ASSIGNMENT DRIVE WINTER 2014

PROGRAM/SEMESTER MBADS/ MBAFLEX/ MBAHCSN3/ MBAN2 SEM 3 PGDBMN/

PGDENMN/ PGDFMN/ PGDHRMN/ PGDHSMN/ PGDIB/ PGDISMN/ PGDMMN/ PGDOMN/
PGDPMN/ PGDROMN/ PGDSCMN/ PGDTQMN SEM 1
SUBJECT CODE & NAME- MB0051-Legal Aspects of Business

Q1. Discharge refers to the termination of contractual relationship between the parties.
Explain the statement along with different modes of discharging a contract.
(Explanation of service positioning, Explanation of modes) 2+8=10
Answer:
Service positioning:
A business must set itself apart from its competition. To be successful it must identify

and promote

itself as the best provider of attributes that are important to target customers. positioning strategy must
establish position for firm or product in minds of customers should be distinctive, providing one simple,
consistent message, must set firm/product apart from competitors and must focus its efforts.
Modes of discharging a contract:
Discharge refers to the termination of contractual relationship between the parties. The contract ceases to
operate, i.e., when the rights and obligations under the contract ends. According to Sections 73-75 of the
Contracts Act, a contract may be discharged in several modes.
1. Performance or tender
The obvious mode of discharge of a contract is by performance, where the parties have done whatever was
contemplated under the contract. Thus, where A contracts to sell his/her car to B for Rs. 1,85,000, as soon as
the car is delivered to B and B pays the agreed price for it, the contract comes to an end by performance. The
tender or offer of performance has the same effect as performance. If a promisor tenders performance of his/her
promise but the other party refuses to accept it, the promisor stands discharged of his/her obligations.
2. Mutual consent
Section 62 of the Act states that if the parties to a contract agree to substitute a new contract for the old or
rescind or alter the terms, the original contract is discharged. A contract may be terminated by mutual consent
in any of the six ways, viz., novation, rescission, alteration and remission, waiver and merger. Novation means
substitution of a new contract for the original one.

3. Impossibility of performance
A contract may be discharged because of impossibility of performance.
There are two types of impossibility:

One that is inherent in the transaction (i.e., the contract)

One that may emerge later by the change of certain circumstances material to the contract.

4. Operation of law
Discharge by operation of law may take place in three ways:
(i) By death of the promisor in cases involving personal skill or ability
(ii) By insolvency, where an order of discharge is passed by an insolvency court and the insolvent stands
discharged of all debts incurred previous to his adjudication.
(iii) By merger

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Q2. Explain the meaning of Power of Attorney, its types and clause related to registration.
(Meaning, Types, Registration) 2, 2, 6
Answer:
Power of Attorney:
Power of attorney is defined by Section 2(21) of the Stamp Act as including any instrument not chargeable with
a fee under the law relating to court fees for the time being in force, that empowers a specified person to act
for and in the name of the person executing it. It is the Powers of Attorney Act, 1882, which deals with the
subject but does not define it. In common parlance, a power of attorney is an instrument or a deed by which a
person is empowered to act for and in the name of the person executing it. The person executing the deed is

known as the principal or donor and the one in whose favor it is executed is the agent, or the power agent or the
power of attorney agent.
Types:
Power of attorney may be special or general. If the deed conferring power by one to another relates to one single
transaction, it is known as special power of attorney. If the deed conferring power relates to several transactions
it is general power of attorney.

Registration:
As a general rule, registration of power of attorney is not necessary. However, if it authorizes the donee to
recover the rent of an immovable property of the donor for the donees benefit, it would require a registration.
Also, a power creating a charge in favor of the donee upon an immovable property referred to therein will need a
registration. Further, Section 32 (c) of the Registration Act, 1908, requires that where a document is presented
for registration by the agent of a person entitled to present it for registration, such agent must be duly
authorized by power of attorney executed and authenticated in manner as mentioned in Section 33 of the Act.
Such a power of attorney is to be executed before and authenticated by a registrar or sub-registrar. Unregistered
power executed in a foreign country before a public notary can be used by the agent for presentation of
document for registration. The power of attorney, however, executed before a public notary in India will not
enable the agent to present any document for registration under the Registration Act, 1908.
Power of attorney is required to be embossed on non-judicial stamp paper. The amount of stamp duty varies
with different types of powers as described in the Stamp Act and varies in different states of India. Section 4 of
the Power of Attorney Act, 1882, provides that the original deed of power can be deposited in the High Court in
whose jurisdiction the principal resides. Moreover, a certified copy of the deed can be obtained from the High
Court. Such certified copies are equal to originals and are binding on all.

Q3. Explain the procedure of registration of partnership firms.

(Explanation) 10
Answer:
Registration partnership of Firms (Sections 58-59)

Application for registration

Section 58 lays down the procedure for registration of partnership firms. A partnership firm may be registered
at any time by post, or delivering to the Registrar of Firms of the area in which the business of the firm is
situated or proposed to be situated, a statement in the prescribed form and accompanied by the prescribed fee,
stating:

Firms name
Place or the principal place of business
Names of any other places where the firm carries on business
Date when each partner joined the firm
Names in full and addresses of the partners, and
Duration of the firm

The statement must be signed by all partners, or by their agents especially authorized in that behalf and duly
verified. When the Registrar of Firms is satisfied that the provisions of Section 58 have been duly complied with,
he/she registers the firm by recording an entry of the statement in a register called the Register of Firms and
files the statement (Section 59). The Registrar then issues a Certificate of Registration. Registration is effective
from the date when the Registrar files the statement and makes entries in the Register of Firms.
Registration of firms is optional
The Act does not provide for compulsory registration of firms. It is optional and there is no penalty for nonregistration. However, Section 69 has effectively ensured registration of firms by introducing certain disabilities
that an unregistered firm suffers from.

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Q4. What are the circumstances under which breach of condition is treated as breach of
warranty?
(Explanation) 10 marks
Answer:

Circumstances under that Breach of condition to be treated as breach of warranty

According to Section 13, under certain circumstances, a breach of condition is to be treated as a breach of
warranty, i.e., the right to repudiate the contract is deemed to have been lost. These circumstances are:
Where a contract of sale is subject to any condition to be fulfilled by the seller, the buyer may either:

Waive the condition

Elect to treat the breach of the condition as a breach of warranty.

In such situations, the buyer is active and is either waiving the condition or electing to treat the breach of
condition as a breach of warranty. If the buyer decides to waive the condition, he/she cannot later on insist that
the condition be fulfilled. Where the buyer treats the breach of condition as a breach of warranty, he/she has to
give a notice to the seller to that effect.
There is also a compulsory treatment of breach of condition as a breach of warranty. Where the contract of sale
is not severable and the buyer has accepted the goods or part thereof, the breach of any condition to be fulfilled
by the seller can only be treated as a breach of warranty. However, the agreement may provide otherwise, i.e.
may permit repudiation of the contract in spite of the acceptance of the goods by the buyer.

Q5 Explain the procedure for filing a complaint and admission of complaint in consumer
protection act.
(Filing a complaint-5 marks, Admission of complaint-5 marks) 10 marks
Answer:
Procedure for filing a complaint
There is no fee for filing a complaint before any of the aforesaid bodies. The complainants or their authorized
agent can present the complaint in person.
The complaint can also be sent by post to the appropriate Forum/ Commission. The complaint should be
addressed to the President of the Forum/Commission. A complaint should contain the following information:

Name, description and address of the complainant

Name, description and address of the opposite party or parties, as the case may be, as far as they can be

ascertained
Facts relating to complaint and when and where it arose
Documents, if any, in support of the allegations contained in the complaint
Relief that the complaint is seeking.

Admission of complaint (Section 13)

Procedure in respect of goods where the defect requires no testing or analysis: The District Forum
should send a copy of admitted complaint to the opposite party mentioned in the complaint within 21 days of
admission. He should be instructed to provide his version of the case within 30 days or may be granted a further
extension of 15 days, at the discretion of the Forum. If the opposite party disputes the allegations or fails to take
any action, the forum can settle the disputes as specified in the Act.
Procedure in respect of goods where the defect requires analysis or testing: With respect to goods
which need to be tested or analyzed for defects, the District Forum should obtain a sample of goods from the
complainant and should take steps to seal and authenticate the sample and send it to the appropriate laboratory
for testing or analysis. This exercise should be carried out to ascertain whether the goods suffer from defects
alleged by the complainant and the results of such tests must be provided within 45 days. This period may be
extended by the Forum, if necessary. The complainant is obliged to bear the necessary charges towards the
analysis/testing and needs to deposit these fees to the forum. The Forum, in turn, remits the amount deposited
to the laboratory which undertakes the test or analysis. Upon receiving the report, the Forum then forwards a
copy of the same, along with its remarks, to the Opposite party seeking clarification. Any disputes with respect
to the laboratorys findings must be countered by written objections from the concerned party. The Forum then
provides reasonable opportunity for both the complainant and the opposite party to be heard.

Q6 Write short notes on:

a) Shares and its classification
b) Meetings and its classification
(Meaning and classification-5 marks, Meaning and classification-5 marks) 10 marks
Answer: a)
Shares and its classification
Section 2 (46) defines a share as a share in the share capital of a company and includes stock except where a
distinction between stock and share is expressed or implied. This definition does not encompass the meaning
of a share. A share of a company in the hands of a shareholder signifies a bundle of rights and obligations
[Viswanath vs. East India Distilleries (1957) 27 Comp. Cas. 175]. However, a share is not a negotiable
instrument [C.I.T. vs. Associated Industrial Dev. Co. (1969) 2 Comp. L.J. 19] Section 83 requires that each
share in a company having a share capital must be distinguished by its appropriate number. The Companies
(Amendment) Act, 1999, amended Section 82 to the effect that for the word shares, the words shares and
debentures shall be substituted.
The most common classes of shares are:

Preference

Equity or Ordinary
Deferred or Founders

A public company and a private company that is a subsidiary of a public company may not issue shares other
than equity, preference and Cumulative Convertible Preference Shares (CCPS).
Preference Shares
A preference share is one that carries the following two rights over holders of equity shares:

A preferential right in respect of dividends at a fixed amount or at a fixed rate, and

A preferential right in regard to repayment of capital on winding up.

Equity shares
Equity share means a share that is not preference share (Section 85). The rate of dividend is not fixed. The
Board of Directors recommends the rate of dividend that is then declared by the members at the Annual General
Meeting. Before recommending dividend on equity shares, the Board of Directors have to comply with the
provisions of law as regards depreciation, transfer of a minimum amount to reserves, etc. The holders of equity
shares have voting rights in proportion to the paid-up equity capital of the company (Section 87 (1)).
Cumulative Convertible Preference Shares (CCPs)
The Government of India vide its guidelines dated 19 August 1985 permitted issue of another class of shares by
public limited companies, called cumulative convertible preference shares.
Deferred or founders shares
A private company can issue shares of a type other than those discussed above (Section 90). Thus, it may issue
what are known as deferred shares. As deferred shares are normally held by promoters and directors of the
company, they are usually called founders shares.
Non-voting shares
Non-voting shares as the term suggests are shares that carry no voting rights. These are contemplated as
altogether a different class of shares which may carry additional dividends in lieu of the voting rights. The
Companies (Amendment) Act, 2000, provided for issue of such type of equity shares under Section 86.
Sweat equity shares
The Companies (Amendment) Act, 1999, allowed issue of sweat equity shares subject to fulfillment of certain
conditions. The new Section 79A was inserted for this purpose.
b) Meetings and its classification:
Need for meetings

A company is an artificial person and therefore, must act through some human intermediary. The various
provisions of law empower shareholders to do certain things. They are specifically reserved for them to be done
in companys general meetings. Section 291 empowers the Board of Directors to manage the affairs of the
company. In this context, meetings of shareholders and directors become necessary. The Act has made
provisions for following different types of meetings of shareholders:
(i) Statutory Meeting; (ii) Annual General Meeting; (iii) Extraordinary General Meeting; and (iv) Class Meetings
Statutory meetings (Section 165)
The most important legal provisions regarding statutory meetings are:

It is required to be held only by a public company having share capital. A private company or a public

company registered without share capital is under no obligation to hold such a meeting.
It must be held within a period of not less than one month and not more than six months from the date

on which the company is entitled to commence business.

At least 21 days before the day of meeting, a notice of the meeting is to be sent to every member stating it
to be a Statutory Meeting.

Annual general meeting (AGM) (Sections 166-168)

As the name signifies, this is an annual meeting of a company. The provisions relating to this meeting are:
Every company, whether public or private, having a share capital or not, limited or unlimited must hold
this meeting.
The meeting must be held in each calendar year and not more than 15 months shall elapse between two
meetings. However, the first AGM may be held within 18 months from the date of its incorporation and
if such general meeting is held within that period, it need not hold any such meeting in the year of its
incorporation or in the following year. The maximum gap between two such meetings may be extended
by three months by taking permission of the Registrar, who may so allow for any special reason. The

meeting must be held

On a day that is not a public holiday
During business hours

At the registered office of the company or at some other place within the city, town or village in which the
registered office is situated. (Section 166 (2))
Extraordinary Meeting (EGM) Section 169
Clause 47 of Table A (Schedule I) provides that all general meetings other than AGMs shall be called the
EGMs. The legal provisions as regards such meetings are:
EGM is convened for transacting some special or urgent business that may arise in between two AGMs, for
instance, change in the objects or shift of registered office or alteration of capital. All business transacted at such

meetings is called special business. Therefore, every item on the agenda must be accompanied by an
Explanatory Statement.
An EGM may be called by:

Directors of their own accord

Directors on requisition
Requisitionists themselves
The Tribunal.

The Board of Directors may call a general meeting of the members at any time by giving not less than 21 days
notice. A shorter notice may, however, be held valid if consent is accorded thereto by members of the company
holding 95 percent or more of the voting rights (Section 171).
Class Meetings
A company has two classes of shares equity shares and preference shares. The class meetings are held for
these different classes of shareholders, as and when their rights are affected.

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