreement is void.

Distinction between a void contract and voidable contract.

Void Voidable contract

contract

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1. A void contract was valid when it was A voidable contract is valid until it is
made. Due to subsequent happenings, it avoided or rescinded by the affected
has become void, (ie) unenforceable party. Such a party, however has to
avoid it within a reasonable time.

2. A void contract cannot be enforced A voidable contract is valid until it is

by either party avoided by the affected party.

3. The question of a third party acquiring There is scope for a third party to
rights does not arise acquire rights over what has been
obtained under a voidable contract.

4. There is no question of payment of The affected party can claim

damages (compensation) to anyone damages.
under a void contract

Distinction between an unlawful agreement and an illegal

agreement.

Unlawful agreement Illegal agreement

1. Unlawful acts (eg. Restricting a Illegal acts (eg. bribing) result in the
person„s to choose his job or life partner) commission of a crime.
are simply not approved by law. They do
not result in the commission of a crime

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2. What is 8unlawful need not be illegal What is illegal is always

unlawful

3.As no crime is committed, the party to As an illegal act results in the

the agreement is not awarded commission of a crime, punishment is
punishment awarded.

WAGERING AGREEMENT :

Agreements entered into between parties under the condition that money is
payable by the first party to the second party on the happening of a future uncertain
event, and the second party to the first party when the event does not happen, are
called Wagering Agreements or Wager. There should be mutual chance of profit and
loss in a wagering agreement.

Historical Background of Contract:

The concept of contracts has a long and winding history, dating back
to the earliest civilizations:

 Ancient Civilizations: Even in Mesopotamia and Egypt,

there's evidence of agreements being written down on clay tablets or papyrus.
These early contracts often involved things like debt repayment, sales of goods,
and labor agreements.

 Greek and Roman Law: These civilizations had a major impact on the
development of contract law. Greek philosophers like Aristotle explored concepts
of fairness and justice in agreements, while Roman law established a more formal
structure for contracts, including enforceable promises.

 Middle Ages: During this period, contract law continued to evolve, with the
influence of the Catholic Church and the rise of merchant guilds. Canon law

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(church law) addressed issues like fairness and usury (charging interest on loans),
while merchant guilds developed customes around trade agreements.

 Common Law: The common law system, which originated in England, played a
pivotal role in shaping modern contract law. Judges' decisions in contract disputes
over time became legal precedents, establishing principles like freedom of contract
and consideration (the promise to exchange something of value).

 Industrial Revolution: The rise of industry and global trade in the 18th and 19th
centuries led to a further development of contract law. Courts grappled with issues
like unfair bargaining power and standardized contracts.

7.Which of the following persons are not competent

to contract?

• Minor

• Person disqualified by law

• Person of unsound mind

• All of the above

8.Consent is free under section 14 if not caused by

 Coercion & undue influence

 Fraud and misrepresentation

 Mistake subject to the provisions of sections 20, 21 and 22

 All the above

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9.Which is correct?

 Proposal + acceptance = promise

 Promise + consideration = agreement

 Agreement + enforceability = contract

 All the above.

10.The Bailment of goods as security for payment of a debt or

performance of a promise is called:

 Pledge

 Bailment

 Contingent contract

 Agreement

1.4.1 Unit Summary

The Indian Contract Act, 1872 is a cornerstone of Indian contract law.

The Act defines a contract as an agreement that creates legal obligations (Section
2(h)).
It outlines the elements needed for a valid contract, including offer, acceptance,
capacity of parties, consideration, and lawful object (Section 10).
The Act details what constitutes a valid offer and acceptance (Sections 2-9). It
covers aspects like revocation of offers and communication of acceptance..
The Act outlines the duties of each party in fulfilling their contractual promises
(Sections 37-61).
The Act details ways a contract can be legally discharged, such as performance,

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mutual agreement, or breach of contract (Sections 37-67).

The Act defines what constitutes a breach and the consequences for the
breaching party (Sections 37-73).

1.4.2 Glossary

Contract: A contract is an agreement that specifies certain legally

enforceable rights and obligations pertaining to two or
more parties. .

Void:  A void contract is legally unenforceable, starting from the time it

was created.

 Void contracts arise for many reasons, including unlawful

consideration.

Voidable: A voidable contract is a formal agreement between two parties

that may be rendered unenforceable for any number of legal
reasons

Merger: A merger is an agreement that unites two existing companies

into one new company. There are several types of mergers and
reasons companies complete mergers.

Special Contract: The Act also covers specific types of contracts, including:

 Sale of Goods

 Indemnity & Guarantee

 Bailment & Pledge

 Agency

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Self – Assessment Questions

1. What is contract?

2. Difference between Agreement and Contract.

3. What are the formulation of the Contract?

4. What are the types of Contract?

5. What is mean by Void contract? And Explain the Essential of Void Contract.

6. What is mean by Discharge contract? And explain its Various method of Discharge
contract .

7. Difference between Void and Voidable Contract.

8. Difference between Unlawful agreement and Illegal agreement.

Activities / Exercises / Case Studies

1. In this case, Mr. Balfour was a civil servant in Ceylon (now Sri
Lanka), and Mrs. Balfour remained in England due to medical
reasons. Before Mrs. Balfour left for England, Mr. Balfour
promised to pay her £30 per month as maintenance. However,
when their relationship soured, Mr. Balfour stopped making
these payments.
Activities

Answers for 1. D) A sit in a public Omni bus.

check your
2.D) Not enforceable in the court of law
progress
3. A) Also void

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4. A) Related to each other

5. A) Promisor alone

6. A) It must move at the desire of the promisor

7. D) All of the above

8. D) All the above

9. D)All the above.

10. A) Pledge

Suggested Readings

1. https://www.slideshare.net/slideshow/special-contracts-as-per-contract-
actpptx/266695550
2. https://blog.ipleaders.in/all-you-need-to-know-about-special-
contracts/#:~:text=The%20Indian%20Contract%20Act%2C%201872,%2C%20bail
ment%2C%20
3. https://www.indiacode.nic.in/bitstream/123456789/2187/2/A187209.pdf
4. https://corporatefinanceinstitute.com/resources/accounting/void-
contract/#:~:text=A%20void%20contract%20is%20a,and%20becomes%20unenfor
ceable%20in%20court.
5. https://www.investopedia.com/terms/v/void-contract.asp

Open-Source E-Content Links

https://youtu.be/RzOJT3euah8?si=4o
PN1F5exesb9LyE
1. Historical of contract

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https://youtu.be/SWrC2Bo2kZs?si=Y
2 Discharge of contract
WO1QWaQGfG1XT8v

https://youtu.be/BBYr8wlFq0g?si=eQ
3 Contract of agency
ekQkF5VHib9fxv

https://youtu.be/LuSBV0CSx1E?si=B
4 Breach of contract
b9oCrExBG7iizgf

https://youtu.be/BiEZ_V6N2mY?si=2
5 Special contract act
cULEyIkZtcJ8iSy

References

1. https://www.slideshare.net/slideshow/special-contracts-as-per-contract-
actpptx/266695550
2. https://blog.ipleaders.in/all-you-need-to-know-about-special-
contracts/#:~:text=The%20Indian%20Contract%20Act%2C%201872,%2C%20bail
ment%2C%20
3. https://www.indiacode.nic.in/bitstream/123456789/2187/2/A187209.pdf
4. https://corporatefinanceinstitute.com/resources/accounting/void-

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contract/#:~:text=A%20void%20contract%20is%20a,and%20becomes%20unenfor
ceable%20in%20court.
5. https://www.investopedia.com/terms/v/void-contract.asp

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Self-Learning Material Development – STAGE 1

UNIT - II SALES OF GOODS ACT

Sales of goods Act – Contract of Agency

Unit Module Structuring

STAGE – 2 – Modules Sections and Sub-sections structuring

Section Topic Page No

2.1.1 Introduction of sale of goods act 3

2.1.2 Difference between the sale and agreement to sell 5

2.1.3 Introduction of Goods 7

2.1.4 Let‟s sum up 10

2.1.5 Self-assessment 11

2.2.1 Conditions and Warranties 12

2.2.2 Caveat Emptor 19

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2.2.3 Transfer of property 20

2.2.4 Let‟s sum up 22

2.2.5 Self-assessment 23

2.3.1 Performance of Contract of sale 24

2.3.2 Rules to delivery of goods 25

2.3.3 Unpaid seller 29

2.3.3 Let‟s sum up 36

2.3.4 Self-assessment 38

2.4.1 Unit Summary 39

2.4.2 Glossary 39

2.4.3 Answers for Self-Assessments 40

2.4.4 Suggested Readings 41

2.4.5 E-Contents/Videos 42

2.4.6 References 43

2.1.1 Introduction:

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The sale of Goods Act, 1930 was passed in 1930 for the exclusive contract dealing
with the sale of only movable goods. It extends to the
whole of India except the state of Jammu and Kashmir.

This Act does not deal with the sale of immovable

property. Sale of Goods Act is the most important one
because it affects the exchange function (i.e) buying and
selling.

CONTRACT OF SALE:

According to sec 4(1) of the sale of Goods Act, a contract of sale is ―a contract
whereby the seller transfers or agrees to transfer the property in goods to the buyer for a
price‖.

In other words, a contract to transfer property in the goods is known as a contract of

sale. The ownership is transferred from the seller to the buyer. The person who sells or
agrees to sell goods is called the ―seller‖ and the person who buys or agrees to buy the
goods is called the ―buyer‖.

The contract of sale may be made:

i) In writing

ii) by Words

iii) party in writing and partly by words

iv) implied from the conduct of parties

v)

ESSENTIALS OF A VALID CONTRACT OF SALE:

i) Essential elements of a valid contract:

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All the requirements of a valid contract such as free consent, valid consideration,
competency of the parties, lawful object must be fulfilled.

ii) Two parties:

Another essential elements of a contract of sale is that there must be two parties to
the contract of sale viz, seller and buyer.

iii) Goods:

There must be some goods as a subject-matter. Goods must be one which is

defined in the sale of Goods Act. Here the goods means every kind of movable
property and it includes i) stock and shares ii) Growing crops and iii) The things
attached to or forming a part of the land.

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iv) Transfer of ownership:

In every contract of sale, the ownership of the goods must be transferred by the
seller to the buyer or there must be an agreement to transfer the ownership by the
seller to the buyer.

v) Price:

Another essential element of a contract of sale is that there must be some price for
the goods. That means the goods must be sold for some price. According to sec 2(10)
of the sale of Goods Act, The term price means ―The money consideration for a sale of
goods.

2.1.2 DIFFERENCE BETWEEN THE SALE AND AGREEMENT TO SELL

Sale:

Sec 4(3) of the sale of Goods Act, 1930 describes ―sale‖ as, ―where under a
contract of sale, the property (ownership) in the goods is transferred from the seller to
the buyer, it is called a sale‖.

Agreement to sell:

Sec 4(3) of the sale of Goods Act, 1930 describes ―agreement to sale‖ as,
―where the transfer of the property in the goods is to take place at a future time or
subject to some condition there after to be fulfilled the contract is called an agreement
to sell.

Sale Agreement to sell

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1. It is an executed contract. 1. An agreement to sell as an executory

contract.

2. The transfer of property in the goods

2. The property in the goods passes
is to take place at a future time or
from the seller to the buyer
subject to certain conditions to be
immediately so that the seller is no
fulfilled.
more the owner of goods sold.
3. If the goods are destroyed the loss
3. It the goods are destroyed, the loss
falls on the seller even though they were
falls on the buyers even though they
in the possession of the buyer.
were in the possession of the seller.
4. It creates a right in personam (ie)
4. It creates a right in rem (ie) against
against a specified person only.
the whole world.
5. Performance is conditional and is
5. Performance of sale is absolute and
made in future.
without any condition.
6. The property in the goods remains
6. The property is with the buyer and
with the seller and he can dispose of the
as such the seller cannot resell the
goods as he likes, although he may
goods.
thereby commit a breach of his contract.
7. If the buyer becomes insolvent
7. If the buyer becomes insolvent before
before he pays price for the goods, the
he pays price for the goods, the seller
seller in the absence of a lien, Must
may refuse to deliver the goods unless
deliver the goods to the official
the price is paid by him.
Receiver or assignee. He can claim
only retable divided for the price due. 8. An agreement to sell is mostly in case
of future and contingent goods.
8. A sale can only be in case of
existing and specific goods.

2.1.3GOODS:
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Goods form the subject-matter of contract of sale.

According to sec 2(7) of the sale of Goods Act,

―Goods means every kind of movable property other than
actionable claims and Money; and includes stocks and
shares, growing crops, things attached to or forming part of
the land which are agreed to be severed before sale or under the contract of sale.

Classification of goods:

As per the sale of Goods Act, the goods may be classified into three types namely,

1. Existing goods

2. Future goods, and

Contingent goods

1. Existing Goods:

Existing goods are those goods that are legally owned and possessed by the seller
the time of sale. In other words, these are goods which are in actual existence at the

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time of contract of sale. The seller is either the owner of such goods or he has the
possession of such goods. The existing goods may be classified into three types as
follows:

i) Specific goods:

Specific goods are those goods that identified and agreed upon to buy or sell For
eg: If A who owns a no. of. Horses, promises to sell one of them, the contract is for
unspecified goods. But if the horse that is be sold has been singled out, the contract for
specific goods.

ii) Ascertained goods:

The goods that are identified only after the formation of the contract of sale, are
called as ascertained goods.

For eg: If a merchant agrees to supply one bag of sugar from his go down to a buyer, it
is a sale of unascertained goods because it is not known which bag will be delivered.
As soon as a particular bag is separated out and marked or identified for delivery it
becomes specific goods.

iii) Unascertained goods:

Unascertained goods are also called general goods. The goods which are not
specifically identified at the time of contract of sale, are known as unascertained
goods. These goods are usually described in the form of contract.

For eg: A had 5 cows. He agreed to sell two cows to B. In this case, the contract
is for the sale of unascertained goods as the cows have not been identified at the time
of contract of sale.

2. Future goods:

Future goods are goods that will be manufactured or acquired by the seller after
making the contract of sale. So these goods are not in existence at the time of contract
of sale. When a person purports to make a present sale of the future goods, the
contract operates as an agreement to sell, and not sale because in such cases the
ownership of the goods cannot be transferred before the goods come into existence.

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3. Contingent Goods:

Contingent goods are the goods which are also not in existence at the time of
contract of sale. These are also a type of future goods. Here the acquisition of the
goods by the seller depends upon a contingency which may or may not happen.

For eg: A agrees to sell to B, certain goods provided he is able to purchase the
same from C who is its present owner.

The Sale of Goods Act, most commonly referring to the

Indian Sale of Goods Act, 1930, is a law governing the sale
of goods in India. It establishes the legal framework for
commercial transactions involving the transfer of ownership
of goods between a seller and a buyer.

Here's a summary of the Act's key points:

 Formation of a Sales Contract: The Act defines a contract of sale as an

agreement where a seller transfers or agrees to transfer ownership of goods to a
buyer for a price. [^india sale of goods act ON India Code indiacode.nic.in]

 Duties of Seller: The seller is obligated to deliver the goods as per the contract,
ensure they are in the agreed condition, and have the right to sell them. [^ipleaders
the sale of goods act 1930 ON blog.ipleaders.in]

 Rights of Buyer: The buyer has the right to receive goods in the contracted
condition, ownership of the goods upon transfer, and quiet enjoyment of the goods
without interference.

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1.Where the price is not determined by the parties to the

contract of sale of goods, what price shall be paid by the
buyer:

a. The buyer shall pay the seller a reasonable price.

b. The buyer shall determine the price at his discretion.

c. The seller shall determine the price at his discretion.

d. The seller shall charge the price according the market forces.

2.When a seller can stop the goods in transit:

a. When the buyer of the goods informs that he will make payment after some time.

b. The seller has no right to stop the goods in transit.

c. When the buyer of goods becomes insolvent and goods are in transit.

d. When the buyer informs that he is now not in need of the goods.

3.Where there is a contract for the sale of specific or ascertained goods the
property in them is transferred to the buyer:

a. At such time as the parties to the contract intend it to be transferred

b. At such time as the buyer only intend it to get it transferred.

c. It depends upon the circumstances of the case.

d. At such time as the seller only intend it to transfer to the buyer.

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2.2.1CONDITIONS AND WARRANTIES:

MEANING OF CONDITION

Certain terms, obligations, and provisions are imposed by

the buyer and seller while entering into a contract of sale, which
needs to be satisfied, which are commonly known as
Conditions. The conditions are indispensable to the objective of
the contract.

There are two types of conditions, in a contract of sale which are:

 Expressed Condition: The conditions which are clearly defined and agreed
upon by the parties while entering into the contract.

 Implied Condition: The conditions which are not expressly provided, but as per
law, some conditions are supposed to be present at the time making the
contract. However, these conditions can be waived off through express
agreement. Some examples of implied conditions are:

 The condition relating to the title of goods.

 Condition concerning the quality and fitness of the goods.

 Condition as to wholesomeness.

 Sale by sample

 Sale by description.

DEFINITION OF CONDITION :

According to Sec 12 (2), ―a condition is a stipulation essential to the main purpose

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of the contract, the breach of which gives rise to a right to treat the contract as
repudiated‖. In other words, it is a stipulation which is there is any breach of condition,
the aggrieved party can treat the contract is repudiated.

MEANING OF WARRANTY

A warranty is a guarantee given by the seller to the buyer

about the quality, fitness and performance of the product. It is
an assurance provided by the manufacturer to the customer
that the said facts about the goods are true and at its best.
Many times, if the warranty was given, proves false, and the
product does not function as described by the seller then remedies as a return or
exchange are also available to the buyer i.e. as stated in the contract.

A warranty can be for the lifetime or a limited period. It may be either expressed,
i.e., which is specifically defined or implied, which is not explicitly provided but arises
according to the nature of sale like:

 Warranty related to undisturbed possession of the buyer.

 The warranty that the goods are free of any charge.

 Disclosure of harmful nature of goods.

 Warranty as to quality and fitness

DEFINITION OF WARRANTY:

According to Sec 12 (3), ― a warranty is a stipulation collateral to the main purpose

of the contract, the breach of which gives rise to a claim for damages but not to right to
reject the goods and treat the contract as repudiated.

DIFFERENCE BETWEEN CONDITION AND WARRANTY

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S.no Condition S.no Warranty

1 It is a stipulation that is vital to the 1 It is a stipulation that is only

main purpose of the Contract. collateral to the purpose of the
contract.

2 Unless the condition is fulfilled, the 2 Even if the Warranty is not

main Contract can be completed. fulfilled, the main Contract
cannot be completed.

3 In case of breach of a condition, the 3 In case of breach of a

buyer can reject the performance of a warranty, the buyer cannot
contract. reject the contract. He can
claim damages only.

4 A breach of condition can be treated 4 A breach of warranty cannot

as a warranty. be treated as a breach of
condition

Explain the Express and Implied Conditions and Warranties in a contract of sale
as provided in the Sale of Goods Act.

Conditions and Warranties may be either express or implied. When the Conditions
and Warranties are definitely written in the contract they are known as express
Conditions and Warranties. When the Conditions and Warranties are not written in the
contract but are attached to the contract by operation of law or custom, they are called
implied Conditions and Warranties.

Conditions

Conditions are of two types namely.

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1. Express Conditions and

2. Implied Conditions

Express Conditions

It is a condition, which has been expressly agreed upon by both the parties at the
time of the contract of sale. It may be noted tat it is open to both the parties to include
in their contract any number of express conditions.

Implied Conditions

When the Conditions are not written in the contract but are attached to the contract
by the operation of law or custom they are called as implied condition. The following
are implied in every contract of sale.

i) Condition as to title of Goods

In every contract of sale of Goods, there is an implied condition that the seller has
right to sell the goods at the time the sale is affected. In case of an agreement to sell,
the seller will have the right to sell the goods at the time when the property is to pass
from the seller to the buyer. This condition is called a condition as to title.

The condition as to the seller„s title is very essential to protect the interest of the
innocent buyers. The whole object of the sale is to transfer the property from one
person to another.

Eg: A purchased a second hand Car from B, a Car dealer. After a few months, the Car
was taken by the Police because, it was a stolen one. A was forced to return the car to
the true owner. Held, A could recover the full price form B. Here there was a breach
of condition as to title because B had no right to sell the care.

ii) Condition as to Description when the goods are sold by description

the implied condition is that the goods shall correspond with the description.

iii) Condition as to Sample

In case of a contract of sale by sample, the implied conditions are:

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a) The Goods delivered shall correspond with the sample.

b) Buyer shall have a reasonable opportunity of comparing the goods with the
sample.

c) Goods shall be free from apparent defects.

Thus the seller is not responsible for the defects that are not discoverable or
clear by simply examining them. Hence, there is no implied condition as to the
Merchantability of the Goods.

iv) Condition as to Sample as well as Description

In case of a contract of sale by sample and description, the implied condition is

that the goods shall correspond with both, the sample as well as description.

v) Condition as to Quality

The general rule is “Caveat Emptor”, i.e., ―let the buyer beware”. So, the
seller need not disclose the faults in the goods he sells. The buyer must buy the goods
after having satisfied himself about the Quality and fitness. According to Sec. 16 of the
Sale of Goods Act, there shall be no implied condition as to Quality for particular
purpose. But, there is an implied condition as to Quality only if the following
requirements are fulfilled.

1. The goods are required by the buyer for a particular purpose.

2. The buyer should make ―known to the seller with regard to the particular
purpose.

3. The buyer should rely on the skill or judgments of the seller.

vi) Condition as to Merchantability

When the goods are sold by description it is implied that the goods shall
correspond with the description and also that they shall be of Merchantable Quality.
i.e., a Quality that is ordinarily accepted in the market.

Goods will be unmerchantable if they have defect which will make them unfit for

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ordinary use or are such that a reasonable person knowing of their condition would not
buy them.

vii) Condition as to wholesomeness

In the case of eatables and provisions, besides the implied condition with regard
to Merchantability, there is another implied condition that the goods shall be
wholesome.

WARRANTIES

Warranties may be discussed under two heads namely,

1. Express Warranties

2. Implied Warranties

1. Express Warranties

It is a warranty which has been expressly agreed upon by both the parties at the
time of contract of sale. It may be noted that it is open to both the parties to include in
their contract many number of express warranties.

2. Implied Warranties

It is a warranty that the law implies into the Contract of Sale. That is, it is the
stipulation which has not been included in the contract of sale in express word. But the
law presumes that the parties have incorporated it into their contracts. Following are
the implied warranties that are contained in the Sale of Good Act.

i) Warranty as to Quiet Possession

As per this warranty, the buyer shall have and enjoy the Quiet Possession of the
goods. If buyer„s right of possession and enjoyment is disturbed by any one, then the
buyer can recover the damages from the seller through the court of law.

ii) Warranty as to Free from Encumbrance

According to this warranty, there is an implied condition that the goods shall be

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free from encumbrances in favour of any third person.

iii) Warranties implied by Customer

As the parties enter into an agreement subject to the known customs or usage of
trade, implied warranties may be attached to a contract of sale by custom or usage of
trade.

2.2.2 CAVEAT EMPTOR

Doctrine of Caveat Emptor

The maxim Caveat Emptor means let the buyer beware.

In other word, the buyer must take care of his own interest
while purchasing the goods. Buyer in a contract of sale of
specific goods will purchase them at his own risk with regard
to the Quality or fitness of the goods except in case of fraud
or where a condition to that effect is laid down in the contract itself.

Exceptions to the Doctrine of Caveat Emptor

The doctrine of Caveat Emptor is subject to the following exception.

i) Implied Condition regarding Quality or Fitness

Where the buyer has made known to the seller the purpose for which he requires
the goods and depends on the skill and judgement of the seller, there is an implied
condition that the goods will be fit for the purpose for which the buyer requires them.
This condition is not applicable in those cases where the goods have been sold under
a patent mark or trade name.

ii) Sale of Goods by Description

Where the goods are purchased from a seller by description, who deals in such
class of goods, there will be implied condition that the goods shall be of Merchantable
Quality.

iii) Usage of Trade

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An implied warranty or condition as to Quality or fitness for a particular purpose

may be annexed by the custom or usage of trade.

iv) Consent by Fraud

The doctrine of Caveat emptor shall not apply to all those purchases which have
been made by a buyer and a contract where his consent was obtained by the seller by
fraud.

v) Misrepresentation

Where the seller has made a false representation relating to the goods and the
buyer has relied upon it, the doctrine will not apply. Such a contract being voidable at
the option of the innocent party the buyer has a right to rescind the contract.

2.2.3TRANSFER OF PROPERTY

Transfer of property:

In a sale, the property in the goods passes from the seller to the buyer immediately
so that the seller is no more the owner of the goods sold. In an agreement to sell, the
transfer of property in the goods is to take place at a future time or subject to certain
conditions to be fulfilled. In this sense, a sale is an executory contract.

Document of title to Goods:

A document of title to goods is a proof of the ownership of the goods. It authories

its holder to receive goods mentioned therein or to further transfer such right to
another person by proper endorsement and delivery.

a) Bill of lading

A Bill of lading is a receipt given by the ship owner acknowledging the receipt of
goods for carriage.

b) Dock Warrant

A Dock Warrant is document which is issued by a dock owner. It authorizes the

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person holding it to receive the possession of the goods.

c) Warehouse Keeper’s Certificate

Warehouse keeper„s certificate is a document which issued by the warehouse

keeper. It is a certificate by the warehouse keeper that the goods specified in the
document are in the warehouse or wharf.

d) Railway Receipt

A Railway Receipt is a document which issued by the railway as the

acknowledgement of the receipt of goods. It provides that on surrender of the receipt at
the destination of the goods by the consignee the goods mentioned therein will be
delivered to him.

e) Delivery order

A Delivery order is an order which as given by the owner of goods directing a

person who holds the goods on his behalf to deliver them to a persons named therein.

TRANSFER OF PROPERTY

Rules regarding Transfer of Property

The following are the basic rules regarding the transfer of property.

1. Goods to be Ascertained

According to Sec. 18, ―where there is a contract for the sale of unascertained
goods no property in the goods is transferred to the buyer unless and until the goods
are ascertained‖.

2. Parties Intention

According to Sec. 19(1), ―where there is a contract for the sale of specific or
ascertained goods, the property in them is transferred to the buyer at such time as the
parties to the contract intend it to be transferred‖.

3. When no Intention is Expressed

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According to Sec. 19(3), ―unless a different intention appears, the rules contained
in Sec. 20 to 24 of the sale of Goods Act, are rules for ascertaining the intention of the
parties as to the time at which the property in the goods is to pass to the buyer.

Conditions and warranties are both legal terms used in

contracts, but they have distinct meanings and
consequences:

Conditions

 Fundamental aspects of the contract.

 If a condition is breached, the aggrieved party can:

 Terminate the contract

 Seek damages

Warranty

 A secondary promise about a product or service.

 If a warranty is breached, the aggrieved party can only seek damages, not
terminate the contract.

Here's an analogy to understand the difference:

Imagine buying a house. A condition would be that the house actually exists. If it turns
out the house doesn't exist, you can walk away from the contract. A warranty might be
that the house has a working furnace. If the furnace is broken, you can't break the
contract, but you can ask the seller to fix it.

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4.Which of the following cannot be said to be included in

the term “goods” defined under section 2(7) of the Sale of
Goods Act, 1930 :

A. Stock

B. Shares

C. Growing crops

D. Actionable claims

5.Goods may be:

A. Future

B. Contingent

C. Existing

D. All of the above

6.The Act relating to the sale of goods is called:

A. The Sale of Goods Act, 1930

B. The Selling of Goods Act, 1930

C. The Sale of Goods Act, 1830

D. The Goods Selling Act, 1930

7.When a seller can sue the buyer:

A. He may ask for the damages for non• cooperation of the goods.

B. Suit for damages for repudiation of the contract.

C. He may sue for the price and interest.

D. All of the above.

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2.3.1PERFORMANCE OF CONTRACT OF SALE

INTRODUCTION:

Performance of a contract of sale means as regards the seller, delivery of the gods
t the buyer, and as regards the buyer, acceptance of the delivery of the goods and
payment for them, in accordance with the terms of the contract (Sec.31)Delivery of
Goods – Meaning

Delivery means ―voluntary transfer of possession of goods from one person to

another [Sec.2(2)].

Kinds of Delivery of Goods

Following are the various kinds of delivery of goods.

i) Actual Delivery

In this case, the goods are handed over by the seller to the buyer or his duly
authorized agent.

ii) Symbolic Delivery

Where the goods are bulky and incapable of actual delivery, the delivery is made
by delivering some symbol that carried with if the real possession or control over the
goods. For eg. Delivery of the key of the warehouse where the goods are stored or the
bill of lading etc.

iii) Constructive Delivery or Delivery by Atonement

Where a third person (eg. Bailee) who is in possession of the goods of the seller at
the time of the sale acknowledges to the buyer that be holds the goods on his behalf,
there takes place a delivery by attornment or constructive delivery [Sec.36(3)].

2.3.2 RULES TO DELIVERY OF GOODS

i) Mode of Delivery (Sec.33)

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Delivery of goods may be actual, constructive or symbolic.

ii) Delivery and Payment – Concurrent conditions

Delivery of the goods and the payments of the price must be according to the
terms of the contract.

The seller should be willing to give possession of the goods and the buyer must be
willing to pay.

iii) Effect of Part Delivery

A delivery of part of the goods in progress of the delivery of the whole, has the
same effect, for the purpose of passing the property in such goods, as a delivery of the
whole.

Eg.: S Sales 5 bales of certain goods to B. B received one bale, paid for it and
refused t accept the otherfour. Held, this amounted to part delivery.

iv) Expenses of Delivery

Unless otherwise agreed, the expenses of and incidental to make delivery shall be
borne by the seller.

v) Buyer to apply for Delivery

Apart from any express contract, the Seller of goods is not bound to deliver them
until the buyer applies for delivery (Sec.75).

Place to Delivery

It should be specified in the contract. Further, the goods must be delivered

at that place during business hours on a working day.

vi) Time of Delivery

It no time is specified in the contract, the seller must deliver within a reasonable time
[Sec.36(2)].

vii) Goods in possession of a third party

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Where the goods are in possession of a third person, there can be no delivery to
the buyer unless the third person acknowledges that he holds them on behalf of the
buyer [Sec.36(3)].

viii) Delivery of Wrong Quantity

 If the seller sends to the buyer a larger or a smaller Quantity of goods than he
ordered, the buyer may:-

 Reject the goods as a whole or

 Accept the whole or

 Accept the Quantity ordered and reject the rest.

ix) Installment Deliveries

Unless otherwise agreed, the goods are not to be delivered by installments.

WHAT ARE THE RIGHTS AND DUTIES OF THE BUYER?

Rights of the Buyer

1. To have Delivery as per Contract

The buyer has the right to have delivery of the goods, as per the contract. He
also has the right to reject them if they are not as per the contract (Sec.37).

2. To Repudiate the Contract

The buyer has to repudiate the contract if the goods have been delivered by
installment unless otherwise agreed upon.

3. To Notice of Insurance

Where the goods are sent by the seller by a Sea route to the buyer, unless
otherwise agreed, the buyer has a right to be informed by the seller so that he may
insure the goods.

4. To Examine the goods

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The buyer has a right to examine the goods before its acceptance.

5. Right to sue for Breach of Contract

1. The buyer has a right to sue the seller for damages for non delivery of the goods.

2. The buyer has a right to sue the seller for specific performance of the Contract.

3. Sue the seller for damages for breach of warranty.

4. Claim of interest on the amount of price paid form the date on which the
payment was made in case of breach of contract by the seller, when the buyer
sues for the refund of the prices.

5. The seller repudiates the contract before the date of delivery.

Duties to the Buyer

1. To Accept Delivery of Goods and make Payment (Sec.31)

It is the duty of the buyer to accept the goods and pay for them as per the
terms of the contract of

sale.

2. To Demand for Delivery (Sec. 35)

Unless otherwise agreed, the seller of goods is not bound to deliver the goods
until the buyer demands for delivery.

3. To Demand for Delivery at a Reasonable hour [Sec. 36(4)]

It is the duty of the buyer to demand for delivery of goods at a reasonable hour.

4. To Accept Installment Delivery and pay for it [Sec.38(2)]

The another duty of the buyer is to accept the installment delivery and pay for it.

5. To take Risk of deterioration (Sec.40)

If the seller accepts to deliver the goods at a place other than that where

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they are sold, the buyer will have to take the risk of deterioration of the goods unless
otherwise agreed upon by the parties.

6. To inform the seller if he rejects the Goods (Sec.43)

Apart from any express contract, it is the duty of the buyer to inform the
seller if he rejects the goods.

7. To Compensate the Seller

Where the buyer neglects or refuses to take delivery of the goods when
tendered, unless otherwise contracted, he is liable to compensate the seller of the
goods.

2.3.3 UNPAID SELLER

MEANING:

A seller is an unpaid seller (i) if the full or part of the price has not been paid to him
(ii) f the conditional payment is made by bill of exchange or other negotiable
instruments and such instrument is dishonored.

Eg.: A sold a T.V. set to B Rs.5,000 and received only Rs.2,500. B failed to pay the
balance. Here, A is an unpaid seller.

RIGHTS OF AN UNPAID SELLER

The rights of an unpaid seller are as follows:-

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I. Rights of an unpaid seller against the Goods

Where after the sale of the goods, the seller still has the possession of the goods
sold an unpaid seller has certain rights against the Goods. They can be discussed
under the following two heads.

1. Where the ownership of the goods is transferred.

2. Where the ownership of the goods is not transferred.

1. Where the ownership of the goods is transferred

Where the ownership of the goods is transferred to the buyer, the unpaid seller has

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the following rights against the goods.

i) Right of Lien

ii) Right of Stoppage in Transit

iii) Right of Resale.

i) Right of Lien

It is available to the unpaid seller when

- The goods have been sold without any stipulation as to credit.

- The goods have been sold on credit, but the term of the credit has expired.

- The buyer becomes insolvent (Sec.47).

ii) Right of Stoppage in Transit

When the buyer of goods becomes an insolvent, the unpaid seller who has
parted with the possession of the goods has the right of stopping them in transit.

iii) Right of Resale

The unpaid seller can resell the goods-

- Where the goods are of a perishable in nature

- Where he has exercised his right of lien or stoppage in transit and given
notice to the buyer has not within a reasonable period of time paid price and

- Where the seller expressly reserves a right of resale in case the buyer

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should make default (Sec54).

2. Where the ownership of the Goods is not transferred t the buyer [Sec.46(2)]

If the property in the goods has not passed to the buyer, the unpaid seller cannot
exercise the right of lien but gets a right of with holding the delivery of goods, similar to
and co-extensive with lien.

II. Right Against the Buyer personally

The unpaid seller also has certain rights against the buyer. These rights may be
discussed under the following heads.

i) Suit for Price

ii) Suit for Damages

iii) Suit for Interest

iv) Suit for Repudiation of Contract.

i) Suit for Price

When under a contract of Sale, the property in the goods has passed to the buyer
and the buyer wrongfully neglects or refuses to pay for the goods according to the
terms of the contract, the seller maysue him for the price of the goods (Sec.55).

ii) Suit for damages

Where the buyer wrongfully neglects or refuses to pay for the goods, the seller
may sue him for the damages for non-acceptance (Sec.56).

iii) Suit for Interest

The seller can recover interest on price from the date on which the payment
became due, if there is a special agreement to the effect.

iv) Suit for Repudiation of Contract

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Where the buyer in a contract of sale repudiate the contract before the date of
delivery, the seller may either treat the contract as subsisting and wait till the date of
delivery, or he may treat the contracts as rescinded and use for damages for the
breach (Sec.60)

REMEDIES FOR BREACH OF CONTRACT OF SALE

The sale of Goods act gives the following remedies to a seller and a buyer from
breach of a contract of sale.

Seller’s Remedies

1. Suit for price.

2. Suit for damages for non-acceptance of the goods.

3. Suit for interest.

4. Suit for damages for repudiation of contract by the buyer before the due date

Buyer’s Remedies

1. Suit for damages for non-delivery of the goods.

2. Suit for specific performance.

3. Suit for breach of warranty.

4. Suit for damages for repudiation of contract by the seller before due date.

5. Suit for interest.

AUCTION SALE

MEANING:

An auction is a method of selling property by bids usually to the highest bidder by

public competition. The auctioneer, who sells goods by action, is an agent of the seller
only. However, he may sell his own property as principal and need not disclose the fact

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that he is so selling. The auctioneer holds the goods as bailee. Under this methods of
sale, a contract is formed between the auctioneer and the buyer, and incurs certain
liabilities though not all the liabilities of a seller.

In the case of sale by auction the following rules shall apply.

Rules for auction sales

i) Goods put up for sale in lots

Here, each lot is prima facie, deemed to be the subject of a separate contract of sale
[Sec.64(1)].

ii) Completion of Sales

The sale is completed when the auctioneer announces its completion by the fall of
the hammer or in some other customary manner like ―one, two or three‖.

iii) Right of seller to bid

A right of bid may be reserved expressly by or on behalf of the seller.

iv) Sale not notified subject to a right to bid

It is not lawful.

a. For the seller to bid himself or to employ any person to bid at such sale or

b. For the auctioneer knowingly to take any bid from the seller or any such
person.

v) Reserve Price

It is a price below which the auctioneer will not sell. Every bid is accepted
conditionally on the reserve price being reached. Otherwise goods will be sold to the
highest bidder.

vi) Use of Pretended bidding

In this case, the sale is voidable at the option of the buyer [Sec.64(6)].

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RIGHTS OF THE PRINCIPAL

1. Right to Recover Damages:

If a loss is caused to the principal on account of the following, he is entitled to

recover such a loss ordamage from the agent.

1. The negligence of the agent , or

2. The disregard of the principal„s instructions while conducting the agency

business, or

3. The lack of skill, care and diligence on the part of the agent.

2. Right to recover secret profits made by the agent:

If the agent has made any secret profit, the principal can obtain an account of such
profits and recover them and resist a claim for remuneration.

I. TERMINATION OF AGENCY BY ACT OF THE PARTIES:

An agency can be terminated by the act of the parties in any one of the following ways.

1. Mutual agreement:

The agency may be terminated at any time and at any stage by the mutual
agreement between the principal and his agent.

2. Revocation of the Agent’s Authority by the principal:

The principal may revoke the authority of his agent before it has been exercised by
the agent. So as to bind the principal.

Ex. A appointed B, as his agent to purchase certain goods. Any time before he
purchases the goods, A may revoke B„s authority.

3. Revocation by the Agent:

Agent, after giving a reasonable notice, to the principal, may renounce the
business of agency. If the contract of agency is entered into for a fixed period, agent

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should pay compensation to the principal for the earlier renunciation of the business of
agency.

A contract of agency is a legal agreement that establishes a

relationship between two parties:

 Principal: The person who authorizes another to act on

their behalf.

 Agent: The person who is authorized to act on behalf of

the principal.

The agent essentially acts in the shoes of the principal for specific purposes or
transactions. This is very common in business settings, where companies might use
agents to:

 Sell products (sales agents)

 Find new clients (brokers)

 Manage properties (property managers)

There's also a third party involved in most agency relationships:

 Third Party: Someone the agent interacts with on behalf of the principal.

Key Elements of a Contract of Agency:

 Authorization: The principal grants the agent the authority to act on their behalf.
This authorization can be express (written or verbal instructions) or implied (actions
that suggest an agency relationship).

 Duties of the Agent: The agent has a duty to act in the best interests of the
principal and follow their instructions. This includes loyalty, obedience, and
reasonable care.

 Duties of the Principal: The principal has a duty to compensate the agent as
agreed and reimburse them for reasonable expenses incurred while acting as an

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agent.

 Rights of Third Parties: Contracts formed by the agent acting within their scope of
authority are binding on the principal.

Types of Agency:

 Express Agency: Created through written or verbal communication.

 Implied Agency: Established through the conduct of the parties.

 General Agency: Grants the agent broad authority to act on the principal's behalf
in a particular business or matter.

 Special Agency: Limits the agent's authority to specific acts or transactions.

Benefits of a Contract of Agency:

 Allows the principal to leverage the skills and expertise of the agent.

 Enables the principal to conduct business in multiple locations.

 Frees up the principal's time to focus on other matters.

8.The unpaid seller of goods, having a lien thereon,

___________by reason only that he has obtained a decree for
the price of the goods:

A. Does not lose his lien

B. Lien cannot be exercised after getting the decree.

C. Losses his right of lien

D. None of the above.

9.When a seller can sue the buyer:

A. He may ask for the damages for non• cooperation of the goods.

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B. Suit for damages for repudiation of the contract.

C. He may sue for the price and interest.

D. All of the above.

10.A contract of sale may be made:

A. Partly in writing and partly by word of mouth

B. It may be implied from the conduct of the parties.

C. In writing or by word of mouth

D. All of the above.

2.4.1UNIT SUMMARY

The Sale of Goods Act (SOGA) is a key piece of legislation governing the
buying and selling of goods (not including land or services)

Covers essentials of a valid contract like offer, acceptance, and mutual

agreement

Deliver the goods, ensure proper title, and (sometimes) comply with specific
quality or description standards

SOGA outlines when and how ownership of the goods passes from seller to
buyer. This depends on factors like the type of goods, delivery terms, and
whether the sale is immediate or future

SOGA outlines the rules for delivery, payment, and remedies for breach of
contract by either party.

SOGA also covers issues like risk of loss (who bears the risk if the goods are
damaged before ownership transfer), passing of title in specific situations

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(e.g., sale by installments), and remedies available upon breach.

The foundation of the contract. The principal grants the agent the authority to
act, which can be express (written/verbal instructions) or implied (actions
suggesting an agency relationship).

2.4.2 Glossary

The Sale of Goods Act (SOGA) is a law that

governs contracts for buying and selling
goods (not including land or services). It
Sales of Goods Act
outlines the rights and obligations of both
the seller and the buyer, ensuring a fair and
predictable sales process.

a condition is a stipulation essential to the

main purpose of the contract, the breach
of which gives rise to a right to treat the
contract as repudiated‖. In other words, it
Condition is a stipulation which is there is any
breach of condition, the aggrieved party
can treat the contract is repudiated.

a warranty is a stipulation collateral to

the main purpose of the contract, the
breach of which gives rise to a claim for
Warranty
damages but not to right to reject the
goods and treat the contract as
repudiated

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A seller is an unpaid seller (i) if the full or

part of the price has not been paid to him
(ii) f the conditional payment is made by
Unpaid Seller
bill of exchange or other negotiable
instruments and such instrument is
dishonored

Self – Assessment Questions

1. What is Sales Contract? Discuss the Nature of Sales contract.

2. Distinguish between Sale and Agreement to sell.

3. What is mean by condition? When a Condition may be treated as a

Warranty?

4. Discuss in detail implied condition.

5. Discuss the doctrine of Caveat Emptor. What are the Expectations to the
„doctrine of caveat emptor’

6. Who is an unpaid seller? Discuss the various rights of unpaid seller.

Activities / Exercises / Case Studies

In this case, Mr. Balfour was a civil servant in Ceylon (now Sri Lanka), and
Mrs. Balfour remained in England due to medical reasons. Before Mrs.
Balfour left for England, Mr. Balfour promised to pay her £30 per month as
maintenance. However, when their relationship soured, Mr. Balfour stopped
making these payments.

1. A)The buyer shall pay the seller a reasonable

Answers for check price

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your progress 2. C) When the buyer of goods becomes insolvent

and goods are in transit.

3. D) At such time as the seller only intend it to

transfer to the buyer.

4. D) Actionable claims

5. D) All of the above

6. A) The Sale of Goods Act, 1930

7. D) All of the above

8. A) Does not lose his lien

9. A) He may ask for the damages for non

cooperation of the goods.

10. D) All of the above.

Suggested Readings

1. https://www.toppr.com/guides/business-laws/the-sale-of-goods-act-
1930/definitions-of-important-terms/

2. https://www.indiacode.nic.in/handle/123456789/2390?locale=hi

3. https://blog.ipleaders.in/the-sale-of-goods-act-1930/

4. https://ujala.uk.gov.in/files/Sale_of_Goods_Act,1930_By_Manoj_Singh_
Rana.pdf

5. https://www.advocatekhoj.com/library/lawareas/saleofgoods/saleofgoo
ds.php?Title=Sale%20of%20Goods&STitle=Introduction

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Open-Source E-Content Links

Sales of https://youtu.be/GUblINDI
1.
goods act z0M?si=f3ipK1e5ljS3dIrI

Sales and https://youtu.be/O3EtREv

2. agreement to ANZc?si=7iCAZMdOLEE
sell HI8JF

https://youtu.be/yXbwtItX
Condition and
3. wOQ?si=OQNgZKcA-
warranty
9JKxU7k

https://youtu.be/A0YPxS
4. Unpaid seller Wbxdw?si=HDsQeEXj4U
Xy3nTo

References

1. https://www.toppr.com/guides/business-laws/the-sale-of-goods-act-
1930/definitions-of-important-terms/

2. https://www.indiacode.nic.in/handle/123456789/2390?locale=hi

3. https://blog.ipleaders.in/the-sale-of-goods-act-1930/

4. https://ujala.uk.gov.in/files/Sale_of_Goods_Act,1930_By_Manoj_Singh_
Rana.pdf

5. https://www.advocatekhoj.com/library/lawareas/saleofgoods/saleofgoo

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ds.php?Title=Sale%20of%20Goods&STitle=Introduction

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CDOE-OLD B.B.A – SEMESTER - IV Unit 3

Self-Learning Material Development – STAGE 1

Unit 3 Indian Companies Act

Brief outline of Indian Act 1956- kinds – formulation –

MOA – AOA – prospectus – Appointment of Directors
– duties – meeting – Resolutions – Winding up

Unit Module Structuring

STAGE – 2 – Modules Sections and Sub-sections structuring

Section Topic Page No

3.1.1 Meaning of company 2

3.1.2 Nature of company 4

3.1.3 Types of company 6

3.1.4 Difference between public company and 13

private company

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3.1.5 Formation of company 14

3.1.6 Incorporation 21

3.1.7 Let‟s sum up 24

3.1.8 Self-assessment 25

3.2.1 Memorandum of Association 26

3.2.2 Articles of Association 28

3.2.3 Difference between MOA and AOA 29

3.2.4 Let‟s sum up 31

3.2.5 Self-assessment 32

3.3.1 Prospectus 33

3.3.2 Contents of prospectus 36

3.3.3 Appointment of directors 37

3.3.3 Let‟s sum up 45

3.3.4 Self-assessment 46

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3.4.1 Unit Summary 47

3.4.2 Glossary 48

3.4.3 Answers for Self-Assessments 50

3.4.4 Suggested Readings 51

3.4.5 E-Contents/Videos 52

3.4.6 References 52

3.1.1 Meaning of Company

In the ordinary common parlance, a

company means a group of persons associated to
achieve some common objective.

Our object is to deal with a company which

is formed for carrying – on some business and providing for limited liability of its
members.

According to the Indian Companies Act, 1956, “A company formed and

registered under this Act or an existing company”.

According to Prof. Haney. “A Company is an artificial person created by law,

having separate entity, with a perpetual succession and common seal”.

Lindley defines a company as “an association of many persons who contribute

money or money‟s worth to a common stock and employ it in some common trade or
business and who share the profit or loss arising there from. The common stock so

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contributed is denoted in money and is the capital of the company. The persons who
contribute it, or to whom it belongs are members. The proportion of capital to which
each member is entitled is his share. Shares are always transferable although the right
to transfer them is often more or less restricted.”

Nature of Company

A company is a legal entity formed by individuals to engage in and operate a

business. It's an artificial person created by law that has a separate legal existence from
its owners. This means the company can own assets and property, enter into contracts,
and sue or be sued in its own name.

Here are some of the key characteristics of a company:

 Separate legal entity: A company is distinct from its members (owners). This
means that the owners' personal assets are generally not liable for the
company's debts.

Separate legal entity company

 Limited liability: The liability of shareholders (owners) is limited to the amount of

their investment in the company. In other words, if the company goes bankrupt,
shareholders will only lose the money they invested in the company, not their
personal assets.

 Perpetual succession: A company's existence is not limited by the lifespan of

its owners. The company can continue to exist even if the owners die, sell their

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shares, or go bankrupt.

 Transferable shares: Ownership of a company is divided into shares. These

shares can be easily bought and sold by shareholders.

3.1.2 Nature of company

The nature of a company can be understood through several key aspects:

Legal Entity: A company is distinct from the people who own it (owners or
shareholders). This means the company has a separate legal existence. It can own
property, enter contracts, and be sued in its own name, entirely independent of its
owners.

Limited Liability: A key benefit of a company structure is limited liability for

shareholders. Their personal assets are generally not at risk if the company faces debts
or bankruptcy. Their financial responsibility is limited to the amount they invested in the
company.

Perpetual Existence: A company's life isn't tied to its owners. The company can
continue to operate even if the owners die, sell their shares, or the company faces a
leadership change. This ensures stability and continuity of the business.

Transferable Ownership: Ownership of a company is divided into shares.

Shareholders can easily buy and sell these shares in a marketplace, allowing for easy
transfer of ownership and investment.

Management Structure: Companies have a defined management structure with

a separation between ownership and control. Owners (shareholders) elect a board of
directors who oversee the company's strategic direction. The board appoints managers
to run the day-to-day operations.

Purpose and Regulation: Companies are formed for a specific purpose,

outlined in their legal documents. They operate within a legal framework and are subject
to government regulations depending on their industry and size.

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3.1.3 Types of company

 A company is a legal entity that is formed by a group of individuals to engage in

and operate a business organization in a commercial or industrial capacity.

 The business line of a company depends on its structure which can range from
a partnership to a proprietorship, or even a corporation.

 A company is purposely organized to earn profits from running its business.

A. Types of Company Under Companies Act, 2013

Different types of companies can be registered under Companies Act, 2013

in India to conduct their business and provide a legal structure for their business. The
different types of companies are as follows:

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1. One-Person Company

 OPC is a type of private company that has only one member. OPC was
introduced with the main aim of promoting entrepreneurship and corporatization of
business.

 However, it is to be noted that an OPC is different from a sole proprietership, as

an OPC is a separate legal entity and the member of the OPC has limited liability,
whereas in the case of a sole proprietorship the liability of the owner is not limited.
There is no minimum paid-up capital required for constituting OPC.

 However, only a natural person who is an Indian citizen resident or otherwise

stayed in India for not less than 120 days during the immediately preceding financial
year shall be eligible to incorporate an OPC or to be a nominee for the sole member of
an OPC. No minor can become a member or a nominee in OPC. Also, OPC cannot be
converted into a company registered under section 8 of the Act.

2. Private Limited Company

 A Private Company as mentioned under Section 2(68) of the Companies Act

2013, has a minimum of 2 members and a maximum of 200 members, however, this
figure shall exclude employees and ex-employees who are also the shareholders in
the company.

 A Private Company cannot invite the general public to subscribe to their

shares/debentures. Shares of private companies are not freely transferable and these
shares can‟t be transferred. A private company should have Private Limited as a suffix
in its name.

3. Public Limited

 A Public Company is defined in Section 2(71) of the Companies Act, 2013. To

establish a Public company, a minimum of seven members is required and there is no
ceiling limit on the number of maximum members. In the case of a Public company,

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there are no restrictions on the buying and selling of shares.

 Any subsidiary of a public company shall be deemed to be a Public company.

The shares of a Public company can be freely transferred. A Public company that has
limited liability is required to add the word „limited‟ at the end of the name. A Public
company should have „limited; as a suffix in its name.

 In case a company does not comply with the specified provisions of the
Companies Act, it will renounce the status of a Private company. To transform a
Public company into a Private company, the company is required to adopt a special
resolution at the general meeting; i.e., 75% majority.

4. Section 8 Company

 Section 8 Companies, also known as companies formed with charitable objects.

According to section 8 of the Companies Act, 2013, these companies are formed to
promote the charitable objects of commerce, art, science, sports, education, research,
social welfare, religion, charity, environment conservation etc.

 Such companies are required to apply their profits back to promote their
objectives. Section 8 companies can‟t pay dividends to their members. Central
Government has strict control over Section 8 companies and in case such a company
fails to fulfill the statutory requirements of the act, the central government may revoke
the license or may issue an order as may seem fit.

B. Types of Company Based on Size

1. Micro Company

 The MSME Act has classified companies based on their size to give them benefits
provided by the government.

 Micro companies are those companies whose investment in plant and machinery is
not more than ₹1 crore, and the annual turnover of such companies does not
exceed ₹5 crores.

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2. Small Company

 A Small Company is a company whose investment in plant and machinery does not
exceed more than ₹10 crore, and the annual turnover does not exceed ₹50 crore.
The Companies Act, 2013, also provides several benefits to small companies.

 A company with a paid-up share capital of below ₹4 crore and an annual turnover of
below ₹40 crore is called as a small company under the Companies Act.

3. Medium Company

 A Medium company is a company whose investment in plant and machinery does

not exceed ₹50 crore, and the annual turnover of such company does not exceed
₹250 crore.

C. Types of Company Based on Liability

1. Company Limited by Shares

 According to the provisions of Section 2(22) of the Companies Act, 2013, when the
liability of the members of a company is limited by its MOA to the amount of unpaid
shares (if any) held by them, in such case it is known as a Company Limited by
Shares.

 In this case, the shareholder may be called upon to contribute only to the extent of
the amount due on his shareholding, for meeting the debts of the company.
However, the separate property of shareholders cannot be encompassed to meet
the company‟s debt.

 As the company is a legal person in the eyes of the law, ownership of assets
remains with the company only. Although, a shareholder is a co-owner of the
company, but he is not a co-owner of the company‟s assets. The rights and duties
of a shareholder as co-owner are considered by his shareholdings.

2. Company Limited by Guarantee

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 It is defined under section 2(21) of the Companies Act, 2013. A Company Limited
by guarantee means the member‟s liability is limited to the amount they guarantee
to contribute towards the assets of the company.

 Here in this case, the liability of the member of a Company limited by Guarantee is
limited up to an agreed sum mentioned in the memorandum. Members are required
to contribute the agreed amount only in case of winding up of the company and only
to the extent of the amount mentioned in the memorandum.

3. Unlimited Company

 According to the provisions of Section 2(92) of the Companies Act, 2013, Unlimited
company is a company that does not have any limit on the liability of its members.
In an Unlimited company, the liability of a member ceases only when he ceases to
be a member of that company. The liability of each member ranges to the amount of
the company‟s debts and liabilities, however, they will be entitled to claim
contributions from other members.

 In case the company has a share capital, the Articles of Association must state the
amount of share capital and each share amount. The creditors can initiate
proceedings for winding up of the company for their claims and the official liquidator
may call upon the members to contribute towards the liabilities and debts of the
company.

D. Types of Company Based on Control

1. Holding Company

 A Holding company is a parent company, which holds sufficient voting shares in

another company. The shareholding pattern is arranged in such a way that the
Holding company can control the policies and affairs of its subsidiary company and
oversee the management decisions.

 Control can either be through holding ownership or by management. For example,

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Alphabet Inc. is the holding company of Google.

2. Subsidiary Company

 According to the provision of Section 2(87) of the Companies Act, 2013, a

Subsidiary Company is a company where the Holding company can control and
manage the composition of the Board of Directors or exercise control over more
than half of the subsidiary‟s voting.

 Control can be determined in case the Holding company has the right to appoint or
remove the majority of the board members.

E. Types of Company Based on Listing

1. Listed Company

 According to the definition provided in Section 2(52) of the Companies Act, 2013, a
listed company is a company that has any of its securities listed on any recognised
stock exchange within India or outside India. It is to be noted that such class of
companies, which have listed or intend to list a prescribed class of securities, as
may be prescribed in consultation with the SEBI, shall not be considered as listed
companies.

 The shares of listed companies can be traded freely on the stock exchanges. Listed
companies are strictly regulated by the Securities Exchange Board of India (SEBI).
A company that wishes to list its shares on stock exchanges can issue a prospectus
to the general public for subscribing to its securities.

 A company can also list its shares via an Initial Public Offer (IPO), whereas a
company that is already listed company can make a Further Public Offer (FPO).
Only public companies can be listed. For example, TATA technologies, Adani Ports,
Titan, MRF, etc. are listed companies.

2. Unlisted Company

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 An Unlisted company is a company that is not listed on any recognised stock

exchange in India or outside India. Neither of its securities are freely traded on any
stock exchange. Unlisted companies can‟t gather funds from the general public,
they have to fulfil their capital requirements by obtaining funds from friends, family
members, relatives, financial institutions, or through private placement.

 To convert into a Public company, an unlisted company must issue a prospectus if

they wish to list their securities on the stock exchanges. There is no available
market to buy or sell shares of unlisted companies, and for the same reason the
shares of these companies aren‟t liquid. Public and private companies comes under
this category.

3.1.4Difference between public company and private

company

S.no Public company Private company

1. A company listed on recognized A company no listed on stock

stock exchanges exchanges

2. Its share are publicly traded Its shares are held privately

3. Minimum members : 3 Minimum members : 2

Maximum members : no limited Maximum members : 200

4. Appointment director : 1 Appointment director : 2 or more

5. It can draw up its own articles They must draw up their own articles
of association or adopt of association.

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Schedule F.

6. The shares of a publicly traded Shares of a private company are not

company are freely freely transferable, as the articles of
transferable, i.e., freely tradable association contain restrictions.
in an open market called the
stock exchange.

7. It may invite the public to Issuance of shares or bonds to the

subscribe for its shares or public is prohibited.
bonds.

8. It may issue a prospectus or Issuing a prospectus is prohibited.

may opt for a private
placement.

9. The company cannot issue The company may allot shares

shares unless it reaches the without obtaining a minimum
minimum subscription specified subscription.
in the prospectus.

3.1.5 Formation of Company

The word „company‟ is derived from Latin word „Com‟ which means „Together‟
and the word „panies‟ which means „bread‟. A company is thus an association of
persons who took their meal together. In simple language the term company means an
association of persons formed for some common purpose. When a few persons form a
company for the purpose of some business of profit it is called Joint Stock Company.

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The persons forming the company are called „shareholders‟. The liability of the
members of the company is usually limited.

MEANING

A joint stock company is an artificial person created by law having separate

legal entity with a perpetual succession and common seal.

DEFINITION

According to Section 3(1) of the Companies Act 1956, “a company means a

company formed and registered under the act or an existing company” and “Existing
Company means a company formed and registered under any of the previous
companies act.”

According to section 2(20) of the Companies Act,2013, “The term Company

means a Company incorporated under the Companies Act 2013 or any previous
Company Law”.

According to Lord Justice Lindley “Company is a voluntary association of many

persons who contribute money or money‟s worth to a common stock and employs it in
some trade or business and who share the profit and loss arising there from”

FEATURES

1. Voluntary association- A joint stock company is a voluntary association or

organization of persons. No person can be compelled to become a member of a
company, or to give up the membership

2. Registration- The Company is created only when registered under the companies
Act 1956. But for the formation of a public company at least seven persons and for
private company at least two persons are necessary. It is on incorporation that company
becomes a body corporate and gets separate legal entity.

3. Legal Entity Artificial

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 legal entity- A company is an artificial person created by law. The company can
acquire and dispose of property, can enter into contract with third parties in its
own name, can sue and be sued in its name. It acts through the board of
directors elected by the shareholders.
 Separate legal entity- A company has a legal entity distinct from and independent
of its members. It is regarded as an entity separate from its shareholders or
members. Hence a share holder can sue the company and be sued by it. The
property of the company is for the benefit of the company and not for its
members, shareholders or individuals.

4. Common seal- The company being an artificial legal entity or person cannot act on
its own. So its acts through the natural persons like directors or secretary who is
authorized hence, there is a need for a common seal of the company for all the
contracts entered into by the company through the directors. The common seal is like
the signature of the company and the seal bears the name of the company engraved on
it.

5. Perpetuity- The Company created by law has continuous existence. It never dies or
has any retirement and therefore it is commonly said that „Men may come, men may go
but company goes on forever‟

6. Limited liability- A company may be limited by shares or limited by guarantee.

 If a company is limited by shares then the shareholder is liable to pay only to the
extent of face value of the shares held by him.
 If a company is limited by guarantee the liability of the members is limited to such
an amount as the members may decide to contribute to the assets of the
company in the event of winding up.

7. Separate of Ownership and Management- in a company, the shareholders are the

owners but the management is entrusted to the board of directors who are separate
from the body of shareholders. Further a shareholder is not an agent of the company or
the other shareholders cannot bind them by his act.

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8. Transferability of shares- The shares of public limited company can be easily

transferable from one person to another.

9. Separate property- A company has a right to own and transfer property in its own
name since it is a legal entity. The shareholder has no proprietary rights in the company
but merely to their shares. Therefore the claims of the company‟s creditors will be
against the company property and that of shareholders.

10. Specific objectives- A joint stock company is formed for specific objectives only
which are expressly stated in the constitution. This objective is laid down in the
Memorandum of Association. A company can undertake only those activities which are
intended to achieve the special objective.

11. Large Membership- A JSC has a large number of memberships and there is no
maximum limit on number of members in case of public company.

12. A company is not a citizen- A company on incorporation assumes a legal

personality distinct from its members but it cannot claim to be citizen of a country under
the constitution of India.

STEPS IN FORMATION OF JOINT STOCK COMPANY:

In the formation of a public limited company having share capital, mainly four stages are
involved viz.,

1. Promotion

2. Incorporation

3. Capita Subscription

4. Commencement of business

In the case of formation of a private company, only the first two stages is involved.

1. PROMOTION OF A COMPANY:

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The person who undertakes responsibility to bring the company into existence is
called promoters.

The steps which are taken to persuade a mummer of persons to come together
for the achievement of a common objective through the company form of organization
are called promotion.

According to Guthmann and Doughall, “A Promoter is a person who assembles

the men, money and the materials into a going concern.”

The person who undertakes responsibility to bring the company into existence
are called promoters. The steps which are taken to persuade a mummer of persons to
come together for the achievement of a common objective through the company form of
organization are called promotion. According to Guthmann and Doughall, “A Promoter is
a person who assembles the men, money and the materials into a going concern.”

Steps in Company Promotion:

Discovery of an idea: The promoter starts out with an idea to start some
business either in a new field which has not been commercially exploited or in some
existing lines of manufacture or business. He makes a preliminary investigation to find
out whether it is worthwhile to make a detailed investigation.

Detailed Investigation: The promoter needs to make a detailed investigation of

his idea with the assistance of many experts. It will help him to know whether the
estimated income is adequate to cover the estimated costs and compensate the owner
fort the risks and services.

Assembling: After a detailed investigation, if the promoter is satisfied with the

practicability and profitability of the proposed concern, he starts assembling.
Assembling means getting the support and consent of some other persons to act as
directors or founders, arranging for patents, a suitable site for the company, machinery
and equipment and making contracts for filling the positions.

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Financing the proposition: After assembling the proposition, the promoter

prepares a prospectus to present to public and to underwriters to persuade them to
finance the proposition.

Functions of promoters:

Promotion of the company: The most important function of the promoters is the
promotion of the company. They undertake various processes of promotion.

Incorporation of the company: Promoters also undertake the function of getting

the company registered. They prepare necessary do necessary documents such as
M.O.A, A.O.A, etc and submit them to the registrar and the company incorporated

Raising Capital: In the case of public limited company having Share capital
promoters raise the required capital and obtain business commencement certificate.

Nursing the company: Promoters are also associated with the company and
nurse the company (They work for the growth of the company).

Types of promoters:

Professional promoters: They are experts who specialize in company promotion.

They float the company and hand it over to the shareholders or their respective.
Promotion is their main profession or occupation.

Occasional promoters: They promoters take interest in floating some

companies. They are not engaged in promotion work on a regular basis. They take up
the promotion of some company and once it is over they go to their original profession.
For instance, engineers, lawyers etc. May float some companies.

Entrepreneur promoters: They are both promoters and entrepreneurs. They

conceive idea of a new business unit, does the ground work to establish it and
subsequently become a part of the management.

Financier Promoters: Some financial institutions, like investment banks or

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industrial banks, may take up the promotion of a company with a view to find
opportunities for investment.

Position of a promoter:

The company not being in existence, a promoter is neither an agent of, nor a
trustee for, the company. But he occupies a fiduciary position (i.e. position of trust of
confidence) in the relation to the company he promotes.

The fiduciary relation requires full disclosure of the relevant facts, including any
profile made.

A promoter does many extraordinary things from the initial planning till the
commencement of business of a company. It, therefore, becomes important to know
what exactly the relationship between the promoter and the company is and what the
legal status of the promoter is. This is an important questions; but the crux of the
question is- on whose initiative does the promoter act? Who gives the orders or the
directions? In other words-what is the position or status of the promoter? To clarify the
status of the promoter, it is important to consider the following:

 Is the promoter an agent of the company?

 Does the promoter act as a trustee of the company?
 Is the promoter the owner, or one of the owners of the company?
 Or is he an official or an employee of the company?

A promoter starts working for the company even before the company is an entity
or is in existence. There being no entity or existence of the company, there can be no
contract between the promoter and the company.

3.1.6 INCORPORATION:

The second stage is the formation of the company is incorporation stage where
in, the company must be registered with the registrar of the companies.

a) Approval of name
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It has to be ensured that the name selected for the company does not match
with the name of any other company. For this, the promoter has to fill in a “name
availability form” and submit it to the registrar of companies along with necessary fees.

b) Filing of documents

For registration an application has to be filed with the registrar of the

companies along with the following documents:

 Memorandum of association properly stamped and signed by the

signatories
 Articles of association properly stamped and signed by the signatories.
 Notice of the address of the registered office of the company.
 Copy of the letter received from the department of company law and
administration of the Government, giving intimation about the availability of the
proposed names of the company.
 Statutory declaration stating that all the requirements of the companies act
have been compiled with
 Statement of nominal capital of the company
 Details of persons(name, addresses, occupation etc.) who have
accepted to act as the first directors of the company
 The written consent of the directors to act so
 An undertaking by the directors to take up and pay for the qualification
shares
 Particulars of managing directors, manager, secretary, etc., if any

c) Payment of filing and registration fees

Along with application and the necessary documents promoter must also
pay required stamp duty, filing fees, registration fees. The registrar will scrutinise the
documents and if satisfied will enter the name of the company in the register and will
issue the company its birth certificate called the „Certificate of Incorporation.‟

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3. CAPITAL SUBSCRIPTION OR RAISING OF SHARE CAPITAL

A private company can commence the business immediately after

incorporation but a public company having a share capital can commence business only
after obtaining another certificate called “Certificate of Commencement of Business”
from the registrar of companies.

In this stage the company has to make arrangements for obtaining the
necessary capital for the company.

a) Issue of prospectus:

In order to raise the requires capital a prospectus has to be issued inviting

the public to subscribe for the shares. After receiving the applications from the public
the company proceeds with the allotment if the minimum subscription has been
reached.

b) Minimum Subscription:

It is the minimum amount of capital that should be subscribed for by the

public before the company can proceed with allotment of shares. This amount should be
stated in the prospectus. It has to be 90% of the issued share capital.

c) Allotment of shares:

it means distribution of the shares among the applicants or subscribers. A

company can proceed with the allotment of shares only after receiving the minimum
subscription from the public. After the distribution is done by the director‟s letter of
allotment should be sent to those applicants who have been allotted the shares and
letter of regret should be sent to those applicants who have not been allotted any
shares and their application money should be returned.

Commencement of Business:

To obtain certificate of commencement of business the promoter should

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apply to the registrar together with prescribed fees. This will be granted only if hte
following conditions are fulfilled:

A prospectus or a statement in lieu of prospectus has to be filed with the

registrar of companies.

A statement in lieu of prospectus has to be prepared by those companies

which do not find it necessary to issue a prospectus.

Company has received the minimum subscription amount.

Directors have paid the application and allotment money payable on the
shares held buy them

Declarations by the directors or secretary of the company that the

requirement of companies act have been complied with

If the registrar is satisfied he will issue the business commencement

certificate. From the date of receipt of this certificate the company is legally authorized
to commence the business.

Forming a company is the process of legally

establishing a business entity. It separates the
business from its owners and gives it certain legal
rights and responsibilities. Here's a breakdown of the
general process:

1. Promotion Stage:

 Idea and Planning: This involves developing your business idea, researching
the market, and creating a business plan.

 Founders and Funding: Identify the people involved (founders) and secure
funding to get started.

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2. Registration Stage:

 Choose a Business Structure: Decide on the type of company (sole

proprietorship, partnership, limited liability company (LLC) etc.) based on factors
like liability and ownership.

 Name Availability: Check for name availability and register your business name.

3. Incorporation Stage:

 Draft and File Documents: Prepare and file legal documents like the
memorandum of association (MOA) and articles of association (AOA) which
outline the company's purpose and internal governance.

 Pay Registration Fees: Pay any government registration fees.

4. Commencement of Business Stage:

 Obtain Licenses and Permits: Depending on your industry and location, you
may need to acquire licenses and permits to operate.

 Open a Business Bank Account: Set up a separate bank account for your
company's finances.

Additional Considerations:

 Comply with Regulations: Familiarize yourself with ongoing regulations and

reporting requirements for your business structure.

 Tax Implications: Understand the tax implications of your chosen business

structure.

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1.As per Section 2(84) Share means share in the

share capital of a Company and
includes__________

a. Debentures

b. Preference Shares

c. Stocks

d. Bonds

2.KMP may be a director of any company with permission.

a. CG

b. ROC

c. Board

d. Shareholders

3.The term company is defined under which sec of the Act?

a) Sec 3(1)
b) Sec 4(2)
c) Sec 2(4)
d) Sec 1(3)

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3.2.1MEMORANDUM OF
ASSOCIATION:

The Memorandum of association is the most

important document of the company. This is a
document which sets out the constitution of a
company. It defines the company‟s relations with
the outside world, and the scope of its activities. Its
purpose is to enable the shareholders, creditors as well as those who deal with the
company to know the company‟s permitted range of enterprises.

CLAUSES of Memorandum:

Name Clause:

The clause contains the name of the company. The name selected should not be similar
to or identical with that of any existing company. Also the name must not be one which
is considered undesirable by the Central Government. The name of the company
should end with the word „Limited‟ if it this public company. If it is private company the
name should end with the words „private limited‟. The purpose of adding the word
„Limited‟ is to enable all those who deal with the company to know that the liability of the
members is limited.

Situation Clause:

In this clause, the state in which the company‟s registered office is located should
be given. To avoid any unnecessary legal formalities and expenses if there is a
subsequent change in the address of the company, the exact address within the state is
not given and only the name of the state is given.

Object Clause:

It should specify in unambiguous language the objects for which the company is

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formed. Great care would be taken in drawing up this clause, as the company will not be
allowed to do any business which is not specifically mentioned here. As it is difficult to
alter the object clause later, it is necessary that promoter‟s should include in this clause,
all possible types of business in which a company may engage in the future.

Liability Clause:

This clause states that the liability of members is limited to the face value of
shares taken up by them. If a member has already paid some amount on the shares, he
can be called upon to pay only the unpaid amount of the shares.

Capital Clause:

In this clause, particulars regarding the amount of share capital with which the
company is proposed to be registered and the division for the capital into shares is fixed
amount are included.

Association or subscription clause:

This contains a declaration by the subscribers to the memorandum. This

declaration just precedes the names of the signatories to the memorandum.

3.2.2 ARTICLES OF ASSOCIATION

Meaning:

The articles are the internal regulation

of the company on the basis of which its
internal affairs are managed. They lay down
the powers of the directors, shareholders and
officers.

It is not compulsory for the a public company to prepare its own article of
association as it can follow Table A of companies act whereas preparation of articles of
association is compulsory for private company.

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Contents:

The following are the contents of AOA:

 Share capital and variation of rights

 Exercise of lien by the company
 Calls on shares
 Transfer, transmission, forfeiture and surrender of shares
 Issues of shares warrants
 Alteration and reduction of capital
 Voting powers of members
 Borrowing powers
 Proceedings at the board and at the general body meetings
 Appointment, powers, duties qualifications, remuneration etc, of
directors.
 Appointment of manager, managing director and secretary
 Dividends and reserves
 Maintenance of books of accounts and their audit
 The company‟s seal
 Winding up

Doctrine of ultra vires memorandum and articles:

The term is derived from two latin words „ultra‟ and „vires‟. Ultra means beyond and
vires means power or authority. Ultra vires means doing an act which is beyond the
legal powers and authority of the company. In corporate law, ultra vires describes acts
attempted by a corporation that are beyond the scope of powers granted by the
corporations‟ object clause, articles of association or in a clause in its Bye-laws, in the
laws authorizing a corporation‟s formation or similar documents. Acts attempted by a
corporation that are beyond the scope of its character are void and voidable.

3.2.3 Differences between Memorandum and Articles of

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Association:

s.no MOA AOA

1. It is the charter of the company It is the bye-law of the company for the
setting out its constitution. internal administration.

2. It lays down the conditions of

incorporation and defines the It defines the rights and duties of
limits and powers of the directors, members etc.
company.

3. It states the rules or manners of

carrying out the business as stated in
It states the objects for which
the memorandum. They cannot be
the company is established.
contrary to the powers and objects set
forth in the memorandum.

4. Its preparation is compulsory Its preparation is not compulsory for

without which incorporation is the public company. Table A will be
not possible. applicable in its absence

5. It defines the relationship between

It governs the external relations members and the management of the
of the company company. Internal administration is its
main area.

6. It is a primary and fundamental It is a secondary, subordinate,

document, foundation for subsidiary document. It should be read

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company‟s structure, and understood in light of

responsible for company‟s birth; memorandum. It compliments or
it is unchallenged on statutory supplements memorandum.
matters.

7. Its activities must be confined to the

area and scope of memorandum. All
It lays down the area or scope of
the articles which are ultra vires
the company beyond which the
articles and intra vires memorandum
company cannot go.
are not void and can be ratified by a
special resolution.

8. It can be altered only by a

special resolution and subject to
It can be altered by a special resolution
the sanction of the court or
and the sanction is not necessary.
central government as the case
may be.

MOA and AOA stand for Memorandum of

Association and Articles of Association, respectively.
They are both crucial documents for any company,
but they serve different purposes:

Memorandum of Association (MOA)

 Defines the company's fundamental details and acts like its birth certificate.

 Includes information like:

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o Company name

o Registered office address

o Objects of the company (what it's authorized to do)

o Liability clause (limited or unlimited)

o Capital clause (authorized share capital)

Articles of Association (AOA)

 Lays down the internal rules and regulations for how the company will be run.

 Acts as a rulebook for the company's management.

 Covers aspects like:

o Appointment and removal of directors

o Shareholder meetings and voting rights

o Issue of capital

o Dividend distribution

In short, the MOA outlines the company's purpose and existence to the external world,
while the AOA details how the company will function internally. Both are essential for
company registration and governance.

4.Minimum number of members in case of private company

is

a.1

b.2

c.3

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d.4

5.If minimum subscription is not received application money should be refunded with
in ______days

a.20

b.25

c.30

d.10

6. Which documents contains the constitution of a company?

a) Memorandum of Association

b) Articles of Association

c) Both (a) and (b)

d) None of these

3.3.1 PROSPECTUS

MEANING:

According to sec 2(70) of the companies act of 2013, “A prospectus, notice,

circular, advertisement or Other document inviting offers for the public for the
subscription or purchase of any shares in Or debentures of a body corporate”.

Objects of prospectus

To inform the public about the forming of a new company To induce the
investors to invest in its shares and debentures To preserve an authentic record of the
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terms on which the investors have been invited and to make the directors responsible
for the statements in the prospectus

Types of prospectus

Red-herring prospectus

A prospectus for stocks and bonds are issued in different stages – the first stage
is the preliminary prospectus, which contains the details of the business and proposed
financial action. It is nicknamed as Red Herring. When a company decides to attract
investors to invest in their company, they use a prospectus named Red Herring
Prospectus. It is basically a prospectus which is used in the public issue to attract
different investors. In this prospectus, the price and quantum are not mentioned or
disclosed.

Pink-herring prospectus

A prospectus that is issued without disclosure of the number of securities being

offered or, in an initial public offering, the estimated or indicative price range. It is a
preliminary prospectus that precedes the filing of a red-herring prospectus.

Free-writing prospectus

Any sort of written, electronic, or graphic statement that describes an offer in

terms of its issuer or securities. It includes a legend stating that the investor can have a
copy of the prospectus at the website of relevant securities commission. Typically, the
issuer must file this prospectus with the securities commission no later than the first
date it is obtained. In the case of inexperienced issuers, the securities commission may
require that a preliminary prospectus is filed before the filing of a free-writing
prospectus.

Abridged prospectus

Abridged Prospectus is the actual summary of a prospectus. It contains all the

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salient features of a prospectus. The original prospectus that a company files to the
exchange regulator is too large. The abridged prospectus contains the summary of the
same prospectus.

Reading the entire prospectus may be too much time consuming for an investor.
Instead, they go through the abridged prospectus, which gives them the basic idea
about the company.

The abridged prospectus contains all the important and materialistic information.
No company will issue the share buying from without the abridged prospectus attached
to it so that investors can take a well-informed decision.

Reconfirmation prospectus

A prospectus that a shell company must prepare and submit for the approval of
relevant securities and exchange authorities (the SEC) prior to considering a reverse
merger. This prospectus contains detailed information about the private company
merging into the shell. It is handed over to purchasers in the shell's initial public offering
(IPO) who must reconfirm their investment after perusing the prospectus before the
merger can be finalized. At least 80 percent of purchasers must reconfirm so that the
merger transaction can be effected. Purchasers who do not confirm will receive their
investment back (of course, less expenses).

Other types:

i) Shelf prospectus Shelf means „life‟ or „validity‟ of a prospectus. Only selected

companies bring their shelf prospectus. All companies are not eligible for designing a
shelf prospectus. Normally finance-based companies are eligible for bringing out their
shelf prospectus. Shelf prospectus has validity with a maximum of one year. There are
various companies which frequently raise funds (ex. banks) for issuing loans. If any
company submits their Shelf prospectus, they don‟t have to file the prospectus again
and again while raising funds for that particular year.

ii) Deemed prospectus A prospectus that is deemed to have been made by the

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issuer, though it is actually offered to the public by a third party or the issue house . The
issuer saves the underwriting expenses in selling its securities.

3.3.2 CONTENTS OF PROSPECTUS

The revised format is effective from 1st November 1991.

Part 1 of schedule 1.

I.General Information

a) Name and address of registered office of the company

b) Date of opening of the issue

c) Name and address of auditors and lead managers

II.Capital Structure of the Company

a) Authorized capital

b) Issued capital

c) Subscribed capital

d) Paid up capital

III. Terms of the present issue

a) Right of the instrument holders

b) How to apply, availability of forms, prospectus and mode of payment

c) Any special tax benefits for company and its shareholders

IV. Particulars of the issue

a) Objects

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b) Project cost

V. Company, Management and Project

a) History and main objects and present business of the company

b) Subsidiary of the company if any

c) Promoter and their background

d) Infrastructure facilities for raw materials and utilities like water, electricity etc.

e) Nature of products

f) Approach to marketing

g) Export possibilities and export obligations if any

h) Future prospects – expected capacity utilization during the first three years
from the date of commencement of production and the expected year when the
company would be able to earn cash profits and net profits.

3.3.3 Appointment of Directors under Companies Act, 2013

The Companies Act, 2013, outlines the procedures and requirements for
appointing directors to ensure transparency, fairness, and accountability in the
process.

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Key aspects of director appointment include:

Shareholder Approval

 Directors are appointed by shareholders through ordinary or special

resolutions passed at general meetings.

 The Act defines the minimum and maximum number of directors that a
company can have, based on its type and structure.

Board Nomination

 The board of directors may nominate individuals for appointment as

directors, subject to shareholder approval.

 Nomination committees, where applicable, assist in identifying suitable

candidates based on their qualifications, experience, and expertise

Director Identification Number (DIN)

 Before appointment, every individual proposed as a director must obtain a

Director Identification Number (DIN) from the Ministry of Corporate Affairs.

 The DIN serves as a unique identifier for directors and facilitates

regulatory compliance.

Disclosure Requirements

 Companies are required to disclose information regarding director

appointments in their annual financial statements and other regulatory filings.

 Disclosure norms aim to enhance transparency and enable stakeholders to assess the
composition and effectiveness of the board.

Duties of Directors:

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Directors of companies have several important responsibilities as outlined in

the Companies Act, 2013. These duties are crucial for ensuring the proper functioning
and success of the company.

1. Duty of Care: Directors must be careful and diligent in their work. They
need to make informed decisions and stay updated on what‟s happening in the
company. This means they should spend enough time understanding the business
and seek advice when needed. By doing this, directors help the company run
smoothly and make good choices.

2. Duty of Loyalty: Directors should always put the company‟s interests first.
They should not let their personal interests or relationships influence their decisions.
If they have any conflicts of interest, they need to tell others about them. This helps
ensure fairness and trust within the company.

3. Duty to Act within Powers: Directors have specific powers given to them
by the company‟s rules. They need to stick to these powers and not go beyond them.
This ensures that they don‟t do anything that the company hasn‟t authorized them to
do. Following these rules keeps everything legal and helps protect the company.

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4. Duty to Promote the Success of the Company: Directors are responsible

for making decisions that will help the company succeed in the long term. This means
considering the interests of everyone involved in the company, like shareholders,
employees, customers, suppliers, and the community. By thinking about everyone,
directors can make choices that benefit the company as a whole.

5. Duty to Exercise Independent Judgment: Directors need to make

decisions based on what they think is best for the company, not what others want
them to do. They should look at the facts and make up their own minds about things.
Being independent in their thinking helps directors make good decisions that benefit
the company.

6. Duty to Exercise Reasonable Skill and Diligence: Directors should use

their skills and knowledge to make smart decisions for the company. This means
staying informed about the industry and keeping up with what‟s happening in the
business world. By using their skills well, directors can help the company stay
competitive and successful.

7. Duty to Avoid Conflict of Interest: Directors need to avoid situations

where their personal interests might conflict with what‟s best for the company. If they
find themselves in such a situation, they should tell others about it and not get
involved in decisions related to it. This helps maintain honesty and fairness within the
company.

Meeting of company under company act

There are two main types of meetings in a company:

Meetings of Shareholders: These gatherings involve the company's owners, the

shareholders. They are typically held annually and allow shareholders to:

o Be informed about the company's performance through financial

statements and reports

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o Vote on important matters like electing directors, approving major

transactions, or changing company policies

o Annual General Meeting (AGM): This is a mandatory yearly meeting that

all companies (except one-person companies in their first year) must hold

o Extraordinary General Meeting (EGM): This is a special meeting called

to address urgent issues that require shareholder approval, such as mergers or
acquisitions

Meetings of the Board of Directors: The board of directors is a smaller group elected
by the shareholders to oversee the company's operations. They hold regular meetings
to discuss and decide on various matters like:

o Setting the company's strategy and goals

o Approving budgets and financial plans

o Monitoring the company's performance and making adjustments as

needed

o Appointing senior management

Resolutions of company under company act

Under the Companies Act, 2013, a resolution is a formal decision made by the
members of a company, typically shareholders or directors, at a properly convened
meeting. There are two main types of resolutions with different voting requirements:

1. Ordinary Resolution: This is the most common type of resolution. It requires a

simple majority vote, meaning more votes are cast in favor of the resolution than against
it, to be passed. This applies to resolutions on matters like approving financial
statements or appointing auditors.

2. Special Resolution: This is required for more significant changes to the

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company, and it requires a higher voting threshold. A special resolution needs to be

passed by a majority of at least three times the number of votes cast against it . This
applies to actions like changing the company's name or articles of association,
increasing the authorized share capital, or approving a merger

Here's the general process for passing a resolution:

 Notice: A proper notice of the meeting must be given to all relevant members
(shareholders or directors) specifying the date, time, venue, and agenda of the meeting.

 Meeting: At the meeting, the resolution is proposed and seconded by members.

 Discussion: Members can discuss the resolution before voting.

 Voting: Votes are cast, either by a show of hands, electronically, or by postal

ballot.

 Outcome: If the required majority vote is achieved, the resolution is passed. The
details of the resolution are documented in the meeting minutes.

Winding up

Winding up refers to the legal process of shutting down a company in India. It's
governed by the Companies Act, 2013, and involves ceasing regular operations, settling
debts, selling assets, and ultimately dissolving the company. There are two main ways a
company can be wound up:

1. Compulsory Winding Up:

 Initiated by a court order through a petition filed by various parties as outlined in

the Act [1].

 Common reasons include inability to pay debts, creditor petition, if the company
ceases to operate for a significant period, or if the court finds it just and equitable.

 The court appoints a liquidator to oversee the winding-up process.

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2. Voluntary Winding Up:

 Initiated by a decision of the company's members (shareholders) through a

special resolution passed at a general meeting [2].

 There are three types of voluntary winding up:

o Members' Voluntary Winding Up: Occurs when the company is solvent

(has enough assets to cover its liabilities) and intends to distribute its assets to
shareholders after settling debts [2].

o Creditors' Voluntary Winding Up: Chosen when the company is

insolvent and creditors will take priority in receiving their dues from the sale of assets.

o Voluntary Winding Up Subject to the Court's Supervision: The

company proposes to wind up voluntarily but seeks court oversight for some aspects of
the process [2].

Process for Winding Up:

The specific steps involved in winding up will vary depending on the chosen
method (compulsory or voluntary). However, the general process involves:

 Passing a resolution (voluntary) or filing a petition (compulsory).

 Appointing a liquidator (official responsible for overseeing the winding up).

 Notifying creditors and regulatory bodies.

 Selling company assets and collecting dues.

 Paying off creditors according to their priority.

 Distributing remaining assets to shareholders (voluntary winding up).

 Dissolving the company.

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The appointment of directors in India is governed by the

Companies Act, 2013. Here's a breakdown of the key
points:

Eligibility:

 Only individuals can be directors, not companies

or firms .

 The individual must be at least 18 years old and

not disqualified under the Act's provisions .

Number of Directors:

 A minimum of 3 directors are required for a public company, 2 for a private

company, and 1 for a one-person company.

 A maximum of 15 directors can be appointed without special permission.

Appointment Process:

 Directors are generally appointed by shareholders in a general meeting.

 This can happen at the Annual General Meeting (AGM) or a specially convened
Extraordinary General Meeting (EGM).

 A resolution to appoint the director must be passed by the shareholders.

Documents and Filings:

 The proposed director must have a Director Identification Number (DIN).

 They must also provide a declaration stating they are not disqualified to be a
director.

 Once appointed, the director's consent to the position needs to be filed.

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 Details of the appointment are filed with the Registrar of Companies (ROC) using
Form DIR-12.

Additional Points:

 The company's Articles of Association (AoA) may specify director appointment

methods in a private company.

 The AoA can allow for appointment based on proportional representation of

shareholders.

7.When there is a untrue statement in a prospectus

who can sue

a)Subscribed in primary market

b) Subscribed in secondary market

c) Rights issue

d) None of the above

8. Who can be director?

a. Association of Persons

b. Body Corporate

c. Any person

d. None of the above

9.A person cannot act s managing director of more than _____ company/ companies at
a time.

a. 5

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b. 10

c. 15

d.20

10. Who undertakes the management and control of the affairs of the company on
behalf of its owners?

a. company secretary

b. board of directors

c. promoters

d. one of the above

3.4.1 UNIT SUMMARY

The Act outlines the process for registering a company, including minimum
capital requirements and director appointments.
The Act sets guidelines for appointing directors, their duties and responsibilities,
and board meetings.
The Act specifies procedures for holding shareholders' meetings (AGM & EGM)
and board meetings.
The Act regulates the issuance and management of shares (common stock) in a
company.
It promotes investor protection by mandating disclosures and regulations against
unfair practices.
This encourages companies to contribute to social causes and sustainable
development.
It also addresses insolvency situations, outlining processes for debt recovery and

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company restructuring.

3.4.2 Glossary

Indian company act The Companies Act, 2013 is the primary law
governing the incorporation, operation, and
winding up of companies in India. It replaced the
Companies Act, 1956, and introduced significant
changes to modernize company law in India.

Company A company is a legal entity formed by a group of

individuals to engage in and operate a business
enterprise in a commercial or industrial capacity.

Formation of Company Formation of a company is a complex activity

involving completion of legal formalities and
procedures. It involves three distinct stages that
are promotion, incorporation and subscription of
capital

Incorporation Incorporation is the term used to describe the

formation and registration of a limited company.
When this process is complete, a certificate of
incorporation will be issued. The legal status of a
limited company is that it is a separate entity from
the owners of that business.

Memorandum of Memorandum of Association is a legal document

Association that explains why the organization was founded. It

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establishes the company‟s authority and the

terms under which it works. It is a manual that
includes all of a company‟s laws and regulations
for its interactions with the outside world.

Articles of Association Articles of association form a document that

specifies the regulations for a company's
operations and defines the company's purpose.

Prospectus A prospectus is a formal document required by

and filed with the Securities and Exchange
Commission (SEC) that provides details about an
investment offering to the public.

Self – Assessment Questions

1) What is a company? Discuss its nature in details.

2) Describe the various types of companies.
3) Explain the stages in company formation.
4) Define Memorandum of Association. What are the various
clauses associated with it?
5) Write a note on registration of articles. Distinguish between
memorandum of association and articles of association.
6) State the various types of prospectus. What are its contents?
7) Elucidate the duties and power of director.
8) What do you mean by winding – up? Discuss the voluntary
winding up in detail.

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Activities / Exercises / Case Studies

Compliance Challenges for XYZ Pharmaceuticals Pvt. Ltd.

XYZ Pharmaceuticals Pvt. Ltd. is a mid-sized pharmaceutical company based in India.

With a focus on research and development of generic drugs, the company has
experienced steady growth in recent years. However, as the company expands its
operations, it encounters several compliance challenges under the Indian Companies
Act, 2013.

Answers for check your 1. C Stock

progress 2. c) Board
3. a) Sec 3(1)
4. b) 2
5. d) 10
6. a) Memorandum of Association
7. a) subscribed in primary market
8. b) Body corporate
9. c) 15
10. b) Board of director

Suggested Readings

1) https://www.bmscw.edu.in/files/StudyMaterials/BCom/IBCom/CSA%20UNIT
%201.pdf
2) https://cleartax.in/s/memorandum-of-association-moa

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3) https://www.toppr.com/guides/business-laws-cs/elements-of company-
law/steps-in-incorporation-of-a
company/#:~:text=The%20incorporation%20of%20a%20company,'Limited'
%20in%20their%20names.
4) https://www.investopedia.com/terms/p/prospectus.asp
5) https://www.investopedia.com/terms/a/articles-of
association.asp#:~:text=Articles%20of%20association%20form%20a,the%2
0handling%20of%20financial%20records.
6) https://www.1stformations.co.uk/blog/what-is-company-formation/

Open-Source E-Content Links

1) https://youtu.be/lFwpKo4UM4o?si=r
Ucry1vtx2QH4UZK

2) https://youtu.be/p87kWjTgz_c?si=Fl
y9R_ivTV1GKJZA

3) https://youtu.be/MmNu1D7Acsk?si=
R93nBiF6VEbo5saV

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4) https://youtu.be/aebYX3aZ3Qo?si=N
hBkrbxThgqoxxPe

5) https://youtu.be/CtXL58ccz-
k?si=j31cEovSCC8Yc5lP

References

1. https://www.bmscw.edu.in/files/StudyMaterials/BCom/IBCom/CSA%20UNIT
%201.pdf
2. https://cleartax.in/s/memorandum-of-association-moa
3. https://www.toppr.com/guides/business-laws-cs/elements-of company-
law/steps-in-incorporation-of-a
company/#:~:text=The%20incorporation%20of%20a%20company,'Limited'
%20in%20their%20names.
4. https://www.investopedia.com/terms/p/prospectus.asp
5. https://www.investopedia.com/terms/a/articles-of
association.asp#:~:text=Articles%20of%20association%20form%20a,the%2
0handling%20of%20financial%20records.

6. https://www.1stformations.co.uk/blog/what-is-company-formation/

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CDOE-OLD B.B.A – SEMESTER - IV Unit 4

Self-Learning Material Development – STAGE 1

Unit 4 Consumer Protection Act

Consumer Protection Act – RTI

Unit Module Structuring

STAGE – 2 – Modules Sections and Sub-sections structuring

Section Topic Page No

4.1.1 Consumer 2

4.1.2 Consumer protection act 3

4.1.3 Objective of the act 6

4.1.4 Consumer rights 9

4.1.5 Let‟s sum up 11

4.1.6 Self-assessment 12

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4.2.1 Consumer Dispute 13

4.2.2 Unfair trade practice 14

4.2.3 Restrictive trade practice 15

4.2.4 Consumer protection council 17

4.2.5 Structure of consumer protection council 21

4.2.6 Let‟s sum up 23

4.2.7 Self-assessment 25

4.3.1 The rights to information 26

4.3.2 Objective of the RTI act 27

4.3.3 Significance of the RTI act 29

4.3.3 Let‟s sum up 33

4.3.4 Self-assessment 34

4.4.1 Unit Summary 35

4.4.2 Glossary 36

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4.4.3 Answers for Self-Assessments 36

4.4.4 Suggested Readings 38

4.4.5 E-Contents/Videos 39

4.4.6 References 40

4.1.1 Consumer

A consumer is someone who buys goods and services for their own use, not for
resale or business purposes. Here's a breakdown of the term:

 In general: A person or group that uses goods or services. This can apply to
anything from the products you buy at the store to the energy used to power your home.

 In economics: Consumers are the driving force behind demand. They decide
what products and services they want to buy, which influences what businesses
produce.

 Legally: The term consumer has a specific meaning. It refers to someone who
purchases goods or services for personal use, as distinguished from commercial use

Who is a Consumer?

A Consumer is a person who purchases a product or avails a service for a

consideration, either for his personal use or to earn his livelihood.

The consideration may be:

 Paid
 Promised

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 Partly paid and promised to paid

 It also includes a beneficiary of such goods/services when such use is made with
the approval of such person.
 Buying goods/ hiring services includes offline or online transactions through
electronic means or by teleshopping or direct selling or multi-level marketing

Who is not a Consumer?

A person is not a consumer if he/she:

purchases any goods or avails any service free of charge

purchases a good or hires a service for commercial purpose;

avails any service under contract of service

4.1.2 Consumer Protection Act

In 1986, the Indian Parliament passed the landmark Consumer Protection Act
which is a milestone in the history of socio-economic legislation and is directed towards
achieving public welfare by enabling the consumer to participate directly in the market.
The Consumer Protection Act, 1986 was a very unique piece of social welfare
legislation.

The Act was enacted with an objective to provide better protection of the
interests of the Consumers. It was intended to provide effective and efficient safeguards
to the consumers against various forms of exploitations and unfair dealings.

The Act is designed to make available cheap and quick remedy to a small
consumer. The Act was passed in 1986 and was made effective in 1987. Amendments
were made in 1991 to provide for situations of absence of President of Forum. Major
changes were made in 1993 (effective from 18-6-1993). On getting further experience of
implementation of the Act, substantial changes have been made by Amendment Act,
2002. Major changes made in the Amendment Act are

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 .Enhancement in monetary limit of District Forum from Rs 5 lakhs to 20

lakhs and of State Commission from Rs 20 lakhs to Rs one crore

 Payment of fees for filing complaint/appeal

 Complaint/appeal will have to be admitted first

 Reason to be recorded if decision not given within specified time

 Cost of adjournment can be imposed

 Interim orders can be passed

 In absence of President, senior most member can discharge functions of

President

 Pre-deposit of certain amount before appeal is entertained

 Notice can be sent by Fax/courier.

 The Act was enacted with an objective to provide better protection of the
interests of the consumers.
 It applies to all goods and services and covers all sectors-private, public
and cooperatives
 The Consumer Protection Act is a weapon in the hands of consumers to
fight against exploitation by traders, manufacturers and sellers on one hand and
providers of services on the other.
 It provides redress to the grievances of the consumers and makes
provision for the establishment of Consumer Councils and other quasi-judicial
authorities for the settlement of consumer disputes.
 It provides for simple, speedy and inexpensive access to redress of
consumer grievances and provides for granting compensation to the consumers for the
inconvenience suffered.
 The Act has been amended thrice in 1991, 1993 and 2002 to keep pace

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with time and to provide more teeth. The third amendment has brought drastic changes
in the Act.

What is Consumer Protection Act, 2019 ?

With the advent in technology, digitization has become norm of the day. E
Commerce, direct selling have redefined the market and provided a new dimension to
consumer-seller relationship. These practices besides providing ease of transaction
have also posed certain challenges for the consumers to deal with. With the aim to
address the new challenges faced by consumers in the digital era and provide timely
and effective administration and settlement of consumer disputes, the Parliament,
passed the landmark Consumer Protection Bill, 2019 on 6 August 2019. The Consumer
Protection Act, 2019 received the assent of the President of India and was published in
the Official Gazette on 9 August 2019. Barring a few provisions, the New Act has come
into force from 20th July 2020 with government notifying Rules and provisions like
Consumer Protection Councils, Consumer Disputes Redressal Commissions,
Mediation, Product Liability and punishment for manufacture or sale of products
containing adulterant / spurious goods.

The New Act replaces the more than three-decade old Consumer Protection
Act, 1986. The 1986 Act has been in operation for more than 33 years, still there were
deficiencies and shortcomings with respect to its operation which made it difficult for the
consumers to get relief. The Act was amended from time-to-time to bring it in
accordance with changes brought about by liberalization, globalization and
digitalization. But it failed to achieve desired objective of providing better protection of
the interests of consumers.

4.1.3 Objective of the Act

An Act to provide for protection of the interests of consumers and for the said
purpose, to establish authorities for timely and effective administration and settlement of
consumers' disputes and for matters connected therewith or incidental thereto.

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Salient Features of the Act

 Wider Ambit to address New Emerging Challenges

The New Act equip the machinery to meet the new emerging challenges like
ecommerce, telemarketing, misleading advertisements, etc. and ensure efficiency in
grievance redressal.

 Inclusion of e- Commerce

The earlier Act did not specifically include e-commerce transactions. This
lacuna has been addressed by the New Act. „E-commerce‟ and „electronic service
provider‟ have been defined under the Act. „E-commerce‟ has been defined as buying or
selling of goods or services including digital products over digital or electronic network.
The central government has been authorized to take measures and make rules to
prevent unfair trade practices in e-commerce.

 Broader Definition of Consumer

The definition of „consumer‟ under section 2(7) is broader and includes both
offline and online transactions. The ambit of consumer has been widened to cover not
only online transactions but also telemarketing and multi-level marketing which will
impose responsibility at all levels.

 Enhanced Pecuniary Jurisdiction

Pecuniary Jurisdiction under CP Act, 2019

District Commission Upto Rupees One Crore

State Commission More than Rupees One Crore upto

Rupees 10 Crore

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National Commission Above Rupees 10 Crore

 Flexibility in Place of Filing the Complaint

The New Act provides flexibility to the consumer to file complaints with the consumer
commission located at the place of residence or work of the consumer.

 E-Filing of Complaints

The New Act also enables consumers to file complaints electronically and for hearing
and/or examining parties through video-conferencing. This is to ensure procedural ease
and reduce inconvenience and harassment to the consumers.

 Establishment of Regulator for Consumer Protection

The New Act provides for establishment of the Central Consumer Protection Authority
(CCPA) to regulate matters relating to violation of rights of consumers, unfair trade
practices and false or misleading advertisements which are prejudicial to the interests of
public and consumers and to promote, protect and enforce the rights of consumers as a
class.

 Unfair Trade Practices

The New Act introduces a specific broad definition of Unfair Trade Practices, which also
includes sharing of personal information given by the consumer in confidence, unless
such disclosure is made in accordance with the provisions of any other law.

 Introduction of Mediation to resolve Consumer Grievances

The New Act provides for mediation as an Alternate Dispute Resolution mechanism,
making the process of dispute adjudication simpler and quicker. This will help with the
speedier resolution of disputes and reduce pressure on consumer commissions.

 Product Liability

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The New Act introduces Chapter VI dealing with Product Liability. These provisions
based on strict liability principles will enable the complainant to claim compensation for
the harm caused due to defective product or services.

Consumer rights

“Consumer‟s Right”, by definition, is the right of a consumer to have adequate

information regarding the quality, quantity, potency, purity, price, and standard of the
commodity they are using and that they are protected against any malpractices as a
consumer. The following are the fundamental consumer rights of an individual in India:

 Right to Safety: The consumer has the right to ensure the quality of the product
available in the market in order to safeguard their long-term interests. The quality marks
for products in India are Indian Standards Institution (ISI) (for industrial, electrical
products), AGMARK (or Agriculture Mark for agricultural products), FPO mark (for
processed fruit items), etc.
 Right to be Informed: The consumer can insist on acquiring all the necessary
details regarding the products and protect themselves from malpractices.
 Right to Choose: It is the right of a consumer to have accessibility to a variety of
products available in the market at fair prices.
 Right to be Heard: The consumer‟s interest will be given proper consideration
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and they will be provided with the appropriate forum to do so.

 Right to Seek Redressal: The consumer has the right to claim for redressal in
case of exploitation and demand for a fair settlement.
 Right to Consumer Education: It is also the responsibility of the consumer to
be aware of their rights and hence the right to consumer education means the right to
acquire relevant skills and knowledge as required to be an informed consumer.

Consumer duties

While consumer rights are well-known, there are also important duties or
responsibilities consumers hold. These duties ensure a fair and healthy marketplace for
everyone. Here are some key consumer duties:

 Be Informed: This means researching products and services before buying.

Read reviews, compare prices, and understand the terms and conditions of any
warranties or contracts.

 Be Responsible with Money: Don't overspend or go into debt beyond what you
can manage. Budget wisely and avoid impulse purchases.

 Be Aware of Scams: Protect yourself from deceptive marketing practices and

fraud. Don't share personal information readily and be wary of offers that seem too good
to be true.

 Use Products Safely: Follow the instructions and warnings that come with
products. Improper use can lead to safety hazards and may void warranties.

 Be Respectful to Sellers: Treat customer service representatives and retail staff

with courtesy.

 Report Issues: If you encounter a defective product or unfair business practice,

bring it to the attention of the seller and relevant authorities.

By fulfilling these duties, consumers play an active role in maintaining a fair

marketplace. They can make informed decisions, protect themselves from harm, and

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hold businesses accountable for their practices.

There are actually two main Consumer Protection Acts to

consider, depending on the specific location:

 The Consumer Protection Act of 11986: This act was a

major step in India towards safeguarding consumer rights. It
established a framework for:

o Consumer councils: These councils were set up at the Central and State
level to promote consumer awareness and address grievances.

o Consumer Dispute Redressal Commissions: These commissions

provide a platform for consumers to file complaints against businesses and seek
redressal.

 The Consumer Protection Act of 2019: This act revamped the 1986 act and
introduced several new provisions including:

o Central Consumer Protection Authority (CCPA): This central body

empowers the government to regulate and address consumer concerns more
effectively.

o Stricter penalties: The new act allows for harsher penalties against
businesses that violate consumer rights.

o E-commerce regulations: Specific regulations were introduced to

address consumer issues related to online shopping.

1.) When was Consumer Protection Act 2019 ratified?

a) August 9th 2019

b) August 7th 2019

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c) August 9th 2018

d) August 10th 2019

2.) Who can make a complaint under this Act?

1.

a) Consumer

b) 3rd Person

c) Alien

d) None of the above

3.) Which Consumers Right is not guaranteed under Consumer Protection Act,
2019?

a) Right to Choose

b) Right to Exploitation

c) Right to be Heard

d) Right to seek redressal

4.2.1 consumer dispute

A consumer dispute is a disagreement between a consumer and a business about a

good or service purchased. These disputes can arise from a number of situations, such
as:

 Faulty or defective products: This could be anything from a malfunctioning

appliance to clothes with rips or tears.

 Misrepresentation or false advertising: If a product or service is advertised

inaccurately, and you buy it based on that advertising, you may have a claim.

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 Warranty issues: If a product breaks down during the warranty period, the
business may be obligated to repair or replace it.

 Billing problems: This could include being charged for something you didn't
order, or being charged the wrong amount.

 Poor service: If you receive inadequate or unprofessional service from a

business, you may have a cause for complaint.

There are a few ways to resolve a consumer dispute:

 Contacting the business directly: Often, the simplest way to resolve a dispute
is to speak to the business directly. Explain the problem and see if they can offer a
solution.

 Consumer mediation: Mediation is a process where a neutral third party helps

both sides reach an agreement.

 Consumer arbitration: Arbitration is similar to mediation, but the arbitrator's

decision is binding.

 Filing a complaint with a consumer protection agency: Most governments

have agencies set up to help consumers resolve disputes.

Here are some resources that can help you with consumer disputes:

 Consumer Protection Agencies: Look for government agencies dedicated to

consumer affairs in your region.

 Consumer advocacy groups: These groups can provide advice and support to
consumers involved in disputes.

4.2.2 Unfair trade practice

Unfair trade practices are business actions that mislead, deceive, or exploit
consumers for an advantage. These practices are illegal and violate consumer

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protection laws. Here's a breakdown of unfair trade practices:

 Deceptive Acts: This includes false advertising, misleading claims about a

product's quality or features, and hiding important information.

 Fraudulent Acts: This involves intentional deception to take advantage of

consumers. Examples include bait-and-switch tactics, pyramid schemes, and fake
reviews.

 Unfair Practices: These are actions that create an uneven playing field for
consumers. This can include tying the sale of one product to another (tied selling),
charging hidden fees, or using high-pressure sales tactics.

Here are some specific examples of unfair trade practices:

 False advertising: A company claims their product is organic when it's not.

 Bait-and-switch: A store advertises a low price on an item but then tries to

pressure you into buying a more expensive one.

 Hidden fees: A service seems affordable until you discover extra charges at
checkout.

 Deceptive pricing: A product's price is unclear or uses misleading tactics like

saying "sale" without mentioning the original price.

 Non-compliance with safety standards: A product is sold despite failing safety

regulations, putting consumers at risk.

4.2.3 Restrictive trade practice

Restrictive trade practices (RTPs) are business agreements or activities that limit
competition in a market. These practices can harm consumers by driving up prices,
reducing choices, and stifling innovation. Here's a closer look at RTPs:

 Impact: RTPs can distort the natural flow of competition in a market. This can

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lead to:

o Higher Prices: When competition is limited, businesses may be able to charge

more for their products or services.

o Lower Quality: With less pressure to innovate, businesses may be less likely to
improve the quality of their offerings.

o Reduced Choice: Consumers may have fewer options to choose from when
RTPs limit competition.

 Examples: Some common types of RTPs include:

o Price fixing: Businesses agree to set prices at a certain level, eliminating

competition on price.

o Market allocation: Businesses divide up a market among themselves, limiting

competition in specific territories.

o Exclusive dealing: A supplier agrees to sell only to a certain retailer, limiting

consumer choice.

o Tied selling: A business requires a customer to buy one product to get another
(e.g., forcing a phone case purchase with a new phone).

o Resale price maintenance: A manufacturer dictates the price at which retailers

can sell its products.

 Legality: RTPs are generally considered illegal in most countries, including

India's Competition Act of 2002. Competition commissions and authorities enforce these
laws to promote fair competition in the marketplace.

 Exemptions: There may be some exceptions to restrictions on RTPs in specific

situations, often when they can demonstrably improve efficiency or benefit consumers.
However, these exceptions are generally narrowly defined.

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Difference between RTP and UTP

Basis of RTP UTP

Difference

Objective The objective of it is the It is concerned with the

promotion of competition in the protection of consumer
market. interest.

Deemed to be An RTP is deemed to be No such deeming provision in

prejudicial prejudicial to the public the case of an UTP.
interest unless the commission
is satisfied of any one or more
of the circumstances or
gateways of public interest.

Cease and When the commission is of the The commission can pass
desist order opinion that the practice is cease and desist order if it is
prejudicial to public interest of the opinion that the practice
only, then the cease and is prejudicial to the interest of
desist order can be issued. any consumer, consumers in
general or public interest.

4.2.4 Consumer Protection Council in India

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India‟s Consumer
Protection Council is a statutory
organization created in
accordance with the Consumer
Protection Act of 1986. The
council is in charge of advancing
and defending Indian consumer
rights.

The council‟s principal goal is to make sure that customers understand their
rights and can exercise them. Also, the council offers a forum for customers to protest
about dishonest business practices, faulty goods, and subpar services. The central
government appoints the president and several other members of the Consumer
Protection Council. The council has the authority to look into complaints, give
directives to companies, and file lawsuits against anyone who breaks consumer
protection rules.

The council also promotes consumer understanding of their rights and

obligations through a number of awareness initiatives and campaigns. Moreover, it
works along with other departments, offices, and groups to advance consumer
protection and raise standards for all products and services. The council has
experienced considerable changes recently, including the replacement of the 1986
statute with a new Consumer Protection Act in 2019. The new act has a number of
measures aimed at enhancing consumer rights and supplying more effective channels
for grievance redressal.

Functions of Consumer Protection Council

Following are some of the important functions of the Consumer Protection Council:

Consumer Education

The main task of the Consumer Protection Council is to inform customers of

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their rights and obligations. The organization conducts a number of consumer

education initiatives to disseminate knowledge about the risks associated with the use
of shoddy goods and services. To educate consumers about their rights, the council
also distributes resources including brochures, leaflets, and instructions.

For example, In Lagos, Nigeria, the Consumer Protection Council launched a

consumer education campaign to teach people how to spot substandard products. The
campaign is designed to raise awareness of the risks associated with the use of
counterfeit and substandard goods and how to avoid them.

Complaints Handling

Consumers, who feel that businesses or service providers have taken full
advantage of or treated them unfairly, file a complaint with the Consumer Protection
Department. The organization reviews complaints and takes necessary measures to
protect the interests of customers. Council also provides a venue for customers to
report fraud, false advertising, and unfair business practices.

For example, A customer spoke to Consumer Protection about a furniture

manufacturer who, upon receipt of full payment, supplied a substandard product. The
company was deemed to have committed fraud when the agency reviewed the
situation. The company was fined and refunded the consumer‟s money by the board.

Product Standards and Quality Control

Customer Protection may enforce product standards and quality control

procedures. An agency that prescribes requirements for goods and services to ensure
that they meet basic quality requirements. The items are also tested and controlled by
the Board to verify their safety.

For example, The Consumer Protection Council examined a well-known brand

of bottled water and discovered that it contained hazardous germs. The FDA
mandated a recall of all tainted items as well as compensation for impacted
customers. The council has issued new bottled water rules to ensure that firms fulfill

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minimal quality standards.

Market Tracking

The Consumer Protection Council monitors the market to identify corporations

and service providers who participate in deceptive business practices. Organizes
market surveillance and conducts investigations for price fixing, price manipulation,
and other anti-competitive acts. The board also works with other government agencies
to ensure companies comply with regulations.

For example, In Abuja, Nigeria, the Consumer Protection Council conducted

market surveillance and determined that some gas stations were selling fuel at a price
higher than the government-approved price. The agency has ordered gas stations to
reduce prices to the allowable level or face penalties for price abuse.

Advocacy and Stakeholder Engagement

The Consumer Protection Council works with stakeholders such as trade

associations, government agencies, and civil society groups to protect the rights and
interests of consumers. The agency encourages dialogue and cooperation among
stakeholders to achieve the common goal of protecting the interests of consumers.

For example, The Manufacturers Association of Nigeria (MAN) and the

Consumer Protection Council collaborated to promote the use of standardized goods
throughout the country. The agency encouraged businesses to follow the criteria
created in partnership with MAN for the development of safe, high-quality products.

4.2.5 Structure of Consumer Protection Councils

Consumer Protection Councils may have different structures and compositions

based on national or regional regulations. However, they typically include the following
elements:

1. Central Consumer Protection Council: At the national level, a Central

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Consumer Protection Council is established. It consists of government representatives,

consumer activists, experts, and other stakeholders. The council serves as the apex
body for consumer protection and policy formulation.

2. State Consumer Protection Councils: Each state in a country may have its
own State Consumer Protection Council. These councils address consumer issues
specific to the state and work in coordination with the central council.

3. District Consumer Protection Councils: At the district level, District

Consumer Protection Councils are established. They focus on addressing consumer
grievances and resolving disputes at the local level.

Benefits of Consumer Protection Councils

Consumer Protection Councils offer several benefits to both consumers and the
overall marketplace:

1. Redressal of Consumer Complaints: Consumer Protection Councils

provide a platform for consumers to lodge complaints and seek resolution. They
facilitate the timely and efficient redressal of grievances, ensuring that consumers
receive the necessary relief or compensation.

2. Awareness and Empowerment: These councils educate consumers about

their rights, responsibilities, and available remedies. By increasing consumer
awareness, they empower individuals to make informed choices, thereby creating a
more equitable marketplace.

3. Fair Market Practices: Consumer Protection Councils play a vital role in

monitoring market activities and ensuring compliance with consumer protection laws.
They promote fair practices, discourage unfair trade practices, and contribute to a
transparent and competitive marketplace.

4. Policy Advocacy: These councils advocate for consumer-friendly policies,

regulations, and reforms. They voice consumer concerns and recommendations to

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government authorities, influencing policy decisions that enhance consumer welfare.

In India, there are two main bodies that deal with consumer protection:

 Central Consumer Protection Council (CCPC):A national-level body

established under the Consumer Protection Act, 2019. It is headed by the Minister in-
charge of the Department of Consumer Affairs in the Central Government. The CCPC's
main functions include advising the central government on consumer protection matters,
promoting consumer awareness, and coordinating the activities of state governments
and consumer organizations.

 District Consumer Protection Council (DCPC):District-level bodies

established under Section 8(A) of the Consumer Protection Act, 1986. Each DCPC is
chaired by the District Collector and comprises representatives from various
government departments, public sector undertakings, voluntary consumer

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organizations, and public representatives. The DCPCs are primarily responsible for
protecting the rights of consumers within their respective districts.

The primary legislation regarding consumer protection

in India is the Consumer Protection Act, 2019. It
supersedes the Consumer Protection Act, 1986,
although some provisions of the 1986 Act might still be
in effect. Here's a breakdown of the 2019 Act:

Key features of the Consumer Protection Act,

2019:

 Objectives: Aims to provide better protection of consumer interests,

ensure speedy and simple redressal of consumer disputes, and promote consumer
awareness.

 Consumer Definition: Expands the definition of a "consumer" to include anyone

who buys goods or avails services for personal use, not for resale or commercial
purposes.

 Rights of Consumers: The Act emphasizes six key consumer rights:

o Right to safety

o Right to choose

o Right to be informed

o Right to be heard

o Right to seek redressal

o Right to consumer education

 Consumer Disputes Redressal Commissions: Establishes a three-tier quasi-

judicial system to handle consumer complaints:
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o District Consumer Disputes Redressal Commission (DCDRC)

o State Consumer Disputes Redressal Commission (SCDRC)

o National Consumer Disputes Redressal Commission (NCDRC)

 Product Liability: Holds manufacturers, sellers, and service providers liable for
product defects that cause harm to consumers.

 Unfair Trade Practices: Prohibits unfair trade practices like misleading

advertisements, denial of service, and hidden conditions.

 E-commerce Regulations: Includes specific regulations for e-commerce

platforms to ensure consumer protection in the online marketplace.

4.Consumer Protection Act is significant to

a) Immovable Goods

b) Movable Goods

c) Particular Goods and Services

d) All Goods and Services

5. How many rights does a consumer have under the Consumer Protection Act?

a) 8

b) 6

c) 4

d) 5

6.Under the Consumer Protection Act, the rights of a consumer do not include to be

a) Safety

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b) Choose

c) Presented

d) Informed

7.What is the Fiscal jurisdiction of the District Commission?

a) Up to 1 Crore

b) Up to 5 Crore

c) Up to 10 Crore

d) None of the above

4.3.1 The Right to Information

Historical Background

The right to information is a fundamental right under Article 19 (1) of the Indian
Constitution. In 1976, in the Raj Narain vs the State of Uttar Pradesh case, the Supreme
Court ruled that Right to information will be treated as a fundamental right under article
19. The Supreme Court held that in Indian democracy, people are the masters and they
have the right to know about the working of the government.

Thus the government enacted the Right to Information act in 2005 which
provides machinery for exercising this fundamental right.

The Right to Information Act of 2005

The act is one of the most important acts which empowers ordinary citizens to
question the government and its working. This has been widely used by citizens and
media to uncover corruption, progress in government work, expenses-related

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information, etc.

The primary goal of the Right to Information Act is to empower citizens, promote
openness and accountability in government operations, combat corruption, and make
our democracy truly function for the people. It goes without saying that an informed
citizen is better equipped to keep a required track on governance instruments and hold
the government responsible to the governed. The Act is a significant step in informing
citizens about the activities of the government.

All constitutional authorities, agencies, owned and controlled, also those

organisations which are substantially financed by the government comes under the
purview of the act. The act also mandates public authorities of union government or
state government, to provide timely response to the citizens‟ request for information.

The act also imposes penalties if the authorities delay in responding to the citizen
in the stipulated time..

What type of information can be requested through RTI?

The citizens can seek any information from the government authorities that the
government can disclose to the parliament.

Some information that can affect the sovereignty and the integrity of India is
exempted from the purview of RTI.

Information relating to internal security, relations with foreign countries,

intellectual property rights (IPR), cabinet discussions are exempted from RTI.

4.3.2 Objectives of the RTI Act

The basic object of the Right to Information Act is to empower the citizens,
promote transparency and accountability in the working of the Government, contain
corruption, and make our democracy work for the people in real sense. It goes without
saying that an informed citizen is better equipped to keep necessary vigil on the

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instruments of governance and make the government more accountable to the

governed. The Act is a big step towards making the citizens informed about the
activities of the Government.

1. Empower citizens to question the government.

2. The act promotes transparency and accountability in the working of the

government.

3. The act also helps in containing corruption in the government and work for the
people in a better way.

4. The act envisages building better-informed citizens who would keep necessary
vigil about the functioning of the government machinery.

Important provisions under the Right to Information Act, 2005

 Section 2(h): Public authorities mean all authorities and bodies under the union
government, state government or local bodies. The civil societies that are substantially
funded, directly or indirectly, by the public funds also fall within the ambit of RTI.

 Section 4 1(b): Government has to maintain and proactively disclose information.

 Section 6: Prescribes a simple procedure for securing information.

 Section 7: Prescribes a time frame for providing information(s) by PIOs.

 Section 8: Only minimum information exempted from disclosure.

 Section 8 (1) mentions exemptions against furnishing information under the RTI
Act.

 Section 8 (2) provides for disclosure of information exempted under the Official
Secrets Act, 1923 if the larger public interest is served.

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 Section 19: Two-tier mechanism for appeal.

 Section 20: Provides penalties in case of failure to provide information on time,

incorrect, incomplete or misleading or distorted information.

 Section 23: Lower courts are barred from entertaining suits or applications.
However, the writ jurisdiction of the Supreme Court of India and high courts under
Articles 32 and 226 of the Constitution remains unaffected.

4.3.3 Significance of the RTI Act

 The RTI Act, 2005 empowers the citizen to question the secrecy and abuse of
power practised in governance.

 It is through the information commissions at the central and state levels that
access to such information is provided.

 RTI information can be regarded as a public good, for it is relevant to the

interests of citizens and is a crucial pillar for the functioning of a transparent and vibrant
democracy.

 The information obtained not only helps in making government accountable but
also useful for other purposes which would serve the overall interests of the society.

 Every year, around six million applications are filed under the RTI Act, making it
the most extensively used sunshine legislation globally.

 These applications seek information on a range of issues, from holding the

government accountable for the delivery of basic rights and entitlements to questioning
the highest offices of the country.

 Using the RTI Act, people have sought information that governments would not
like to reveal as it may expose corruption, human rights violations, and wrongdoings by
the state.

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 The access to information about policies, decisions and actions of the

government that affect the lives of citizens is an instrument to ensure accountability.

 The Supreme Court has, in several judgments, held that the RTI is a fundamental
right flowing from Articles 19 and 21 of the Constitution, which guarantee to citizens the
freedom of speech and expression and the right to life, respectively.

Recent Amendments

 The RTI amendment Bill 2013 removes political parties from the ambit of the
definition of public authorities and hence from the purview of the RTI Act.

 The draft provision 2017 which provides for closure of case in case of death of
applicant can lead to more attacks on the lives of whistleblowers.

 The proposed RTI Amendment Act 2018 is aimed at giving the Centre the power
to fix the tenures and salaries of state and central information commissioners, which are
statutorily protected under the RTI Act. The move will dilute the autonomy and
independence of CIC.

 The Act proposes to replace the fixed 5-year tenure with as much prescribed by
the government.

Criticism of RTI Act

 One of the major set-back to the act is that poor record-keeping within the
bureaucracy results in missing files.

 There is a lack of staffing to run the information commissions.

 The supplementary laws like the Whistle Blower‟s Act are diluted, this reduces
the effect of RTI law.

 Since the government does not proactively publish information in the public
domain as envisaged in the act and this leads to an increase in the number of RTI

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applications.

 There have been reports of frivolous RTI applications and also the information
obtained have been used to blackmail the government authorities.

RTI Act – Associated Challenges

 Different types of information are sought which has no public interest and
sometimes can be used to misuse the law and harass the public authorities. For
example-

 Asking for desperate and voluminous information.

 To attain publicity by filing RTI

 RTI filed as a vindictive tool to harass or pressurize the public authority

Because of illiteracy and unawareness among the majority of the population in

the country, the RTI cannot be exercised.

Though RTI‟s aim is not to create a grievance redressal mechanism, the notices
from Information Commissions often spur the public authorities to redress grievances.

Right To Information Act vs Legislations for Non Disclosure of

Information

 Some provisions of the Indian Evidence Act (Sections 123, 124, and 162) provide
to hold the disclosure of documents.

 Under these provisions, head of department may refuse to provide

information on affairs of state and only swearing that it is a state secret will
entitle not to disclose the information.

 In a similar manner no public officer shall be compelled to disclose

communications made to him in official confidence.

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The Atomic Energy Act, 1912 provides that it shall be an offence to disclose
information restricted by the Central Government.

The Central Civil Services Act provides a government servant not to communicate or
part with any official documents except in accordance with a general or special order of
government.

The Official Secrets Act, 1923 provides that any government official can mark a
document as confidential so as to prevent its publication.

The Right to Information (RTI) Act of 2005 is a landmark

legislation in India that empowers citizens to access
information under the control of public authorities. Here's a
breakdown of the key points:

Objectives of the RTI Act:

 Promote transparency and accountability in the

functioning of government bodies.

 Empower citizens by enabling them to access information.

 Reduce corruption by increasing public scrutiny of government activities.

Key Provisions of the RTI Act:

 Right to Information: Grants every citizen the right to request information from
any public authority.

 Public Authorities: Defines a wide range of bodies as public authorities,

including government departments, local bodies, and organizations substantially
financed by the government.

 Information Officers: Mandates the designation of Public Information Officers

(PIOs) in each public authority to handle RTI requests.

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 Time Limits: Prescribes time limits for responding to RTI requests (usually 30
days).

 Exemptions: Allows exemptions from disclosure of certain information related to

national security, personal privacy, or commercial confidentiality.

 Appellate Mechanism: Provides an appellate process for citizens who are

dissatisfied with the response to their RTI request. This involves First Appellate
Authorities (FAAs) and the Central Information Commission (CIC) at the national
level and State Information Commissions (SICs) at the state level.

Benefits of the RTI Act:

 Increased public participation in governance.

 Improved accountability of government officials.

 Reduced corruption and bureaucratic inefficiency.

 Empowered citizens to hold authorities accountable.

8. RTI Act 2005 came into force on

(a) 12 October 2005

(b) 15 August 2005

(c) 15 June 2005

(d) 1 November 2005

9. Which of the following is not come under

the definition of 'information' under RTI Act2005?

(a) Log books

(b) File notings

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(c) Data material held in any electronic form

(d) Circulars

10. What is the time limit to get the information under RTI Act 2005?

(a) 15 days

(b) 45 days

(c) 60 days

(d) 30 days

4.4.1 UNIT SUMMARY

The Consumer Protection Act, 2019 is the main legislation safeguarding

consumer rights in India
The Act defines a consumer as someone who buys goods or avails services for
personal use, not for resale or commercial purposes.
Freedom to choose goods and services from a variety of options without undue
influence.
Access to clear and accurate information about products and services.
The Act holds manufacturers, sellers, and service providers accountable for
product defects that cause harm to consumers.
The Act includes specific regulations for e-commerce platforms to ensure
consumer protection in the online marketplace.

4.4.2 Glossary

Consumer A customer who purchases goods or services

primarily for personal use, not for resale or

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business purposes.

Consumer protection Act The Consumer Protection Act, 2019 (CPA) is

the main legal framework safeguarding
consumer rights in India

Consumer duties It‟s a consumer‟s responsibility to research

products and services before making a
purchase. This includes reading reviews,
comparing prices, and understanding product
specifications

Consumer rights The Consumer Protection Act, 2019 (CPA)

empowers Indian consumers with six key
rights. These rights ensure you have a safe
and fair experience in the marketplace.

Consumer disputes The Consumer Protection Act, 2019 (CPA)

empowers Indian consumers with six key
rights. These rights ensure you have a safe
and fair experience in the marketplace.

RTI RTI stands for Right to Information, a powerful

tool for Indian citizens enshrined in the Right to
Information Act of 2005. This act empowers
you to access information under the control of
"public authorities," which includes various
government bodies.

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Self – Assessment Questions

1. Explain the concept of consumer. What are the various types of consumers?
2. Define and explain consumer protection. What is the need of consumer
protection in this competitive business world?
3. Enumerate the various rights of the consumers.
4. Discuss briefly the duties of consumers.
5. Difference between RTPs and UTPs.
6. Explain consumer protection council
7. Discuss about RTI.

Activities / Exercises / Case Studies

1. Mr. Singh purchased a new refrigerator from a reputable electronics store in his
city. However, after a few weeks of use, he noticed that the refrigerator was not cooling
properly, and the ice dispenser was malfunctioning. Despite contacting the store
several times and requesting repairs or a replacement, Mr. Singh's complaints were
ignored, and he did not receive any satisfactory resolution.

2. Mrs. Patel, a resident of a rural village, noticed irregularities in the

implementation of a government-funded development project in her locality. Concerned
about the misuse of funds and lack of transparency, she decided to exercise her right
to information under the RTI Act to obtain details about the project's budget,
expenditure, and progress.

Answers for check your progress 1. a)August 9th 2019

2. a)consumer
3. b)Right to exploitation
4. d)all goods and service
5. b)6

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6. c)presented
7. a)upto 1 crore
8. a)12 october 2005
9. b)file noting

10.d)30 days

Suggested Readings

 https://byjus.com/free-ias-prep/right-to-information-rti/
 https://www.indiacode.nic.in/bitstream/123456789/15256/1/a2019-
35.pdf
 https://consumeraffairs.nic.in/acts-and-rules/consumer-
protection
 https://legal251.com/resources/consumer-protection-councils/
 https://s3e21e4e58ad9ab56e8a4634046da90113.s3waas.gov.in/st
ate-distt-level-consumer-protection-organization/
 https://www.writinglaw.com/duties-of-indian-consumers/

Open-Source E-Content Links

1. https://youtu.be/lPKC4lS4uyo?si=6y7D7X
pzmklKaaGY

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2. https://youtu.be/kzCILWqLSq4?si=IyZf2c
1wc9m0S7cd

3. https://youtu.be/wEG0gtGtYrc?si=QRorjv
-z2FFwm8Yo

4. https://youtu.be/KACHSfHbXbA?si=ccXH
H_d3QjRWCwIs

References

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 https://byjus.com/free-ias-prep/right-to-information-rti/
 https://www.indiacode.nic.in/bitstream/123456789/15256/1/a2019-
35.pdf
 https://consumeraffairs.nic.in/acts-and-rules/consumer-
protection
 https://legal251.com/resources/consumer-protection-councils/
 https://s3e21e4e58ad9ab56e8a4634046da90113.s3waas.gov.in/st
ate-distt-level-consumer-protection-organization/
 https://www.writinglaw.com/duties-of-indian-consumers/

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Self-Learning Material Development – STAGE 1

Unit 5 Cyber laws

Brief outline of cyber laws- IT Act 2000 & 2008

Unit Module Structuring

STAGE – 2 – Modules Sections and Sub-sections

structuring

Section Topic Page No

5.1.1 Cyber law 2

5.1.2 Advantages of cyber law 4

5.1.3 Types of cyber crime 5

5.1.4 Cyber law in India 7

5.1.5 Types of Cyber law 8

5.1.6 Let‟s sum up 10

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5.1.7 Self-assessment 11

5.2.1 E - Governance 13

5.2.2 Smart governance 14

5.2.3 Feature of E – Governance 15

5.2.4 Types of E - Governance 16

5.2.5 Let‟s sum up 20

5.2.6 Self-assessment 21

5.3.1 ITA - 2000 21

5.3.2 ITA – 2008 25

5.3.3 Let‟s sum up 32

5.3.4 Self-assessment 34

5.4.1 Unit Summary 35

5.4.2 Glossary 36

5.4.3 Answers for Self-Assessments 38

5.4.4 Suggested Readings 38

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5.4.5 E-Contents/Videos 39

5.4.6 References 40

5.1.1 Cyber Law

Cyber law, also known as internet

law or digital law, is a legal field that
governs the use of communications
technology, particularly the internet. It
deals with the legal issues related to the
use of computers, networks, and
electronic information.

Here are some of the key areas that cyber law covers:

 Online privacy: This includes laws that protect the privacy of personal
information collected online, such as data protection laws and cookies laws.

 Cybercrime: This includes laws that deal with criminal activities that take
place online, such as hacking, identity theft, and online fraud.

 Intellectual property: This includes laws that protect intellectual property

rights online, such as copyright, trademarks, and patents.

 E-commerce: This includes laws that govern online commerce, such as laws
on online contracts, consumer protection, and electronic payments.

 Freedom of speech: This includes laws that deal with the balance between
freedom of speech and the need to remove harmful content online, such as
hate speech and defamation.

What Is Cyber Law?

Cyber law, also known as internet law or digital law, signifies the legal
regulations and frameworks governing digital activities. It covers a large range of
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issues, including online communication, e-commerce, digital privacy, and the

prevention and prosecution of cybercrimes. As the internet has become a
fundamental part of our daily lives, cyber law has become crucial in ensuring digital
space's orderly and secure functioning.

Cyber law deals with the legal aspects of cyberspace, the internet, and
computing. In a broader view, cyber law handles the issues of intellectual property,
contract, jurisdiction, data protection laws, privacy, and freedom of expression in the
digital space.

In addition to regulating the overall internet‟s happenings and crimes, cyber

law recognizes popular usages, which include e-documents. Earlier, contracts,
agreements, or anything of a legal nature was made on paper. With the recognition
of e-documents and digital signatures, the world is moving fast toward a paperless
future. Since this reduces the use of paper and increases sustainability, these
processes are widely encouraged by several environmental enthusiasts.

The very first cyber law to exist was the Computer Fraud and Abuse Act
(1986.) Currently, there are several cyber laws around the world, and the penalties,
punishments, and regulations vary to an extent.

Significance of Cyber Law

The significance of cyber law lies in its capacity to navigate and regulate the
intricate challenges that arise from the pervasive use of technology. Cyberlaw
provides a framework for protecting individuals and organizations from cyber threats,
ensuring the privacy and security of digital transactions, and establishing guidelines
for ethical and legal conduct in cyberspace. As the digital world evolves, the
importance of cyber law becomes more pronounced, serving as a cornerstone for
the responsible and lawful utilization of digital resources.

5.1.2 Advantages of Cyber Law

 Protection Against Cybercrimes:

Cyber laws act as a deterrent by offering legal recourse and prescribing

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penalties for various cybercrimes. This proactive approach helps curb illegal online
activities and provides a safer digital environment for individuals and businesses
alike.

 Data Privacy:

Safeguarding individuals' digital information is a paramount concern

addressed by cyber laws. These regulations ensure that organizations handle
personal data responsibly, establishing a foundation of trust in digital transactions
and interactions.

 E-commerce Regulation:

The legal framework provided by cyber laws is crucial for the regulation of e-
commerce. It defines rules for online transactions, contracts, and consumer
protection, thereby fostering a fair and secure online marketplace.

 Intellectual Property Protection:

Cyber laws play a pivotal role in protecting intellectual property rights in the
vast digital domain. These laws prevent the unauthorized use and distribution of
digital content, encouraging innovation and creativity by safeguarding the fruits of
intellectual labor.

 Cyber security Standards:

Cyber laws contribute significantly to the establishment of cyber

security standards. By mandating organizations to implement measures for the
protection of their networks and systems, these laws address the evolving landscape
of cyber threats.

5.1.3Types of Cybercrime

 Phishing:

Phishing involves deceptive attempts to obtain sensitive information, like

passwords or credit card details, by posing as a trustworthy entity. Cyber laws play a

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crucial role in prosecuting individuals engaged in phishing activities.

 Hacking:

Unapproved access to computer systems or networks to gather, alter, or

destroy data constitutes hacking. Cyber laws define and penalize such activities,
ensuring legal consequences for those who breach digital security.

 Identity Theft:

Illegally acquiring and using someone else's personal information for

fraudulent activities falls under the purview of cyber laws. The legal framework
addresses identity theft, protecting individuals whose identities may be
compromised.

 Ransom ware:

Ransom ware involves the use of malicious software to encrypt files,

demanding payment for their release. Cyber laws aim to prevent and prosecute
individuals involved in orchestrating ransom ware attacks.

 Online Scams:

Cyber laws address fraudulent schemes conducted over the internet to

deceive individuals for financial gain. These laws provide legal recourse for victims
and impose penalties on perpetrators.

 PUPs (Potentially Unwanted Programs):

Cyber laws address software that may harm a computer or its user, often
installed without the user's knowledge. This helps regulate the distribution of
potentially harmful programs and protects users.

 Denial of Service Attack:

Overloading a system, network, or website to make it unavailable to users

constitutes a denial of service attack. Cyber laws define and penalize such attacks,
discouraging individuals from engaging in disruptive online activities.
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 Cyber stalking:

Cyber laws are made to tackle ongoing online harassment or stalking carried
out through electronic methods. These laws recognize the seriousness of cyber
stalking and provide legal avenues for victims to seek protection.

5.1.4 Cyber Law in India: A Brief Understanding

India witnesses many cybercrimes annually, with over 44,000 reported cases.
Among the states in India, Karnataka emerges as the leader in terms of cybercrime
rates. According to a 2022 report by Statistic, the average cost of data breaches was
USD 2 million in India. This financial impact reflects the consequences of data
breach incidents. For more detailed statistical information,.

Cyber law in India is governed by two key legislations: the Indian Penal Code
and the Information Technology Act of 2000. These legal frameworks provide the
necessary guidelines and provisions to address cybercrime and protect digital assets
and individuals‟ rights in cyberspace.

A variety of cybercrimes are addressed by Indian cyber laws, covering two

main aspects: hacking systems and employing them to commit crimes of different
magnitudes. Additionally, Indian cyber law encompasses a comprehensive range of
domains, such as intellectual property rights and privacy rights, among others.

Cyber law in India encompasses a broad range of subjects, although it is

important to note that the list provided is not exhaustive. Similar concepts may also
be addressed in other jurisdictions globally. The following outlines the various types
of cybercrimes and the corresponding cyber law protections.

5.1.5 Types of Cyber Law

There are several types of cyber laws, each addressing specific aspects of digital
activities and cyber security. Here are some common categories of cyber laws:

1. Privacy Laws:

o Privacy laws govern the collection, use, and protection of individuals‟

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personal information online.

o Examples include the General Data Protection Regulation (GDPR)

in Europe and the California Consumer Privacy Act (CCPA) in the
United States.

2. Cybercrime Laws:

o Cybercrime laws focus on criminal activities conducted online,

including hacking, identity theft, online fraud, and cyber bullying.

o These laws define offenses, penalties, and procedures for

investigation and prosecution.

3. Data Breach Notification Laws:

o Data breach notification laws mandate that organizations inform

affected individuals and authorities when a data breach occurs.

o These laws aim to ensure transparency and help individuals take

necessary actions to protect themselves.

4. Intellectual Property Laws:

o Intellectual property laws protect digital content, patents,

trademarks, and copyrights in the digital realm.

o They address issues like copyright infringement and online piracy.

5. Cyber security Laws:

o Cyber security laws require organizations to implement measures to

protect their digital infrastructure and sensitive data.

o These laws often set standards and requirements for data security
practices.

6. E-Commerce and Online Contracts:

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o Laws related to e-commerce and online contracts establish legal

frameworks for online transactions, electronic signatures, and
consumer rights.

o They provide a basis for resolving disputes in the digital

marketplace.

7. Social Media and Online Content Regulations:

o Regulations governing social media and online content address

issues such as hate speech, defamation, and harmful content.

o They set guidelines for the removal or restriction of such content.

8. Computer Crime Laws:

o Computer crime laws specifically target offenses involving computer

systems and networks.

o They encompass unauthorized access, malware distribution, and

cyber attacks on critical infrastructure.

9. Crypto currency and Block chain Regulations:

o As digital currencies and block chain technology gain prominence,

regulations address issues like crypto currency trading, initial coin
offerings (ICOs), and block chain-based contracts.

10. International Cyber security Agreements:

o Some laws and agreements focus on international cooperation in

combating cybercrimes and promoting cyber security best practices.

o Examples include the Budapest Convention on Cybercrime and

bilateral cyber security agreements between nations.

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Here's a brief outline of cyber law:

I. Core Concepts

 Defines the legal framework for online activity.

 Intersection of various legal areas like privacy,

contracts, and intellectual property.

II. Key Areas

 Data Protection & Privacy: Safeguarding personal information online.

 Cybercrime: Combating online criminal activities (hacking, fraud, etc.).

 Intellectual Property: Protecting copyrights, trademarks, and patents online.

 E-commerce: Regulating online commerce (contracts, consumer rights,

payments).

 Freedom of Speech: Balancing free speech with removing harmful content.

III. Importance

 Protects individuals and organizations in the digital space.

 Ensures secure online transactions and data privacy.

 Promotes ethical and legal conduct online.

IV. Challenges

 Rapidly evolving technology creates new legal issues.

 Complexities in enforcing laws across borders.

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1. Tampering with Computer Source

Documents is ______ offence.

(a) Bailable

(b) Non-bailable

(c) Non-cognizable

(d) Both (a) and (c)

2.The authentication to be affected by use of asymmetric crypto system and

hash function is known as :

(a) Public key

(b) Private key

(c) Digital signature

(d) E-governance

3. Cyber squatting is associated with :

(a) Domain Name Dispute

(b) IP addressing dispute

(c) e-mail dispute

(d) Password dispute

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5.2.1 What is E-governance?

E-governance is one of the most cutting-edge

efforts to develop effective governance. Currently,
practically all developed, undeveloped, and
developing nations use e-governance aspects to aid
in their national growth. Thus, its significance in the
modern world is enormous. The solutions to all the queries about e-governance are
provided below. By integrating ICT into the governance processes, a new paradigm
known as “Electronic-Governance” or “E-Government” has emerged in the field of
governance.

In terms of dependable access to information within government, between

government, at the national, state, municipal, and local level, among citizens, and
businesses, e-governance improves transparency, accountability, efficiency, and
effectiveness of the governing process. It also empowers businesses through
information access and use. Giving citizens access to transparent, egalitarian, and
accountable service delivery is the main goal of electronic government. The goal of
e-governance is to ensure that people participate in the political process through
electronic channels like email, websites, SMS connectivity, and others while
facilitating and improving the quality of governance.

E-governance raises the transparency, accountability, efficiency,

effectiveness, and inclusiveness in the governing process in terms of reliable access
to the information within government, between government, national, state,
municipal, and local level governments, citizens, and businesses and empowers
business through access and use of information (Dwivedi and Bharti: 2005).

The tremendous potential of the government to serve the people is realized

through its practical application and use of ICT to provide efficient and affordable
services, information, and knowledge to the citizens being governed. It established
connections between the state and society, government and people, human
interaction, and governance. It will alter how people interact with the government in
the same ways that it alters how people interact with one another.

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5.2.2SMART Governance: With the use of ICTs, we are able to achieve smart
governance as discussed in below mentioned points.

 S(Simple) : Means avoiding complex procedures and simplifying

government rules and regulations, resulting in a more user-friendly administration.

 M(Moral) : It refers to the introduction of a new system into the political and
administrative structures along with technological advancements to increase the
effectiveness of various government institutions.

 A(Accountable) : Ensure that public service employees are held

accountable by creating efficient information management systems and other
performance monitoring tools.

 R(Responsive) : Process streamlining speeds up the system‟s response

time, making it more responsive.

 T(Transparent) : Providing information in the public domain, such as via

websites or other portals, makes government functions and processes transparent.

Objectives of E-Governance

The objectives of e-governance are as follows-

1. One of the basic objectives of e-governance is to make every information

of the government available to all in the public interest.

2. One of its goals is to create a cooperative structure between the government

and the people and to seek help and advice from the people, to make the
government aware of the problems of the people.

3. To increase and encourage people‟s participation in the governance process.

4. E-Governance improves the country‟s information and communication

technology and electronic media, with the aim of strengthening the country‟s
economy by keeping governments, people, and businesses in tune with the modern
world.

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5. One of its main objectives is to establish transparency and accountability in

the governance process.

6. To reduce government spending on information and services.

5.2.3 Features of E-Governance

It has been proven from the concept of e-governance that it is a powerful

means of public service in the present era. Some of its features can be found by
observing the functioning of e-governance.

1. De bureaucratization: Due to e-governance, the gap between the people

and the government in all the services of the government is narrowing and the
dependence of the people on the bureaucracy is also greatly reduced.

2. E-Services: Its main feature is the provision of services through the Internet.
As a result, we get G2C, G2B, G2E, etc. services. This is already discussed in the
section on „types of governance‟.

3. International Services: through e-governance, all the essential services can

be delivered to the citizens who are living outside of their country for job purposes or
any other reasons.

4. It enhances the right to express to the citizens. Using the means of e-

governance anyone can share their views with the government on any bill or act or
decision taken by the government.

5. Economic Development: With the introduction of e-governance, various

information like import-export, registration of companies, investment situations, etc.
are available through the Internet. As a result, time is saved, procrastination
decreases, and economic dynamism increases.

6. Reduce inequality: using e-governance tools everyone can gather

information and empower themselves. In this globalized world, knowledge is power,
and means of e-governance empower us by providing relevant information at
minimal cost, effort, and time.

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5.2.4 Types of E-Governance

E-Governance can be considered as the socially inclusive policy for the

development of transparency and accountability of both people in society and
administration. This policy involves providing services to the people with the
collection of information through institutional and communicational development.

It provides quality services in several ways. Those ways are also called types of e-
governance. These are mentioned below-

1. G2C (Government to Citizen)

2. G2G (Government to Government)

3. G2B (Government to Business)

4. G2E (Government to Employee)

1. G2C (Government to Citizen)

As people are the key concept of politics and government as well as

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governance, the government is compelled to connect with citizens through a

transparent and accountable order. In this connection, the government is
responsible for promoting social opportunities and public services in the field of-

 Transportation (Registration of motor vehicles, Issue of driving licenses, Issue

of plying permissions, Tax and fee collection through cash and bank challans and
control of pollution, etc.),

 hospitals (linking various hospitals in different parts of the country to ensure

better medical services to citizens),

 education ( availability of the e-learning modules to the citizens, right to

education),

 online job portal and various customer services.

It also ensures services such as the issuing of certificates, job cards,

passports, ration cards, payments of bills, and filing taxes from the doorstep through
the e-governance platform. The main objectives of the G2C services are to ensure
equitable distribution of information for all, acceptance of citizens‟ feedback, and
improve welfare services.

2. G2G (Government to Government)

G2G has been referring to raising the quality of the government process by
cost-cutting, managing performance, and making strategic connections within the
government.

It enables government institutions to be more efficient and more effective

through the use of IT tools such as-

 Live fingerprints scanning and verification,

 Electronic entry of reports and paperwork etc.

The major key areas in this type of e-governance are

 E-Secretariat (all the valuable information regarding the function of the

government is interlinked throughout the various departments),
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 E-Police (police personnel records, criminal records, etc), and

 E-Court (creating a database of all the previous cases, pending and ongoing
cases) and Statewide Networks (Kumar: 2011).

3. G2B (Government to Business)

G2B is mainly concerned with these things-

 E-taxation,

 Getting a license from the government etc.

 Secure Electronic Transactions.

It has included the policy of the government with business. According to S.P
Kumar, „the essentials for the achievement of G2B services for secure and authentic
transactions include Standards for electronic transactions, a secure payment
mechanism, and Public key infrastructure‟ (Kumar: 2011).

4. G2E (Government to Employee)

The G2E model refers to providing information and services from the
government to employees and employee to the government as well. It involves
training through-

 e-learning methods;

 Consolidating the employee and

 Share of knowledge among the employees.

It has also facilitated the employee to access information regarding pay and benefits
policies and manages their profits through online.

E-governance, short for electronic governance, is all about

using information and communication technology (ICT) to
improve government functioning. This includes tools like

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the internet, mobile apps, and wide area networks.

Here are some key goals of e-governance:

 Enhanced Efficiency: Streamlining government processes can save time

and resources. Imagine applying for a permit online instead of waiting in long
lines!

 Improved Effectiveness: E-governance can make service delivery more

effective by ensuring information reaches the right people and services are
targeted efficiently.

 Increased Transparency: Online access to government information and data

can promote transparency and accountability. Citizens can see how their tax
rupees are being spent, for instance.

 Greater Citizen Participation: E-governance tools can make it easier for

citizens to engage with the government. This could involve online surveys,
forums for discussion, or e-petitions.

Examples of e-governance initiatives include:

 Online portals: For applying for government services, paying taxes, or filing
complaints.

 Mobile apps: Providing citizens with government services on their phones.

 Data sharing: Enabling government agencies to share information securely

for better coordination.

4.What is E – Governance ?

a) Electronic Governance

b) Engaging governance

c) Efficient Governance

d) Effective governance

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5. Which of the following is not an E – Governance model ?

a)G2B

b)B2C

c)C2C

d)B2B

6.Which of the following isan example of E- Governanace infrastructure?

a)Social media

b) cyber cafes

c) Mobile device

d) All of the above

5.3.1 INFORMATION TECHNOLOGY ACT, 2000

Introduction:

The Information Technology Act, 2000 provides legal recognition for

transactions carried out by means of electronic data interchange and other means of
electronic communication, commonly referred to as "electronic commerce”, which
involve the use of alternatives to paper based methods of communication and
storage of information, to facilitate electronic filing of documents with the
Government agencies and further to amend The Indian Penal Code, The Indian
Evidence Act, 1872, The Banker‟s Books Evidence Act, 1891 and The Reserve Bank
of India Act, 1934 and for matters connected therewith or incidental thereto. The
Information Technology Act, 2000 extend to the whole of India and it applies also to
any offence or contravention there under committed outside India by any person.

Salient Features of The Information Technology Act, 2000

The salient features of The IT Act, 2000 are as follows –

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▪ Digital signature has been replaced with electronic signature to make it a more
technology neutral act.

▪ It elaborates on offenses, penalties, and breaches.

▪ It outlines the Justice Dispensation Systems for cyber-crimes.

▪ The Information Technology Act defines in a new section that cyber café is any
facility from where the access to the internet is offered by any person in the ordinary
course of business to the members of the public.

▪ It provides for the constitution of the Cyber Regulations Advisory Committee.

▪ The Information Technology Act is based on The Indian Penal Code, 1860, The
Indian Evidence Act, 1872, The Bankers‟ Books Evidence Act, 1891, The Reserve
Bank of India Act, 1934, etc.

▪ It adds a provision to Section 81, which states that the provisions of the Act
shall have overriding effect. The provision states that nothing contained in the Act
shall restrict any person from exercising any right conferred under the Copyright Act,
1957.

Applications of The Information Technology Act, 2000

Nothing in The Information Technology Act, 2000 shall apply to documents or

transactions specified in the First Schedule: Provided that the Central Government
may, by notification in the Official Gazette, amend the First Schedule by way of
addition or deletion of entries thereto. Every notification issued shall be laid before
each House of Parliament. Following are the documents or transactions to which the
Act shall not apply –

▪ Negotiable Instrument(Other than a cheque) as defined in The Negotiable

Instruments Act, 1881;

▪ A power-of-attorney as defined in The Powers of Attorney Act, 1882;

▪ A trust as defined in The Indian Trusts Act, 1882;

▪ A will as defined in The Indian Succession Act, 1925 including any other
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testamentary disposition;

▪ Any contract for the sale or conveyance of immovable property or any interest in
such property;

▪ Any such class of documents or transactions as maybe notified by the Central

Government.

Amendments Brought in The Information Technology Act, 2000

The Information Technology Act, 2000 has brought amendment in four

statutes vide section 91- 94. These changes have been provided in schedule 1-4.

▪ The first schedule contains the amendments in the Penal Code. It has widened
the scope of the term “document” to bring within its ambit electronic documents.

▪ The second schedule deals with amendments to the India Evidence Act. It
pertains to the inclusion of electronic document in the definition of evidence.

▪ The third schedule amends the Banker‟s Books Evidence Act. This amendment
brings about change in the definition of “Banker‟s-book”. It includes printouts of data
stored in a floppy, disc, tape or any other form of electromagnetic data storage
device. Similar change has been brought about in the expression “Certified-copy” to
include such printouts within its purview

 The fourth schedule amends the Reserve Bank of India Act. It pertains to the
regulation of fund transfer through electronic means between the banks or between
the banks and other financial institution.

A major amendment was made in 2008. Amendment introduced the Section

66A which penalized sending of “offensive messages”. It also introduced the Section
69, which gave authorities the power of “interception or monitoring or decryption of
any information through any computer resource”. It also introduced penalties for child
porn, cyber terrorism and voyeurism. Amendment was passed on 22 December
2008 without any debate in Lok Sabha. The next day it was passed by the Rajya
Sabha. It was signed by the then President (Pratibha Patil) on 5 February 2009.

Objectives of the Amendments in The Information Technology Act,

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2000:

▪ With proliferation of information technology enabled services such as e -

governance, e-commerce and e-transactions, protection of personal data and
information and implementation of security practices and procedures relating to
these applications of electronic communications have assumed greater importance
and they require harmonization with the provisions of the Information Technology
Act. Further, protection of Critical Information Infrastructure is pivotal to national
security, economy, public health and safety, so it has become necessary to declare
such infrastructure as a protected system so as to restrict its access.

▪ A rapid increase in the use of computer and internet has given rise to new forms
of crimes like publishing sexually explicit materials in electronic form, video
voyeurism and breach of confidentiality and leakage of data by intermediary,
ecommerce frauds like personating commonly known as Phishing, identity theft and
offensive messages through communication services. So, penal provisions are
required to be included in the Information Technology Act, the Indian Penal Code,
the Indian Evidence Act and the Code of Criminal Procedure to prevent such crimes.

▪ The United Nations Commission on International Trade Law (UNCITRAL) in the

year 2001 adopted the Model Law on Electronic Signatures. The General Assembly
of the United Nations by its resolution No. 56/80, dated 12th December, 2001,
recommended that all States accord favorable consideration to the said Model Law
on Electronic Signatures. Since the digital signatures are linked to a specific
technology under the existing provisions of the Information Technology Act, it has
become necessary to provide for alternate technology of electronic signatures for
bringing harmonization with the said Model Law.

▪ The service providers may be authorized by the Central Government or the

State Government to set up, maintain and upgrade the computerized facilities and
also collect, retain appropriate service charges for providing such services at such
scale as may be specified by the Central Government or the State Government.

5.3.2 Information Technology (Amendment) Act, 2008

BRIEF HISTORY

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The Indian Information Technology Act 2000 (“Act”) was a based on the
Model Law on Electronic Commerce adopted by the United Nations Commission on
International Trade Law[1]; the suggestion was that all States intending to enact a law
for the impugned purpose, give favorable consideration to the said Model Law when
they enact or revise their laws, in view of the need for uniformity of the law applicable
to alternatives to paper-based methods of communication and storage of
information. Thus the Act was enacted to provide legal recognition for transactions
carried out by means of electronic data interchange and other means of electronic
communication, commonly referred to as "electronic commerce", which involved the
use of alternatives to traditional or paper-based methods of communication and
storage of information, to facilitate electronic filing of documents with the
Government agencies. Also it was considered necessary to give effect to the said
resolution and to promote efficient delivery of Government services by means of
reliable electronic records. The Act received the assent of the President on the 9th of
June, 2000.

The Act was subsequently and substantially amended in 2006 and again in 2008
citing the following objectives:

 With proliferation of information technology enabled services such as e-

governance, ecommerce and e-transactions, protection of personal data and
information and implementation of security practices and procedures relating to
these applications of electronic communications have assumed greater importance
and they require harmonization with the provisions of the Information Technology
Act. Further, protection of Critical Information Infrastructure is pivotal to national
security, economy, public health and safety, so it has become necessary to declare
such infrastructure as a protected system so as to restrict its access.

 A rapid increase in the use of computer and internet has given rise to new
forms of crimes like publishing sexually explicit materials in electronic form, video
voyeurism and breach of confidentiality and leakage of data by intermediary, e-
commerce frauds like personation commonly known as Phishing, identity theft and
offensive messages through communication services. So, penal provisions are
required to be included in the Information Technology Act, the Indian Penal Code,
the Indian Evidence Act and the Code of Criminal Procedure to prevent such crimes.

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 The United Nations Commission on International Trade Law (UNCITRAL)

in the year 2001 adopted the Model Law on Electronic Signatures. The General
Assembly of the United Nations by its resolution No. 56/80, dated 12th December,
2001, recommended that all States accord favorable consideration to the said
Model Law on Electronic Signatures. Since the digital signatures are linked to a
specific technology under the existing provisions of the Information Technology Act,
it has become necessary to provide for alternate technology of electronic signatures
for bringing harmonization with the said Model Law.

 The service providers may be authorized by the Central Government or

the State Government to set up, maintain and upgrade the computerized facilities
and also collect, retain appropriate service charges for providing such services at
such scale as may be specified by the Central Government or the State
Government.

Information Technology (Amendment) Act, 2008

BRIEF HISTORY

The Indian Information Technology Act 2000 (“Act”) was a based on the Model
Law on Electronic Commerce adopted by the United Nations Commission on
International Trade Law[1]; the suggestion was that all States intending to enact a law
for the impugned purpose, give favourable consideration to the said Model Law when
they enact or revise their laws, in view of the need for uniformity of the law applicable
to alternatives to paper-based methods of communication and storage of information.

Thus the Act was enacted to provide legal recognition for transactions carried
out by means of electronic data interchange and other means of electronic
communication, commonly referred to as "electronic commerce", which involved the
use of alternatives to traditional or paper-based methods of communication and
storage of information, to facilitate electronic filing of documents with the Government
agencies. Also it was considered necessary to give effect to the said resolution and to
promote efficient delivery of Government services by means of reliable electronic

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records. The Act received the assent of the President on the 9th of June, 2000.

The Act was subsequently and substantially amended in 2006 and again in 2008 citing
the following objectives:

 With proliferation of information technology enabled services such as e-

governance, ecommerce and e-transactions, protection of personal data and
information and implementation of security practices and procedures relating to these
applications of electronic communications have assumed greater importance and they
require harmonization with the provisions of the Information Technology Act. Further,
protection of Critical Information Infrastructure is pivotal to national security, economy,
public health and safety, so it has become necessary to declare such infrastructure
as a protected system so as to restrict its access.

 A rapid increase in the use of computer and internet has given rise to new
forms of crimes like publishing sexually explicit materials in electronic form, video
voyeurism and breach of confidentiality and leakage of data by intermediary, e-
commerce frauds like personation commonly known as Phishing, identity theft and
offensive messages through communication services. So, penal provisions are
required to be included in the Information Technology Act, the Indian Penal Code, the
Indian Evidence Act and the Code of Criminal Procedure to prevent such crimes.

 The United Nations Commission on International Trade Law (UNCITRAL) in the

year 2001 adopted the Model Law on Electronic Signatures. The General Assembly of
the United Nations by its resolution No. 56/80, dated 12th December, 2001,
recommended that all States accord favorable consideration to the said Model
Law on Electronic Signatures. Since the digital signatures are linked to a specific
technology under the existing provisions of the Information Technology Act, it has
become necessary to provide for alternate technology of electronic signatures for
bringing harmonization with the said Model Law.

 The service providers may be authorized by the Central Government or the

State Government to set up, maintain and upgrade the computerized facilities and
also collect, retain appropriate service charges for providing such services at such

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scale as may be specified by the Central Government or the State Government.

EXTENT APPLICABILITY OF THE ACT

The Act extends to the whole of India, save as otherwise provided in this
Act. It can also apply to any offence or contravention provided for in the Act, whether
committed in India & outside India by any person, if the act or conduct constituting
the offence involves a computer, computer system or computer network located in
India .

The main provisions of the Act come in to force on the 9 th of June 2000.
Certain provisions were given effect on later dates by issuing specific notifications in
this regards.

The Act shall not apply to documents or transactions specified in the First
Schedule. Every notification issued to amend the first schedule shall be laid before
each House of Parliament. Presently, the First schedule contains the following
entries:

1. A negotiable instrument (other than cheque) as defined in negotiable

instrument Act, 1881.

2. Power of Attorney as defined in P-O-A Act, 1882.

3. A trust as defined in Indian Trusts Act, 1882.

4. A will as defined in Indian Succession Act, 1925 including any other

testamentary disposition by whatever name called.

5. Any contract for sale or conveyance of immovable property or any interest in

such property.

For this purpose every notification issued by the Central Government to add,
amend or delete any item mentioned in the schedule as a pre-requisite place before
both houses of the Parliament for their scrutiny and approval.

The provisions of the Act have an overriding effect, notwithstanding anything

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inconsistent therewith contained in any other law for the time being in force.

The Information Technology (Amendment) Act, 2008 is a significant update to

the original Information Technology Act, 2000 in India. Enacted on October 27, 2009,
it aimed to address emerging challenges in cyberspace and strengthen cybersecurity
measures. Here are some key aspects of the IT (Amendment) Act, 2008:

1. Data Protection and Privacy: The amendment introduced new provisions

related to the protection of personal data and privacy. It outlined regulations
concerning the collection, storage, processing, and transfer of sensitive personal
information. This was a crucial addition given the growing concerns over data privacy
in the digital age.

2. Cyber security Enhancements: The Act included provisions to enhance

cyber security measures, such as the establishment of the Indian Computer
Emergency Response Team (CERT-IN) as the national agency for responding to
cyber security incidents. It also outlined requirements for securing computer systems
and networks, as well as reporting cyber security incidents.

3. Penalties for Cyber Offenses: The amendment expanded the scope of

cyber offenses and increased the penalties for various cybercrimes such as hacking,
identity theft, and cyber terrorism. It introduced stricter punishments to deter
individuals and organizations from engaging in illegal activities online.

4. Intermediary Liability: Building upon the provisions of the original IT Act,

the amendment further clarified the liability of intermediaries such as internet service
providers (ISPs) and online platforms for third-party content. It defined conditions
under which intermediaries could claim immunity from liability while also imposing
obligations on them to take down unlawful content.

5. Electronic Signatures and Authentication: The Act strengthened the

legal framework for electronic signatures and authentication methods, ensuring their
validity and reliability in electronic transactions. It provided guidelines for the use of
electronic signatures and digital certificates issued by Certifying Authorities.

6. Other Provisions: The amendment addressed various other aspects,

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including the recognition of electronic contracts, electronic filing of documents, and

the admissibility of electronic records as evidence in legal proceedings. It aimed to
promote the growth of e-commerce and electronic governance while safeguarding
the interests of stakeholders.

Overall, the IT (Amendment) Act, 2008, played a crucial role in updating and
modernizing India's legal framework for information technology and cybersecurity. It
aimed to address the evolving challenges and opportunities presented by the digital
revolution while promoting trust and confidence in electronic transactions and
communications.

The Information Technology Act (ITA) in India is a comprehensive

legislation that governs various aspects of electronic commerce
and cyber security. Here's a comparison between the Information
Technology Act, 2000 (ITA 2000) and its significant amendment,
the Information Technology (Amendment) Act, 2008 (ITA 2008):

Information Technology Act, 2000 (ITA 2000):

1. Enactment Date: ITA 2000 was enacted on June 9, 2000.

2. Focus: ITA 2000 was primarily focused on providing a legal framework for
electronic governance and e-commerce, aiming to facilitate electronic
transactions and provide legal recognition for electronic records and digital
signatures.

3. Key Provisions:

o Legal recognition of electronic records and digital signatures.

o Regulation of certifying authorities issuing digital certificates.

o Promotion of electronic governance in government processes.

o Addressing cybercrimes and specifying penalties for offenses.

o Establishing adjudicating authorities and the Cyber Appellate Tribunal.

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Information Technology (Amendment) Act, 2008 (ITA 2008):

1. Enactment Date: ITA 2008 was enacted on October 27, 2009.

2. Focus: ITA 2008 aimed to address emerging challenges in cyberspace and

strengthen cyber security measures. It sought to update and enhance the
provisions of ITA 2000 in response to evolving technologies and cyber
threats.

3. Key Amendments:

o Introduction of provisions related to data protection and privacy,

including regulations for the collection, storage, and processing of
personal data.

o Establishment of CERT-IN as the national agency for responding to

cyber security incidents.

o Expansion of cyber offenses and increased penalties for various

cybercrimes.

o Clarification of intermediary liability and obligations for online platforms.

o Strengthening of the legal framework for electronic signatures and

authentication.

o Other provisions aimed at promoting e-commerce and electronic

governance while safeguarding stakeholders' interests.

7.Digital signature are based on ________ key encryption

a)Private

b)public

c)shared

d)internal

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8.In which year India‟s IT Act came into existence?

(a) 2000

(b) 2001

(c) 2002

(d) 2003

9.What is the updated version of the IT Act, 2000?

(a) IT Act, 2007

(b) Advanced IT Act, 2007

(c) IT Act, 2008

(d) Advanced IT Act, 2008

10.Digital signature are created and verified using
a)program
b)Graphical coding
c)Html
d)cryptography

5.4.1 UNIT SUMMARY

Cybercrime refers to criminal activities carried out using computers and the
internet.
Unauthorized access to computer systems or networks.
Cybercrime can lead to financial loss, data breaches, privacy violations, and
damage to reputation.
Strong cyber security measures, such as firewalls and encryption, can prevent
cybercrimes.
Law enforcement agencies investigate and prosecute cybercriminals under
relevant laws, including the ITA.
The Information Technology Act (ITA) in India is a comprehensive legislation
that governs various aspects of electronic commerce and cyber security.
Legal recognition of electronic records and digital signatures.
Regulation of certifying authorities issuing digital certificates.

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Addressing cybercrimes and specifying penalties for offenses.

5.4.2 Glossary

Cyber law "Cyber law" refers to the legal framework that

governs cyberspace, encompassing various
legal issues related to the internet, digital
communications, electronic commerce, and
online activities. It includes both statutes and
regulations developed to address the unique
challenges and opportunities presented by the
digital age.

Cyber crime Cybercrime refers to criminal activities carried

out using computers, networks, and the internet.
These offenses target individuals, businesses,
organizations, and governments, with the aim of
causing harm, financial gain, or disruption.

E governnce E-governance, short for electronic governance,

refers to the use of information and
communication technologies (ICTs) by
governments to enhance the delivery of public
services, improve efficiency, transparency, and
accountability, and foster citizen participation in
decision-making processes.

ITA 2000 The Information Technology Act, 2000 (ITA

2000) is a crucial piece of legislation enacted in
India to provide a legal framework for electronic
governance and e-commerce.

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ITA 2008 The Information Technology (Amendment) Act,

2008 is a significant update to the original
Information Technology Act, 2000 in India. The
IT (Amendment) Act, 2008 was enacted on
October 27, 2009, and it introduced several
amendments to the IT Act, 2000, to address
emerging challenges in cyberspace.

Self – Assessment Questions

1. What is Cyber law?

2. What is the signature of E- governance?
3. What is cyber crime? What are the difference types of cyber
crime?
4. What are the object and scope of the information technology
act 2000?
5. What are the object and scope of the information technology
act 2008?
6. Discuss the factors contributing to cyber crime?

Activities / Exercises / Case Studies

Case Study: Phishing Attack on a Financial Institution

Background: A prominent financial institution, XYZ Bank, experienced a

sophisticated phishing attack targeting its customers. The attackers sent deceptive
emails posing as legitimate representatives of the bank, urging recipients to update
their account information to avoid service disruptions.

Answers for check your progress 1.b) non- bail able

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2.c) digital signature

3.a) domain name dispute

4.a) Electronic governance

5.c) C2C

6.d)All of the above

7.b)public

8.a)2000

9.c)IT Act 2008

10.d)Cryptography

Suggested Readings

1. https://www.meity.gov.in/content/cyber-laws

2. https://www.shiksha.com/online-courses/what-is-cyber-law-st603-tg165

3. https://iritm.indianrailways.gov.in/uploads/files/1360312590693-
12.Cyber-Laws-chapter-in-Legal-Aspects-Book.pdf

4. https://intellipaat.com/blog/what-is-cyber-law/

5. https://www.indiacode.nic.in/bitstream/123456789/13116/1/it_act_2000_u
pdated.pdf

6. https://cleartax.in/s/it-act-2000

Open-Source E-Content Links

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https://youtu.be/inWWhr5tnEA?si=Kn
MpQpiTHzCJQhgR

https://youtu.be/if5PU1SQ7-
M?si=dGVqW_x6CVJuUyDy

https://youtu.be/MMlr0AyLYmI?si=ER
SXyl_vz_gZcfjb

https://youtu.be/GysHf5kIpW0?si=13R
b_8VKII5qElGy

https://youtu.be/q0ZkowJxxUM?si=4S
S97WJSSAf3Z323

References

1. https://www.meity.gov.in/content/cyber-laws

2. https://www.shiksha.com/online-courses/what-is-cyber-law-st603-tg165

3. https://iritm.indianrailways.gov.in/uploads/files/1360312590693-
12.Cyber-Laws-chapter-in-Legal-Aspects-Book.pdf

4. https://intellipaat.com/blog/what-is-cyber-law/

5. https://www.indiacode.nic.in/bitstream/123456789/13116/1/it_act_2000_u

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pdated.pdf

6. https://cleartax.in/s/it-act-2000

206 Periyar University – CDOE - | Self Learning Material- BBA