Legal Aspects of Business

RULE MADE BY AUTHORITY FOR THE PROPER REGULATION OF A COMMUNITY OR SOCIETY OR FOR CORRECT CONDUCT OF LIFE. BY SAURABH JAIN

Introduction
In words of Woodrow Wilson Law is that portion of

the established habit and thought of mankind which has gained distinct and formal recognition in the shape of uniform rules backed by the authority and power of the govt.

Definition & Scope of Business Law

The Term Business Law may be defined as that

branch of law which comprises laws concerning trade, industry & commerce. Ignorance of law is no excuse The breach of law is omission to do something for which the law casts an obligation upon the person to do or doing something which the law refrains. That is why it is accepted that Every person is presumed to know the law

Law of Contract
SECTION 2(H) OF INDIAN CONTRACT ACT: AN AGREEMENT ENFORCEABLE BY LAW IS A CONTRACT

Definition of Contract
A contract is an agreement the object of which is to create legal obligation i.e. a duty enforceable by law. A contract Essentially consists of two elements: 1. An Agreement 2. Legal Obligation i.e. a duty enforceable by law.

Agreement
As per section 2(e): Every promise & every set of promises forming the consideration for each other, is an agreement. So, a promise is an agreement. What is a promise? Sec 2(b) defines the term as: when the 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.

Characteristics of an Agreement
Plurality of persons: There must be two or more persons to make an agreement because one person cannot enter into an agreement with himself Consensus-as-idem (meeting of minds): Both the parties to an agreement must agree about the subject-matter of the agreement in the same sense and at the same time

Legal Obligation
If an agreement is incapable of creating a duty enforceable by law, it is not a contract. All contracts are agreements but all agreements are not contracts Agreements of moral, social or religious nature are not contracts because they are not likely to create duty enforceable by law for the simple reason that the parties never intended that they should be attended by legal consequences. As against that in business agreements the presumption is usually that the parties intend to create legal relation.

Essential Elements of a Valid Contract

According to Section 10, all agreements are contracts if they are made by the free consent of the parties, competent to contract, for a lawful consideration, with a lawful object, are not expressly declared by the act to be void, and , where necessary, satisfy the requirement of the law as to writing or attestation or registration.

Essential Elements of a Valid Contract

Offer & acceptance Intention to create legal obligation Lawful Consideration Capacity of parties Free Consent i. Coercion ii. Undue influence iii. Fraud iv. Misrepresentation v. Mistake 6. Lawful Object 7. Writing & registration 8. Certainty 9. Possibility of performance 10. Not expressly declared void
1. 2. 3. 4. 5.

Essential Elements of a Valid Contract

Offer & acceptance:

There must be a lawful offer and a lawful acceptance of the offer, thus resulting in an agreement Intention to create legal obligation There must be an intention among the parties that the agreement should be attached by legal consequences and create legal obligation. Lawful Consideration Consideration is the price paid by one party for the promise of the other. An agreement is legally enforceable only when each of the parties to it gives something & gets something. But only those considerations are valid that are lawful

Essential Elements of a Valid Contract

Capacity of parties

The parties to the agreement must be competent to contract, otherwise it cannot be enforced by a court of law. In order to be competent the parties must: o Be of Age of majority o Be of Sound mind o Not be disqualified from contracting by any law to which they are subject. If any party to the agreement suffers from o Lunacy o Idiocy o Drunkenness The agreement is not enforceable by law

Essential Elements of a Valid Contract

Free Consent

Consent means that the parties must have agreed upon the same thing in the same sense (sec13). There is absence of free consent if the agreement is induced by: i. Coercion ii. Undue influence iii. Fraud iv. Misrepresentation v. Mistake If the agreement is entered into by any of the first four factors, the contract is voidable & cant be enforced by the party guilty of these factors. The other party can either reject the contract or accept it. If the agreement is induces by mutual mistake which is material to the agreement, it would be void ( section20)

Essential Elements of a Valid Contract

Lawful Object

The object for which the agreement has been entered into must not be fraudulent or illegal or immoral or opposed to public policy or must not imply injury to the person or property of another(section 23). If the object is illegal for one or the other reasons mentioned above the agreement is void
Writing & registration

A contract may be oral or in writing. But in certain special cases it lays down that the agreement, to be valid, must be in writing or/and registered. For example: i. An arbitration agreement must be in writing as per the arbitration and conciliation act, 1996 ii. An agreement for a sale of immovable property must be in writing and registered under the Transfer of Property Act 1882

Essential Elements of a Valid Contract

Certainty

Section 29 of the contract act says Agreements, the meaning of which is not certain or capable of being made certain, are void. It must be possible to ascertain the meaning of the agreement, for otherwise, it cant be enforced
Possibility of performance

Section 56, an agreement to do an act impossible in itself is void.

Not expressly declared void

Section 24-30 specifies certain types of agreement which have been expressly declared to be void. For example : An agreement in restraint of marriage An agreement in restraint of trade An agreement by way of wager have been expressly declared void under sections 26, 27 & 30 respectively.

KINDS OF CONTRACT

Kinds of contract from the Point of View of Enforceability

Valid Contracts A contract in which all the essentials of a valid contract as mentioned above are present Voidable Contracts Section 2(i), an agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract. The aggrieved party must exercise his option of rejecting the contract within a reasonable time & before the rights of the third parties intervene. Other circumstances under which a contract becomes voidable are: i. When a contract contains reciprocal promises & one party prevents the other from performing his promise ii. When a party to the contract promises to do a certain thing within a specifies time, but fails to do it, then the contract becomes voidable at the option of the promisee. Consequences of rescission of voidable contract Section 64 says, when a person at whose option a contract is voidable rescinds it, the other party thereto need not perform any promise therein contained in which he is a promisor. If the party rescinding a voidable contract has received any benefit from the another party to such a contract, he must restore such benefits to the person from whom it was received.

Kinds of contract from the Point of View of Enforceability

Void Contracts Literally Void means not binding by law. Accordingly the term void contract implies a useless contract which has no legal effect at all. Such a contract is a nullity. Section 20(j) defines: a contract which ceases to be enforceable by law becomes void, when it ceases to be enforceable. The reasons which transform a valid contract into a void contract, as given in the contract act are: i. Supervening Impossibility(section 56) : a contract becomes void by impossibility of performance after the formation of the contract. ii. Subsequent illegality (section 56): for example A agrees to sell B 100 bags of wheat at Rs 1650 per bag. Before delivery, the govt. bans private trading of wheat, the contract becomes void iii. Repudiation of a voidable contract: a voidable contract becomes void when the party, whose consent is not free, repudiates the contract. iv. In case of a contract contingent on the happening of an uncertain future event, if that event becomes impossible.

Kinds of contract from the Point of View of Enforceability

Unenforceable Contracts Its a valid contract in itself, but is not capable of being enforced in a court of law because of some technical defect such as absence of writing , registration or requisite stamp etc.

Illegal & unlawful Contracts The word illegal means contrary to law and contract means an agreement enforceable by law so an illegal contract is an oxymoron, because it means an agreement enforceable by law & contrary to law

Kinds of contract from the Point of View of Mode of Creation

Express Contract

Where both the offer & acceptance constituting an agreement enforceable at law are made in words spoken or written, its an express contract. Implied Contract Where both the offer and acceptance constituting an agreement enforceable at law are made otherwise than in words i.e., by acts and conduct of the parties, its an implied contract Constructive or quasi-contract These contracts do not arise by virtue of any agreement, expressed or implied between the parties but the law infers or recognises a contract under certain special circumstances. For example, liability of person to whom money is paid under mistake to repay it back cannot be said to arise out of any contract even in its remotest sense, as there is neither an offer or acceptance nor consent.

Kinds of contract from the Point of View of Extent of Execution

Executed Contract

When both the parties have, completely performed their share of obligation and nothing remains to be done by either party under the contract. Where only of the parties to a contract has performed his share of obligation and the other party is still to perform his share of obligation, then also the contract is called execute Executory Contract When both the obligations are outstanding, one on either party to the contract, either wholly or in part, at the time of the formation of the contract.

Offer- sec 2(a)

1) An Offer may be express or implied 2) An offer must contemplate to give rise to legal

consequences 3) The Terms of the offer must be certain & not vague 4) An invitation to offer is not an offer (self service system in a restaurant) 5) An offer may be specific or general 6) An offer must be communicated to the offerree 7) An offer should not contain a term the non-compliance of which would amount to acceptance 8) An offer can be made subject to any terms & conditions 9) Two identical cross-offers do no make a contract

Lapse & revocation of Offer

1) An offer lapses after a stipulated or reasonable time 2) An offer lapses by not being accepted in a mode

3) 4)
5) 6) 7)

prescribed, of if no mode if no mode is prescribed, in some usual or reasonable manner An offer lapses by rejection An offer lapses by the death or insanity of the offeror or the offeree before acceptance An offer lapses by revocation Revocation by non- fulfillment of a condition precedent to acceptance An offer lapses by subsequent illegality or destruction of the subject matter

Acceptance- 2(b)
1) Acceptance must be given only by the person to 2)

3)

4)

5)
6)

7)

whom the offer is made Acceptance must be absolute & unqualified Acceptance must be expressed in some usual & reasonable manner, unless the proposal prescribes the manner in which its to be accepted Acceptance must be communicated by the acceptor Acceptance must be given within a reasonable time & before the offer lapses &/or revoked Acceptance must succeed the offer Rejected offers can be accepted only, if renewed

Consideration- 2(d)
When at the desire of the promisor, the promissee or any

other person has done or abstained from doing something such act or abstinence or promise is called a consideration of a promise No consideration No Contract A consideration must move at the desire at the promisor Consideration may move from the promissee or any other person Consideration may be past, present or future. Consideration must be something of value

Consideration- 2(d)
Exceptions to the rule No consideration No contract 1. Agreement made on account of natural love & affection 2. Agreement to compensate for past voluntary services 3. Contribution to charity 4. Completed gift 5. Contract to agency 6. Remission by the promisee, of performance of the promise

Capacity of parties
Minor Minors Agreements 1.An agreement by a minor is absolutely void & inoperative (no restitution) 2.Beneficial agreements are valid contracts (exception: contracts of apprenticeship & service by a minor) 3.No ratification on attaining the age of maturity

Capacity of parties
1.The rule of estoppel does no apply to a minor (section 115

explains estoppel: where one person has by his declaration, act or omission, intentionally caused or permitted another person to believe a thing to be true & to act upon such belief, neither he nor his representatives shall be allowed, in any suit or proceeding between himself & such person or his representative, to deny the truth of that thing 2.Minors liability for necessaries (its a quasi contract, tho the minor is not personally liable it is his property only which is liable) 3.Specific performance (a contract entered into on behalf of a minor, by his guardian, is binding on the minor, provided the contract is for the benefit of the minor & the guardian has the authority to enter such a contract)

Capacity of Parties
1.Minor partner (section 30 of Indian partnership act says, a

minor can be admitted to the benefits of partnership with consent of all the other partners) 2.Minor Agent (sec 184, but not personally liable for any breach or negligence) 3.Minor & insolvency 4.Contract by minor & adult jointly (minor has no liability) 5.Surety for a minor 6.Position of minors parents (liable only when the minor is contracting as an agent for the parents) 7.Minor shareholders 8.Minors liability in tort (a tort is a civil wrong , normally the remedy is damages)

Persons of Unsound Mind

Whats a sound mind: Section 12 says A person is said to be of sound mind for the purpose of making a

contract, if at the time when he makes it, he is capable of understanding it & forming a rational judgment as to its effects upon his interests. i. A person whose usually of unsound mind, but occasionally of sound mind, may make a contract ii. A person whose usually of unsound mind, but occasionally of sound mind, may not make a contract when he is of unsound mind. Unsound mind may arise from: a) Idiocy b) Lunacy or insanity c) Drunkenness d) Hypnotism e) Mental decay Effects of agreements made by persons of unsound mind???

Disqualified Persons
Alien/foreign Enemies (contracts entered into before the

war stands suspended, but can be revive after the war is over) Foreign sovereigns & ambassadors (they can sue but cant be sued without obtaining prior sanction of the central govt.) Convict (whose found guilty & imprisoned) Married women (cant enter into a contract with respect to her husbands property) Insolvent (he can enter into certain contracts like incurring debts, purchase property or be an employee but cant sell his property)

Free Consent
Two or more persons are in consent when they agree upon the same thing in the same sense. Consent is not free when its not caused by: Coercion (sec 15): Committing or threatening to commit any act forbidden by IPC Unlawful detaining or threatening to detain any property with intention to case any person to enter into an agreement Undue influence (sec 16)

Free Consent
Misrepresentation (sec 18) A representation means, a statement of fact made by one party to the other, either before or at the time of contract, relating to some matter essential to the formation of the contract, with an intention to induce the other party to enter into the contract. It may be expressed or implied. Misrepresentation means & includes: a) The positive assertion of unwarranted statements of material facts believing them to be true; b) Any breach of duty which brings an advantage to the person committing it by misleading another to his prejudice. c) Causing mistake about subject matter innocently.

Free Consent
Essentials of Misrepresentation i. There should be a misrepresentation , made innocently, with an honest belief as to its truth & without any desire to deceive the other party. Either expressly or impliedly ii. The representation must relate to facts material to the contract & not to mere opinion or hearsay iii. The representation must be, or must have become untrue. iv. The representation must have been instrumental in inducing the other party to enter into a contract Mistake (sec 20, 21 & 22)

Mistake
An erroneous belief concerning anything Mistake by Law 1. Mistake of law of the country 2. Mistake of foreign law
Mistake by Fact 1. Bilateral Mistake

2.

a) Both the parties must be under the Mistake. b) Mistake must relate to some fact & not judgment or opinion. c) The fact must be essential to the agreement (quality, quantity, existence, identity, title of the subject matter) Unilateral Mistake

Free Consent
The relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other. He uses the position to obtain an unfair advantage over the other Fraud (sec 17) means & include: i. The representation that a fact is true when its no true by one who does not believe it to be true ii. The active concealment of a fact by a person who has knowledge or belief of the fact (Caveat Emptor) iii. A promise made without any intention of performing it iv. Any other act fitted to deceive (all tricks, cunning & unfair way that is used to cheat anyone) v. Any such act or omission as the law specially declares to be fraudulent (ex: sec55 of the transfer of property act , the seller is bound to disclose all material facts about the property)

Can Silence be Fraudulent?

As a rule mere silence is not fraud as there is no duty on a party cast by law 2. The circumstances of the case are such that, it is the duty of the person keeping silence to speak like contracts uberrimae fidei (utmost good faith) : a) fiduciary relationship (broker) b) Contracts of Insurance c) Contracts of Marriage Engagement d) Contracts of family Settlement e) Share allottment contracts 3. Silence is, in itself, equivalent to speech Effects of Fraud I. Rescission II. Restitution III. Damages
1.

Difference between Fraud & Misrepresentation

Fraud
Misrepresentation

Deliberate

Innocent

Civil wrong( can claim

Only rescission
If the party had means

damages beyond rescission Excepting the fraud by silence, the contract is voidable in all other cases

to discover the truth it can prevent the right to rescind the contract

Legality of object & consideration

What considerations & objects are unlawful? 1. If its forbidden by law 2. If its of such nature that, if permitted, it would defeat the provisions of any law 3. If it is fraudulent 4. If it involves or implies injury to the person or property of another 5. If the court regards it as immoral (sexual immorality) 6. If the court regards it as opposed to public policy

Void Agreements
a) b) c) d)

Agreements by a minor or a person of unsound mind (sec 11) Agreements made under bilateral mistake (sec 20) Agreements with unlawful object & consideration (sec 23) Agreements made without consideration (sec 25)

Expressly Declared Void Agreements 1. Agreement in restraint of marriage (26) 2. Agreement in restraint of trade (27) 3. Agreement in restraint of legal proceedings (28) 4. Agreements the meaning of which is uncertain(29) 5. Agreements by way of wager (30) 6. Agreements contingent on impossible events (36) 7. Agreements to do impossible acts (56)

Contingent Contract
Sec 31 : A contingent contract is a contract to do or not do something, if some event, collateral to such contract does or doesnt happen. Collateral event: an event which is neither a performance directly promised as part of the contract, nor the whole of the consideration for a promise Essentials of a Contingent Contract 1. The performance of such a contract depends upon the happening or not-happening of some future uncertain event. 2. The future uncertain event is collateral.

Comparison
Contingent Contract
Wagering Agreement

Its a valid contract

Its absolutely void

The parties have real

Parties are only

interest in occurrence or non occurrence of events Future uncertain event is merely collateral

interested in winning or losing of the bet amount Its the sole determining factor of the agreement

Performance of Contracts
1. Who can demand performance? Only the Promisee 2. By whom contracts must be performed? a) By the promisor himself b) By promisors agent c) By his legal representatives d) Performance by a third person

3.Order of performance of Reciprocal Promises 1. Mutual & independent 2. Mutual & dependent 3. Mutual & concurrent 4. Consequences where a party prevents performance

Discharge of Contract
1. Discharge by Performance a) Actual Performance b) Attempted performance or tender i. It must be unconditional ii. It must be made at proper time & place iii. It must be of the whole obligation iv. It must give reasonable opportunity to the promisee to

inspect the goods v. Must be made by a person whose in a position & capable of performing the promise vi. Must be made to the proper person vii. If there are joint promisee, tender made to any one of them is a valid tender Effects of refusal to accept a valid tender?

Discharge of Contract
Discharge by mutual consent or agreement (62 & 63) a) Novation (62) b) Alteration c) Rescission d) Remission (63) e) Waiver Discharge by supervening impossibility or legality a) Impossibility at the time of contract b) Subsequent impossibility i) Destruction of subject matter ii) Failure of ultimate purpose iii) Death or personal incapacity of promisor iv) Change of law v) Outbreak of war

Discharge of Contract
Discharge by lapse of time Discharge by operation of law a) Death b) Insolvency c) Merger Discharge by breach of contract a) Anticipatory breach i) Expressed breach ii) Implied breach Effects of anticipatory breach 1) Rescission or claim damages 2) He may elect not to rescind and wait for the other party to perform till the time mentioned in the contract Actual breach

Remedies for breach of Contract

a) b)

c) d)

e)

Rescission Suit for damages i) Ordinary Damages ii) Special Damages iii)Exemplary, punitive or vindictive damages (exceptions: breach of contract to marry, dishonor of cheque) iv)Nominal damages Suit upon quantum meruit (as much as is earned or in proportion to the work done) Suit for specific performance Suit for an injunction

Indemnity
Sec 124:A contract by which one party saves the other from loss caused to him by the conduct of the promisor himself or by the conduct of any other person is called a contract of indemnity. Rights of Indemnity holder when sued (sec 125) He can recover all damages which he maybe compelled to pay in respect of suit to which the promise to indemnify applies Can claim the cost of suit

Guarantee
Sec 126: A contract of guarantee is a contract to perform the promise, or discharge the liability of the third person in case of his default The person who gives the guarantee is called the guarantor or surety The person in whose been guaranteed for is called principal debtor The person whom the guarantee is given is called creditor Like all other contracts a contract of guarantee must also satisfy the essential elements of a valid contract Liability of the surety ?

Difference b/w Indemnity & Guarantee

Indemnity
There are two parties Object is for the

Guarantee
There are three parties

reimbursement of loss There is only one contract The liability is of primary nature Such a contract is independent without any request from the debtor or third party

Object is for the security

of the debt There are three contracts The liability is of secondary nature The surety should give guarantee only at the request of the debtor

Revocation of Continuing Guarantee

By notice of revocation by the surety (sec 130) By death of surety (sec 131) By variance in terms of contract (sec 133) By release or discharge of principal debtor (sec 134) By arrangement with principal debtor (sec 135) By creditors act or omission impairing suretys eventual remedy (sec 139) 7. Loss of security (sec 141)
1. 2. 3. 4. 5. 6.

Discharge of Guarantee All the above &: 8. Invalidation of the contract of guarantee.

Bailment
Sec 148: A bailment is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them Essential features: 1. It is the delivery of movable goods by one person to another (not being his servant); (physical delivery & constructive delivery) 2. The goods are delivered for some purpose & not by mistake 3. When the purpose is accomplished the goods are to be returned or disposed as per the directions of the bailor

Bailment
Bailment from benefit point of view 1. Bailment for the exclusive benefit of the bailor 2. Bailment for the exclusive benefit of the bailee 3. Bailment for the Mutual benefit of the bailor & bailee Bailment from reward point of view 1. Gratuitous bailment 2. Non-Gratuitous bailment

Duties of Bailee 1. Duty to take reasonable care of goods delivered (sec151) 2. Duty not make unauthorized use of goods entrusted to him, 153 3. Duty not to mix goods bailed with his own goods, 155 4. Duty to return the goods, 160 5. Duty to deliver any accretion to the goods, 163

Bailment
Duties of Bailor 1. Duty to disclose faults in goods bailed, 150 2. Duty to repay necessary expenses in case of gratuitous bailment, 158 3. Duty to repay any extraordinary expenses in case of non-gratuitous bailment, 4. Duty to indemnify bailee, 164 5. Duty to receive back the goods. Rights of Bailee 1. Enforcement of bailors duties 2. Right to deliver goods to one of several bailors, sec 165 3. Right to deliver goods, in good faith, to bailor without title, sec 166 4. Right of lien Rights of Bailor 1. Enforcement of bailees duties 2. Right to terminate bailment if the bailee uses the goods wrongfully, 153 3. Right to demand return of goods at any time in case of gratuitous bailment, 159

Agency
Sec 182: an agent is a person employed to do any act for another or to represent another in dealings with third persons. The person for whom such act is done, is called the principal Kind of Agents by the extent of their authority 1. General agents 2. Special Agents 3. Universal Agents Kind of Agents by the extent of the nature of work 1. Mercantile agents 2. Non- mercantile agents

Creation of Agency
1. 2. i.

ii.
iii.

3.

Agency by Express Agreement Agency by Implied Agreement Rule of Estoppel Rule of holding out Necessity Agency by ratification

Law Of Sale of Goods

CONTRACT OF SALE OF GOODS

Contract of Sale of Goods

Sec 4(1): A contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. Essential Characteristics 1. Two parties 2. Transfer of property (ownership) 3. Goods (movable property) 4. Price 5. Includes both a sale & an agreement to sell

Modes of Fixing the price

Expressly fixed by the contract itself 2. Fixed in accordance with an agreed manner provided by the contract 3. Determined by the course of dealings between the parties 4. If not mentioned then a reasonable price should be paid
1.

Kinds of goods
Existing goods a. Specific goods b. Unascertained goods

Future goods
Contingent goods

Rules Regarding Transfer of Property

Transfer of Specific goods, 19 1. When the goods are in a deliverable state, 20 2. When the goods have to be put into a deliverable state, 21 3. When the goods have to be measured to ascertain price,22 4. When the goods are delivered on approval, 24 Transfer of unascertained goods 18 & 23 Transfer of title by Non-owners 1. Unauthorized sale by a mecantile agent, 27 2. Transfer of title by estoppel, 27 3. Sale by a joint owner 4. Sale by person in possession under voidable contract 5. Sale by seller in possession after sale 6. Sale by buyer in possession after agreement to buy 7. Resale by an unpaid seller

Performance of Contract of Sale

Its the duty of the seller to deliver the goods & of the buyer to accept & pay for them, in accordance with the terms of contract of sale, sec 31 Delivery : voluntary transfer of possession of goods from one person to another, sec 2(2)

Modes of delivery 1. Actual delivery 2. Symbolic delivery 3. Constructive delivery or delivery by attornment

Rules of Delivery
Delivery may be either actual or symbolic, 33 Delivery & payment are concurrent conditions, 32 Effects of part delivery, when property in goods is to pass on delivery, 34 4. Buyer to apply for delivery, 35 5. Time of delivery, 36(2)(4) 6. Place of delivery, 36(1) 7. Delivery of goods where they are in possession of a third party, 36(3) 8. Expenses on delivery, 36(5) 9. Delivery of wrong quantity or different quality, 37 10. Installment deliveries, 38 11. Delivery to carrier, 39 12. Liability of buyer for neglecting or refusing to take delivery of goods, 44
1. 2. 3.

Law of Negotiable Instruments

Negotiable Instruments
The word negotiable means transferable by delivery & Instrument means a written document by which a right is created in favor of some person Sec13: A negotiable instrument means a promissory note, bill of exchange or cheque payable either to order or bearer. Payable to Order 2. Payable to bearer
1.

Characteristics of Negotiable Instruments

1. 2. 3. 4. a) b) c) d)

Easy negotiability Transferee can sue in his own name without giving notice to the debtor Better title to a bona fide transferee for value Presumptions Every negotiable instrument was made for a consideration The instrument was made on the date which is mentioned on the same Every bill of exchange was accepted within a reasonable time after its date & before maturity That the lost negotiable instrument was duly stamped.

Examples
Negotiable Instruments i) Bills of Exchange ii) Promissory Note iii) Cheques iv) Treasury bills v) Hundis

Non Negotiable Instruments i) Money Orders ii) Postal Orders iii) Share certificates iv) Fixed deposit reciepts

Promissory Note
Sec 4: A promissory note is an instrument in writing containing an unconditional undertaking signed by the make, to pay a certain sum of money only to, or to the order of, a certain person or the bearer of the instrument. Essentials of a Promissory Note 1) It must be in writing 2) It must contain a promise or undertaking to pay 3) The promise to pay must be unconditional 4) It must be signed by the maker 5) The maker must be a certain person 6) The payee must be certain 7) The sum payable must be certain 8) The amount payable must be in legal tender money of India

Bill of Exchange
Sect 5 A bill of exchange is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay certain sum of money only to, or to the order of, a certain person or the bearer of the instrument. Parties: Drawer Drawee Payee Essentials of BOE 1) It must be in writing 2) It must contain a order to pay 3) The promise to pay must be unconditional 4) It must be signed by the drawer 5) The drawer, drawee, payee must be a certain person 6) The payee must be certain 7) The sum payable must be certain 8) The amount payable must be in legal tender money of India

Cheque
Sec 6: a cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand. Essentials Characteristics: 1. Its always drawn on a bank 2. Always payable on demand 3. Written on paper or electronic form 4. Written signatures or digital signatures

Bill of exchange
Can be drawn on anyone

Cheque
Drawn only on the

Payable on expiry or on

demand payable to bearer on demand is void It requires acceptance 3 days of grace are allowed Cant be crossed

banker Only on demand payable to bearer on demand is valid Doesnt require acceptance No grace Can be crossed

Bank Draft
Its an order issued by one bank on another or on its own branch instructing the latter to pay a specified sum of money to a specifies person or his order.

Hundi They are negotiable instruments written in Hindustani language Darshani Hundi Muddat Hundi Shah jog hundi Nam jog hundi Jokhmi hundi

Parties to Negotiable Instruments

Holder, sec 8 1. He must be entitled to the possession of the instrument in his own name 2. He must be entitled to receive or recover the amount due thereon from the parties liable thereto Holder in Due Course, sec 9 1. He must be a holder 2. He must be a holder for valuable consideration 3. He must have become the holder of the negotiable instrument before its maturity 4. He must take the negotiable instrument complete & regular on the face of it. 5. He must have become holder in good faith

Privileges of a holder in Due Course

1. 2. 3.

4.
5. 6. 7.

He gets a better title than that of the transferor Privileges in case of inchoate stamped instruments Liabilities of prior parties Privileges in case of fictitious bills Privileges when an instrument delivered conditionally is negotiated Estoppel against denying original validity of instrument Estoppel against denying capacity of payee to endorse

Capacity of Parties
Minor Insolvent Joint stock company Legal representative Agent Liability of Parties 1. Liability of Drawer 2. Liability of Drawee 3. Liability of Maker 4. Liability of endorser
a) b) c) d) e)

Law of Partnership

Definition
Section 4 of Indian Partnership Act 1932: Partnership is the relation between persons who have agreed to share the profits of business carried on by all or any of them acting for all. Essential Elements 1) There must be a contract 2) Between two or more persons (not more then 10 for banking & 20 for other business, else illegal) 3) Who agree to carry on a business 4) With an object of sharing profits 5) Business must be carried on by all or any of them acting for all (mutual agency)

Difference
Partnership

Joint Stock Company

Companies Act, 1956 Min 2, max 50 members apart from

Indian Partnership Act, 1932 Min 2, max 20 (11 for banking business Unlimited liability, personally liable No separate entity Implied authority, to bind the co partners by the acts done in ordinary course of business All partners are entitled to participate in mgt. Partner cant transfer interest in the firm without consent Audit is not required unless the annual turnover is over 40 lacs Registration not essential Partnership firm can be wound up at any time by any patner

employees Liability limited to the unpaid amount of share held by him or amount guaranteed otherwise Separate entity There is no mutual agency between the shareholders Only board of directors Transfer require permission from board of directors in pvt co & in a public co. there is no such restriction Audit is a necessity Essential in case of a co. Winding up involves legal formalities

Formation of Partnership
Partnership Deed The document in which the respective rights & obligations of the members of a partnership are set forth is called a partnership deed. It should be signed by all partners, duly stamped & registered with the registrar of firms. The Deed should cover: 1) The name of the firm, name & address of the partners 2) Nature of business & the place where it will be carried on 3) Date of commencement of partnership 4) The duration of partnership 5) The amount of capital to be contributed by each partner & the methods of raising finance in future 6) The ratio of sharing of profits & losses

Formation of Partnership
1) 2) 3) 4) 5) 6) 7) 8) 9)

Interest on partners capital, partners loan & interest on drawings if any. Salaries, commissions to partners The method of preparing accounts & arrangement for audit & safe custody of cash Duties, powers & obligations of partners Rules to be followed in case of retirement, death & admission of a partner Expulsion of partners in case of gross breach of duty or fraud Can a partner carry on a competing business or any other business The circumstances under which the partnership will stand dissolved Arbitration in case of dispute among partners

Kinds of Partners
1. 2. 3. 4. 5. 6.

Active or actual partners Sleeping or dormant partners Silent partners Partner in profits only Sub-partner Partner by Estoppel or holding out

Effects of Non-registration 1. No suit in a civil court by a partner against the firm or other copartners 2. No suit in a civil court by firm against third parties

Rights, Duties & Liabilities of Partners

Rights 1. Right to take part in the conduct of the business, 12a 2. Right to be consulted, 12b 3. Right to access to books, 12d 4. Right to share profits, 13b 5. Right to earn interest on capital, 13c 6. Right to indemnity, 13e

Duties
Absolute Duties 1. Duty to carry on the business to the greatest common advantage, 9 2. Duty to be just & faithful inter-se 3. Duty to render true accounts 4. Duty to provide full information 5. Duty to indemnify for loss caused by fraud 6. Duty to be liable jointly & severally 7. Duty not to assign his interest Qualified Duties 1. Duty to attend diligently to his duties, 12b 2. Duty to work without remuneration, 13a 3. Duty to contribute to the losses, 13b 4. Duty to indemnify for willful neglect, 13f 5. Duty to use firms property exclusively for the firm, 15 6. Duty to account for personal profits derived, 16a 7. Duty not to compete with the business of the firm, 16b

Liabilities of Partners
Liabilities of partners for acts of the firm, 25 2. Liabilities of the firm for wrongful acts of a partner, 26 3. Liability of the firm for misapplication by partners, 27
1.

Dissolution of Partnership
1. 2. 3.

4.
5. a) b) c) d) e)

Dissolution by agreement, 40 Dissolution by notice, 43 On happening of certain contingencies, 42 Compulsory dissolution, 41 Dissolution by court, 44 Insanity Permanent incapacity Misconduct Persistent breach of agreement Continuous losses

Consequences of Dissolution
1. 2.

3.
4. 5.

6.
7.

Continuing liabilities of partners, 45 Continuing authority of partners for the purpose of winding up, 47 Rights of partners to enforce winding up, 46 Liability to share personal profits, 50 Return of premium, 51 Rights where partnership contract is rescinded for fraud, 52 Rights to impose restrictions

Introduction to Company Law

COMPANIES ACT, 1956

Meaning and Definition of a Company

Section 3(1)(i) of the Companies Act, 1956

defines a company as: a company formed and registered under this Act or an existing Company. Existing Company means a company formed and registered under any of the earlier Company Laws.

Characteristic Features
1. Registered association: A company is in law different from its members. It has as independent corporate existence; it has a legal personality of its own. It can make contracts open a bank account can sue and be sued by others , it can own property in its own name. 2.Perpetual succession: Section 34 (2) The life of a company is not related to the life of members & is not affected by death insolvency, retirement or transfer of shares of members. 3.Limited liability: It means that the liability of a member shall be limited to the nominal value of the shares held by him. In the case of a company limited by guarantee, the liability of members is limited up to the amount guaranteed by a member. 4. Transferability of Shares: The shares of a joint stock company are freely transferable. A shareholder can transfer his shares to any person without the consent of other members. 5.Separate Property: Because of its corporate personality, a company can own and transfer property in its own name. Although the shareholders have contributed to the capital of the company, they do not become the part owners of its property. 6. Capacity to Sue: A company being a juristic person it can sue in its own name and be sued by others. 7.Flexibility and Autonomy: Diversity of ownership from management.

Types of Companies

Private Company
Public Company

Private Company [Section 3(1)(iii)]

A private company means a company which has a minimum paid up capital of one lakh rupees or such higher paid-up capital as may be prescribed and by its articles : (a) restricts the right to transfer its shares, if any; (b) limits the number of its members to 50, not including: (i) persons who are in the employment of the company, and
(ii)

persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased; (c) prohibits invitation to the public to subscribe for any shares in or debentures of, the company; and (d) prohibits any invitation or acceptance of deposits from persons other than its members, directors or their relatives. Where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of membership, be treated as a single member.

Public Company [Section 3(1)(iv)]

A public company means a company which: a) is not a private company [In other words, it should not have the restrictions of Section 3(1)(iii) in its articles ]; b) has a minimum paid-up capital of five lakh rupees or such higher paid-up capital, as may be prescribed; and c) is a private company, which a subsidiary of a company, which is not a private company.

How to form a company?

The whole process of formation of a

company may be divided into four stages, namely:

(i) Promotion (ii) Registration (iii) Floatation/Raising of Capital (iv) Commencement of Business.

Promotion

Who is a Promoter?
The term promoter is a term not of law but of business, usefully summing up, in a single word promotion, a number of business operations familiar to the commercial world by which a company is brought into existence.

Bowen, L.J.

However, the persons assisting the promoters by acting in a professional capacity do not thereby become promoters themselves.

Legal Position of a Promoter

Promoter stands in a fiduciary position

towards the company. In other words, he is not allowed to make secret profits. Case: Gluckstein v. Barnes

Pre-incorporation contracts
Void-ab-initio. However, pre-incorporation contracts

shall be valid if:

The contract is made for the purpose of the company and the contract is warranted by the terms of incorporation.
The company adopts the transactions after incorporation.

Registration/Incorporation
Private Company
Minimum

Number of Members required

2.
Public Company
Minimum

Number of Members required

7.

Steps
1.

Application for availability of name:

Section 25 Companies (ii) Govt. Companies (need not use Pvt. Ltd.) Producer Companies.
(i)

Three names in order of priority conforming to the provisions of the Act and the Guidelines issued by Department of Company Affairs in this regard: Name to end with the word(s) Limited or Private Limited, as the case may be, except:

Name should not be identical or too similar to the name of an already existing company. Should not include the name of a registered trade mark. Memorandum defines and limits the scope of activities of a company.

2. Preparation of Memorandum and Articles of Association

Stepscontd.

Contents of Memorandum
1. 2. 3. 4. 5.

Name clause Registered office clause Object clause

Doctrine of ultra-vires

Liability clause Capital clause Power of Attorney in favour of a professional to effect registration. Statutory Declaration
To the effect that all requirements of law with respect to incorporation have been duly complied with. The declaration to be signed by:

3. Preparation of other documents

Advocate of Supreme Court or High Court; OR C.A../C.S. practising in India and associated with the formation of the company; OR Director, Manager, Secretary of the company (as named in the Articles)

4. Filing of documents with ROC

Consent of Directors (in case of a Public Company) Particulars of Directors, Manager, Secretary, etc. in the prescribed form. Notice of registered address

To be supplied within 30 days of incorporation.

Certificate of Incorporation
Effect of Certificate of

Incorporation (Section 34)

On incorporation, the association of persons becomes a body corporate by the name contained in the memorandum, capable forthwith of exercising all the functions of an incorporated company and having perpetual succession and a common seal but with such liability on the part of the members to contribute to the assets of the company in the event of its being wound-up as is mentioned in the Act.

Conclusiveness of Certificate of Incorporation (Section 35)

Conclusive to the effect that all

requirements of law relating to registration and matters precedent and incidental thereto have been duly complied with.

Case Laws:
Moosa v. Ibrahim Jubilee Cotton Mills Ltd. v. Lewis

Provisional Contracts
Contracts entered into by company after incorporation but before getting the certificate to commence business are called provisional contracts. Provisional contracts are, therefore, relevant to public companies only. Such contracts become void, if company fails to obtain certificate to commence business and automatically become valid, and binding if company obtains the certificate.

Raising of Capital

A company may raise capital through

Private placement Issue of Prospectus

Private placement means raising of

capital from friends, relatives and through brokers.

Commencement of Business (Section 149)

Where Company has issued a Prospectus:

a company cannot commence business or exercise borrowing powers unless: (a) shares up to the amount of the minimum subscription have been allotted by the company; (b) every director of the company has paid to the company, on each of the shares taken or contracted to be taken by him and for which he is liable to pay in cash, the same proportion as is payable on application and allotment on the shares, offered for public subscription; (c) no money is, or may become, liable to be repaid to the applicants for shares or debentures offered for public subscription, for failure to obtain permission for the shares to be dealt in on any recognised stock exchange; (d) there has been filed with the Registrar a duly verified declaration by one of the directors or the secretary or, where the company has not appointed a secretary, a secretary in whole time practice in the prescribed form that clauses (a), (b) and (c) (mentioned above) have been complied with. Penalty: Every person at fault may be fined upto Rs.5,000/- for every day of default.

Memorandum of Association
Every company has to have a Memorandum of

Association. It contains, besides other significant information, the objects for which the company is formed. Object clause defines as well as confines the powers of the company. Anything done beyond these objects is ultravires the company and void.

Contents of Memorandum
1. Name Clause: It contains the name with
which company is proposed to be registered. Companies Act requires that:
(a)

(b)

The name chosen should end with the word Limited or the words Private Limited, as the case may be. The name should not be undesirable i.e., it should not be identical or too similar to the name of an already existing company OR include the name of a registered trade mark unless consent of the owner of the trade mark is obtained.

Contents of Memorandum
2. Registered Office Clause:
This clause states the name of the State in which registered office of the company is to be situated.

3. Objects Clause
This clause is to be divided into:
(a) (b)

Main objects and objects incidental or ancillary to main objects Other objects

A company cannot commence any business stated under other objects unless special resolution by the shareholders is passed.

Doctrine of Ultra-Vires

Case Law: Ashbury Rly. Carriage Co. v. Riche.

Effects of Ultra-vires transactions (i) void-ab-initio (ii) Injunction (iii) Personal liability of directors

towards the company towards the outsiders

Contents of Memorandum

4. Liability Clause 5. Capital Clause

This clause states the authorised capital and the number of shares into which the same shall be divided.

Alteration of Memorandum
Various clauses of memorandum of

association can be altered by following the procedure laid down in the Act. Different requirements are prescribed for different clauses:

1. Name Clause: can be altered by:

Passing a special resolution; and (b) Obtaining the approval of the Central Govt.
(a)

Alteration of Memorandum
2. Registered Office Clause: may be shifted:
(a)
(b)

within the same city by passing Directors Resolution; From one city to another city within the same State:

by passing special resolution only, if no change in jurisdiction of Regional Director by passing special resolution, and Obtaining the approval of Regional Director.

Alteration of Memorandum

3. Objects Clause

Special Resolution Only on Grounds stated in Sec.17(1).

Cannot be increased without written consent of each and every member. Can be reduced:

4. Liability Clause

by passing special resolution Confirmation of court

Alteration of Memorandum

5. Capital Clause

Authorised capital may be increased by passing an ordinary resolution at a meeting of the shareholders.

Articles of Association
The articles of association of a company are its bye-

laws or rules and regulations that govern the management of its internal affairs and the conduct of its business. The articles regulate the internal management of the company. They define the powers of its officers. They also establish a contract between the company and the members and between the members inter se. This contract governs the ordinary rights and obligations incidental to membership in the company [Naresh Chandra Sanyal v. Calcutta Stock Exchange Association Ltd. (1971)].

Companies which must have Articles

Unlimited Companies:

The Articles of such a company must state:

Total

number of members; and Share capital.

Companies limited by Guarantee:

Articles of such company must state total number of members.

must include requirements of Section 3(1)(iii).

Private Companies limited by shares:

No Article Company
A public limited company having share capital may be

registered without Articles.

Alteration of Articles
Articles may be altered by a company by

passing special resolution at a general body meeting of shareholders. However, where alteration has the effect of converting a public company into a private company (i.e., introduction of restrictive clauses of Section 3(1)(iii), approval of Central Government must be obtained.

Doctrine of Constructive Notice

According to Section 610, every person dealing with the company is deemed to have read M/A and A/A and understood the contents thereof in the correct perspective.

Doctrine of Indoor Management The rule was first laid down in Royal British Bank v. Turquand. Rule of Indoor Management is an exception to the Doctrine of Constructive notice.

Exceptions of Indoor Management

1. Knowledge of irregularity : Case:

Howard v. Patent Ivory Co. 2. Negligence : Case: Anand Behari Lal v. Dinshaw & Co. (Bankers) Ltd. 3. Forgery : Case: Ruben v. Great Fingal Consolidated [Secy. Forged signatures of two directors] 4. No knowledge of articles : Case: Rama Corporation v. Proved Tin & General Investment Co.

Prospectus
A prospectus, as per Section 2(36), means any document described or issued as prospectus and includes any notice, circular, advertisement or other document inviting deposits from the public or inviting offers from the public for the subscription or purchase of any shares or debentures of a body corporate. Thus, a prospectus is not merely an advertisement; it may be a circular or even a notice. A document shall be called a prospectus if it satisfies two things: (a) It invites subscription to shares or debentures or invites deposits. (b) The aforesaid invitation is made to the public.

What constitutes Invitation to Public

As per Section 67, Invitation to public

includes:
invitation to any section of the public howsoever selected provided the invitation is made to all the members of that section of public indiscriminately. Invitation calculated to be made available even to those who do not receive the same. Invitation to 50 or more persons.

Mis-statement in a Prospectus and its consequences

What is Mis-statement?
According to Section 65(1) of the Act: (a) a statement included in a prospectus shall be deemed to be untrue, if the statement is misleading in the form and context in which it is included; and (b) where the omission from a prospectus of any matter is calculated to mislead, the prospectus shall be deemed in respect of such omission, to be a prospectus in which an untrue statement is included. Case: Rex v. Kylsant

Remedies
Liability for Misstatements in a Prospectus Civil Liability (Sec.62 & 56) Against the Promoters, Directors, other Officers and Experts Compensation under Sections 62 and 56 Criminal Liability (Sec. 63) Against the Promoters, Directors and Other officers (not available against experts)

Against the Company

Against the Company

Rescission of Contract

Fine upto Rs. 50,000

Imprisonment upto 2 years

Damages

Fine upto Rs.50,000

Claim for Damages

Both

Share and Share Capital

According to Section 2(46), A Share represents a

unit into which capital of a company is divided. However, courts have held that a share is not merely a unit of capital, it represents a bundle of rights and obligations. Holder of a share is entitled to certain rights (say, right to receive dividends, to receive notice of meetings, to participate in the proceedings of a meeting, to elect directors) and is also subjected to a number of obligations (say, to abide by Articles of Association, to maintain decorum of the meetings).

Kinds of Shares
The following kinds of shares may be

issued by a company:
1. 2.

3.

4.

Equity shares carrying voting rights. Equity shares carrying differential rights as to voting or dividend (commonly called Non-Voting Equity Shares) Preference Shares Cumulative convertible Preferable Shares

Kinds of Shares
with respect to two things:
1.

contd.

Preference Shares carry preference

2.

Preference with respect to dividend at a fixed rate or of a fixed amount. Preference with respect to return of capital in case of winding up.

Equity Shares means a share which is

not a preference share.

Allotment of Shares
Allotment is an acceptance to an offer for purchase of shares. Where allotment does not conform to the statutory requirements, it is called irregular allotment. For allotment to be valid, following requirements must be satisfied:

1.

A copy of prospectus or statement in lieu of prospectus must have been delivered to Registrar of Companies.

Allotment of Shares

contd.

2. Application money must not be less than

5% of the nominal value. 3. Minimum subscription (i.e., at least 90% of the issue) must have been received. 4. Application money must be kept deposited in a Scheduled Bank till the minimum subscription has been received. 5. Shares must have been listed on the stock exchange(s) mentioned in the Prospectus.

Administration/Management of a company
A company functions through the medium of

Board of Directors. However, certain powers have been reserved to be exercised by shareholders in general body meetings. Section 291 of the Companies Act, 1956 confers general power on the Board of Directors. It provides: Subject to the provisions of the Act, the Board of Directors of a company shall be entitled to exercise all such powers, and to do all such acts and things, as the company is authorised to exercise and do.

exerciseable only by the shareholders.

1. Sell, lease or otherwise dispose of the whole, substantially the whole, of the undertaking of the company, or where the company owns more than one undertaking, of the whole or substantially the whole, of any such undertaking. 2. Remit or give time for the repayment of any debt due by a director except in the case of renewal or of continuance of an advance made by a banking company to its directors in the ordinary course of business.

Powers

contd.

3. Invest, otherwise than in trust securities, the amount of compensation received by the company in respect of compulsory acquisition of any property or fixed assets of the company. 4. Borrow monies exceeding the aggregate of the paid-up capital of the company and its free reserves. Borrowing does not include temporary loans (i.e., loans payable on demand or within six months but excluding loans for capital expenditure) obtained from the companys bankers in the ordinary course of business.

Powers

contd.

The resolution passed at the general meeting must specify the total amount upto which moneys may be borrowed by the Board of directors in any financial year. 5. Contribute in any year, to charitable and other funds not directly relating to the business of the company or the welfare of its employees any amount exceeding Rs. 50,000 or five per cent of its average net profits of the last three financial years, whichever is higher.

Powers

contd.

However, the resolution must specify the total

amount that may be contributed by the Board of directors in any financial year. However, contributions to National Defence Fund, the Prime Ministers National Relief Fund or any other fund approved by the Central Government* for the purpose are exempted from the above provisions.

Disqualifications for Directors

Qualifications
A public company cannot prescribe any

qualifications for directorship except share qualification. Again, share qualification requirement cannot exceed holding of shares exceeding Rs. 5000/- in nominal value or value of one share where nominal value of one share exceeds Rs.5000/-. A director may obtain his share qualification within 2 months after his appointment.

Disqualifications
Section 274 of the Companies Act, 1956

provides that the following persons shall not be capable of being appointed as directors of any company :
(a) a person found by a competent court to be of unsound mind and such finding remaining in force; (b) an undischarged insolvent; (c) a person who has applied to be adjudged an insolvent;

Disqualifications

contd.

(d) a person who has been convicted by a Court of an offence involving moral turpitude and sentenced in respect thereof to imprisonment for not less than six months, and a period of five years has not elapsed from the date of the expiry of the sentence; (e) a person who has not paid any call in respect of shares of the company held by him, whether alone or jointly with others and six months have elapsed from the last date fixed for the payment of the call; and

Disqualifications

contd.

(g) a person who is already a director of a public company which,

(i) has not filed the annual accounts and annual returns for any continuous three financial years commencing on and after the first day of April, 1999; or (ii) has failed to repay its deposit or interest thereon on due date or redeem its debentures on due date or pay dividend and such failure continues for one year or more.

Number of Directorships
Whole-time Directorship A person cannot be appointed as a whole-time director in more than one company. Part-time Directorship Not more than 15 companies excluding the directorships of,

No. of Directorships
contd.
private companies [other than subsidiaries or holding companies of public company(ies)]. ii. unlimited companies, iii. associations not carrying on business for profit or which prohibit payment of a dividend, and iv. alternate directorships (i.e., he is appointed to act as a director only during the absence or incapacity of some other director).
i.

Remedies
Liability for Mis-statements in a Prospectus
Civil Liability Civil Liability (Sec.62 &(Sec.62 & 56) 56) Criminal Liability (Sec. 63)

Criminal Liability (Sec. 63)

Against the Promoters, Directors and Other officers (not available against experts)

Against the Company

Against the Promoters, Directors, other Officers and Experts Claim for Damages

Against the Company

Rescission of Contract

Fine upto Rs. 50,000

Damages

Compensation under Imprisonment Fine upto Both DamagesCompensation Imprisonment Fine upto Sections 62 under Sectionsand 56 upto 2 years Rs.50,000 upto 2 years Rs.50,000 62 and 56

Both