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Applicability of tort law in Consumer Protection Cases

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This article is written by Sonali Chauhan, a student of Lloyd Law College, Greater Noida. The author, in this article, has discussed the concept of Consumer Protection and Tort.

Introduction

By awarding compensation, the law of tort is primarily concerned with redressing wrongful civil actions. Conflict of interest is bound to occur in a society where men live together, and they can cause damage to one or the other from time to time. Moreover, tortious liability has come to be used against manufacturers and industrial units with rapid industrialization. The Law of tort came from Common Law, and by and large, this branch of law remains uncodified. Tortious liability has only been codified to a very limited extent, such as worker’s compensation,   motor vehicle accidents, environmental degradation, consumer protection and so on.

The development of the consumer protection regime is quite young and can be traced back to the rights of the Bill of Consumers in which the recognition of consumer rights began at an international level. This Bill acknowledged four important consumer rights, namely: 

(i) The right to safety; 

(ii) The right to be informed; 

(iii) The right to choose; and 

(iv) The right to be heard. 

These consumer rights were further reinforced bypassing of a resolution by the UN General Assembly on 9 April 1985, in which general guidelines were issued by the General Assembly of the United Nations which included: 

(i) Physical safety, 

(ii) Protection and promotion of consumer economic rights, 

(iii) Standards for the safety and quality of consumer goods and services, 

(iv) Measures enabling consumers to obtain redress, 

(v) Measures relating to specific areas like food, water and pharmaceuticals; and (vi) Consumer education and information programs. 

Object

On the domestic front, the consumer movement began with the enactment of the Consumer Protection Act, 1986 (hereinafter referred to as the CPA), which aimed to provide “for better protection of consumers ‘ interests and for the establishment of quasi-judicial authorities for the settlement of consumer disputes”. This Act has primarily given statutory recognition to the Consumer’s rights in India. These rights, specified in the Act, include:

(i) The right to be protected against the marketing of goods and services which are hazardous to life and property; 

(ii) The right to be informed about the quality, quantity, potency, purity, standard and price of goods or services as the case may be so as to protect the consumer against unfair trade practices; 

(iii) The right to access to a variety of goods and services at competitive prices; 

(iv) The right to be heard and be assured that consumer interests will receive due consideration at appropriate flora; 

(v) The right to seek redress against unfair trade practices or unscrupulous exploitation of consumers; and 

(vi) The right to consumer education.

However, before these developments, the concern for protecting the rights and interests of consumers may be located under Tort Law, which is equally effective and enforceable even now. Therefore, this monograph tries to throw light on the relationship between Tort Law and Consumer Protection with special emphasis on cases of medical negligence. The primary aim of the consumer protection regime is to protect against deficiency in service and defects in goods. Thus, these aspects will be discussed primarily under tort law and consumer laws, with the sector-specific treatment of consumer cases. Insurance, transport, banking and finance, medical, etc. are the sectors specifically included in this monograph.

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Consumer Protection In India

In India, in view of the ever-increasing population and the consequent need for many goods and services of which there is no matching supply, the need for consumer protection is crucial. India’s increased consumer exploitation could be attributed to a lack of education, poverty, illiteracy, lack of information, Indians’ traditional views of suffering in silence and their ignorance of the legal remedies available in such cases.

In India, consumerism is as old as trade. There are references in Kautilya’s Arthashastra to the concept of consumer protection against exploitations such as manipulation of weights and measures and adulteration. Also for these offenses, the same book provides punishment. Book IV of Kautilya’s Arthashastra, Chapter II, “The Removal of Thorns,” deals in-depth with consumer protection against merchants. When a trader sells or mortgages inferior commodities by misrepresenting them as superior commodities or by adulterating grains, oils, salts, scents and medical articles with similar inferior quality articles, the said trader is not only to be punished with a fine but also to be compelled to make good the loss.

Differences between Law of torts and Consumer Protection Act, 1986

Law of Tort

Consumer Protection Act

In the case of tort, damages are always unliquidated, or unascertained and invariably they are not, and cannot in fact be real.

In the case of the CP Act of 1986, the aggrieved consumer is entitled to liquidated damages only, i.e. pre-settled or actual damages. Redressal agencies can ascertain the damages.

A tort is an infringement of a right in rem.

In the case of this Act, the consumer is injured or suffer loss then, it is an infringement of a right in personam.

The philosophy of the law of tort is a new subject and formulated into a separate branch just from the beginning of the 20th century.

Consumer awareness, consumerism, consumer rights are formulated in a separate law department is a very fresh subject, formulated in a separate law department just twenty years ago. 

In tort, the duty is one that is imposed by the law and is owned by the community at large. This principle is known as “Respondeat Superior”.

The duty is also imposed by the law in consumerism but is owned by the seller /manufacturer/trader. This duty’s principle is known as “Caveat Venditor”. 

Sometimes the motive is an essential factor in determining the liability, for example, malicious prosecution, defamation, etc.

The motive in consumerism is not a key factor. The defaulting party, i.e. the seller/trader/manufacturer, must pay the costs of the goods or services or replace them with new defect-free goods or actual damages, without any inquiry as to the motive.

Tort law has not been codified. It’s the law made by the judge.

While consumer law is new, it is codified.

In tort, a person may be entitled to such damages that he has not suffered in actuality. (injuria sine damnum). 

Consumers are entitled only to actual damage or replacement of new goods or services under consumer law.

In tort, exemplary or vindictive damages are awarded.

Actual damages are generally awarded to consumers. Exemplary or vindictive damages can also be awarded in exceptional cases where the seller acts in bad faith and negligently.

There is no establishment of separate courts. The cases of tort are also enquired in ordinary civil and criminal courts.

Separate consumer disputes redressal agencies are established in India, one at National level-National Commission, second is at State level-State Commission, and the third District level-District Forum.

The plaintiff should pay the court fee, the fee for the lawyer, etc.

There is no fee for the court or for the lawyer.

Generally, the petition must be filed only by the aggrieved. The litigation of public interest is allowed to a limited extent in exceptional circumstances. PIL is now highly prevalent in environmental law, coupled with tort.

Public interest litigation is allowed. The complaints can also be filed by third parties on behalf of aggrieved consumers.

The inquiry will be carried out for a long time.

The inquiry must be concluded within a prescribed time by the redressal agencies as prescribed by the Act.

The proceedings are conducted in accordance with the rigid legal principles, and natural justice is also followed.

The proceedings are conducted in a fast and simple manner. There are no legal procedures to follow. Natural justice principles may not also be taken into consideration.

The courts investigating the cases of tort are purely judicial bodies.

Consumer disputes redressal agencies are not judicial bodies. They are quasi-judicial bodies.

The judge or group of justices shall investigate and decide the cases of tort. The judge or group of justices shall possess excellent legal knowledge and have previous judicial experience.

The president and the members are investigate and decide on the cases. They all do not need to have legal abilities and knowledge. From the judiciary line, only the president is appointed. The remaining members are taken from the public, representing different walks of human life. They shall be a person of ability, integrity, and standing, and have sufficient understanding or experience of economic, law, trade, accountancy, business, public affairs or administration issues, or have demonstrated the ability to address them.

There is no mandatory requirement to appoint a woman as a member.

The Act, 1986 imposes mandatory instructions that one woman should be a member of the consumer disputes redressal agencies.

In tort cases, the courts interpret the laws beyond their legal provisions and take more into consideration the humanitarian values. Thus, in awarding damages to the victim, they search for new principles. All cases of environmental pollution are evolved only from tort law.

The redressal agencies follow mercantile principles only in consumer cases. There is no doubt that consumer laws evolve from tort law. But they are circumscribed by strict rules and principles. It is impossible for redressal agencies to go beyond those rules. However, the courts evolve new principles in cases where the consumer cases are connected with tort. Example:  medical consumer cases.

Law of tort and Product Safety Standards

It should be noted that in India common law tortious remedies are still available to consumers in addition to the various legislation related to consumer protection. This is particularly important in such a situation where an injured consumer of goods can not claim damages under contract law even if they harm him if he is not the purchaser of the goods but some subsequent user. Such a user may be an employee or family member of the primary buyer, or someone else may inadvertently come into contact with the goods, such as a passer-by or a donee. Contractual remedies are not available in these cases because there is no privity of contract between the victim and the retailer or dealer. Nevertheless, tort remedies may be available against parties who owe such ultimate consumers a tortious liability. Such parties may include two or more of the manufacturer, supplier, importer, distributor or retailer.

The foundation of such a tortious remedy can be traced back to Donoghue v. Stevenson case, which laid down the principle that a manufacturer owes a duty of care to every possible consumer of his product and that such a consumer can bring an action against the manufacturer even if there is no contract between the two parties. The plaintiff (consumer) here is entitled to damages for loss caused by any defective, unsuitable or hazardous product and this liability may arise from the following circumstances-where the defendant is negligent; where the defendant has defrauded the plaintiff; or where he has committed a willful act. In the case of fraud, the tort of deceit allows the defendant to recover damages for fraud that the defendant practices on him. If the defendant is negligent, the tort of negligence would provide the consumer with a right to seek redress for the damage suffered as a result of the defective and unsafe product. In the case of service deficiency, this tort of negligence is also available.

In tort cases, the rule of strict liability uses to play a very important role, but in today’s world, this has changed along with the rapid industrialization, scientific and technological advancement. Such progress has resulted in increased environmental and industrial hazards. A few industrial accidents in the 1980s led to substantial changes in the laws of no-fault liability.

The Supreme Court of India introduced the rule of absolute liability, which superseded the rule of strict liability laid down in the case of Rylands v. Fletcher, which had certain exceptions. The term’ absolute’ means total or no exception in itself. There are no exceptions in this new definition of absolute liability to which the defendant can rely upon to escape liability.

Conclusion

Indian tort law while being less developed, based on English tort law and English court decisions. As a result, Indian consumers will also have to resort to the decisions of the English courts on the product liability domain to base their claims under tort law. But the liability was based on strict liability under the English Consumer Protection Act 1987. As a result of this product liability under tort law, more consumers have been oriented since the strict liability in place of negligence-based liability in England has been supported. It is important to note here that the Indian law under C.P. Act 1986 bases the product on the trader’s and service provider’s negligence. Thus, the Indian courts will follow either the Common Law principles of negligence-based liability or strict liability as proposed in the Ryland v. Fletcher case and under C.P. Act,1987  while dealing with product liability under tort law. 

As a result, the  Consumer Protection Act,1986 was enacted with the aim of providing Indian consumers with “cheap, simple and quick” justice.


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Unique Legal Structuring, Contracts and Compliance for Fintech Business

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This article is written by M Arjun, pursuing a Diploma in Cyber Law, Fintech Regulations and Technology Contracts from Lawsikho.com. Here he discusses “Unique Legal Structuring, Contracts and Compliance for Fintech Business”.

Introduction

India has the second-largest number of internet users across the world. It also has the second-largest smartphone users with around one-third of the population using smartphones for various activities. Despite all the claims  India still has a chunk of its population unbanked. Even in 2019, Cash is still the King of Indian Economy by a huge margin. The Government is trying hard to push India to a digital revolution through schemes like ‘Digital India’. All of these facts had practically contributed to a widespread fintech adoption in the country which is only next to China. The Reserve Bank of India has been working for Financial Inclusion ever since 2005 to bring a large number of population to the forefront of the Economy. The unification of traditional finance and 21st-century technologies through the buzzword ‘fintech’ has contributed greatly to the financial inclusion in the country.

Eyeing the massive opportunity in India, the number of fintech startups has been proliferating in the past 5 years. The innovative and problem-solving attitude of these startups helped them achieve huge success in India, even attracting foreign investments from firms like Berkshire Hathaway, SoftBank and so on. This has forced the traditional financial institutions such as banks to play catchup game. Fintech businesses were treated no different from the rest of the financial businesses ever since its development. However, this approach of the regulators is gradually changing as they started driving deep into the operational differences of fintech firms when compared to conventional financial institutions. Fintech companies have a focus area and do not deal with all aspects of finance like traditional institutions. The ease of use/access nature, automation of activities and the potential to leverage next-gen technologies like blockchain, artificial intelligence and machine learning have made these entities tougher to be regulated. Right from incorporation to requirements like GST, regulations and compliance requirements of these businesses have become more complex when compared to its inception. Most of the fintech companies in India are regulated by RBI, SEBI, IRDA and TRAI.

Business Structure

Various methods of incorporating a business in India include Sole proprietorship, Partnership firm, One Person Company, Limited Liability Partnership, Private Limited Company and Public Limited Company. Private Limited company had been the go-to option for fintech firms as they offer more flexibility and room for the future growth of the company. A Private Limited Company is considered to be more credible when compared to other options. Funding and investments are the lifeblood for fintech startups. According to the India Fintech Report 2019, Venture and Private Equity funding for fintech startups in 2018 were estimated to be around $1.83 billion. Registering the startups as a Pvt Ltd company attracts Foreign Direct Investments and investments from VCs and other Investors. The fintech industry often comes across several partnership deals, collaborations, mergers and acquisitions. Most of the businesses prefer Private Limited Companies for such deals. Besides, it helps fintech firms to launch new tech-based products and expand their business to other jurisdictions in the future. However, an LLP may be preferred if the business doesn’t want to raise funds and focus just on providing services to its customers. Fintech startups preferring other methods over Private Limited Company is almost non-existent.

Compliances

The core fintech businesses started as startups while others have just extended their services online. There has been a lot of classifications of fintech firms. Some of these include payments and remittance, lending platforms, personal finance, blockchain and cryptocurrency, insuretech, enterprise solutions and investment platforms. It has become a cumbersome task to classify a startup into any of the categories. Most of them have started offering multiple services which make the nature of classification complicated. Regulations and investments differ according to segments in the industry. A segment-wise overview of various regulations and compliances:-

Payments and Remittance:- The Payments sector is the foremost member of the fintech industry. This sector has seen huge growth, inviting a huge number of investments ever since its inception. Demonetization led to widespread adoption of the payments sector. An ASSOCHAM – PWC India study predicts that digital payments in India will double to around 135.8 billion dollars in 2023. Mobile/digital wallets, PoS systems, payment gateways account for around 50% of startups from the payment sector. Earlier this year the Reserve Bank of India formed a ‘High-level Committee on Deepening Digital Payments’. 

From digital wallets to Payments Bank and UPIs, the Payments sector witnessed a series of changes in previous years. Digital/Mobile wallets were the go-to option for digital payments. They were closed/semi-closed prepaid payment instruments used for payments between the same platform along with uses such as for recharge, e-commerce and shopping. RBI in its “guidelines for prepaid payment instruments” has come up with KYC requirements for various prepaid payment instruments. KYC compliance has become mandatory for usage of mobile/digital wallets which are mostly semi-closed PPIs. RBI has classified semi-closed PPIs into two categories- (i) PPIs up to Rs 10,000 where only the minimum details of the PPI holder is required (ii) PPIs up to Rs 1 lakh where a full-fledged KYC is mandatory. Customers of these wallets have to do at least a minimum KYC to use the wallet and avail some of its benefits. However, RBI has extended its deadline for KYC compliance to February 29, 2020. RBI has also directed the PPIs to maintain adequate data and security control systems to safeguard payment-related data for preventing fraudulent activities during online transactions.

The Payments sector in recent times went through a paradigm shift when the Unified Payments Interface (UPI) was introduced by the National Payment Corporation Of India (NPCI). The NPCI was formed as an independent organisation under the provisions of Payments and Settlements Act 2007. It was formed for operating the payments and settlement systems under the guidance of RBI and IBA. UPI turned out to be a great rival for e-wallets. As of now, there are no KYC requirements for UPI applications. The RBI’s annual report indicated that the transactions in UPI surpassed that of debit cards in 2018-19. The UPI infrastructure developed by the RBI guided NPCI, was the perfect answer from banks against the popularity of digital wallets. UPI is a cross banking transfer medium backed by a consortium of banks. Mobile wallets cannot access UPI technology on their own for which they have to depend on banks. NPCI provides guidelines for  UPI, Bharat QR code and BBPS related payments.

The advent of UPI, lack of interoperability, and KYC requirements drastically affected the digital wallets. For countering the problem, e-wallet giants like Paytm launched a new system of banking called the ‘ Payments Bank’. RBI has launched its guidelines for Payments bank in 2017. According to which Payments Bank are to be registered as Public Limited Companies under the Companies Act and shall be licensed under section 22 of the Banking Regulations Act. The minimum capital required is 100 crore. The foreign shareholding requirements are as per the FDI policy for private banks. The concept of Payment Banks was conceptualised by RBI to tackle financial inclusion. Payment Banks supports paperless banking and has no right to accept deposits of above Rs 1 lakh. RBI doesn’t permit Payment Banks to lend money or issue credit cards. A full KYC is required to be done for opening savings bank accounts with Payment Banks. Payment Banks had lots of similarities with ordinary banks and were seen as a major movement for financial inclusion. Platforms like Paytm has integrated their wallets to the Payment bank. 

As a result of the increase in digital transactions, payment gateways and aggregators are playing a crucial role in the payments sector. These entities do not come directly under the Reserve Bank Of India. All the interactions between payment gateways and RBI are made through the banks. RBI in a press release in 2017 directed the payment gateways to route their transactions to a nodal account opened with a bank. Those accounts will be considered as an internal account of the bank and payment gateways cannot operate on such account. But still, they are largely self-regulated and is not authorised directly by the RBI. Payment gateways maintain themselves certain standards such as the Payment Card Industry Data Security Standard (PCI DSS) to protect and secure digital payments. Recently the Central Bank has come up with a proposal to directly regulate these payment operators considering the growing number of digital transactions. 

Financial Lending:- In recent times digital lending platforms thrived in the Indian fintech industry. P2P Lending and SME lending startups have increased exponentially revolutionising the lending landscape in India which was largely dominated by banks. Lending platforms provide hassle-free loans with very less documentation in very less time. MSME enterprises in India greatly benefited from these services, especially when applying for loans in banks involved complicated procedures with a less chance for approval. These platforms used technologies like Machine learning and AI to replace the older systems of analysing the creditworthiness of the loan seeker.  Integration of various APIs through platforms like Indiastack largely helped the lending space in India.

Until 2017 there were no specific regulations applicable for lending platforms. RBI in September 2017 published a circular for the regulation of P2P lending companies. P2P lending platforms are the place where lenders meet borrowers directly through the platform. Fintech Businesses in India are required to obtain an NBFC license from the RBI. RBI in its guidelines mandated P2P platforms to be registered as P2P lending NBFCs. Companies that have received P2P NBFC license from RBI are required to publish the default rates of the platform on their website. They are also directed to share the information regarding grievance redressal mechanisms, portfolio performance etc. Besides, NBFC P2Ps should provide sufficient details to the borrowers and lenders to facilitate transparent decision making. RBI has classified these platforms as NBFC P2Ps for shielding them against the stricter regulations followed by traditional NBFCs.

Personal Finance and Investment Platforms:- The increased adoption of internet and smartphones helped personal finance and asset management companies to penetrate deeper sections in the market. The ease and convenience of making investments and managing personal finance have attracted a larger audience like women and youth. These platforms utilise modern technologies to make the whole process of investing and wealth management easier especially when compared to traditional institutions.

SEBI is the chief policymaker for this segment of the fintech industry. Several traditional players have already extended their services online. There are stockbrokers like Zerodha who are registered with SEBI and are members to NSE and BSE. Companies providing online trading are required to follow trading member guidelines of NSE, BSE and MCX. There are other companies dealing with advisory functions concerning personal finance and wealth management. These businesses are mandated to obtain Registered Investment Advisor certificate (RIA) from SEBI. SEBI has come up with SEBI(Investment Advisers) Regulations in 2013 to regulate these entities. As per the guidelines RIAs are directed to make certain disclosures such as its remuneration and other key features of the products/securities to its clients. They are also required to maintain copies of documents like risk profiles, KYC records, client agreements, investment advice provided and so on. A compliance officer should be appointed for monitoring the compliance requirements mandated by the regulations. Asset management companies dealing with mutual funds are registered as a distributor with ‘Association Of Mutual Funds In India’ ( AMFI). AMFI is an association of SEBI registered mutual funds which prescribes guidelines for mutual fund distributors.

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Insurtech:- Online Insurance services are still in its nascent stage in India. This segment has not gained significant trust from the consumers. These platforms use IoT enabled services to track the individual needs of the customers. IRDAI is the chief policymaker for this segment. Businesses functioning in this segment of the industry are mostly insurance brokers or web aggregators. Insurance brokers exist both online and offline and act as an intermediary on behalf of their clients to help them choose the best product. Insurance brokers receive a brokerage from the insurance company. Apart from the remuneration, they can also receive a fee from the client for their expert services like risk assessment which shall not be a percentage of premium or claim amount.  IRDAI has prescribed a code of conduct which should be followed by these brokers. They are bound to act as per the IRDAI (Insurance Brokers) Regulations 2018.

Insurance Web Aggregators are platforms in which customers can get knowledge of various insurance products. They act as an online shopping interface for insurance products. Web aggregators display all the relevant information about the policies listed and help the users to compare their benefits and take a decision accordingly. They operate as a website helping in comparison of policies offered by several insurers. They are guided by the IRDAI (Insurance Web Aggregators Regulations) 2017. IRDAI has clearly defined and given a structure to some of the important activities and functions of the Web Aggregators. They include – Display of product comparisons on the web-site and their conditions, transmission of leads by web aggregator to the insurer in a specified manner, the manner and process of sale of insurance online by web aggregators, sale of insurance by telemarketing mode and other distance marketing for solicitation of insurance based on the leads generated from its designated website. The web aggregators are not allowed to push or promote a particular company. They are required to provide necessary details to the consumers such as the term of the insurance policy, the premium payable etc to allow consumers to make their own decision.

IRDAI has also come up with ‘’Guidelines on Insurance e-commerce’’ for providing directions to all the functioning ISNPs. Insurance Self-Network Platform(ISNP) means an electronic platform set-up by any applicant with the permission of the Authority. All the insurance brokers are mandated to follow the e-commerce guidelines and web aggregator regulations in their operation. IRDAI has also come up with “Guidelines for Information And Cyber Security for insurers” to prevent cyberattacks, data and information leakage. All the insurance companies are directed to follow the guidelines and take measures for improving cybersecurity. 

Cryptocurrencies/Blockchain-Based Business:- In India, businesses functioning in this segment are diminishing. India has the second-largest number of blockchain developers which is only next to the US. The regulatory environment in India is not so conducive for crypto-related businesses. RBI in its circular in 2018 prohibited banks in the country from dealing with crypto-related exchanges and businesses. A lot of Indian startups in this space had migrated to other jurisdictions from then. Recently a committee formulated under the Finance Secretary recommended a complete ban on trading, holding, mining and using cryptocurrencies. As per the recommendation, the penalties for violation can be heavy fines or imprisonment or both. The strict and uncertain regulations in the country make it an unfavourable environment for startups in this sector. A few of them are still surviving hoping for positive regulations. However, the Indian Government has expressed its willingness to encourage the use of blockchain technology i.e the underlying technology behind cryptocurrencies. Without clear regulations, blockchain/crypto-related businesses may not come to light in India.

The Adhaar Ruling 

The Supreme Court in 2018 struck down section 57 of the Aadhaar Act. Section 57 allowed any state, corporate or person to use the 12 digit Aadhaar number to establish the identity of an individual. This ruling prevented private entities from accessing the Aadhaar data of individuals. The decision had a substantial impact on the fintech industry which was relying on Aadhaar for e-KYC. It was a major blow for payments and lending platforms in particular. This means that the fintech companies will have to go back towards the old paper-based KYC. However, the Reserve Bank of India later amended its ‘Master Direction on KYC Norms’.The direction was a result of the ordinance passed by the Government by amending the Prevention of Money Laundering (Maintenance of Records) Rules 2005 and certain provisions of Aadhaar Act 2016.

The ordinance allowed voluntary use of Aadhaar in physical (QR code) or electronic form for offline verification and eKYC, with the consent of the customer. However, only banks were allowed to use eKYC based on Aadhaar. Fintech firms still had to go with offline verification of Aadhar based on QR codes or XML files. XML files are downloadable for users from UIDAI’s website. They contain necessary details which can be shared offline for KYC purposes without revealing the Aadhaar number. This system could never replace the ease and effectiveness provided by the older eKYC methods. Fintech firms, especially from the payments sector, lost a lot of customers due to the sophisticated KYC requirements. Lately, the “Steering Committee on Fintech” submitted its report to the finance ministry for easing KYC norms through methods like video-based KYC and Digilocker facility. Digilocker is a platform for issuance and verification of documents/certificates online. Users who sign up on the platform receives a cloud storage space linked with the Aadhaar number. Positive changes in the KYC regulations can help the industry to soar new highs.

Compliance with the Information Technology Act 2000

Fintech companies are platforms existing on the internet. Hence, they are mandated to follow the directions laid down by the IT Act. Section 43A describes the liability of the body corporates to pay damages when there is negligence in maintaining reasonable security procedures for protecting the sensitive personal data of its users. Section 72A prescribes punishment for disclosure of information in breach of a lawful contract. Fintech businesses rely a lot on the personal data of individuals. Following the prescribed data protection norms are vital for avoiding legal complications. 

The Information Technology (Reasonable security practices and procedures and sensitive personal data or information) Rules 2011. It explains personal information as any information which relates to a natural person directly or indirectly, information when combined with another information is capable of identifying a person. Sensitive personal data includes data or information such as passwords, biometric data, financial data, sexual orientation etc. The rules regulate how personal data is stored, used, processed and transferred. It also mandates body corporates to prepare a privacy policy and make it available to the information providers in a clear and accessible manner. Body corporates have to obtain the permission of the information provider before any disclosure of any sensitive personal data. In addition, body corporates have to maintain security control systems and procedures for information security. The includes certifications like IS, ISO, IEC 27001.

Contracts and Intellectual Property

Although the fintech startups caused a major disruption in the financial sector, there has been a switch in the relation between traditional financial institutions and fintech businesses. They have deviated from competition to collaboration. Hence fintech firms are always subjected to partnership deals, collaborations, mergers and acquisitions. They constantly deal with contracts relating to technology and financial aspects. These include common agreements like Partnership deeds, vendor agreements, product development agreements, investor agreements, outsourcing contracts, shareholder agreements, co-founder agreements and so on. Considering the nature of the fintech industry, investment agreements and partnership deeds are the most critical agreements as fintech startups depend on a lot of investments and partnerships. For offering digital services, fintech businesses should have a well-structured privacy policy and terms of use. Terms of use are the most crucial agreement that a fintech business enters with the customers. Well drafted loan agreements are vital for the functioning of lending platforms. In the case of insurtechs, the insurance policy itself is a specialised type of contract, based on good faith, which serves as an agreement between the policyholder and the insurer. In the personal finance segment, the trustees of mutual funds enter into an investment management agreement with the asset management company.

As for any industry, intellectual property of the fintech operators should be safeguarded with the highest level of protection. Players in the fintech sector often find situations where they partner with other financial institutions and third parties. They should have adequate protection of their IP rights in various licensing and collaborative agreements. Trademarks protect the brand name and logo of the entity, copyrights protect its source code, trade secret protects the crucial business information, industrial designs protect the look and feel of things like computer interfaces and patent offers protection to the innovative business models in the fintech space.

Conclusion

It is no brainer that the fintech industries disrupted the traditional financial markets. The use of modern technologies for providing financial services greatly contributed to financial inclusion. However, uncertain regulations, consumer mistrust and lack of large customer base especially when compared to traditional financial institutions are causing complications for this sector. Traditional financial institutions have the trust of customers. Whereas it is slow to adopt modern technologies in providing its services. Each fintech firm has a unique character and it may not be a good idea to integrate policies for fintech industries and other financial institutions. Fintech businesses are constantly driven by innovation and change in technologies. Hence, the need for regulations from financial as well as technological aspects arise. Conventional players like banks have started to develop their own initiatives or engage in partnership deals with fintech firms for drawing technology into its services. 

In addition to the existing regulations, future laws like “Personal Data Protection Bill” can have a major impact on the data-driven fintech industry. Data is a lifeline for fintech startups. Modern technologies need data for launching innovative products and services. The irregularity in existing regulations led to various operational difficulties for the fintech firms. Fintech businesses selling different services are often subjected to multiple regulations from different regulators. They are forced to follow the directives of the regulators that keep on changing from time to time. A large amount of time and money is spent on complying with the changes in regulations. Regulators like RBI has been blamed for not ensuring a level playing field for these companies.  Fintech institutions are generally forced to comply with regulations designed for traditional financial institutions. The attitude of the regulators towards the fintech industry is gradually changing. They have already started considering the uniqueness of the industry. RBI, SEBI and IRDAI have started enabling frameworks for developing regulatory sandboxes for testing emerging technologies and their implications. Regulatory Sandbox has been a long-standing demand of the fintech sector. The industry hopes that the sandbox and supportive approach from the government will ensure them a level playing field along with other financial institutions. Growth of fintech companies can contribute to “Industry 4.0” and a wide-scale financial inclusion.


Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.

LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join:

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AIBE: Mock Test for Bar Exam Preparation

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Solve the Mock Test to strengthen your Preparation for All India Bar Exam and increase your chances of clearing the paper.

Mock Test 1 

1.) A valid contract requires: 

A.) Free Consent 

B.) Consideration 

C.) Lawful object 

D.) all of above 

2.) A contract is void under which of the following conditions ? 

A.) Coercion 

B.) Undue Influence 

C.) mistake of fact 

D.) fraud 

3.) A and B enter into a contract to commit a fraud. 

A.) The Contract is void for its unlawful object 

B.) The Contract is voidable for its unlawful object 

C.) The Contract is valid 

D.) none of the above 

4.) Is the Principal responsible for a sub-agent’s act ? 

A.) No, the sub-agent appointed by the agent is responsible 

B.) Yes, the principal is responsible 

C.) No, the principal is responsible for his agent and not a sub-agent 

D.) none of the above 

5.) When can an agent’s duty be terminated ? 

A.) Death of the principal 

B.) Insanity of the principal 

C.) Revocation by the principal 

D.) all of the above 

6.) A employs B to beat C and agrees to indemnify B, for all the consequences. B beats up C and is liable to pay damages for his wrongdoings: 

A.) A is not liable to indemnify B 

B.) A is liable to indemnify B 

C.) A is liable to indemnify B being the principal 

D.) none of the above 

7.) A employs B to buy a house for himself. B buys a house and furnishes it completely. 

A.) A is liable to pay for the house and furnishing 

B.) A is liable to pay for the house 

 

C.) A is not liable to pay anything because B exceeded his authority 

D.) none of the above 

8.) Who will be held liable for the acts of a pretended agent? 

A.) The pretended agent himself 

B.) The principal if he ratifies the agents act 

C.) The principle without ratifying the agents act 

D.) both A and B 

9.) Arun employs Ram to sell his house not below Rs. 1 Lakh. Ram sells it to Abhay for Rs. 70000. 

A.) The sale is valid 

B.) The sale is void 

C.) The sale is voidable 

D.) Both b and c 

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10.) Which of the following agreements are voidable? 

A.) Agreement in restraint of marriage 

B.) Agreement in restraint of trade 

C.) Agreement in restraint of legal proceedings 

D.) none of the above 

11.) The Negotiable Instruments Act extends to: 

A.) The whole of India 

B.) The whole of India except Jammu & Kashmir 

C.) The whole of India except Jammu & Kashmir and Nagaland 

D.) The whole of India except Jammu & Kashmir and Arunachal Pradesh 

12.) According to the Negotiable Instruments Act, which of the following are considered to be instruments? 

A.) Promissory Note 

B.) bills of exchange 

C.) cheque 

D.) all of the above 

13.) A cheque is valid for a period of: 

A.) 12 months 

B.) 3 months 

C.) 6 months 

D.) 4 months 

14.) If the amount in a negotiable instrument is different in words and figures: 

A.) The amount stated in figures has to be considered 

B.) The amount stated in words has to be considered 

C.) The negotiable instrument will stand as cancelled 

D.) The holder of the instrument has the discretion to consider the amount either in figures or in words 

15.) If a negotiable instrument does not specify the time for payment, it is: 

A.) Payable on demand 

B.) Not payable at all 

C.) Not considered as an instrument 

D.) none of the above 

16.) A bill of exchange has been endorsed fraudulently. Ram accepts the bill of exchange even after knowing that the endorsement is forged. Is Ram liable? 

A.) No, Ram did not forge the endorsement 

B.) Yes, Ram accepted the instrument even after having knowledge of the forgery. 

C.) No, Ram did not do anything wrong by accepting the bill of exchange 

D.) Both a and c 

17.) The holder of a bill of exchange must allow…………hours to the drawee of the bill to consider whether to accept or not: 

A.) 96 hours 

B.) 72 hours 

C.) 48 hours 

D.) 24 hours 

18.) Specific Relief can be granted for: 

A.) Individual Civil Rights 

B.) Penal laws 

C.) Both a and b 

D.) none of the above 

19.) Rahul enters into an agreement to sell his apple orchard to Rohit. Rahul did not know that his apple orchard was acquired by the government at the time of making the contract. Is this contract specifically enforceable? 

A.) Yes, Rahul entered into the contract in good faith and thought he had a good title to his orchard 

B.) No, Rahul did not have a good title to his orchard 

C.) Yes, the contract is valid and it is specifically enforceable 

D.) a and c 

20.) Under which of the following circumstances can a contract be rescinded? 

A.) Yes, when the contract is voidable or terminable 

B.) Yes, when the contract is unlawful 

C.) No, a contract cannot be rescinded 

D.) a and b 

21.) The Code of Civil Procedure extends to the whole of India except 

A.) Jammu& and Kashmir 

B.) Nagaland 

C.) Jammu and Kashmir and Arunachal Pradesh 

D.) Jammu& and Kashmir and Nagaland 

22.) Ajit is in wrongful possession of Arun’s property situated in Pune. Arun a resident of Bangalore institutes a suit against Ajit in Pune. The decision is pending in the court. At the same time Arun institutes a same suit against Ajit in a Bangalore court. The suit is: 

A.) Barred by Res Judicata 

B.) Not barred by Res Judicata 

C.) Barred by Res Sub Judice 

D.) Not barred by Res Sub Judice 

23.) Suraj runs a newspaper agency in Delhi. His agency published defamatory remarks against Gaurav in Calcutta. Gaurav can institute a suit against Suraj in: 

A.) calcutta only 

B.) delhi only 

C.) either calcutta or delhi 

D.) non of the above 

24.) Can a suit be transferred from one court to another after being instituted? 

A.) Yes, it can be transferred 

B.) No, it cannot be transferred ever 

C.) No , it cannot be transferred after instituting a suit 

D.) both b and c 

25.) According to the Code of Civil Procedure, a court after issuing summons to a person can compel his attendance by: 

A.) Issuing a warrant for his arrest 

B.) Attach and sell his property 

C.) Impose a fine upon him not exceeding five hundred rupees 

D.) all of the above 

26.) A court has the power to issue a commission to: 

A.) Examine a person 

B.) Examine or adjust accounts 

C.) Make a partition 

D.) all of the above 

27.) A decree has been passed against the Government Of India. The decree can only be executed after the expiry of _______ months by the decree holder: 

A.) 2 

B.) 3 

C.) 4 

D.) 5 

28.) A suit against public nuisance may be instituted by 

A.) Advocate General 

B.) Attorney General 

C.) Solicitior General 

D.) Either a or b or c 

29.) Under which of the following circumstances can the High Court call for a revision of a case decided by a subordinate court : 

A.) When the subordinate court has exercised irregular jurisdiction 

B.) When the subordinate court has failed to exercise the jurisdiction so vested 

C.) When the subordinate court has exercised its jurisdiction illegally 

D.) All of the above 

30.) According to the Code of Civil Procedure, an alien enemy may sue in a competent Indian court with the permission of the: 

A.) President 

B.) Central Government 

C.) Chief Justice of India 

D.) Either a or c 

31.) The right to assemble peaceably and without arms is mentioned in article: 

A.) 18 

B.) 19 

C.) 20 

D.) 21 

32.) The minimum age of the President of India should be: 

A.) 25 

B.) 30 

C.) 35 

D.) 40 

33.) A dispute regarding the election of the president is decided by: 

A.) An independent committee appointed by the Central Government 

B.) The Parliament 

C.) The Supreme Court 

D.) Both A & B 

34.) A money bill can only be introduced in the: 

A.) Lok Sabha 

B.) Rajya Sabha 

C.) Either a or b 

D.) Legislative Council 

35.) Anti-Defection law is mentioned in the………. Schedule of the constitution: 

A.) 9th 

B.) 10th 

C.) 11th 

D.) 12th 

36.) As per the Constitution, how many states have a bicameral legislature? 

A.) 4 

B.) 5 

C.) 6 

D.) 7 

37.) A Gram Sabha exercises powers at the village level as per law passed by the: 

A.) Parliament 

B.) State Legislature 

C.) Either a or b 

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D.) non of the above 

38.) The Finance Commission consists of : 

A.) A chairman and 3 other members 

B.) A chairman and 4 other members 

C.) A chairman and 5 other members 

D.) A chairman and 6 other members 

39.) Right to Property is: 

A.) A constitutional Right 

B.) A Fundamental Right 

C.) A Fundamental Duty 

D.) Both b and c 

40.) The language of the union is mentioned in the………..schedule of the constitution: 

A.) 2nd 

B.) 4th 

C.) 6th 

D.) 8th 

41.) With respect to a cognizable case, investigation can be commenced by a police 

A.) With the permission of the magistrate 

B.) Without the permission of the magistrate 

C.) With the permission of a senior police officer 

D.) Without the permission of the police officer 

42.) If an investigation cannot be completed in 24 hours, then the magistrate can detain the accused in custody for a term usually not exceeding………..days: 

A.) 7 

B.) 10 

C.) 12 

D.) 15 

43.) In a cognizable offence, a person can be arrested: 

A.) With a warrant 

B.) Without a warrant 

C.) Either a or b 

D.) none of the above 

44.) An investigation under the CrPC is conducted by 

A.) A police officer 

B.) A magistrate 

C.) Either a or b 

D.) both a and b 

45.) A warrant-case is one where the punishment prescribed is imprisonment exceeding ………. year/years: 

A.) 1 

B.) 2 

C.) 4 

D.) 7 

46.) The officers of the courts of Judicial magistrates are appointed by: 

A.) President 

B.) Supreme Court 

C.) High Court 

D.) Governor of the concerned state 

47.) A first-class magistrate may pass a sentence of imprisonment not exceeding…….years: 

A.) 2 

B.) 3 

C.) 4 

D.) 5 

48.) A person who is arrested believes that he may be exculpated if his medical test is conducted. Which officer’s order is required for his medical examination? 

A.) Superintendent of Police 

B.) Commissioner of Police 

C.) Station House Officer 

D.) Magistrate 

49.) A person arrested by a police officer without a warrant cannot be detained in custody beyond……..hours: 

A.) 12 

B.) 24 

C.) 48 

D.) 72 

50.) A death sentence passed by a Sessions Judge has to be confirmed by: 

A.) An additional sessions judge 

B.) High Court 

C.) Governor of the concerned state 

D.) either a or b or c 

51.) According to the Evidence Act, the expression “a court may presume a fact” means: 

A.) The court may regard such fact as proved unless it is disproved 

B.) The court may ask for the proof of such fact 

C.) Both a and b 

D.) None of the above 

52.) Under which of the following instances, can a court avail the opinion of an expert: 

A.) Upon a point of foreign law 

B.) Upon an issue in Science 

C.) Upon an issue in Arts 

D.) All of the above 

53.) According to Evidence Act, oral evidence is considered to be: 

A.) Direct evidence 

B.) Indirect evidence 

C.) It could be either a or b, depending on the circumstances 

D.) Oral evidence is not recognised under this act 

54.) According to the Evidence Act, the contents of a document may be proved by: 

A.) Primary Evidence 

B.) Secondary evidence 

C.) Either a or b 

D.) None of the above 

55.) A court will presume a certified copy to be genuine if: 

A.) It is by law admissible 

B.) It is duly certified by an appropriate officer of the Central or State Government 

C.) It has been executed substantially in the form and manner directed by law 

D.) All of the above 

56.) The doctrine of Res Gestae is explained under which of the following sections: 

A.) 5,6,7,8 

B.) 6,7,8,9 

C.) 7,8,9,10 

D.) 4,5,6,7 

57.) Ajay prays to the court to punish Bob and Rahul for the offences committed by them together against Ajay. The burden of proof lies on: 

A.) Ajay for proving the offences committed against him 

B.) Bob for disproving Ajay’s allegations 

C.) Rahul for disproving Ajay’s allegations 

D.) Bob and Rahul together for disproving Ajay’s allegations 

58.) Sneha has suffered 95 percent burn injuries. At her death bed Sneha alleges Ishan to have set her on fire: 

A.) Sneha’s statement is admissible only after sufficient evidence 

B.) Sneha’s statement is admissible as a dying declaration 

C.) Sneha’s statement is not admissible at all 

D.) Either a or b 

59.) Shaun, a British citizen, murders Akshay an Indian citizen on a registered Indian vessel in the English channel: 

A.) Shaun can be tried under the IPC because he has committed the offence on a registered Indian vessel 

B.) Shaun can be tried under the IPC because he has committed an offence against an Indian citizen 

C.) Shaun cannot be tried under the IPC because the crime was committed in the English channel, where the code does not extend 

D.) Both a and b 

60.) A, B and C play for the Rising Star cricket team. All the three players agree to commit theft at the team sponsor’s office against payment of some money. A, B, C have committed the offence of: 

A.) Criminal Conspiracy 

B.) Theft 

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C.) Both a and b 

D.) None of the above 

61.) The punishment for waging war against the Government of India is: 

A.) Death sentence 

B.) Life imprisonment 

C.) Fine 

D.) Either a and c or b and c 

62.) Rohit, with the intention of shooting at a rabbit, ends up shooting at Ram accidentally and kills him. Rohit is guilty of: 

A.) Culpable Homicide 

B.) Murder 

C.) Culpable Homicide amounting to murder 

D.) None of the above 

63.) A death of a woman within………years of marriage due to cruelty of her husband is considered to be a dowry death: 

A.) 3 

B.) 5 

C.) 7 

D.) 9 

64.) The minimum number of people required to commit a dacoity is: 

A.) 3 

B.) 4 

C.) 5 

D.) 6 

65.) The famous case of Donoghue v Stevenson created the concept of: 

A.) Nuisance 

B.) Negligence 

C.) Trespass 

D.) Defamation 

66.) Which of the following does not come under defamation: 

A.) Libel 

B.) Slander 

C.) Innuendo 

D.) Hypothecation 

67.) Under the Motor Vehicles Act, the compensation to be paid for the death of a person in a hit and run case without the driver being at fault is: 

A.) 12500 

B.) 25000 

C.) 40000 

D.) 50000 

68.) An application for compensation under the Motor Vehicles Act must be made to the: 

 

A.) District Court 

B.) Metropolitan Court 

C.) Motor Accident Claims Tribunal 

D.) Both a and b 

69.) The proceeding of the District Forum for consumer protection shall be conducted by: 

A.) The President and at least one member 

B.) The President only 

C.) The Vice-President only 

D.) Either b or c 

70.) The limitation period of filing a consumer complaint with the district forum is: 

A.) Within 5 years from the date on which the cause of action has arisen 

B.) Within 4 years from the date on which the cause of action has arisen 

C.) Within 3 years from the date on which the cause of action has arisen 

D.) Within 2 years from the date on which the cause of action has arisen 

71.) Under the Factories Act 1948, a person having ultimate control over the affairs of the factory is called: 

A.) Occupier 

B.) Manager 

C.) Chairman 

D.) Managing Director 

72.) The first factory Act was enacted 

A.) 1880 

B.) 1881 

C.) 1882 

D.) 1883 

73.) According to the Industrial disputes act, Retrenchment means: 

A.) Voluntary retirement of an employee 

B.) Transfer of an employee from one department to another 

C.) Termination of Employees service 

D.) None of the above 

74.) According to the Industrial Disputes Act, a Works Committee is required to be formed when there are more than………. Workmen: 

A.) 250 

B.) 200 

C.) 150 

D.) 100 

75.) Children born to a Hindu who has converted before they were born, are: 

A.) Entitled to succession 

B.) Disqualified from succession 

C.) Partly disqualified from succession 

D.) None of the above 

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76.) According to the Hindu Adoption and Maintenance Act, what are the criteria for adoption by a female Hindu: 

A.) The female Hindu should be of sound mind 

B.) The marriage of the female Hindu must have been dissolved 

C.) The husband of the female Hindu must have died 

D.) All of the above 

77.) According to the Dissolution of Muslim Marriages Act, what are the grounds of divorce for a woman: 

A.) When her husband has been imprisoned for 7 years 

B.) When her husband is suffering from leprosy 

C.) Where her husband is impotent 

D.) All of the above 

78.) Ashish and Rohan are brothers. They were born from the same mother but different fathers. How are they related according to the Hindu Marriage Act: 

A.) Full blood 

B.) Half blood 

C.) Uterine Blood 

D.) None of the above 

79.) What procedure must be followed to change the name of a company, under the Companies Act? 

A.) By passing a special resolution in the general meeting of the company 

B.) Approval from the Central Government 

C.) Both a and b 

D.) None of the above 

80.) An Extraordinary General Meeting can be called by: 

A.) The Board of Directors of the company acting on their own 

B.) The Board of Directors on requisition by shareholders 

C.) The shareholders acting on their own, if the Board refuses to convene a meeting 

D.) All of the above 

81.) The shares that must be held by a person so that he can qualify to be a Director of a company are known as: 

A.) Qualification shares 

B.) Pre-qualification shares 

C.) Nomination shares 

D.) Eligibility Shares 

82.) Which of the following actions affects the rights of preference shareholders and hence requires their vote to be taken at a meeting: 

A.) Winding up of the company 

B.) Repayment of Share Capital 

C.) Reduction of Share Capital 

D.) All of the above 

83.) The mandate of an arbitrator terminates, when: 

A.) When the arbitrator is de facto unable to perform his functions 

B.) When the arbitrator withdraws from his office 

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C.) When the parties terminate his mandate 

D.) All of the above 

84.) In an international commercial arbitration, the arbitral tribunal shall decide the dispute in accordance with the: 

A.) Rules of law designated by the parties as applicable to the dispute 

B.) Any system of law deemed appropriate by the tribunal 

C.) Both a and b 

D.) None of the above 

85.) In which of the following instances can an arbitral tribunal terminate the arbitral proceedings: 

A.) When the claimant withdraws his claim 

B.) When the parties to the proceedings consent to its termination 

C.) When the continuance of the proceedings becomes unnecessary or impossible 

D.) All of the above 

86.) An ‘additional award’ must be made by an Arbitral Tribunal within……… days of receiving the application from the concerned party: 

A.) 30 

B.) 45 

C.) 60 

D.) 90 

87.) According to the Advocates Act 1961, appointed day means: 

A.) The day on which an advocate is appointed as a judge of the High Court 

B.) The day on which an advocate is appointed as the Vice President of the Bar Council Of India 

C.) The day on which the provisions of the act come into force 

D.) None of the above 

88.) In the State Bar Council of Delhi, the ……….. is the ex officio member: 

A.) Attorney General of India 

B.) Advocate General of the National Capital territory of Delhi 

C.) Solicitor General Of India 

D.) Additional Solicitor General Of India 

89.) Every Bar Council is like a body corporate having: 

A.) Perpetual Succession 

B.) Common Seal 

C.) Power to acquire and hold property 

D.) All of the above 

90.) The Disciplinary Committee of a Bar Council consists of……….. members: 

A.) 2 

B.) 3 

C.) 4 

D.) 5 

91.) If an advocate is enrolled in a State Bar Council, he is entitled to practise in: 

A.) All the courts including the Supreme Court 

B.) All tribunals or persons legally authorised to take evidence 

C.) Any authority under which an advocate is entitled to practise under any law 

D.) All of the above 

92.) An advocate’s duty to the court includes: 

A.) Maintaining dignity and self-respect while his case in the court 

B.) Not influencing the decision of the court through improper means 

C.) Refraining his client from adopting unfair practises 

D.) All of the above 

93.) A complaint against an advocate should be in the form of a: 

A.) Letter 

B.) Petition 

C.) Application 

D.) Both b and c 

94.) Who is authorised to fix the date and place of enquiry in the Disciplinary Committee of a Bar Council: 

A.) Probing body of the Disciplinary Committee 

B.) Chairman of the Bar Council 

C.) Ex officio member of the Bar Council 

D.) Both b and c 

95.) Raj has to file an application in the court by the 14th of June. Incidentally, the 14th day of June is a court holiday. Will Raj’s application is considered if he files it on the 15th of June: 

A.) Yes, since his term for filing an application expired on a court holiday 

B.) No, since 14th June was the last day of filing the application 

C.) No, since Raj was careless for not filing the application before the 14th of June, knowing it to be a court holiday 

D.) Both b and c 

96.) Rahul had to institute a suit regarding a possession of a property by the 31st of July 2013. He filed a suit on the 30th November 2013 . Rahul’s suit is clearly barred by limitation. Rahul’s right to property has been: 

A.) Extinguished 

B.) Not extinguished 

C.) Temporarily extinguished 

D.) None of the above 

97.) Audi alteram partem means: 

A.) Supremacy of Law 

B.) No person should be condemned unheard 

C.) Both a and b 

D.) None of the above 

98.) The expression ‘Rule of Law’ was used by: 

A.) A.V Dicey 

B.) Emmanuel Kant 

C.) Professor Ullman 

D.) None of the above 

99.) CAT stands for: 

A.) Central Authority Tribunal 

B.) Central Administrative Tribunal 

C.) Central Adjudicatory Tribunal 

D.) None of the above 

100.) Central Vigilance Commission checks up on the corruption by: 

A.) Judge 

B.) Minister 

C.) Public Servants 

D.) None of the above 

1.) A valid contract requires: 

A.) Free Consent 

B.) Consideration 

C.) Lawful object 

D.) all of above 

2.) A contract is void under which of the following conditions ? 

A.) Coercion 

B.) Undue Influence 

C.) mistake of fact 

D.) fraud 

3.) A and B enter into a contract to commit a fraud. 

A.) The Contract is void for its unlawful object 

B.) The Contract is voidable for its unlawful object 

C.) The Contract is valid 

D.) none of the above 

4.) Is the Principal responsible for a sub-agent’s act ? 

A.) No, the sub-agent appointed by the agent is responsible 

B.) Yes, the principal is responsible 

C.) No, the principal is responsible for his agent and not a sub-agent 

D.) none of the above 

5.) When can an agent’s duty be terminated ? 

A.) Death of the principal 

B.) Insanity of the principal 

C.) Revocation by the principal 

D.) all of the above 

6.) A employs B to beat C and agrees to indemnify B, for all the consequences. B beats up C and is liable to pay damages for his wrongdoings: 

A.) A is not liable to indemnify B 

B.) A is liable to indemnify B 

C.) A is liable to indemnify B being the principal 

D.) none of the above 

7.) A employs B to buy a house for himself. B buys a house and furnishes it completely. 

A.) A is liable to pay for the house and furnishing 

B.) A is liable to pay for the house 

C.) A is not liable to pay anything because B exceeded his authority 

D.) none of the above 

8.) Who will be held liable for the acts of a pretended agent? 

A.) The pretended agent himself 

B.) The principal if he ratifies the agents act 

C.) The principle without ratifying the agents act 

D.) both A and B 

9.) Arun employs Ram to sell his house not below Rs. 1 Lakh. Ram sells it to Abhay for Rs. 70000. 

A.) The sale is valid 

B.) The sale is void 

C.) The sale is voidable 

D.) Both b and c 

10.) Which of the following agreements are voidable? 

A.) Agreement in restraint of marriage 

B.) Agreement in restraint of trade 

C.) Agreement in restraint of legal proceedings 

D.) none of the above 

11.) The Negotiable Instruments Act extends to: 

A.) The whole of India 

B.) The whole of India except Jammu & Kashmir 

C.) The whole of India except Jammu & Kashmir and Nagaland 

D.) The whole of India except Jammu & Kashmir and Arunachal Pradesh 

12.) According to the Negotiable Instruments Act, which of the following are considered to be instruments? 

A.) Promissory Note 

B.) bills of excahange 

C.) cheque 

D.) all of the above 

13.) A cheque is valid for a period of: 

A.) 12 months 

B.) 3 months 

C.) 6 months 

D.) 4 months 

 

14.) If the amount in a negotiable instrument is different in words and figures: 

A.) The amount stated in figures has to be considered 

B.) The amount stated in words has to be considered 

C.) The negotiable instrument will stand as cancelled 

D.) The holder of the instrument has the discretion to consider the amount either in figures or in words 

15.) If a negotiable instrument does not specify the time for payment, it is: 

A.) Payable on demand 

B.) Not payable at all 

C.) Not considered as an instrument 

D.) none of the above 

16.) A bill of exchange has been endorsed fraudulently. Ram accepts the bill of exchange even after knowing that the endorsement is forged. Is Ram liable? 

A.) No, Ram did not forge the endorsement 

B.) Yes, Ram accepted the instrument even after having knowledge of the forgery. 

C.) No, Ram did not do anything wrong by accepting the bill of exchange 

D.) Both a and c 

17.) The holder of a bill of exchange must allow…………hours to the drawee of the bill to consider whether to accept or not: 

A.) 96 hours 

B.) 72 hours 

C.) 48 hours 

D.) 24 hours 

18.) Specific Relief can be granted for: 

A.) Individual Civil Rights 

B.) Penal laws 

C.) Both a and b 

D.) none of the above 

19.) Rahul enters into an agreement to sell his apple orchard to Rohit. Rahul did not know that his apple orchard was acquired by the government at the time of making the contract. Is this contract specifically enforceable? 

A.) Yes, Rahul entered into the contract in good faith and thought he had a good title to his orchard 

B.) No, Rahul did not have a good title to his orchard 

C.) Yes, the contract is valid and it is specifically enforceable 

D.) a and c 

20.) Under which of the following circumstances can a contract be rescinded? 

A.) Yes, when the contract is voidable or terminable 

B.) Yes, when the contract is unlawful 

C.) No, a contract cannot be rescinded 

D.) a and b 

21.) The Code of Civil Procedure extends to the whole of India except 

A.) Jammu& and Kashmir 

B.) Nagaland 

C.) Jammu and Kashmir and Arunachal Pradesh 

D.) Jammu& and Kashmir and Nagaland 

22.) Ajit is in wrongful possession of Arun’s property situated in Pune. Arun a resident of Bangalore institutes a suit against Ajit in Pune. The decision is pending in the court. At the same time Arun institutes a same suit against Ajit in a Bangalore court. The suit is: 

A.) Barred by Res Judicata 

B.) Not barred by Res Judicata 

C.) Barred by Res Sub Judice 

D.) Not barred by Res Sub Judice 

23.) Suraj runs a newspaper agency in Delhi. His agency published defamatory remarks against Gaurav in Calcutta. Gaurav can institute a suit against Suraj in: 

A.) calcutta only 

B.) delhi only 

C.) either calcutta or delhi 

D.) non of the above 

24.) Can a suit be transferred from one court to another after being instituted? 

A.) Yes, it can be transferred 

B.) No, it cannot be transferred ever 

C.) No , it cannot be transferred after instituting a suit 

D.) both b and c 

25.) According to the Code of Civil Procedure, a court after issuing summons to a person can compel his attendance by: 

A.) Issuing a warrant for his arrest 

B.) Attach and sell his property 

C.) Impose a fine upon him not exceeding five hundred rupees 

D.) all of the above 

26.) A court has the power to issue a commission to: 

A.) Examine a person 

B.) Examine or adjust accounts 

C.) Make a partition 

D.) all of the above 

27.) A decree has been passed against the Government Of India. The decree can only be executed after the expiry of _______ months by the decree holder: 

A.) 2 

B.) 3 

C.) 4 

D.) 5 

28.) A suit against public nuisance may be instituted by 

A.) Advocate General 

B.) Attorney General 

C.) Solicitior General 

D.) Either a or b or c 

29.) Under which of the following circumstances can the High Court call for a revision of a case decided by a subordinate court : 

A.) When the subordinate court has exercised irregular jurisdiction 

B.) When the subordinate court has failed to exercise the jurisdiction so vested 

C.) When the subordinate court has exercised its jurisdiction illegally 

D.) All of the above 

30.) According to the Code of Civil Procedure, an alien enemy may sue in a competent Indian court with the permission of the: 

A.) President 

B.) Central Government 

C.) Chief Justice of India 

D.) Either a or c 

31.) The right to assemble peaceably and without arms is mentioned in article: 

A.) 18 

B.) 19 

C.) 20 

D.) 21 

32.) The minimum age of the President of India should be: 

A.) 25 

B.) 30 

C.) 35 

D.) 40 

33.) A dispute regarding the election of the president is decided by: 

A.) An independent committee appointed by the Central Government 

B.) The Parliament 

C.) The Supreme Court 

D.) Both A & B 

34.) A money bill can only be introduced in the: 

A.) Lok Sabha 

B.) Rajya Sabha 

C.) Either a or b 

D.) Legislative Council 

35.) Anti-Defection law is mentioned in the………. Schedule of the constitution: 

A.) 9th 

B.) 10th 

C.) 11th 

D.) 12th 

36.) As per the Constitution, how many states have a bicameral legislature? 

A.) 4 

B.) 5 

C.) 6 

D.) 7 

37.) A Gram Sabha exercises powers at the village level as per law passed by the: 

A.) Parliament 

B.) State Legislature 

C.) Either a or b 

D.) non of the above 

38.) The Finance Commission consists of : 

A.) A chairman and 3 other members 

B.) A chairman and 4 other members 

C.) A chairman and 5 other members 

D.) A chairman and 6 other members 

39.) Right to Property is: 

A.) A constitutional Right 

B.) A Fundamental Right 

C.) A Fundamental Duty 

D.) Both b and c 

40.) The language of the union is mentioned in the………..schedule of the constitution: 

A.) 2nd 

B.) 4th 

C.) 6th 

D.) 8th 

41.) With respect to a cognizable case, investigation can be commenced by a police 

A.) With the permission of the magistrate 

B.) Without the permission of the magistrate 

C.) With the permission of a senior police officer 

D.) Without the permission of the police officer 

42.) If an investigation cannot be completed in 24 hours, then the magistrate can detain the accused in custody for a term usually not exceeding………..days: 

A.) 7 

B.) 10 

C.) 12 

D.) 15 

43.) In a cognizable offence, a person can be arrested: 

A.) With a warrant 

B.) Without a warrant 

C.) Either a or b 

D.) none of the above 

44.) An investigation under the CrPC is conducted by 

A.) A police officer 

B.) A magistrate 

C.) Either a or b 

D.) both a and b 

45.) A warrant-case is one where the punishment prescribed is imprisonment exceeding ………. year/years: 

A.) 1 

B.) 2 

C.) 4 

D.) 7 

46.) The officers of the courts of Judicial magistrates are appointed by: 

A.) President 

B.) Supreme Court 

C.) High Court 

D.) Governor of the concerned state 

47.) A first class magistrate may pass a sentence of imprisonment not exceeding…….years: 

A.) 2 

B.) 3 

C.) 4 

D.) 5 

48.) A person who is arrested believes that he may be exculpated if his medical test is conducted. Which officer’s order is required for his medical examination? 

A.) Superintendent of Police 

B.) Commissioner of Police 

C.) Station House Officer 

D.) Magistrate 

49.) A person arrested by a police officer without a warrant cannot be detained in custody beyond……..hours: 

A.) 12 

B.) 24 

C.) 48 

D.) 72 

50.) A death sentence passed by a Sessions Judge has to be confirmed by: 

A.) An additional sessions judge 

B.) High Court 

C.) Governor of the concerned state 

D.) either a or b or c 

51.) According to the Evidence Act, the expression “a court may presume a fact” means: 

A.) The court may regard such fact as proved unless it is disproved 

B.) The court may ask for the proof of such fact 

C.) Both a and b 

D.) None of the above 

52.) Under which of the following instances, can a court avail the opinion of an expert: 

A.) Upon a point of foreign law 

B.) Upon an issue in Science 

C.) Upon an issue in Arts 

D.) All of the above 

53.) According to Evidence Act, oral evidence is considered to be: 

A.) Direct evidence 

B.) Indirect evidence 

C.) It could be either a or b, depending on the circumstances 

D.) Oral evidence is not recognised under this act 

54.) According to the Evidence Act, the contents of a document may be proved by: 

A.) Primary Evidence 

B.) Secondary evidence 

C.) Either a or b 

D.) None of the above 

55.) A court will presume a certified copy to be genuine if: 

A.) It is by law admissible 

B.) It is duly certified by an appropriate officer of the Central or State Government 

C.) It has been executed substantially in the form and manner directed by law 

D.) All of the above 

56.) The doctrine of Res Gestae is explained under which of the following sections: 

A.) 5,6,7,8 

B.) 6,7,8,9 

C.) 7,8,9,10 

D.) 4,5,6,7 

57.) Ajay prays to the court to punish Bob and Rahul for the offences committed by them together against Ajay. The burden of proof lies on: 

A.) Ajay for proving the offences committed against him 

B.) Bob for disproving Ajay’s allegations 

C.) Rahul for disproving Ajay’s allegations 

D.) Bob and Rahul together for disproving Ajay’s allegations 

58.) Sneha has suffered 95 percent burn injuries. At her death bed Sneha alleges Ishan to have set her on fire: 

A.) Sneha’s statement is admissible only after sufficient evidence 

B.) Sneha’s statement is admissible as a dying declaration 

C.) Sneha’s statement is not admissible at all 

D.) Either a or b 

59.) Shaun, a British citizen, murders Akshay an Indian citizen on a registered Indian vessel in the English channel: 

A.) Shaun can be tried under the IPC because he has committed the offence on a registered Indian vessel 

 

B.) Shaun can be tried under the IPC because he has committed an offence against an Indian citizen 

C.) Shaun cannot be tried under the IPC because the crime was committed in the English channel, where the code does not extend 

D.) Both a and b 

60.) A, B and C play for the Rising Star cricket team. All the three players agree to commit theft at the team sponsor’s office against payment of some money. A, B, C have committed the offence of: 

A.) Criminal Conspiracy 

B.) Theft 

C.) Both a and b 

D.) None of the above 

61.) The punishment for waging war against the Government of India is: 

A.) Death sentence 

B.) Life imprisonment 

C.) Fine 

D.) Either a and c or b and c 

62.) Rohit, with the intention of shooting at a rabbit, ends up shooting at Ram accidentally and kills him. Rohit is guilty of: 

A.) Culpable Homicide 

B.) Murder 

C.) Culpable Homicide amounting to murder 

D.) None of the above 

63.) A death of a woman within………years of marriage due to cruelty of her husband is considered to be a dowry death: 

A.) 3 

B.) 5 

C.) 7 

D.) 9 

64.) The minimum number of people required to commit a dacoity is: 

A.) 3 

B.) 4 

C.) 5 

D.) 6 

65.) The famous case of Donoghue v Stevenson created the concept of: 

A.) Nuisance 

B.) Negligence 

C.) Trespass 

D.) Defamation 

66.) Which of the following does not come under defamation: 

A.) Libel 

B.) Slander 

C.) Innuendo 

D.) Hypothecation 

67.) Under the Motor Vehicles Act, the compensation to be paid for the death of a person in a hit and run case without the driver being at fault is: 

A.) 12500 

B.) 25000 

C.) 40000 

D.) 50000 

68.) An application for compensation under the Motor Vehicles Act must be made to the: 

A.) District Court 

B.) Metropolitan Court 

C.) Motor Accident Claims Tribunal 

D.) Both a and b 

69.) The proceeding of the District Forum for consumer protection shall be conducted by: 

A.) The President and at least one member 

B.) The President only 

C.) The Vice-President only 

D.) Either b or c 

70.) The limitation period of filing a consumer complaint with the district forum is: 

A.) Within 5 years from the date on which the cause of action has arisen 

B.) Within 4 years from the date on which the cause of action has arisen 

C.) Within 3 years from the date on which the cause of action has arisen 

D.) Within 2 years from the date on which the cause of action has arisen 

71.) Under the Factories Act 1948, a person having ultimate control over the affairs of the factory is called: 

A.) Occupier 

B.) Manager 

C.) Chairman 

D.) Managing Director 

72.) The first factory Act was enacted 

A.) 1880 

B.) 1881 

C.) 1882 

D.) 1883 

73.) According to the Industrial disputes act, Retrenchment means: 

A.) Voluntary retirement of an employee 

B.) Transfer of an employee from one department to another 

C.) Termination of Employees service 

D.) None of the above 

74.) According to the Industrial Disputes Act, a Works Committee is required to be formed when there are more than………. Workmen: 

A.) 250 

B.) 200 

 

C.) 150 

D.) 100 

75.) Children born to a Hindu who has converted before they were born, are: 

A.) Entitled to succession 

B.) Disqualified from succession 

C.) Partly disqualified from succession 

D.) None of the above 

76.) According to the Hindu Adoption and Maintenance Act, what are the criteria for adoption by a female Hindu: 

A.) The female Hindu should be of sound mind 

B.) The marriage of the female Hindu must have been dissolved 

C.) The husband of the female Hindu must have died 

D.) All of the above 

77.) According to the Dissolution of Muslim Marriages Act, what are the grounds of divorce for a woman: 

A.) When her husband has been imprisoned for 7 years 

B.) When her husband is suffering from leprosy 

C.) Where her husband is impotent 

D.) All of the above 

78.) Ashish and Rohan are brothers. They were born from the same mother but different fathers. How are they related according to the Hindu Marriage Act: 

A.) Full blood 

B.) Half blood 

C.) Uterine Blood 

D.) None of the above 

79.) What procedure must be followed to change the name of a company, under the Companies Act? 

A.) By passing a special resolution in the general meeting of the company 

B.) Approval from the Central Government 

C.) Both a and b 

D.) None of the above 

80.) An Extraordinary General Meeting can be called by: 

A.) The Board of Directors of the company acting on their own 

B.) The Board of Directors on requisition by shareholders 

C.) The shareholders acting on their own, if the Board refuses to convene a meeting 

D.) All of the above 

81.) The shares that must be held by a person so that he can qualify to be a Director of a company are known as: 

A.) Qualification shares 

B.) Pre-qualification shares 

C.) Nomination shares 

D.) Eligibility Shares 

82.) Which of the following actions affects the rights of preference shareholders and hence requires their vote to be taken at a meeting: 

A.) Winding up of the company 

B.) Repayment of Share Capital 

C.) Reduction of Share Capital 

D.) All of the above 

83.) The mandate of an arbitrator terminates, when: 

A.) When the arbitrator is de facto unable to perform his functions 

B.) When the arbitrator withdraws from his office 

C.) When the parties terminate his mandate 

D.) All of the above 

84.) In an international commercial arbitration, the arbitral tribunal shall decide the dispute in accordance with the: 

A.) Rules of law designated by the parties as applicable to the dispute 

B.) Any system of law deemed appropriate by the tribunal 

C.) Both a and b 

D.) None of the above 

85.) In which of the following instances can an arbitral tribunal terminate the arbitral proceedings: 

A.) When the claimant withdraws his claim 

B.) When the parties to the proceedings consent to its termination 

C.) When the continuance of the proceedings becomes unnecessary or impossible 

D.) All of the above 

86.) An ‘additional award’ must be made by an Arbitral Tribunal within……… days of receiving the application from the concerned party: 

A.) 30 

B.) 45 

C.) 60 

D.) 90 

87.) According to the Advocates Act 1961, appointed day means: 

A.) The day on which an advocate is appointed as a judge of the High Court 

B.) The day on which an advocate is appointed as the Vice President of the Bar Council Of India 

C.) The day on which the provisions of the act come into force 

D.) None of the above 

88.) In the State Bar Council of Delhi, the ……….. is the ex officio member: 

A.) Attorney General of India 

B.) Advocate General of the National Capital territory of Delhi 

C.) Solicitor General Of India 

D.) Additional Solicitor General Of India 

89.) Every Bar Council is like a body corporate having: 

A.) Perpetual Succession 

B.) Common Seal 

C.) Power to acquire and hold property 

D.) All of the above 

 

90.) The Disciplinary Committee of a Bar Council consists of……….. members: 

A.) 2 

B.) 3 

C.) 4 

D.) 5 

91.) If an advocate is enrolled in a State Bar Council, he is entitled to practise in: 

A.) All the courts including the Supreme Court 

B.) All tribunals or persons legally authorised to take evidence 

C.) Any authority under which an advocate is entitled to practise under any law 

D.) All of the above 

92.) An advocate’s duty to the court includes: 

A.) Maintaining dignity and self-respect while his case in the court 

B.) Not influencing the decision of the court through improper means 

C.) Refraining his client from adopting unfair practises 

D.) All of the above 

93.) A complaint against an advocate should be in the form of a: 

A.) Letter 

B.) Petition 

C.) Application 

D.) Both b and c 

94.) Who is authorised to fix the date and place of enquiry in the Disciplinary Committee of a Bar Council: 

A.) Probing body of the Disciplinary Committee 

B.) Chairman of the Bar Council 

C.) Ex officio member of the Bar Council 

D.) Both b and c 

95.) Raj has to file an application in the court by the 14th of June. Incidentally the 14th day of June is a court holiday. Will Raj’s application be considered if he files it on the 15th of June: 

A.) Yes, since his term for filing an application expired on a court holiday 

B.) No, since 14th June was the last day of filing the application 

C.) No, since Raj was careless for not filing the application before the 14th of June, knowing it to be a court holiday 

D.) Both b and c 

96.) Rahul had to institute a suit regarding a possession of a property by the 31st of July 2013. He filed a suit on the 30th November 2013 . Rahul’s suit is clearly barred by limitation. Rahul’s right to property has been: 

A.) Extinguished 

B.) Not extinguished 

C.) Temporarily extinguished 

D.) None of the above 

97.) Audi alteram partem means: 

A.) Supremacy of Law 

B.) No person should be condemned unheard 

C.) Both a and b 

D.) None of the above 

98.) The expression ‘Rule of Law’ was used by: 

A.) A.V Dicey 

B.) Emmanuel Kant 

C.) Professor Ullman 

D.) None of the above 

99.) CAT stands for: 

A.) Central Authority Tribunal 

B.) Central Administrative Tribunal 

C.) Central Adjudicatory Tribunal 

D.) None of the above 

100.) Central Vigilance Commission checks up on the corruption by: 

A.) Judge 

B.) Minister 

C.) Public Servants 

D.) None of the above 

Answer Key

1.) D 2.) C 3.) A 4.) B 5.) D 6.) A 7.) B 8.) D 9.) A 10.) D 11.) A 12.) D 13.) B 14.) B 15.) A 16.) B 17.) C 18.) A 19.) B 20.) D 21.) D 22.) C 23.) C 24.) A 25.) D 26.) D 27.) C 28.) A 29.) D 30.) B 31.) B 32.) C 33.) C 34.) B 35.) B 36.) B 37.) B 38.) B 39.) A 40.) D 41.) B 42.) D 43.) B 44.) A 45.) B 46.) C 47.) B 48.) D 49.) B 50.) B 51.) C 52.) B 53.) 54.) C 55.) D 56.) B 57.) A 58.) B 59.) D 60.) A 61.) D 62.) D 63.) C 64.) C 65.) B 66.) D 67.) D 68.) D 69.) A 70.) D 71.) A 72.) 73.) C 74.) D 75.) B 76.) D 77.) D 78.) C 79.) C 80.) D 81.) A 82.) D 83.) D 84.) C 85.) D 86.) C 87.) C 88.) D 89.) D 90.) B 91.) D 92.) D 93.) B 94.) B 95.) A 96.) B 97.) B 98.) A 99.) B 100.) C 


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What is Vested & Contingent Interest?

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This article is written by Sarabjit Singh, pursuing Certificate Course in Advanced Civil Litigation: Practice, Procedure and Drafting from Lawsikho.com. Here he discusses “What is Vested & Contingent Interest?”.

Background

Transfer of interest flows from the transfer of property, so understanding the latter shall aid us before we proceed further.  Transfer of property takes place by an act of parties or by operation of law such as insolvency, forfeiture or sale in execution of a decree.  The Transfer of Property Act, 1882 (TPA) relates to transfer by way of sale, exchange, gift, lease or mortgage.  The first three convey absolute title, while the last two i.e. lease and mortgage convey limited interest.  This transfer is intervivos i.e. between living persons only.  Transfer of property also takes place under ‘The Indian Succession Act, 1925’(TISA). It regulates intestate and testamentary succession i.e. when testator a person makes a will before his death for the disposition of his property or when he dies without making a will.   A will comes into operation only on the death of the testator.  

Transfer of property entails viz. transfer of title, right and interest.  Interests are of different kinds Vested, Contingent, Conditional(Precedent and Subsequent), Conditional limitation and Accelerated interests. However, we are confining ourselves only to vested and contingent interests.  Dictionary meaning; vested confers or bestows power, authority or property on someone while contingent is subject to chance or occurring or existing only if (certain circumstances) are the case; dependent on.

Vested Interest

Sections 19 & 20 of (TPA)directly deal with a vested interest.  Under section 19, it is created on registration of transfer deed/instrument of registration.  The same specifies the name(s) of the person/company/association in whose favor it is created, along with terms and conditions, and the next important thing is when does it come into effect.  There are three possibilities, (a) does not specify the time that it is to take effect, (b) states that it is to take effect forthwith (c) or comes into effect on happening of a specific event that must happen.  

Salient features of vested interest: –

  1. Vested interest creates an immediate right and is not subject to any condition.
  2. It is both transferrable and heritable right. 
  3. Even if transferee dies before actual possession or enjoyment, it passes on to his heirs.
  4. Enjoyment can be postponed to a future date.  
  5. Income derived from the property can be accumulated until the time of enjoyment arrives. 
  6. It is not defeated by the death of the transferee before he obtains actual possession. 
  7. Interest is not defeated even if prior interest in the same property is given to some other person. 

Similarly, under (TISA) which is applicable to intestate and testamentary succession, vested interest is defined under section 119.  Succinctly, stating that vested interest shall accrue on testator’s death to the named legatee. Possession can be postponed depending upon the instructions contained in the will.  And if the legatee dies before possession the interest shall pass on to his representative.   

When on the transfer of property interest is created for a person not then living, it is a vested interest, and it comes into operation on his birth.  Provided there is no prior interest restricting this transfer. Enjoyment of property shall be inferred from the terms of the transfer. And on becoming a major he shall enjoy all rights.

https://lawsikho.com/course/certificate-course-in-advanced-civil-litigation-practice-procedure-and-draftingClick Above

Contingent Interest

Whereas contingent interest is directly governed by sections 21 – 24 of (TPA).  Whereby, on the transfer of property an interest is created that is to take effect only if a specified uncertain event takes place or the specified uncertain event does not take place, such interest shall qualify it to be called contingent interest. 

Analogous section 120 of (TISA) explains contingent interest.  That a legacy bequeathed shall not come into operation unless specified uncertain event happens, or if the specified uncertain event is not to happen then until it becomes impossible. Such an interest is called contingent interest. 

Salient features of Contingent Interest: –

  1. Contingent interest is acquired on the happening of a specified uncertain event or on it becoming impossible if that is the required contingency. 
  2. If the specified uncertain event does not happen or becomes impossible then contingent interest fails and the property reverts to the transferor. 
  3. Does not create a present right, but a promise of right if the condition of contingency matures, otherwise fails. 
  4. It cannot take effect if the transferee dies before the condition is met.
  5. It is transferable but not heritable. 
  6. Incapable of descending to heirs. 

Therefore, when contingency succeeds depending upon the implied conditions, either on it happening or becomes impossible the contingent interest gets converted to a vested interest, and shall accordingly operate for example w.r.t.right to transfer, inherit, succession etc.  However, if the contingency fails then the property reverts to the transferor absolutely, and laws applicable as when it stood in his hands shall come into force. Like vested interest; enjoyment and possession of the property in question shall have no bearing upon the success or failure of contingent interest. 

Creation of Contingent Interest

The crux of the contingent interest is ‘specified uncertain event’.  So, on the day of creation of this interest, in favor of the ultimate beneficiary, there are a lot of possibilities which the transferor does not know about such as: –

  1. Actual beneficiary shall come into existence or not. 
  2. Actual beneficiary is born or not. 
  3. If beneficiary shall survive to a particular age or lives to become a major or not.
  4. When the specified uncertain even will happen. 
  5. Will the beneficiary be surviving at a particular period?
  6. Time of transferor’s own death etc. 

Therefore, to deal with such instances section 13 and 14 of the TPA comes in to play.   Namely, section 13 allows the transferor to create interest during his lifetime in favor of the ultimate beneficiary by using an intermediary who holds the precedent interest until the specified uncertain event occurs.  Conditions necessary for this to succeed are as follows. For simple understanding let us call the title holder(transferor), intended beneficiary(transferee), and the person holding precedent interest(intermediary).

  1. Transferor should create interest in favor of the intermediary during his lifetime. 
  2. When contingent interest is created in favor of a person, not in existence.  Child in the womb is a person in existence, therefore; for a contingency to succeed minimally intermediary and child in womb both should exist, and the precedent interest has not ceased.
  3. When contingent interest is passed in favor of persons more than one, subject to them attaining a particular age, it shall operate independently in favor of those of that age and intermediary are alive at the same time, and the precedent interest has not ceased.
  4. While creating contingent interest, in favor of some specified person, but the transferor does not mention the time of its occurrence.  Then the contingency shall fail if the precedent interest ceases in the hands of the intermediary for some reason or he expires before interest is transferred to the specified person.
  5. Similarly, when transferor does not specify the exact period when contingency interest shall benefit persons surviving unknown period.  Interest shall accrue to only those alive at the same time as an intermediary, or before the precedent interest ceases to exist, whichever occurs earlier. 
  6. Lastly, the intermediary cannot transfer the interest to the transferee after he becomes a major when there is no other condition.  

Example of Contingent Interest

Let us take the case of, ‘Transfer for benefit of unborn person’ section 13 of (TPA) & section 113 of (TISA), Bequest to a person not in existence at testator’s death subject to prior bequest’.  Since coming into existence of a person is an uncertain event; hence the transfer of property in his favor shall constitute contingent interest.  As the ultimate beneficiary is not in existence on the day of transfer of property, and section 5 of (TPA) mandates transfer of property only between living persons. Therefore, employing provisions of section 13 / 113transferor / testator during his lifetime creates prior interest in a person living then which could be life interest or less depending upon the construction of the conveyance. Now for this interest to pass on to the person not in existence three conditions have to be met viz. he/she has to come into existence during the lifetime of predecessor holding his interest, the interest passed to ultimate beneficiary should be unfettered i.e. whole of the remaining interest of the transferor / testator in the property, and lastly the conveyance should not contain any clause allowing it to be made voidable or revocable. As narrated earlier limitation with respect to enjoyment or possession of the property shall not defeat the contingency.  

In order to understand the concept, important relevant excerpts from case titled N. Radhakrishna Naidu And Ors. vs S. Govindaswami Naidu And Anrare reproduced under: – 

“6….Section 113 of the Indian Succession Act deals with the quantum of interest which may be bequeathed in favour of unborn persons. By enacting Section 113 of the Succession Act theLegislature disapproved of any attempt to put limitations upon the estate to be given to persons unborn at the time when the will comes into operation.  As observed by their Lordships of the PrivyCouncil in Sopher v. Administrator General, Bengal (1944) 46 Bom.L.R. 865 at 868: 71 I.A. 39 :(1944) 2 M.L.J. 20 (P.C), Section 113 as framed ‘raises or may raise questions of very great difficulty’. The difficulty in the interpretation of the section is caused by the clause ‘the later bequest shall be void unless it comprises the whole of the remaining interest of the testator in the thing bequeathed’. The expression ‘the later bequest’ is obviously used with reference to the bequest in favor of unborn persons. That bequest in order to be valid must comprise the whole of the remaining interest of the testator in the thing bequeathed. The expression ‘remaining interest’ means the entire interest of the testator, less the interest carved out by the prior bequest. In other words, the bequest in favour of unborn persons and the prior bequest between them must exhaust the entire interest of the testator in the thing bequeathed. The section cannot and does not mean that unless the interest bequeathed to an unborn person is in all manner as exhaustive as the interest of the owner of the thing bequeathed, that interest is void. A vested interest granted under a will in favour of an unborn person, possession of which is deferred till the happening of a certain event, is not void by reason of the provisions of Section 113. What that section means is, that where a prior interest is given and a later bequest is provided in favour of an unborn person in the something, the completeness of the estate in favour of the unborn person can be limited only to the extent to which a prior valid bequest can limit it. If there are any other limitations which derogate from the completeness of the estate granted in the thing bequeathed, the bequest in favour of an unborn person is void. If the bequest in favour of an unborn person after a prior valid bequest is dependent upon a contingency, the bequest may also be regarded as void. Similarly, any limitation or a condition of defeasance which derogates from the completeness of the estate in favour of an unborn person so as to reduce it to a life estate, or to an estate defeasible on the happening of a contingency renders such estate void. The expression ‘ remaining interest’ therefore connotes an interest which is as complete as an interest which the testator had in the thing bequeathed such interest not being fettered or limited except by and to the extent of the prior estate; but where a vested interest is given in the thing bequeathed in. favour of an unborn person, the vested interest will not be avoided merely by reason of imposition of limitations which restrict enjoyment.”

“17…. that if under a bequest in the circumstances mentioned in Section 113 there is a possibility of the interest given to a beneficiary being defeated either by a contingency or by a clause of defeasance, the beneficiary under the later bequest does not receive the interest bequeathed in the same unfettered form as that in which the testator held it, and that the bequest to him does not, therefore, comprise the whole of the remaining interest of the testator in the thing bequeathed. That is the conclusion at which their Lordships have arrived on the words of the section read in conjunction with the other sections relating to void gifts

“22 ….(a) where an interest which is to vest on the birth of a devisee, who at the date of the death of the testator is unborn, is granted, subsequent limitations which merely defer enjoyment are not void by reason of the provisions of Section 113; (b) whereby reason of a contingency the estate devised in favour of an unborn person subject to a previous bequest may not take effect the bequest is void, as it does not comprise the whole of the remaining interest of the testator in the thing bequeathed ; and (c) where an estate which is to vest in an unborn person subject to a prior bequest is made subject to a condition of defeasance, the bequest is void for the same reason.”


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Reverse Merger

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This article is written by Jelena Marijanović, pursuing a Diploma in M&A, Institutional Finance and Investment Laws (PE and VC transactions) from  Lawsikho.com. Here she discusses “REVERSE MERGER”.

It all starts with going Public or before?

In most of the cases, the ultimate measure of a company’s progress is the moment when it comes out of the shade and starts being publicly traded. Going public brings different benefits to the company- its securities are traded on an exchange, it’s capital and liquidity increase, its shareholders get more interesting exit strategies, and it gets better access to the capital markets.

Many private companies looking for growth are often going public in order to reach more investors and raise capital faster. There are also private companies with huge revenues, not in the need for additional capital, but simply attracted to the prospect trading on SE and other benefits public companies usually gain. Going public is normally connected with IPO (initial public offering), where the company is offering its shares to the public for the first time. For companies, however, it can be risky, time-consuming and expensive, so they often look for simpler and more cost-effective alternatives to grow in desired directions, without even raising the capital if it is not their primary interest. One of the unconventional ways to achieve that is a reverse merger.

What is Reverse Merger?

Simply defined, reverse merger (reverse takeover) is a corporate transaction in which the public company is acquired by a private company and then merged with it, which allows the acquirer to go public through the procedure which is less complex, risky and time-consuming than IPO. Despite the simple definition, reverse merger immediately opens a lot of questions for discussion: Why would somebody do this instead of IPO? Why would public company actually want to be acquired by a smaller, private company? How is this executed? Are there any risks? Explaining the basics first only brings up additional questions. 

BREAKING DOWN THE BASICS

In the simplest scenario, the private company shows up and takes over the public company, in a way that its shareholders purchase the substantial majority of it, and subsequently control its board of directors. Acquired company is interestingly called the shell company – all that is left of it after the transaction is its old organizational structure. So which steps does this transaction involve?

  • The private and public company first exchange necessary information, negotiate all the transaction terms and sign the agreement
  • At the closing, a public company issues the substantial majority of shares or transfers the majority of existing shares to private company’s shareholders, and gives the control over the board of directors to shareholders of the private company
  • On the other side, the shareholders of the private company pay for those shares by contributing their shares in the private company to the public company
  • When the control and share exchange is completed, a private company owns the majority of the public company 
  • The public company starts operations of the private company
  • As a result, a private company has gone public since it is controlling the public company

After the situation is set up like this, it becomes clear that the basic steps taken are very similar to a regular merger, except that the target actually ends up as an acquirer. However, it still does not answer most of the questions.

Why this instead of an IPO?

As it was previously mentioned, going public through traditional IPO necessarily requires raising capital and detailed planning. It often happens that managers spend countless hours structuring different aspects of their company’s future IPO, just to find out that the market simply does not want them at the moment, and those unfavourable conditions lead them to cancelled deals and wasted efforts. 

So why would we choose an IPO if we want our very liquid company to trade stock without any need for raising the capital and facing the risky market surrounding for that? Or even better, what if our very liquid company is simply interested in reaching some other benefits of being public as an ultimate goal, and there is no reason for additional complications while achieving that goal? In those cases, given definition of a reverse merger already makes sense. Not only that we would be released from capital raising function as an inseparable part of IPO, but the risky stock market surrounding which could make our goal of going public uncertain could also be avoided. And all that with countless hours of working on IPO saved for something as important as our business development since this transaction can take only a few weeks to complete.

If going Public is progress why would anybody go Private?

A public company, on the other side, chooses going private for a number of reasons. Being acquired by a private company can create significant financial gain for both CEOs and shareholders. Shareholders, often being short-term retail investors, pressure the board of directors and senior management to complete such deal in order to increase the value of their equity holdings, whole CEOs are motivated with amounts of their considerations. Public companies do enjoy many benefits but are also more burdened. Compared to private companies, compliance regulations and reporting requirements are often so expensive and time consuming that the management would actually consider completing the deal which would free their time and funds, allowing them to focus on long-term business goals.

Other side of the Coin- Risk for Effectiveness

Although the reverse merger provides the parties with numerous benefits, this transaction does not come without its own set of risks. Normally, a reverse merger is a perfect option for the company which does not look for immediate capital gains, or even better, for the foreign company which plans to access other markets in the fiercest way possible. However, not every company is able to bear the outcomes of risky manoeuvres undertaken during this transaction. 

Let’s return to the basics, where we named the public company shell company. Unfortunately, in most of the cases, shell companies are in that state for real, not only figuratively and for the purpose of completing the merger. Those are the companies which experienced a series of losses and currently operate in name only. This circumstance can be used as a benefit when it comes to a tax deduction, but also brings another series of problems that accompanied the financial downfall of the shell– pending lawsuits.

Another big disadvantage of a reverse merger is the reverse stock split – during the process of merging, shareholders may reduce the number of shares, and then issue new shares, thus diluting the value of original shares, which can make the unattractive solution for original shareholders. This risk, of which original shareholders are aware, may bring to additional complications where the shareholders are actually making the reverse merger more lengthy and difficult while trying to protect their interests.

As it was earlier mentioned, compared to IPO, which can take up to 12 months, a reverse merger is a much shorter way to achieve desired goals in going public. However, even this short process can surprisingly take much longer from the initial plan where parties are closing the deal as soon as the lawyers finish the paperwork. This comes not only from the undesired complications that may occur along the way but also from objective circumstances such as public company’s complexity. This, in addition, may bring to another problem – management of the private company suddenly dealing with a public company without any additional time to prepare for such a big turn.

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And while reverse mergers are much cost-effective than IPO, they can still cost a lot of money. An example is given, according to US law firms data they can run anywhere from 150.000 to 550.000 USD, depending on the price and quality of the shell company. 

In recent years reverse mergers started losing some of their tarnish, mostly due to shareholder fraud attempts, tax avoidance, and other stories of suspicious involvements with shell companies. In order to prevent risks, and avoid complications, due diligence is a must. Once it is ensured there are no unsolved liabilities or suspicious issues associated with the shell company that could come back to haunt the acquirer’s management in the future, this is a good way to go public. 

Variations on a theme – Can it become more Complex?

Yes, it can. The earlier presented, a simple scenario is hard to execute in reality. Most of the reverse mergers are actually structured as triangular mergers. In this case, we still keep private acquirer and public shell, as main actors – for the beginning. Things get more complex structure when a public company creates the subsidiary, which is actually the entity to be merged with a private company. When it comes to share exchange as the closing point, shareholders of the acquirer exchange their ownership for shares in the public company, so the acquirer actually becomes the subsidiary of the public company. This is often done because it is easier to obtain the shareholder consent- directors the public company are approving the transaction on behalf of the acquirer as the subsidiary. 

Other version of the triangular structure occurs when an acquiring company creates a subsidiary, which purchases the public company and is absorbed by it. After the amalgamation, the subsidiary is simply liquidated, and the public company is left as the surviving entity – and the subsidiary of acquirer. After the stock exchange, things get more defined, so the acquirer gets all the assets and liabilities the seller has. 

Back to Legal – Main Transaction Components

Reverse mergers are still mergers. It means that the whole process, although done backwards, is not really different when it comes to steps execution. 

The first step is signing the confidentiality agreements and letters of intent. Having in mind the nature of the transaction, a confidentiality agreement is important and recommendable step to be taken, and its provisions cover not only negotiation, but also customers, employees, and all the business matters. For letter of intent, essentially being the non-binding document, it is important to set up all the parameters of a future transaction, negotiations, and, most importantly – detailed due diligence. 

After taking the initial preparation steps, both parties start working on the agreement, which is the essential deal document. Of course, it defines all the rights, obligations, and conditions and covers all the legal and financial circumstances that exist or may occur. Moreover, it defines the closing procedures, with closing preconditions, and post-closing obligations. As the components to pay attention to, the following should be mentioned:

  • Representations and Warranties – where each side discloses all the facts related to the deal. Here it is important to remove any risk that the shell may bring into the game, so the acquirer should insist on confirmation that there are no undisclosed liabilities, pending litigations, tax issues, or any other situations which may make the transaction potentially unsafe.
  • Pre-closing conditions – where the conditions to be fulfilled prior to closing are listed. It gives each side the right to cancel the transaction in case some of the conditions are listed but in reality, are not met
  • Indemnification-  where rights and remedies of the parties in case of the breach of the agreement are listed

The next step of the process is actual closing – where shares are exchanged and consideration is paid and required paperwork fulfilled. In reverse merger, the acquirer practically pays for acquiring a shell. Based on the shell quality, the price can vary, but in practice, it is generally between 200.000 and 400.000 USD, worldwide. The consideration may be paid in cash, debt, or both. In most of the cases, this consideration is paid in equity, so the sellers are advised to be careful not to overleverage the company when they decide to go private, since the big revenues still may not be enough to service the debt in the future.

REVERSE MERGER WORLDWIDE

This type of transaction is more common in the US, compared to other parts of the world. In US it is more or less successfully executed for achieving different goals- not only going public but also internal restructuring and tax benefits. In Asia, this kind of transaction is still rare. In recent years, China experienced the reverse merger boom, since it is noticed as a good way for companies to access other capital markets, which however resulted in Chinese private company attempting the fraud in order to get listed in US stock market. In India, reverse mergers are still very few. One of the famous cases is ICICI merging with ICICI Bank in 2002 in this way, where, despite the seller was more than three times size of the acquirer, it is done for the purpose of creating the universal bank for both industry and retail. 

References

  1. Shell company is an entity that exists only on paper and serves as an instrument in different corporate transactions, without performing any business, having employees or owning assets itself. Shell companies may be used for achieving business goals such as assets transfer, providing anonymity or creating limited liability for different parties, but may also be used as an instrument for different illegal transactions, including tax evasion and money laundering.

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What are the Essentials of Contract?

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What is a contract?

A contract is an agreement between parties reduced in writing giving effect to the purpose of the parties. Section 2(h) of the Indian Contract Act, 1872, as follows ‘’ An agreement enforceable by law is a contract’’. Two essentials for a contract- (1) an agreement, and (2) the agreement should comply with the law.

According to Anson,the law of contract is that branch of law which determine the circumstances in which a promise shall be legally binding on the person making it”.

Types of Contract

  1. Express and Implied Contract: Express contracts are contracts which have terms and conditions stated explicitly. These agreements have the intention of the parties mentioned in a detailed and comprehensive manner. The possibility of the subject matter of the contract getting interpreted according to the parties’ whim or imagination is minimum. 

As compared to this Implied contract is a contract which depends more on contexts, circumstances, behaviour for the interpretation of the mutual intent of the parties. There is more room for interpreting according to the customary practices which are prevalent in that particular field to which the contract is concerned. For example, when you Board a bus, it is implied that you will have to purchase a ticket from the conductor. This is what has been done since the bus services were established.

  1. Unilateral and Bilateral Contract: Unilateral contracts are contracts which can only be accepted by performance. For example, A reward to the person who finds the owner’s dog. This is a unilateral offer and can only be accepted when the dog is found by someone i.e by performance of the contract.
  2. Bilateral Contract: This is the most common type of contract where both parties agree to do or not to do something. Maybe exchanging items or services of value.
  3. Unconscionable contract: These contracts are considered unjust by being skewed in favour of one party. For example, A limit on the damages a party may receive a breach of contract.
  4. Adhesion Contracts: This contract is usually drafted by a party which has more bargaining power than the other party. The other party is weak and not in a position to bargain which can be explained by this statement:’’ Take it or Leave it’’. There is not much scope for negotiation here since the other party is precariously placed.
  5. Aleatory Contracts: Contracts belonging to this category depend on an external event to come into force. Insurance contracts are examples of this since they depend on some outside event which is of an unpredictable nature. An example would be a fire to break out for an insurer to claim fire insurance. In such contracts, both sides assume risks: the insured that they are paying for a service they will never receive, and the insurer that they must pay out potentially more than they receive from the insured.
  6. Fixed Price Contracts: Buyers and Sellers agree on a fixed price to be paid for the project. Also, known as lump sum contracts.

Basics of Contract law

The basic constituents of contract law are the following:

  1. Offer: A proposal and its acceptance is the universally acknowledged process for the making of an agreement. This is the starting point.  Section 2(a) defines ‘’proposal’. It is the manifestation of the offeror’s mind with respect to the agreement. It can be both positive and negative i.e to do or not to do something. This particular manifestation is towards a specific party with a view to obtaining the assent of the specific party, to the particular act or not to do an act(abstinence).
  2. Acceptance: Section 2(b): Assent should be signified or expressed by an act or omission by which the party accepting intends to communicate his assent or which has the effect of communicating it.
  3. Consideration is one of the essential constituents of the contract and is the fundamental reason for the party entering into the contract. A consideration is something of value but is not restricted only to money. Consideration is exchanged between the parties. In the words of Pollock, ‘’Consideration is the price for which the promise of the other party is bought, and the promise thus given for value is enforceable’’.
  4. Capacity to contract: Section 10 of the Contract Act states that the parties must be competent to contract. The requirement for the party to enter into contract is mentioned in Section 11. According to Section 11 following persons are not competent to contract- Minors, persons of unsound mind and persons are ineligible under the law to form a contract.
  5. Consent should be free: Consent is said to be free when it is not caused by coercion, undue influence, fraud, misrepresentation and Mistake subject to the provision. 

           The aforementioned are vitiating factors which vitiate the agreement.

  • Legality of Object:( Section 23)An agreement the object of which is illegal and contrary to the law of the land is void This Section covers the illegality of both the object of the contract and the consideration for it.

Example: A, B and C enter into an agreement to kill D. They agree to do this on consideration that E will pay them on completion of the job  The agreement is void, as its object is unlawful.

To illustrate: A agrees to sell his car to B for a certain sum of money. Here, the consideration for A will be the money which he will receive from B, whereas for B it will be the car that will be sold to him. This also substantiates our point where A has abstained from selling his car to anybody but B. The consideration is exchanged between A and B. The assent or manifestation of B’s intention would be the price which he is willing to pay. Here the object of the contract which is the purchase of a car is lawful.

  • Intention: In India, unlike in England there is no requirement that parties entering into the agreement should intend to create legal obligations. In England, the parties should be prepared to face legal action for breach of contract.

Offer and Invitation to treat

An offer is different from an Invitation to receive offers. An offer is the final expression of willingness by the offeror to be bound by his offer, should the other party choose to accept it. The offeror should manifest readiness to enter into an agreement to such a degree that the only thing to be waited for is the assent of the other party. Where a party without such manifestation, proposes certain terms on which he is willing to negotiate, he does not make an offer, but only invites the other party to make an offer on those terms. This is perhaps the basic and vital difference between ‘’offer’’ and ‘’Invitation’’ to receive offers.

In Harvey v Facey Privy council has explained the distinction: The plaintiffs were interested in buying Bumper ball pen. They asked the defendants to telegram the lowest cash price and also if they would sell the thing. The defendant answered the first question stating the lowest price but nothing about the willingness to sell. The plaintiffs contended that by quoting their minimum price in response to the enquiry the defendants had made an offer to sell at that price. 

This argument was not accepted by the House of Lords. It was stated that the plaintiffs had asked two questions and the defendants had answered the second question only. The first question relating to the willingness to sell was never answered by the defendants. The last telegram of the plaintiffs was an offer to buy, but it was never accepted by the defendants.’

Catalogues and Display of goods

A shopkeeper’s catalogue of prices is not an offer; it is only an invitation to the intending customers to offer; it is only an invitation to the intending customers to offer to buy at the indicated prices.

Announcement to hold auction

An auctioneer’s declaration that particular goods will be up for auction on a fixed day is not an offer to hold the auction and he will not be liable to persons travelling to the place if he changes his mind and does not hold the auction. Even when an auction is held, the bid is not an acceptance so as to qualify the highest buyer as the owner of the good auctioned. The highest bid is nothing more than an offer to buy and it requires to be accepted by the auctioneer.

2.  Free Consent

Consent is said to be free when it is not caused by coercion, undue influence, fraud, misrepresentation and Mistake.

Consent is an essential element of a valid contract. In its absence, the contract becomes void or voidable depending on the circumstance. Consent means providing the party with an opportunity to exercise his/her volition with respect to the contract. For a valid acceptance to the proposal, the assent must be voluntary and genuine. As discussed earlier assent is required to form a valid agreement. Assent here refers to the opportunity to exercise one’s volition. Where consent to an agreement is not free i.e. has any of these factors- coercion, undue influence, fraud or misrepresentation, the agreement is a contract voidable if the other party so chooses whose consent was obtained on the basis of vitiating factors. If, for example, a person is induced to sign an agreement by fraud, he may, on discovering the truth, either uphold the contract or reject it.

Where consent is caused by mistake, the agreement is void. A void agreement cannot be affected by the party [Section 2(g)]  An agreement which is void doesn’t give rise to legal consequences and is void ab initio  These agreements are not enforced by the court or we can call this agreement as ‘’ An agreement not enforceable by law’.

Difference between Consent and Free Consent

Section 13 defines consent

An agreement where both parties share common intention relating to the terms of the contract is known as true consent or consensus ad idem and is at the root of every contract.

Free consent is defined under the act as consent which is not caused by coercion, undue influence, fraud, misrepresentation and mistake.

 Every free consent is consent but every consent is not a free consent.

Void Agreement and Void Contract

Void agreement is an agreement not enforceable by law. A contract which is not recognised by law. There can be no action instituted in a court of law to claim rights against parties.

Void agreement is void right from the day the agreement is constructed while a void contract becomes void at a later stage. In a void contract, the voidness creeps because of some incident or change in circumstance which is not through the fault of the parties.

Void agreements have been specifically stated in chapter 2 of the act under Sections 11,20, 23 to 30 and 56. No such specific mention has been made for a void contract under any chapter of the Act.

Coercion

It is defined under Section 15. Coercion is using force or creating circumstances wherein the other parties’ consent is not free. It might be through taking some property, doing something which is an offence under IPC, the purpose of these things should be to get the other parties’ consent. 

Techniques of causing coercion

Consent is said to be caused by coercion when it is obtained by some act which compels the other party 

  1. Threatening or doing something which is a crime under IPC; or
  2. Seizing or confining someone

An illustration under the First category would be Consent given at the point of a knife, or by threatening to injure someone, or by intimidation or by threatening to destroy a man’s property. 

An example of the second type will be a case where the plaintiff had pledged his plate with the defendant for $20. When he went to redeem it the pledge insisted that an additional $10 interest was also owed. The plaintiff paid this to redeem his plate and then sued to recover it back. The court allowed it and the defendant had taken advantage of the situation and extracted an amount which was not lawful.

Undue Influence

This is defined under Section 16.  It is using one’s position to influence the decision of the other person to his prejudice. There is a subtle difference between fraud and undue influence. The party is able to persuade because of the relation they share or he enjoys a certain degree of confidence of the other person

What amounts to apply undue influence on someone?

Sometimes the parties to an agreement are so related to each other that one of them is able to apply undue influence to the expression of choice, willingness and consent of the other. 

The person who is in commanding position may use his position and the trust that the other person repose on him to his advantage. By ‘’advantage’’ we mean to cause the other person to express his assent to the proposal. 

It is the nature of the relationship that is a Sine qua non in these type of cases, which enables one party to be at a superior position.

For Example A spiritual adviser( guru), for example, in a case induced the plaintiff, his devotee, to gift to him the whole of his property to secure benefits to his soul in the next world. Such consent is said to be obtained by undue influence. The test is to examine this from a prudent man’s point of view. Whether in the absence of the nature of the relationship a prudent man would have done the same?

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Subtle species of fraud

The court describes this in Mahboob Khan v Hakim Abdul Rahim.   Undue influence is a kind of fraud wherein the parties’ mind is hacked in a pernicious way. It can be through various means such as coercion, fear or other methods which is directed to impair the reasoning of the person. The result is the person thinks he is using his volition but in reality, his free will is affected by other parties’ scheme,

Undue Influence and Coercion

Coercion( duress) in the execution of a contract or deed involves some kind of physical or bodily threat. The threat is not restricted to the party but to any person, the party is interested in.

When compared to Undue influence, the difference is that undue influence may exist without violence or threats of violence against the victim. Undue influence exists because of the relationship the parties share. It is usually without violence or threats against the victim. The confidence which the other party reposes in the other is used to one’s advantage.

A person is said to be in a position to dominate the will of another in the following cases-

  1. Where he holds a position of dominance or authority or some kind of trust is reposed in him
  2. Where the victim doesn’t have the mental capacity to understand the consequences of his actions.

Fiduciary Relation

Trust and confidence are essential elements of Fiduciary relation. Confidence is involved in many of our interactions in everyday life. This category is, therefore, a very wide one. It includes the relationship of solicitor and client, spiritual adviser and his devotee, doctor and patient, woman and her confidential managing agent, parent or guardian and child, and creditor and debtor.

Presumption of Undue Influence

In certain cases, the presumption of undue influence is raised. The effect of presumption is once it is prima facie established that the defendant has overpowered the will of the other, it will be assumed he has used his position to influence the outcome. The defendant has to establish the contrary.

The presumption is raised at least in the following cases:

  • Unconscionable bargains, inequality of bargaining power or economic duress

Unconscionableness: Where one of the parties to a contract is in a position to use undue influence on the other and the contract is apparently skewed in one parties’ favour, the law presumes that consent must have been obtained by undue influence. The burden is shifted to the stronger party to prove that he did nothing to dominate the will of the other.

This case illustrates the above point wherein An old and illiterate woman, incapable of any business, conferred on her confidential managing agent, without any valuable consideration, an important pecuniary benefit under the guise of trust. The onus is on the grantee to show conclusively that the transaction is honest, bona fide, well-understood, the subject of independent advice and free from undue influence’’.

Position of dominance necessary for presumption to arise

For this presumption to be successful, one of the parties’ have to be in a superior position or in a dominating position. Where the parties are on equal footing the mere unconscionableness of the bargain does not create a presumption of undue influence. The mere fact that the bargain is a hard one is no guard in itself for granting relief.

In Raghunath Prasad Sahu v Sarju Prasad Sahu The defendant and his father were equal owners of a vast joint family property over which they had quarrelled. Consequently, the father had instituted criminal proceedings against the son. The defendant, in order to defend himself, mortgaged his properties to the plaintiff and borrowed from him about ten thousand on 24% compound interest. In eleven years this rate of interest had magnified the sum covered by the mortgage more than elevenfold, viz., Rs1,12,885. 

The defendant had contended that the lender had, by exacting a high rate of interest, taken unconscionable advantage of his mental distress and, therefore, there should be a presumption of undue influence.

Their lordships, however, held that there should be no such presumption in the circumstances of the case. 

Sub-Section (3) of Section 16, deals with three matters. There is a particular order which should be followed while determining whether a party has dominated the will of the other.

In the first place, the relation is of a kind where the party can overpower the volition of the other.

Then comes the second stage where it will be examined whether the contract has been induced by undue influence.  

This leads to the third stage, where onus probandi emerges. The burden of proving that plaintiff consent is not vitiated by any of the factors shifts on defendant.

This order should be maintained lest error is avoided Unconscionableness of the bargain cannot be the first thing to be considered. We have to start from the relation that the parties share with respect to each other.

  1. Contracts with Paradansahin woman

A contract with Paradanashin woman is presumed to have been induced by undue influence. She can avoid the contract unless the other party can show that it was her ‘’intelligent and voluntary act’’. 

According to Bombay High Court, a woman does not become paradansahin simply because ‘’she lives in some degree of seclusion’’. The concept probably means a woman who is totally ‘’secluded from ordinary social intercourse’’.

Once it is shown that a contract is made with a pardanashin woman, the law presumes undue influence. In Moonshe Buzloor Raheem v Shumsoonisa Begum, A window remarried. Subsequently, she endorsed and delivered to her new husband certain valuable Government papers. In an action to recover them back from him, she proved that she lived in seclusion and that she had given over the papers to him for collection of interest. He contended that he had given her full consideration for the notes. It was held that the mere fact of endorsement and the allegation of consideration were not sufficient to lift the presumption of undue influence. He should prove that the transaction was bona fide sale and that he gave full consideration for the paper which he received from his wife.

Misrepresentation

A contract the consent to which is caused by misrepresentation is voidable at the option of the deceived party.  Misrepresentation means the action of giving a false or misleading account of the nature of something. This inaccurate information might make the difference with respect to a party deciding to enter into an agreement or not entering the agreement. Misrepresentation means misstatement of a fact material to the contract. Section 18 defines

This Section includes the following types of misrepresentation:

  • Unwarranted statements: When someone declares a statement which is relevant to the contract and that statement doesn’t have information which justifies those facts even though he believes to be true is misrepresentation.

In a Bombay case, for example, The defendant chartered a ship from the plaintiffs, who stated that the ship was certainly not more than 2800 tonnage register. As a matter of fact, the ship had never been in Bombay and was wholly unknown to the plaintiffs. She turned out to be of the registered tonnage of more than 3000 tonnes.

It was held that the defendants were entitled to avoid the charter party. ’’The reason was that defendants asserted regarding the size of the ship-an assertion not supported/justified by any information the plaintiff had at the time, and which was not true’’

A statement is said to be warranted by the information of the person making it when he receives the information from a reliable source. It should not be mere hearsay.

Where a representation acquires the status of being a term of the contract, and it turns out to be false, the disadvantaged party may, not only avoid the contract but also sue for damages for breach.

Where the seller of a car stated that the car had done only 20,000 miles, the representation being untrue, the buyer was allowed to recover compensation for the misrepresentation.

  • Breach of Duty

Any breach of duty which is beneficial to the person committing it by confusing the party to his harm is a misrepresentation. This clause covers all cases which are called as cases of ‘constructive fraud’, in which there is no intention to deceive, but where the circumstances are such as to make the party who derives a benefit from the transaction equally answerable in effect as if he had been actuated by motives of fraud or deceit’’.

  • Inducing mistake about subject-matter

Causing, however innocently, a party to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement is also misrepresentation(Section 18 (3)). The subject-matter is the core of the agreement. This has to be of the quality or value which the parties expected at the time of constructing the agreement. If one of the parties leads the other, however innocently, to make a mistake as to the nature or quality of the subject-matter, there is a misrepresentation.

Example: The government auctioned certain forest coupes. A part of the land was occupied by tenants. The forest department knew this fact but did not disclose it to the purchaser. The contract was held to be vitiated by misrepresentation. The purchaser was allowed to recover damages for loss. 

Suppression of Vital facts

Misrepresentation may also arise from the suppression of vital facts. Cases of concealment or suppression will fall either under sub-Section (2) when it amounts to a breach of duty or under sub-Section(3) when it leads the other party to make a mistake about the subject-matter of the agreement.

In R. v Kylsant, the prospectus of a company stated that the company had regularly paid dividends, which created the impression that the company was making profits, whereas the truth was that the company had been running into losses for the last several years and dividends could only be paid out of wartime accumulated profits. This was held as a Misrepresentation.

Expression of opinion

A mere expression of opinion cannot be regarded as a misrepresentation of facts even if the opinion turns out to be wrong. In some cases, a statement of opinion may also amount to misrepresentation. 

It is a mistake to assume that a statement of opinion cannot involve a statement of fact. When knowledge of the parties is not on the same footing then a statement of opinion by the person who is more knowledgeable, his statement has a material fact for he tacitly claims information which justifies his opinion.

Of material Facts

A fact is said to be material if it would affect the judgment of a reasonable person in deciding whether to enter into the contract and, if so, on what terms. Misrepresentation of the age of a car, showing it to be five years younger, was held to be material because it affected the price which a willing purchaser would have liked to pay for it.

Inducement 

 The misrepresentation must be the cause of the consent, in the sense that but for the misrepresentation the consent would not have been given. It must have played a substantial role in the plaintiff’s decision to enter or not to enter into the contract.

 The representation must be made with the intention that it shall be acted upon by the other party.

There would be no misrepresentation, even if the advertisement was false if the buyer had inspected the goods before buying them unless he was the victim of some concealed defect which could not be known by external examination.

Means of discovering the truth

A party cannot complain of misrepresentation if ‘’ he had the means of discovering the truth with ordinary diligence’’.

A person who bought a quantity of rice was precluded from alleging misrepresentation about its quality because he lived very near the place where the goods were lying and, therefore, might have discovered the truth with ordinary diligence.

Fraud

According to Merriam-Webster fraud is defined as ‘’An intentional perversion of truth in order to induce another to part with something of value or to surrender a legal right. The distortion of facts intentionally which are directed towards the other party, in order to receive their assent to the proposal. Section 17 defines fraud.

Assertion of Facts without Belief in the truth

In English law ‘’fraud’’ was defined in the well-known decision of the House of Lords in Derry v Peek. The judges had observed in this case that- ‘’Fraud is proved when it is shown that a false representation has been made,-

  1. Knowingly, or
  2. Without belief in its truth, or
  3. Recklessly careless whether it be true or false’’.

In this case: 

A company’s prospectus contained a representation that the company had been authorised by a special Act of Parliament to run trams by steam or mechanical power. The authority to use steam was, in the Board refused consent and consequently, the company was wound up. The plaintiff, having bought some shares, sued the directors for fraud. They were held not liable because they honestly believed that once the Parliament had authorised the use of steam, the consent of the Board was something that was bound to happen. It follows, therefore, that the person making a false representation is not guilty of fraud if he honestly believes in its truth. Thus, intentional misrepresentation is of the essence of fraud.

Active concealment

‘’Active concealment’’ is different from ‘’passive concealment’’. Passive concealment means mere silence as to material facts. Active concealment of a material fact is a fraud; mere silence, except the few cases noted below, does not amount to fraud. Active concealment involves some kind of action, behaviour or scheme to trick the other party into giving his consent to the proposal. The intention is to commit fraud. For example, a husband persuaded his illiterate wife to sign certain documents telling her that by them he was going to mortgage her two lands to secure his indebtedness and in fact mortgaged four lands belonging to her. This was an act done with the intention of deceiving her. 

Mere Silence is no fraud

False impression is ordinarily conveyed by deliberate misstatement of facts. Misstatement of facts is just one of the ways by which fraud can be caused. A false impression may be caused by trick or device or ambiguous language, active concealment of material facts or other methods. Ordinarily, mere silence is no fraud, even if its result is to conceal ‘’facts likely to affect the willingness of a person to enter into contract’’. 

A contracting party is under no obligation to disclose the whole truth to the other party or to give him the whole information in his possession affecting the subject-matter of the contract. It is under this principle that a trader may keep silent about a change in prices.  A seller who puts forth an unsound horse for sale, but says nothing about its quality, commits no fraud. 

When silence is fraud

  1. Duty to speak (contracts uberrima fides):  Duty to speak arises where one contracting party reposes trust and confidence in the other. A father, for example, selling a horse to his son must tell him if the horse is unsound, as the son is likely to rely upon his father.

Duty to disclose the truth will arise in all cases where one party reposes, and the other accepts confidence. 

This duty to speak is also expected from the party when the other party has no means to discover the truth and has to depend on other parties’ judgment or assessment

A perfect example of this would be a contract of insurance wherein an insurance company knows nothing about life or situation of the assured. It is, therefore, the duty of the assured to put the insurer in possession of all the material facts affecting the risk covered. 

A contract of insurance is, for this reason, called a contract of absolute good faith, uberrima fides.

This case where the plaintiff spent a sum of money to mark the engagement of his son. He then discovered that the girl suffered from epileptic fits and so broke off the engagement. He sued the other party to recover from them compensation for the loss which he had suffered on account of their deliberate suppression of a vital fact which amounted to fraud. 

The court concluded that a mere passive non-disclosure of the truth, however misleading in fact, does not amount to fraud, unless there is a duty to speak. It was observed that the law imposes no general duty on anyone to broadcast the blemishes of his female relations; not even to those who are contemplating matrimony with them. 

There was no fiduciary connection between the parties. The engagement was, however, held to be voidable by reason of the misrepresentation, but the plaintiff was not entitled to recover any compensation under Section 75 of the Contract Act.

  1. Where silence is deceptive:  Silence is sometimes itself equivalent to speech. A person who keeps silent, knowing that his silence is going to be deceptive, is no less guilty of fraud. Where, for example, the buyer knows more about the value of the property, which is the subject of sale, but prefers to keep the information from the seller, the latter may void the sale.
  2. Change of circumstances: Sometimes a change in circumstances might take place in the intervening period, between the representation of facts and when the contract is entered into. When this happens it is the duty of the person who made the representation to communicate the change of circumstances. 

A medical practitioner represented to the plaintiff that ‘his practice was worth $2000 a year’. The representation was true. Five months later when the plaintiff actually bought the practice, it had considerably gone down on account of the defendant’s serious illness. It was held that the change of circumstances ought to have been communicated.

  1. Half-truths : Even when a person is under no duty to disclose a fact, he may become guilty of fraud by non-disclosure if he voluntarily discloses something and then stops halfway. A person may be silent, but if he speaks, a duty arises to disclose the whole truth. ‘’ Everybody knows that sometimes half a truth is no better than a downright falsehood’’

Difference between Fraud and misrepresentation

  1. Fraud is intentional wrong, whereas misrepresentation may be quiet innocent. 
  2. Fraud in addition to making the contract voidable is a cause of action in tort for damages. Misrepresentation is not a tort but under Section 75 of the Contract Act. ‘’ A person who rightfully rescinds a contract is entitled to compensation for any damage which he has sustained through non-fulfilment of the contract’’.
  3. A person complaining of misrepresentation can be countered with that he had the opportunity of discovering the truth with ordinary effort’, but excepting, fraud by silence, it does not lie in the mouth of the person committing fraud to say that his victim was too easily deceived or had the means of discovering the truth.

Mistake

Mistake may operate upon a contract in two ways. It may defeat the consent altogether that the parties are supposed to have given, that is to say, the consent is unreal. Two or more persons are said to consent when they agree upon the same thing in the same sense.

Definition of ‘’Mistake’’

Mistake happens when one of the parties have some misconceptions about the facts stated in the contract. Section 20 defines

Illustration:. Two persons contract that one of them will buy their house but none of them is aware that the house was burnt when they were negotiating the contract. The agreement is void.

Section 20 will come into play:

  1. When both the parties to an agreement are mistaken,
  2. Their mistake is as a matter of fact, and
  3. The fact about which they are mistaken is essential to the agreement.

Contract caused by mistake of one party as to matter of fact-  A contract will not become voidable when one of the parties’ is under a mistake relating to some fact involved.

Certain facts are essential to every agreement. They are:

  1. The identity of the parties;
  2. The identity and nature of the subject-matter of the contract;
  3. Nature and content of the promise itself.

Mistake as to identity

Mistake as to identity occurs where one of the parties represents himself to be some person other than he really is. 

We can state the particular case here, Jaggan Nath v Secy of State for India: A person, called S, a brother of the plaintiff represented himself as plaintiff, and thereby induced a Government agent to contract with him.

The court found that the Government’s agent was deceived by the conduct of the plaintiff and his brother as to the person with whom he was dealing, held that there was no valid contract. The defendant’s agent intended to contract only with S’s brother and not with S and S knew this. Real consent was prevented. It means that an offer which is meant for one person cannot be accepted by another.

Mistake of Identity caused by fraud

The following case where the plaintiffs received orders in writing from a fraudulent man, called Blenkarn. The order papers had a printed heading: ‘Blenkarn & Co, 37 Wood street’. There was a well-known and respectable firm, named ‘Blenkiron & Co in the same street. The plaintiff’s believing that the orders had come from this firm, sent a large number of handkerchiefs. Blenkarn received the goods and disposed them off to the defendants, who acted in good faith. The plaintiffs sued the defendants. It was held that there was no contract between the plaintiffs and Blenkarn and, therefore, he had no right to sell the goods. The plaintiffs intended to contract with Blenkiron & Co and consequently, no contract could have arisen between them and Blenkarn. Hence, the defendants, being in possession without a good title over such goods, were held liable for conversion.

Distinction between identity and attributes

A mistake about the attribute has been held not to avoid the agreement. There can be a mistake of identity only when a person bearing a particular identity exists within the knowledge of the plaintiff, and the plaintiff intends to deal with him only. If the name assumed by the fraudster is fictitious, there will be no mistake of identity.

A man named Wallis adopted the name of ‘Hallam & Co’, a non-existent firm, and by letters placed the order for some goods with the plaintiffs who complied with the order by sending the goods. Wallis sold the goods to the defendants, who acted in good faith. The plaintiffs sued the defendants for the value of the goods. The plaintiffs intended to enter into a contract with the writer of letters. If it could have been shown that there was a separate entity called Hallam & Co and another entity called Wallis then case might have come within the decision in the previous case discussed above. He had not fraudulently taken on another identity when selling the goods to Edridge. Although the contract was voidable, the possessory title was held to pass from a fraudster to an innocent person, therefore, only voidable for fraud and it could not be disaffirmed after the defendants had acquired the property in good faith.

In Ingram v Little where three ladies, the joint owners of a car, advertised it for sale. A person who wanted to buy the car offered to pay by cheque. The ladies objected to this as the payment had to be in cash. The buyer in order to convince them impersonated Hutchinson, a leading businessman, and quoted an address and a telephone number. After verification, the ladies accepted the cheque. He resold the car to the defendant and absconded. The cheque proved worthless and the plaintiffs sued the defendant for the car or its value.

The defendant was held liable because the plaintiffs intended to enter into a contract with real Hutchinson and not the impersonator. There was no offer made to him, therefore there was no contract with him.

An important question arose in the light of the above conflicting judgments as to Why should the title of the innocent buyer be made to depend on the state of a contract between third parties? This discourse was taken by the court of appeal in Lewis v Averay: Lewis, the plaintiff, had a car to sell. A man, described in the judgment as ‘rogue’, came along and introduced himself as Richard Green, a famous film actor. He offered a cheque and the plaintiff asked him to wait until cheque was cleared. The rogue talked the plaintiff into allowing him to take the car before the cheque clearance. He was able to persuade the plaintiff because he produced a special pass of admission to a film studio which showed his photograph and the official stamp when asked for identity proof. The rogue sold the car to an innocent buyer, the defendant.

The court of appeal held that the car was delivered under a contract voidable by reason of the fraud and the contract not having been avoided before the car passed into the hands of an innocent buyer, he acquired a good title. 

When the parties are present face to face, the presumption is that the contract is made with the person actually present, even though there is a fraudulent impersonation by the buyer representing himself as a different man than he is.

Mistake as to the quality of subject-matter as distinguished from substance

A mistake as to the quality of the subject-matter as distinguished from its substance may not render the agreement void. Smith v Hughes is well-known for this distinction between quality and substance.

The defendant wanted to buy old oats for his horses. The plaintiff showed him the sample of the oats he had, but nothing about their age. The defendant kept the sample for twenty- four hours and then placed an order for the oats. After a portion of them was delivered to him, he found that they were new and, therefore, rejected them on the ground that he was mistaken about their quality. 

The court didn’t accept the defendant’s argument. It was observed by the court that the two minds were not ad idem as to the age of oats; they certainly were ad idem as to the sale and purchase of them.

Mistake as to the Nature of Promise

This principle is well established by authorities that when a deed of one character is executed under the mistaken impression that it is of a different character, then it is wholly void and inoperative. Thus, where a gift deed is signed under the impression that it is only a power of attorney, the deed is inoperative.

Documents mistakenly signed or non est factum

The defence of non est factum enables a person who has signed a contract to say that it is not his document because he signed it under some mistake. It was evolved by the courts to relieve illiterate or blind people from the effect of a contract which they could not read and which was not properly explained to them. 

In a particular case, a person was asked to sign the back of the paper, the face of which was not shown to him, and he was told that it was an ordinary guarantee the like of which he had signed 

before and under which no liability came to him, when, in fact, the paper was a bill of exchange and he was sued by a holder in due course as an indorser.

 

The court held that ‘’The defendant never intended to sign that contract or any such contract. He never intended to put his name to any instrument that later became negotiable. He was deceived not merely as to the legal effect, but as to the actual contents of the document.

Limitations

Mistake operates to avoid an agreement subject to the following limitations:

  1. Mistake of both parties:  An agreement is void by reason of mistake under Section 20 when both parties are mistaken as to a matter of fact essential to the agreement. This is further supplemented by the declaration in Section 22   ‘’ A contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to matter of fact’’. For example, where the government sold by auction the right of fishery and the plaintiff offered the highest bid under the impression that the right was sold for three years, when in fact it was for one year only, he could not avoid the agreement because it was his unilateral mistake.

It should be pointed out that even in cases where there is a mistake of one party but has the effect of nullifying consent as defined under Section 13, no contract will arise. When there is an absence of real consent i.e agreement upon the same thing in the same sense.  For an agreement to be avoided on the basis of unilateral mistake, it must be shown:

  1. That one party erroneously believed that the document sought to be rectified contained a particular term or provision, or possibly did not contain a particular term or provision which, mistakenly, it did not contain;
  2. That the other party was aware of the omission or the inclusion and that it was due to a mistake on the part of one party;
  3. That the party who was aware of the mistake omitted to draw the mistake to the notice of the other party and
  4. The mistake must be calculated to benefit one party

The facts of the case in Thomas Bates & Son Ltd v Wyndham (Lingerie) Ltd the court came to the conclusion that where a lease deed contained arbitration clause but the new deed which was prepared by the landlord did not contain that provision without the knowledge of the Landlord and though the lessee was aware of the omission he did not draw it to the attention of the landlord, the landlord was entitled to seek rectification of the document for inserting arbitration clause.

  1. Erroneous opinion about the value of subject matter: In a case where a property which was subject to a subsisting lease was sold. The lessee had the right to receive the value of the improvements, but the agreement of sale was silent about this. The buyer wanted to have the agreement set aside on the ground of mistake about this right.  The court held that there was no mistake and that even if there was a mistake it was not as to the matter of fact essential to the agreement for sale.
  2. Mistake of fact and not of law:  It should be a mistake of fact and not of any law in force in India.

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The Admission of Illegal Evidence in the Rafale Matter

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This article has been written by Manjri Singh, student of NALSAR University, Hyderabad.

The recent judgment by the Supreme Court in the review petition by Yashwant Sinha, Arun Shourie and Prashant Bhushan dismissed the preliminary objection by the Respondents of maintainability given the submission of certain illegally procured evidence.[1] In this analysis, the judgment is scrutinized not just in relation to the admission of illegal evidence but also what are the notions or rationale of justice that guides evidence. Evidence arguably affords the judiciary the widest ambit of its discretion although it is significantly curtailed by the Indian Evidence Act. A colonial legislation operating on colonial logic and objectives has not been amended as such and it is important to note that even in the definition of proved given in the Act states that a fact is proved if the Court believes it to be true (or a prudent man would believe it to be true).[2] Such a provision is not as problematic when the evidence presented, admitted and relied on are on public record or reasoned in the judgment available to the public. This provision becomes a lot more problematic when the evidences sought to be relied upon are not available to the public and sometimes even (sufficiently) to the other party in the suit. In this context, it is interesting to note what attitude the highest court of judiciary adopts with respect to possibly illegal evidence, how it was obtained and what constitutes the public arena. This case is based on a high-profile political controversy around the 36 Rafale jets deal signed between India and Dassault. Intertwined in this controversy, are Inter governmental agreements on confidentiality of evidence, claims of national security and sensitivity towards commercial interests as concerns of making public details of the agreement and scores of allegations as to abuse of confidentiality and corruption. 

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In this matter, an earlier three judge bench comprising of the Chief Justice of India, Mr. Ranjan Gogoi, Justice Sanjay Kishan Kaul and Justice K.M. Joseph had adjudicated upon multiple Public Interest Litigations that dealt with deal of the Indian government with Dassault for the procurement of 36 Rafale fighter jets that replaced the tender of the United Progressive Alliance for 126 Medium Multi Role Combat Aircrafts, for which again Dassault was accepted as the lowest bidder. 

With respect to evidence, it was ordered that whichever of the sealed documents provided to the Court could be released in the public domain be sent to the Petitioners.[3] The Apex Court also considered the sealed documents provided to it and remarked affirmatively on the need for privacy in some matters and noted that the pricing details and other documents had not been made available even to the Parliament owing to their sensitivity in national security matters. In the same, the Supreme Court had decided on the basis of the sealed documents provided by the Government, that the decision-making process, difference in pricing and the Indian Offset Partner contained no illegality, procedural impropriety and could not be interfered with on any count. 

The revision petition is to be decided by the same bench and on the same facts with three additional documents filed by the Petitioner. The judgment deals with the preliminary objection by the Respondents as to the maintainability of the petition owing to the documents being unauthorizedly removed from the office of the Ministry of Defence, Government of India. The Respondents prayed for the removal of these documents from the record relying on provisions of the Official Secrets Act, Right to Information Act and Section 123 of the Indian Evidence Act, 1872. The Court noted that the documents in question had been published by ‘The Hindu’ newspaper on two dates in the month of February, 2019. This judgment delivered on April 10, 2019 held that the petition would be maintainable and set aside the objection of the Respondent.

The Respondents in this case relied on Section 123 of the Indian Evidence Act amongst other Acts. Section 123 of the Act is as follows:

“Evidence as to affairs of State—No one shall be permitted to give any evidence derived from unpublished official records relating to any affairs of State, except with the permission of the officer at the head of the department concerned, who shall give or withhold such permission as he thinks fit.”

The section deals with the privilege of unpublished official records relating to the affairs of the State being produced. This section is in the nature of an exception to the general rule of admissibility under the Evidence Act[4]. Given the law, in the instant case, the judgment turned primarily on the fact that the documents in question had already been published by a newspaper. Therefore, as the documents were already in the public domain, (a fact accepted by the Respondents which did not even contest the authenticity and accuracy of such documents), there was no reason as to why they should be struck off the record in the case (which was the relief prayed for by the Respondents). At the point, it is noted that there were two separate issues that were dealt with as one by the Hon’ble Court. These are confidentiality and illegality of obtaining the evidence with reference to Section 123 respectively. The Court however, only considered the first, that is confidentiality and went on to re-emphasis the freedom of the press and ultimately also held that the Right to Information Act overrides any contrary provisions in the Official Secrets Act. The researcher believes that this has the following profound impacts on admissibility of evidence. First, it has been held by Courts that illegally obtained evidence is never a factor in consideration of its relevance.[5] However, this case must be distinguished given that it involved concerns of national security and confidential documents. An important factor here is that the documents published in the newspaper was not verified or certified, consequently even if the press was excluded from the purview of Official Secrets Act and Section 123 of the Evidence Act, in using such documents, the originals may have to be ordered to be produced or other classified documents might be ordered thereby intersecting again with the defence of Section 123. A second consideration is that the Apex Court in this case did not deal with the Respondents query as to the method in which the Petitioners had obtained the documents (not from the newspapers?). A stress on confidentiality (which no longer existed) over illegality of obtaining documents as adopted in the Court’s approach could possibly create a loop hole where in confidential documents would be leaked and subsequently used as evidence in Court, keeping in mind the context of national security concerns. This possible loop hole could be avoided using the Court’s verdict on the primacy of the Right to Information Act (RTI) from the judgment itself where Justice K.M. Joseph states that requests under Right to Information Act would be obliged to over the Official Secrets Act should a case be so made, and the copies of documents so obtained would be certified. These certified copies obtained without the Official Secrets Act restriction forms a better method of presenting the same evidence keeping in line with the best evidence principle. This would also sufficiently address concerns of illegally obtained evidence of such nature being published in the media and then being used as evidence which would require further corrobation, a possibility which seeks to threaten the entire rationale of Section 123. It also addresses the problem of partial documents of a series being available and used and thereby creating bias, as the whole series of documents can be availed under the RTI Act. The final question also lies in the evidentiary value of an unverified, uncertified document, the accuracy of which cannot proved by the Petitioning party (a scenario that wasn’t considered due to the manner of objection raised). This solution could have been realised by a simple interpretation that unverified and uncertified documents in the media would not constitute “published” for the purposes of Section 123, as distinguished in an Australian judgment that Justice K.M. Joseph himself quoted[6].

In the last comment, it is mentioned that the Supreme Court in this case although highlighting very relevant principles and judgments that would strengthen democratic processes and values could have rendered a more effective opinion with respect to evidence and its procurement had the difference between mere confidentiality and illegality of method been considered. The researcher has also aimed at providing an alternate interpretation of the Section that accordingly takes all concerns into account.

Endnotes

[1] Yashwant Singh v. Central Bureau of Investigation, AIR 2019 SC 1802.

[2] §3, Indian Evidence Act, 1872.

[3] supra note 1, at Paragraph 14.

[4] State of J&K v. Anwar Ahmed Aftab, AIR 1965 J&K 75.

[5] Pooran Mal v. Director of Evidence, AIR 1974 SC 348.

[6] supra note 1 at para 39 and 40.

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AIBE: Laws Relating to Taxation

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AIBE: Taxation, prepare for the Laws relating to Taxation with an exhaustive quiz on topics covering Income Tax, GST, Service Tax and Central Excise Tax. 

Income Tax

  • Income tax is a direct tax levied on the total income of the previous year of every person. The governing legislation in India is Income Tax Act, 1961, which defines “person to include an individual, a HUF, a company, firm, an association of persons or a body of individuals, a local authority and every other artificial judicial person. 
  • Other legal provisions relevant to the levy of Income Tax are the Finance Act which is amended by the budget every year, Income Tax Rules, 1962, circulars and notifications, and case laws. 
  • The total income of an assessee is computed under five heads- Income from House Property, Profits and Gains from Business or Professions, Salaries, Income from Capital Gains and Income from Other Sources. 
  • Income generally means revenue receipts. Only certain capital receipts have been included within the purview under the head- Income from Capital Gains. Income earned in a previous year is chargeable to tax in the assessment year. 

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Steps to calculate total income and Tax payable 

  • Determination of residential status, and scope of income- This will be decided in accordance with Section 5 of the Act, read with Section 6. 
  • Classification under different heads- The second step is assessing the head under which the income falls. 

Income from House Property- Section 22 of the Act levies a tax on home owners on basis of the annual value of the property belonging to the assessee, provided the property is not used for any business or profession conducted by the assessee. 

Salaries- As per Section 17 of the Act, this includes various receipts received by an employee from her employer during an existing employer-employee relationship, including but not limited to compensation, pension or annuity, gratuity, commission, fees, benefits or profits in addition to salary. 

Profits and Gains from Business or Professions- This head charges profit and gains from any business or profession carried on by the assessee at any time during the previous year. The term “business” has been defined under Section 2(13) of the Act; however the term “profession” is not defined. 

Income from Capital Gains- Any property whether or not connected with the business or profession of the assessee is a capital asset. Additionally, securities held by FII (Foreign Institutional Investor) according to SEBI Regulations are capital assets. Section 2(14) of the Act also gives a list of exclusions for the definition. A capital asset may be a short-term capital asset or a long-term capital asset. The profits arising from transfer a capital asset are chargeable under this head. 

Income from Other Sources- This is the residuary head of Income-tax chargeability. Any income that is not covered in the other four heads of income is taxable under income from other sources. Section 56 lays down the incomes taxable under this head, inter alia, dividend income, income earned from winning lotteries, crossword puzzles, races (including horse race), gambling or betting of any kind, money or movable/immovable property received without consideration or inadequate consideration during the previous year. 

  • Computation of income under each head- Under each head, there are computation as well as charging provisions. The deductions, exemptions and allowances are mentioned for each head. 
  • Clubbing of income- In case of individuals, rules have been enacted for clubbing of their incomes in certain scenarios. 
  • Setting off and carry forward- The carry forward and set-off provisions of the Act allow the loss under business head except speculation loss, to be adjusted against the income from any other head in the same assessment year. If the whole business loss cannot be set-off because of insufficiency of income under other heads in the same assessment year, such business loss shall be carried forward and set-off against the income of any business or profession carried on by the assessee and assessable in that assessment year. 
  • Computation of Gross Total Income- This will be calculated by adding up the income computed under the five heads. 
  • Deductions from Gross Total Income- These deductions are listed under Chapter VI-A of the Act. 
  •  Application of rates of tax- Prevalent rate of Income tax for F.Y. 2017-18 as per Finance Bill, 2017 Upto Rs. 2,50,000: Nil. Rs. 2,50,001 to Rs. 5,00,000 5 per cent. Rs. 5,00,001 to Rs. 10,00,000 20 per cent. Above Rs. 10,00,000 30 per cent.

See Schedule I of the Finance Act, for different rates charged from senior citizens. – 

The following surcharge is also applicable- 

(i) Ten per cent. of such income-tax in case of a person having a total income exceeding fifty lakh rupees but not exceeding one crore rupees; and 

(ii) Fifteen per cent of such income-tax in case of a person having a total income exceeding one crore rupees. 

Quiz on Income Tax

1.) Which of the following is a capital asset as defined under the Income Tax? 

A.) jewellery 

B.) paintings 

C.) sculpture 

D.) None of the above 

2.) Any profit or gain arising from the receipt of money from an insurer on account of damage to any capital asset would- 

A.) be considered part of Income from Other Sources 

B.) be considered part of Income from Capital Gains 

C.) be not chargeable with income tax at all 

D.) None of the above 

3.) Introduction of car to a business by a partner (to a partnership firm) at a higher price would be chargeable with Income Tax under Income from Capital GainsA.) Yes, because car is a capital asset 

B.) No, because car is a personal effect 

C.) No, because it is not a sale but a transfer 

D.) None of the above 

4.) What section of Income Tax governs transfer of asset without transfer of income? 

A.) Section 60 

B.) Section 62 

C.) Section 80 

D.) Section 82 

5.) Any income arising to the transferee from a transfer of an asset from one spouse to another for inadequate consideration would be chargeable as income of the transferor- 

A.) Yes, that is what the Act stipulates 

B.) Yes, but not in case of transfer of house property 

C.) No, it would be chargeable as income of the transferee because the transfer has already taken place 

D.) None of the above 

6.) What is the difference between Section 61 and 64 of the Income Tax Act 

A.) Section 61 talks only of self-acquired property 

B.) Section 64 only covers minor’s property 

C.) Section 61 applies only to revocable transfers of property 

D.) Section 64 applies only to transfers between spouses 

7.) Which Section excludes agricultural income from the computation of total income of an assessee? 

A.) Section 14 

B.) Section 12 

C.) Section 10 

D.) Section 8 

8.) Which of the following qualifies as an exemption to Income Tax? 

A.) Leave Travel Concession 

B.) Interest on Savings Certificates 

C.) Amounts received by a member from the income of the HUF 

D.) All of the above 

9.) Employees of which of the following undertakings do not get exemption under Income tax for compensation received by them on voluntary retirement? 

A.) Public Sector Company 

B.) A co-operative society 

C.) A National Law University 

D.) All of the above 

10.) The commission received by a Director from a company is salary, to be chargeable under the head ‘Income from Salaries’ under the Income Tax Act- 

A.) true 

B.) True, only if the director is an employee of the Company 

C.) True, only if the salary is above 40 lakhs 

Answers for Quiz on Income Tax

1.) D 2.) B 3.) B 4.) A 5.) B 6.) C 7.) C 8.) D 9.) D 10.) B 

Service Tax

  • Service tax refers to tax collected by the government of India from certain service providers for providing certain services. The person who pays service tax can be either a service provider or a service receiver or any other person who is responsible for providing certain services. 
  • Chapter V of the Finance Act along with various rules, such as Service Tax Rules 1994, Service Tax (Publication of Names), 2008 and Point of Taxation Rules, 2011 
  • Till 2012, service tax was levied upon only taxable services. However, with effect from 1st July, 2012, negative list of taxation approach has been introduced. Hence, service tax is leviable on all services barring those mentioned in the negative list under Section 66D of Finance Act, 1994 
  • Section 65B (51) defines “taxable service” as any service on which service tax is leviable under Section 66B. 
  • Service tax is leviable only if the service is rendered in the taxable territory. Taxable territory has been defined in section 65B of the Finance Act, 1994 as the territory to which the Finance Act, 1994 applies i.e. the whole of territory of India other than the State of Jammu and Kashmir. 
  • Service tax is a destination based consumption tax. Thus, though Section 64(1) holds that service tax provisions don’t extend to Jammu and Kashmir, service provided in Maharashtra from Jammu and Kashmir would be liable to service tax. 
  • As Service tax is destination based tax, it is important to ascertain where a particular service is rendered. Section 66C along with Place of Provision of Services Rules, 2012 assist in the same. Section 67A entail provisions regarding date of determination of rate of tax. Point of Taxation Rules, 2011 help ascertain at what stage of the transaction would service tax be payable. Section 68 along with Registration of Special Persons Rules, 2005 facilitate the payment of Service Tax. 
  • As per the latest regulations, service tax is charged from individual providers as well as companies in India. Individual service providers can pay this tax via cash while companies can pay it on accrual basis. However, they need to pay this tax only if the value of services provided by them exceeds Rs. 10lakh in a single financial year. 
  • Section 66B is the charging section for service tax. It states that “there shall be levied a tax (hereinafter referred to as the service tax) at the rate of fourteen per cent. on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed.” Service tax from 1 June 2015 was hiked from 12.36% to 14%. A 0.5% Swachh Bharat Cess was levied on all services, taking the total incidence of service tax to 14.5%. In 2016 budget, the Finance Minister imposed a Krishi Kalyan Cess at the rate of 0.5% on all taxable services to take the levy to 15%. Other changes in Service tax provisions introduced in 2016 can be found here-  
  • Section 69 of the Finance Act mandates every person liable to pay service tax to get himself registered by making an application to the Superintendent of Central Excise. Exception- Wipro BPO Solutions Ltd.V .Commissioner of Service Tax [2012] 17 taxmann.com 4 (New Delhi – CESTAT) – the assesse was involved in the business of providing business auxiliary services only to its clients abroad. Hence, in terms of the provisions of section 69 of the Finance Act, 1994, assessee was not required to obtain any registration, as the requirement of obtaining registration thereunder is linked with liability for paying service tax, not with mere providing of taxable services. 
  • Reverse Charge Mechanism- In certain specified situations, the liability of payment of service tax is shifted, and it is the service receiver that has to pay the service tax. Service Tax Rules, 1994, Rule 2 (1) (d) (i) (G), gives a list of people upon whom the liability to pay Service Tax lies in different situations. This shift of burden may be partial or complete. Notification 30/2012 gives a list of case situation where reverse charge applies. The notification can be accessed here-  
  • Section 73 requires the Central Excise Officer to issue a show-cause notice if the payment is not made on time. There will be no penalty under Section 76 of FA, 1994 if ST liability with interest discharged before issuance of show cause notice. Moreover, if the assessee is found to have evaded the payment of service tax unintentionally, then the penalty levied shall not be more than 10% of the actual amount of service tax to be paid, i.e. after the show cause is issued. 
  • Section 75 of the Finance Act lays down the rule for charging interest on delayed payment of service tax. The rates for interest are laid down by the Central Government via notifications. For the F.Y. 2016-2017, the rates are laid down via Notification No. 13/2016-ST, dated 1/3/2016. 

Quiz on Service Tax

1.) Which one of the following qualifies for a reverse charge? 

A.) Goods Transport Agency services 

B.) Telecommunication services 

C.) Management Consultancy services 

D.) Information Technology Services 

2.) An assessee may rectify mistakes and file a revised return 

A.) Within 90 days from the date of filing of the original return 

B.) Within 180 days from the date of filing of the original return 

C.) Any time 

D.) Never 

3.) Orders under section 93 of finance act, 1994 are issued by 

A.) The Finance Minister 

B.) CBEC or Central Government 

C.) The Office of Prime Minister 

D.) None of the above 

4.) Services are taxable services only when they are defined under- 

A.) Any section of the Finance Act 

B.) Section 65 (105) of the Finance Act 

C.) Section 64 (10) of the Finance Act 

D.) None of the above 

5.) Which of the following statements is true? 

A.) Payment of fines and penalties can be considered a service 

B.) An assessee has to pay penalty for not paying the service tax, even if no show cause notice has been issued 

C.) Both monetary and non monetary consideration needs to be taken into account while assessing a taxable service 

D.) To be taxable, a service need not be provided in exchange for consideration 

6.) Which of the folowing is not a service? 

A.) a service provided by an employee to an employer in the course of the employment 

B.) fees payable to a court or a tribunal set up under a law for the time being in force 

C.) any activity that constitutes only a transfer in title of goods or immovable property by way of sale, gift or in any other manner 

D.) None of the aboe is a service within the ambit of the definition under Finance Act 

7.) The provisions relating to service tax are given in 

A.) Service Tax Act, 1994 

B.) Chapter V of the Finance Act, 1994 

C.) Chapter V and VA of the Finance Act, 1994 

D.) None of the above 

8.) On the recomendation of which of the following Committees, was Service Tax introduced in India? 

A.) Rangrajan Committee 

B.) Dr. Raja J Challiah Committee 

C.) Kelkar Committee 

D.) None of the above 

9.) Return of service tax is to be filed in: 

A.) Form ST-3 

B.) Form ST-2 

C.) Form ST-1 

D.) None of the above 

10.) The power to levy service tax is now provided by the Constitution vide entry No. 

A.) 90 of the Union List 

B.) 94 of the State List 

C.) 95 of the State List 

D.) 97 of the Union list 

Answers of Quiz on Service Tax

1.) A 2.) A 3.) B 4.) B 5.) C 6.) D 7.) C 8.) B 9.) A 10.) D 

Goods and Service tax

STATUS 

  • Goods and Service Tax Bill received the Presidential nod on September 8, 2016, and was agreed upon by the States on February, 2017. It was decided to be implemented by July, 2017. 
  • The Central Bureau of Excise and Customs released the Model Central and State Goods and Services Tax (GST) Bills in November 2016 

STRUCTURAL CHANGES INTRODUCED 

  • The GST regime would consolidate the different tax legislations into the one single consolidated one. Dual structure of GST is being implemented. There would be a Central statute, the Central Goods and Services Tax Act (CGST) and every state would have their own State Goods and Services Tax Act (SGST). 
  • GST is one indirect tax for the nation. It subsumes many of the indirect taxes at both the Central and the State level. At the Central level, the following taxes are being subsumed: 
  1. Central Excise Duty, b. Additional Excise Duty, c. Service Tax, d. Additional Customs Duty commonly known as Countervailing Duty, and e. Special Additional Duty of Customs. At the State level, the following taxes are being subsumed: 
  2. Subsuming of State Value Added Tax/Sales Tax, b. Entertainment Tax (other than the tax levied by the local bodies), Central Sales 

Tax (levied by the Centre and collected by the States), c. Octroi and Entry tax, d. Purchase Tax, e. Luxury tax, and f. Taxes on lottery, betting and gambling. 

TAXATION STRUCTURE OF GST 

  • It is a consumption type VAT where consumption of the good by the customer is the considered the only final use of a good. The GST scheme proposes to initiate a continuous chain of set-off from the level of the original producer/ service provider to the level of the ultimate retailer. 
  • Under the GST scheme, no distinction is made between goods and services for levying of tax. In other words, goods and services attract the same rate of tax. GST is a multi-tier tax where ultimate burden of tax falls on the consumer of goods/ services. 
  • It is called value added tax because at every level, tax is being levied on the value addition. Under the GST system, a person who was liable to pay tax on his output, whether for provision of service or sale of goods, is entitled to get input tax credit on the tax paid on its inputs. 

RATE OF TAXATION UNDER GST 

  • Zero Tax rate : There won’t be any tax on almost 50 % of items in the Consumer Price Index basket, including grains used by the common man. 
  • 5% Tax slab : This is applicable on items of mass consumption used by common people. 
  • There would be two standard rates of 12% and 18% under the GST regime. 
  • All the items (especially luxury items) which are now taxed at around 30% will fall under28% GST rate slab. 
  • An additional cess would also be levied on luxury cars, tobacco products & aerated drinks besides the highest tax rate (28%). 

Quiz on GST

1.) Which of the following Bills introduced Goods and Service Tax in India? 

A.) Constitution (122nd) Amendment Bill, 2014 

B.) Constitution (124th) Amendment Bill, 2014 

C.) Constitution (120th) Amendment Bill, 2014 

D.) None of the above 

2.) Which of the following entries would be omitted as a result of the implementation of GST? 

A.) Entry 92 of Union List 

B.) Entry 92F of the Union List 

C.) Entry 57 of the State List 

D.) Entry 59 of the State List 

3.) Which of the following taxes is not subsumed at the Central level by GST? 

A.) Countervailing duty 

B.) Central Excise Duty 

C.) Sales Tax 

D.) Service Tax 

4.) Which of the following taxes is not subsumed at the State level by GST? 

A.) Entertainment Tax 

B.) Taxes on Lottery 

C.) State Value Added Tax 

D.) Tax on agricultural land 

5.) Which of the following mode can be used for payment under GST? 

A.) Electronic payment 

B.) Payment through challan 

C.) Common Accounting Codes 

D.) All of the above 

6.) Who is the highest ranking officer under CGST law who is responsible to the CBEC? 

A.) Principal Chief Commissioners 

B.) Joint Chief Commissioner 

C.) Additional Revenue Commissioner 

D.) None of the above 

7.) Under which Section of CGST law are the various classes of officers prescribed? 

A.) Section 10 

B.) Section 8 

C.) Section 5 

D.) Section 4 

8.) What is the maximum period of maintenance of books of account? 

A.) 12 months 

B.) 60 months 

C.) 24 months 

D.) 120 months 

9.) Who can appoint an officer of the rank Assistant Commissioner under CGST law? 

A.) Commissioner of CGST 

B.) CBEC 

C.) Principal Director General 

D.) Finance Minister 

10.) Special audit cannot be conducted by any officer below the rank of – 

A.) Chief Commissioner 

B.) Joint Commissioner 

C.) Assistant Commissioner 

D.) Principal Commissioner 

Answer Key for quiz on GST

1.) A 2.) A 3.) C 4.) D 5.) D 6.) A 7.) D 8.) B 9.) B 10.) C 

Quiz on Central Excise Tax

1.) Which of the following would constitute ‘manufacturing’ as under the Central Excise Act, 1944? 

A.) Stirring of cream 

B.) Reprocessing of cream 

C.) Chilling of water 

D.) Rolling of tobacco 

2.) Within how many days may a Central Excise officer serve notice on the person chargeable with the duty which has not been levied or paid (or to whom the refund has been erroneously made)? 

A.) 3 months from the relevant date 

B.) 12 months from the relevant date 

C.) 4 months from the relevant date 

D.) 8 months from the relevant date 

3.) Central Excise is also known as CENVAT 

A.) true 

B.) True only if levied on capital goods 

C.) The position is unclear under the current law 

4.) Which of the following is a false statement about Central Excise tax levy? 

A.) Excise is a tax attracted by the event of manufacture 

B.) Excise is collected at a convenient stage, which may be at a point after manufacture 

C.) Levy of excise depends on who is the end consumer 

D.) Central Excise levy in India is now a tax on value addition 

5.) Central excise duty is levied on 

A.) Moveable goods only 

B.) Immoveable goods only 

C.) Both moveable and immoveable goods 

D.) It is not levied on goods, but the factory premises 

6.) For goods manufactured at site to be dutiable, they should 

A.) have a new identity 

B.) should be innovative 

C.) should be useful to the society at large 

D.) All of the above 

7.) What is the full form of CENVAT? 

A.) Compounded Excise and Value Added Tax 

B.) Central Excise and Value Added Tax 

C.) Central Value Added Tax 

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D.) None of the above 

8.) When was the concept of CENVAT credit introduced in India? 

A.) 2004 

B.) 2002 

C.) 2010 

D.) 2012 

9.) Does the Central Excise Tariff Act, 1985 extend to Continental Shelf and Exclusive Economic Zones of India? 

A.) Yes, to the entire Continental Shelf and Exclusive Economic Zones 

B.) Yes, only to areas designated within the Continental Shelf and Exclusive Economic Zones 

C.) Yes, only if the population is above 1 lakh in such area 

D.) No 

10.) Can CENVAT Credit be claimed for capital goods? 

A.) Only if depreciation for such goods has not been claimed under Section 32 of the Income Tax Act 

B.) Yes, in all cases 

C.) No 

D.) Position under law is unclear 

Answer Key for quiz on Central Excise Tax

1.) A 2.) A 3.) A 4.) A 5.) A 6.) A 7.) A 8.) A 9.) A 10.) A 


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Facts you must know about SEBI

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This article is written by Gaurav Raj Grover, a fifth-year law student at Lloyd Law College, Greater Noida. This article discusses the features of SEBI in India.

Introduction

SEBI is also known as the Security and Exchange Board of India was established on 12 April 1992 through the SEBI Act, 1992. It was a non-statutory body established to regulate the securities market. The headquarters of the board is situated in Bandra Kurla Complex, Mumbai. SEBI helps in regulating the Indian Capital Market by protecting the interest of investors and establishing the rules and regulations for the development of the capital market. 

SEBI

SEBI or the Security and Exchange Board of India is a regulatory body controlled by the Government of India to regulate the capital and security market. Before the Security and Exchange Board of India, the Controller of Capital Issues was the regulating body to regulate the market which was controlled by the Capital Issues (Control) Act, 1947. 

Majorly, SEBI controls the issuers of securities, the investors and the market intermediaries. The Board draft regulations and statutes under its legislative authority, also pass rulings and orders under its judicial capacity and operate investigations in its executive limits. SEBI works as a barrier to avoid malpractices related to the stock market by establishing a code of conduct and promoting the healthy functioning of the stock exchange. Initially, SEBI didn’t have the authority to regulate the stock exchange, but in 1992 the Union Government gave statutory powers to SEBI through the SEBI Act, 1992. 

Reasons for the Establishment of SEBI

During the fall of the 1970s and the rise of the 1980s, the people of India were preferring to work in the Capital Market as the market was trending. Without any authority, problems like unofficial private placements, the rigging of prices, unofficial self-styled merchant bankers started violating the rules and regulations of the stock exchange which caused delays in the delivery of shares. 

The Government felt an immediate need to establish a regulatory body to regulate its working and to find solutions for all the problems the market was going through, as the people were losing interest in the market. This led to the establishment of the Security and Exchange Board of India. 

Purpose and Role of SEBI

SEBI helps in creating a healthy environment to facilitate an effective mobilization between the market participants and investors. It helps in locating the resources with the help of the securities market. SEBI establish rules and regulations, policy framework and infrastructure to meet the needs of the market. 

The financial market majorly comprises of three groups:

The Issuer of Securities 

Issuers are the group that works in the corporate department to easily raise funds from the various sources of the market. So, SEBI helps the issuers by providing them a healthy and open environment to work efficiently. 

Investors 

The investors are the soul of the market as they keep the market alive by providing accurate supplies, correct information, and protection to the people on a daily basis. SEBI helps investors by creating a malpractice free environment to attract and protect the money of the people who invested in the market. 

Financial Intermediaries

The intermediaries are the people who act as middlemen between the issuers and the investors. SEBI helps in creating a competitive professional market which gives a better service to the issuers and the investors. They also provide efficient infrastructure and secured financial transactions. 

Organizational Structure of SEBI

The members of the Security and Exchange Board of India are:

  • The Chairman who is appointed by the Union Government of India.
  • Two members who are selected from the officers of the Union Finance Ministry.
  • One member who is appointed from the Reserve Bank of India.
  • The other five members are appointed by the Union Government of India, out of five three must be whole-time members. 

Dr. S.A. Dave was the first Chairman of SEBI who was appointed on 10th April 1988. Ajay Tyagi is the present Chairman appointed on 10th February 2017 replacing U K Sinha. 

Functions of SEBI

SEBI basically protects the interest of the investors in the security market, promotes the development of the security market and regulates the business. The functions of the Security and Exchange Board of India can primarily be categorized into three parts: 

  • Protective Function

Protective functions are used to protect the interest of investors and other financial participants. These functions are: 

  • Prevent Insider Trading: When the people working in the market like director, promoters or employees working in the company starts to buy or sell the securities because they have access to the confidential price which results in affecting the price of the security is known as insider trading. SEBI restricted companies to buy their own shares from the secondary market and SEBI also regulates regular check-ups to prevent insider trading and avoid malpractices.
  • Checks price rigging: The malpractices which create unreasonable fluctuations in the price of the securities with the help of increasing or decreasing the market price of stocks which results in an immense loss for the investors or traders are known as price rigging. To prevent price rigging, SEBI keeps active surveillance on the factors which can promote price rigging. 
  • Promotes fair trade practices: SEBI established rules and regulations and a certain code of conduct in the securities market to restrict fraudulent and unfair trade practices. 
  • Providing awareness/financial education for investors: SEBI conducts seminars both online and offline to educate the investors about insights into the financial market and money management. 
  • Regulatory Function

Regulatory functions are generally used to check the functioning of the financial business in the market. They establish rules to regulate the financial intermediaries and corporates for the efficiency of the market. These functions are: 

  • SEBI designed guidelines and code of conduct for efficient working of financial intermediaries and corporate.
  • Established rules for taking over a company. 
  • Conducts regular inquiries and audits of stock exchanges.
  • Regulates the process of mutual funds.
  • Registration of brokers, sub-brokers, and merchant bankers is controlled by SEBI.
  • Levying of fees is regulated by SEBI. 
  • Restrictions on private placement.
  • Development Function

The development functions are the steps taken by SEBI to improve the security of the market through technology. The functions are:

  • By providing training sessions to the intermediaries of the market. 
  • By promoting fair trading and restrictions on malpractices of any kind. 
  • By introducing the DEMAT format. 
  • By promoting self-regulating organizations. 
  • By introducing online trading through registered stock brokers. 
  • By providing discount brokerage. 

Objectives of SEBI

The objectives of SEBI are:

  • Protection of investors: The primary objective of SEBI is to protect the rights and interests of the people in the stock market by guiding them to a healthy environment and protecting the money involved in the market. 
  • Prevention of malpractices: The main objective for the formation of SEBI was to prevent fraud and malpractices related to trading and to regulate the activities of the stock exchange.
  • Promoting fair and proper functioning: SEBI was established to maintain the functioning of the capital market and to promote functioning of the stock exchange. They are ordered to keep eyes on the activities of the financial intermediaries and regulate the securities industry efficiently. 
  • Establishing Balance: SEBI has to maintain a balance between the statutory regulation and self-regulation of the securities industry.
  • Establishing a code of conduct: SEBI is required to develop and regulate a code of conduct to avoid frauds and malpractices caused by intermediaries such as brokers, underwriters and other people. 

Features of SEBI

Sebi is an organization that is responsible for maintaining an environment that is free from malpractices to restore the confidence of the general public who invest their hard-earned money in the market. SEBI controls the bylaws of every stock exchange in the country. SEBI keeps an eye on all the books of accounts related to the stock exchange and financial intermediaries to check their irregularities. The features of the Security and Exchange Board of India are given below: 

  • Quasi-Judicial 

SEBI is allowed to conduct hearings and can pass judgments on unethical cases and fraudulent trade practices. This feature of SEBI helps to protect transparency, accountability, reliability, and fairness in the capital market. 

  • Quasi-Legislative

SEBI is allowed to draft legislatures with respect to the capital market. SEBI drafts rules and regulations to protect the interests of the investors. For eg: SEBI LODR or Listing Obligation and Disclosure Requirements. This helps in consolidating and streamlining the provisions of existing listing agreements for several segments of the financial market like equity shares. This helps in protecting the market from malpractices and fraudulent trading activities happening at the bay. 

  • Quasi-Executive 

SEBI covers the implementation of the legislation. They are allowed to file a complaint against any person who violates their rules and regulations. They also have the power to inspect all the books and records to check for wrongdoings.

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SEBI Act

The Parliament established the Securities and Exchange Board of India Act,1992 or SEBI Act, 1992 to regulate and develop the securities market in India. It was further amended to meet the changes in the developing requirements of the securities market. 

Features and Regulations of the Act

Sebi is an organization that is responsible for maintaining an environment that is free from malpractices to restore the confidence of the general public who invest their hard-earned money in the market. SEBI controls the bylaws of every stock exchange in the country. SEBI keeps an eye on all the books of accounts related to the stock exchange and financial intermediaries to check their irregularities. SEBI Act defines and gives powers to the body. The SEBI Act is divided into seven chapters that provide the rules and regulations associated with the capital market.

  • The First Chapter is an introductory or preliminary chapter of the Act which provides the title, extent, and definitions of the terms used in the Act. 
  • The Second Chapter is the establishment of the Securities and Exchange Board of India. This chapter deals with management, employees, meetings, and the office of the board. This provides the necessary details of the board established by this Act.
  • The Third Chapter is the transfer of assets, liabilities, etc. of the existing Security and Exchange Board to the Board, which means it declares the provisions to be used to transfer the assets in the case of the formation of a new board.
  • The Fourth Chapter is the powers and functions of the Board. This chapter helps in mentioning the powers and functions of the board which are given by the Act. The Board is bound to follow the instructions given by the act and is not allowed to exploit their powers. 
  • The Fifth Chapter is the Registration Certificate. It deals with the documentation involved in the registration of the stockbrokers, sub-brokers, and share transfer agents, etc. 
  • The Sixth Chapter is finance, accounts, and audits. This chapter controls all the grants given by the Central Government, funds and accounts, to ensure the productivity of the board as well as the capital market.
  • The Seventh Chapter miscellaneous, which discusses other topics that are relevant to the board and the market. To help the board from avoiding mistakes. 

The laws and regulations of the Security and Exchange Board of India are very important and must be followed seriously by the people who are entitled or registered with the stock exchange and capital market of India. The SEBI Act, 1992 is the supreme power of the securities market of India and has the authority to make laws and regulations. And these rules and regulations are applied to all the listed companies, their board of directors, key managerial personnel of such companies, investors, and all the other companies who are associated with the security market sector. 

The most valuable regulations promoted by SEBI are:

  • Regulations on the Issue of Capital and Disclosure Requirements, 2009 

These regulations helped with the issues related to capital and disclosure by improving the trading in securities of the listed companies and investors in India.

  • Regulations on Substantial Acquisition of Shares and Takeovers, 2011 

These regulations of SEBI were established to solve difficulties related to the legal and fair acquisition of shares and takeovers.

  • Regulations on Prohibition of Insider Training, 2015

These regulations introduced new provisions for prohibiting the insider training of securities and tries to protect the laws for lawful and fair trading in India. 

  • The Equity Listing Agreement

These provisions were a reminder of the clauses which mainly dealt with the mandatory compliances to be made between the stock exchange of India and the listed companies. 

Scope of Act

The Preamble of the SEBI Act, 1992 provides that SEBI came into force to cover two objectives:

  • To protect the interests of investors in Securities.
  • To promote the development and regulations of the securities market. 

All the provisions and regulations are made to achieve their goal of improving the market and to reach their goal. SEBI acts like a mini-state as it works includes executive, judiciary and legislature. Section 11 of the SEBI Act allows the board to work on its objective. 

SEBI controls:

  • The regulations of the stock exchange and capital market. 
  • Prohibition of fraudulent and unfair trade.
  • Improving education and training of intermediaries of the securities market.
  • Promoting investors and registering intermediaries. 
  • Regulating substantial acquisition of shares and takeovers of companies. 
  • Calling for information and records.
  • Conducting inquiries of audits and stock exchanges.

SEBI is India’s capital market regulator and is trying to benefit the investors by:

  • Increasing the trading volumes 
  • Syncing with the Global Markets
  • Hedging

SEBI helped the market participants by consolidating their settlement functions at a single clearing meeting and by reducing the effective trading cost for investors. The board improved the market by allowing the contributions of the foreign participants through certain background checks before entering the Indian Market.

Depository Institutions

In every economy, depositories play an important role in developing the country, as the developing countries don’t have enough investments to complete their schemes efficiently. A well functioning securities market can stabilize economic growth. India needs investment for growth, so they need to improve market efficiency and protect the interests of investors to attract them to invest in our market. So, the capital market needs to improve investment opportunities for investors and take care of their interests and security. 

In India, the depository institutions are governed under the Securities and Exchange Board of India (SEBI). The depository must be formed under the Companies Act and must receive a certificate from SEBI. Depositories registered under SEBI are:

  • Central Depository Service Limited (CDSL) 
  • National Securities Depositories Limited (NSDL)

NSDL was established in 1996 by the National Stock Exchange (NSE). NSE introduced the rolling system which helped the investors to receive their payment within 5 days of the sale as it was 8-12 days, before NSE. CDSL was promoted by the Bombay Stock Exchange (BSE). 

Advantages

Depository Systems play an important role as they help in eliminating the risks of holding physical securities. Initially, the buyers had to keep an eye on the transfer of shares but now the depository systems have reduced the risks by involving technology in the process. This helped in improving the chances of foreign investments in the Indian Capital Market. The advantages of Depository Institutions are:

  • It reduced the chances of forgery and delay.
  • Unlike physical transfer, these transfers are immediate. 
  • The securities are controlled by the stock exchange.
  • It reduced the chances of bad delivery, fake certificates, and signature related issues.
  • The fear of losing the certificate is reduced as everything is online. 
  • This electronic system is time-saving. 
  • It restricted the transfer of Benami properties. 

Depository Participants

The agents which provide services related to depositories to investors is known as a depository participant. Any approved institution from RBI which agrees on the rules prescribed by SEBI can be a depository participant. For example stockbrokers, financial corporations, foreign banks, etc. 

Free Transferability

Free transferability of securities with security, accuracy, and speed is given by the Depositories Act, 1996. It was achieved by:

  • By making the securities of public limited companies freely transferable with some exceptions.
  • By dematerializing the securities in the depository mode.
  • By maintaining the ownership records in a book-entry form. 

Rights of Transferee

The rights of transferee are:

  • The transferee must receive the share certificate in due time.
  • The transferee must receive a copy of the annual report with the auditor’s report.
  • The transferee must receive the dividends in due time.
  • The transferee must inspect the statutory registers at the registered office. 
  • The transferee must receive corporate benefits like rights, bonus, etc.
  • The transferee must receive the residual proceeds.
  • The transferee must receive an offer in case of takeover or buyback under SEBI regulations.

So, SEBI introduced the Depositories Act, 1996 to make share transfer secured and easily accessible because SEBI is trying to protect and develop the interest of the investor in the Indian Market. 

SEBI Notifications

Date

Title

2nd August 2019

Streamlining issuance of SCORES Authentication for SEBI registered intermediaries

1st August 2019

Database for Distinctive Number (DN) of Shares – Action against non-compliant companies

1st August 2019

Rationalisation of the imposition of fines for false/incorrect reporting of margins or non-reporting of margins by Trading Member/Clearing Member in all segments

26th July 2019

Streamlining the Process of Public Issue of Equity Shares and convertibles- Implementation of Phase II of Unified Payments Interface with Application Supported by Block Amount

26th July 2019

Staggered Delivery Period in Commodity futures contracts

26th July 2019

Guidelines for Liquidity Enhancement Scheme (LES) in Commodity Derivatives Contracts

SEBI Guidelines

Date

Title

13th Sep 2019

Guidelines for Data Sharing

26th Jul 2019

Guidelines for Liquidity Enhancement Scheme (LES) in Commodity Derivatives Contracts

13th Jun 2019

Guidelines for Enhanced Disclosures by Credit Rating Agencies (CRAs)

23rd Apr 2019

Guidelines for determination of bidding, allotment and trading lot size for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs)

26th Mar 2019

Guidelines for Business Continuity Plan (BCP) and Disaster Recovery (DR) of Market Infrastructure Institutions (MIIs)

15th Jan 2019

Guidelines for public issue of units of REITs – Amendments

15th Jan 2019

Guidelines for public issue of units of InvITs – Amendments

26th Nov 2019

Operating Guidelines for Alternative Investment Funds in International Financial Services Centres

13th Nov 2019

Guidelines for Enhanced Disclosures by Credit Rating Agencies (CRAs)

16th July 2018

Strengthening the Guidelines and Raising Industry standards for RTAs, Issuer Companies and Banker to an Issue – Clarification

4th July 2018

Guidelines on Anti-Money Laundering (AML) Standards and Combating the Financing of Terrorism (CFT) /Obligations of Securities Market Intermediaries under the Prevention of Money Laundering Act, 2002 and Rules framed there under

5th June 2019

Guidelines for Preferential Issue of Units by Infrastructure Investment Trusts (InvITs)

20th April 2018

Strengthening the Guidelines and Raising Industry standards for RTA, Issuer Companies and Banker to an Issue

17th April 2019 

Amendment to the Securities and Exchange Board of India (STP Centralised Hub and STP Service Providers) Guidelines, 2004

16th Aug 2019

Parking of Funds in Short Term Deposits of Scheduled Commercial Banks by Mutual Funds – Pending deployment

4th July 2019

Details of Daily Inter-Scheme Transfer in Corporate Bonds by Mutual Funds

21st May 2019

Participation of Mutual Funds in Commodity Derivatives Market in India

26th April 2019

Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2019

11th April 2019

Technology Committee for Mutual Funds / Asset Management Companies (AMCs)

8th March 2019

Circular on Filing of Advertisements under SEBI (Mutual Funds) Regulations, 1996

SEBI v. Sahara

Background

Initially, there was a floating-issue of Optionally Fully Convertible Debentures (OFCDs) with Sahara India Real Estate Corporate Limited (SIRECL) and Sahara Housing Investment Corporation Limited (SHICL) which affected the collective subscription from 25th April 2008 up to 13th 2011. The company bagged roughly Rs. 17,656 crore during this period. This whole amount was collected in the name of ‘Private Placement’ from 30 million investors without fulfilling the requirements needed to comply with public offerings of securities. So, as a result, the Whole Time Member of SEBI passed an order on 23rd June 2011 to refund the money which was collected from the investors and restrained the companies promoters including Mr. Subrata Roy from reaching the securities market. Sahara appealed the orders of the Whole Time Member in front of the Securities Appellate Tribunal (SAT) and the appeal was dismissed by SAT through an order on 18th October 2011. In the end, Sahara appealed in front of the Supreme Court against the SAT order. 

Issues

There were many issues raised while the Supreme Court was interpreting the various provisions of the SEBI Act, the Companies Act, and the Securities Contract (Regulation) Act, 1956. The issues were:

  • The first issue was that, whether SEBI has its jurisdiction over this matter under Section 11, 11A, 11B of SEBI Act and Section 55A of the Companies Act or this matter comes under the Ministry of Corporate Affairs. 
  • The second issue was that, whether the hybrid Optionally Fully Convertible Debentures comes under the category of ‘Securities’ as defined in the Companies Act, SEBI Act, and SCRA to allow SEBI to have jurisdiction to investigate the case. 
  • The third issue was that the OFCDs subscribed by the people is a private placement or not. If not then who has jurisdiction over the matter. 
  • The fourth issue was that, whether the provisions given under Section 73 of the Companies Act is applied over the case or not.
  • The fifth issue was that, whether the provisions provided under the Public Unlisted Companies, 2003 will have jurisdiction over this case.

Arguments and Supreme Court Judgments

In this case, the Supreme Court held that SEBI has no jurisdiction to investigate or adjudicate this matter as the SEBI Act allows SEBI with special powers to protect the interest of the investors. The powers given to SEBI can not supersede other regulations provided under different laws which means SEBI must respect the provisions of other laws and must not conflict with the Ministry of Corporate Affairs where the interests of investors are at stake. The Supreme Court also laid down objectives for the enactment of the SEBI Act and inserted Section 55A in the Companies Act to provide special powers to SEBI in the matters related to the transfer of securities. So, the Supreme Court advised that SEBI has the jurisdiction to administer the listed public companies in matters related to the transfer of securities and also in those public companies where there is intended to obtain the securities which are listed under the Stock Exchange of India. 

The Supreme Court stated that the OFCDs issued by the companies are in the nature of ‘hybrid’ instruments, so it doesn’t come under ‘security’ within the definition provided by the Companies Act, SEBI Act, and SCRA. As the definition of ‘Securities’ provided under Section 2(h) of SCRA contains ‘marketable security’ rather ‘hybrid instruments’. So, the Court can not question the marketability of the instrument as it was offered to millions of people and debentures came under security as described by the provisions of SEBI Act, the Companies Act, and SCRA. 

The Supreme Court described the intentions of the companies was to show OFCDs as the public placement but they don’t act like that when offered to more than 50 people. Section 67(3) states that any security which is offered and subscribed by more than 50 persons will be considered as a public offer which gives the jurisdiction to SEBI and the companies have to comply with all the legal provisions related to this matter. 

Sahara argued that the Companies Act is not applicable as it is applied to only listed companies and no company can be forced to get listed on the stock exchange. The Supreme Court rejected this argument and stated that the law is clear and impartial. The Supreme Court also observed that Section 73(1) of the Act provides a restriction on every company intending to offer shares and debentures to the public.

Conclusion

So, SEBI strongly believes that the investors are the soul of the securities market and they need to protect the interests of investors for the development of the capital market. SEBI deals with all the policies and regulations of the market. SEBI also signed a contract with the International Organization of Securities Commission and allowed its members to maintain a regular check for cross border misconduct in their respective jurisdictions. This case is considered as the landmark judgment in India’s Corporate Landscape as it helped in preventing war between MCA and SEBI. 


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Relevance of Aadhar in Present Era

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This article is written by Mariya Paliwala of 7th semester, student at Mohan Lal Sukhadiya University College of Law, Udaipur (Rajasthan).

Aadhar Card or UIDAI

Aadhar is basically a 12-digit unique identification number which is issued by the Unique Identification Authority of India (UIDAI), is a statutory authority regulated by Aadhar (Targeted Delivery of Financial and other subsidies, Benefits and Services) Act 2016. Under this Act UIDAI is responsible for aadhar enrollment and authentication which also includes the operation and management of all the stages of aadhar procedure. The procedure mainly includes developing the policy, procedure and system for issuing Aadhar numbers to individuals and perform authentication and also required to ensure the security of identity information and authentication records of individuals. 

The main objective behind creating UIDAI was to generate Unique Identification Number (UIN) which is named as Aadhar. UIDAI has a very well planned Organisational Structure for the smooth and efficient functioning. 

Meaning of Aadhar Card

Aadhar card is an identification card which consists of a 12-digit unique identification number generated and issued by UIDAI after undergoing due authentication process which deals with the looking of demographic information including name, address, place of birth, date of birth, etc, and Biometric information which involves digital fingerprints, two iris scan and a facial photograph. Mainly fingerprint and iris data are taken for authentication. Aadhar card is issued only to an India citizen, who is a resident of India so that the system can:

  1. Be strong enough to eliminate fake, fabricated and duplicate identity cards.
  2. It is the cost-efficient way for verification and authentication of identity of people.

Usage of Aadhar Card

  • Identity card

There wasn’t any exclusive reason behind Aadhar card. This can be used for various reasons. Unlike, voter ID card, whose purpose is to permit the ID card holder to enjoy his political rights by taking part in electoral process. So aadhar card is a versatile card which can be used for all the governmental functions.

  • Avail Subsidies

If in case any person is eligible to avail any kind of subsidies or benefits by the government then he/she may grab it through aadhar. For instance, the government has introduced a scheme wherein the citizens with poor economic background will be entitled for subsidies on LPG connection. All they needed to do is link their Aadhar number with their bank account, their amount of subsidy would directly come into the linked account.

  • Easily available 

Aadhar card is a document which is issued by the government. It is easily available online in the name of e-aadhar, an easy print out can be taken. It reduces the risk of the document being misplaced/stolen.

  • Use of Aadhar in Government Scheme

Aadhar is the most important document which can be used to avail maximum of the government schemes and processes such as:

  • LPG Subsidy 
  • Disbursing Provident Fund 
  • Jan Dhan Yojna 
  • Digital Life Certificate
  • Opening bank accounts
  • Acquisition of passport
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Features of Aadhar Card

  • Notion of Transparency

The notion of the government behind introduction of Aadhar was to increase the efficiency, good governance, transparency and to fulfill efficiently the targeted delivery of subsidies, services and benefits. Consolidated Fund of India is responsible to incur all such type of expenditure to every citizen of India through the unique identification number.

  • Authenticate Digital identity 

Another function of aadhar is to provide verified and authentic digital identity to the citizens of India.

  • Secure confidentiality of identity

As all the verification and authentication work is done on the basis of biometrics, the security and confidentiality of identity is ensured. 

Brief History

Back on the 28th of January 2009, UIDAI was established on the issuance of notice by the Planning Commission. Nandan Nilekani, the co-founder of Infosys was appointed as the head of the project by the then UPA government. Moreover, he was made the chairman of UIDAI, which is equivalent to the position of a cabinet minister. Nilekani launched the logo and the brand name “aadhar” in 2010, he was also of the view that he will be a supporter of the legislation which will be passed to favour data held by UIDAI. Further, UIDAI selected 15 agencies to provide training to all those people who will be involved in enrolment procedure. In January, 2012, UIDAI took a step forward and launched the online verification system for aadhar number. With the coming up of this innovation any telecom companies, banks, and government can find out that a person is a Indian resident or not by a single click.

Moreover, in 2017 the then Prime Minister Manmohan Singh launched an aadhar-linked direct benefit transfer scheme. The project was to introduce in 51 districts in 2013 and then it slowly made its root through out India.

Aadhar Services 

Aadhar card is the most important document which helps to recognise the identity and the address of a person. Moreover, just providing Aadhar number to the Indian residents is not the only task of UIDAI. It also provides both offline and online services to the card holders to solve their queries and problems.

Aadhar Enrolment

Enrolment activities are carried by the Office of the Registrar General of India (RGI), which is established by UIDAI at every district and union territory. The activities pertaining to enrolment are exclusively done by RGI. Residents except from the state of Assam and Meghalaya, all the other states and UTs are ought to register at Aadhar enrolment centre/ aadhar enrolment camps/ permanent offices.

Aadhar enrolment can be done by adhering to the following steps:

  • visiting the nearest enrolment centre, 
  • filling the enrolment form
  • getting demographic and biometric data captured, 
  • submitting identity proof and address proof,
  • collect and acknowledge the receipt of enrolment ID.

Further, the following highlights must be acknowledged by before the enrolment:

  1. The aadhar enrolment is free of cost.
  2. A person going for the enrolment must take his identity and address proof.
  3. Apart from PAN card or any other government document, electricity and water bills are also accepted and considered as a valid identity proof. Wide range of identity are accepted and also given in the list of supporting documents.
  4. In case a person does not possess above common proofs, then the Certificate of Identity having photo issued by Gazetted Officer/Tehsildar on letterhead is also accepted as proof of identity. There must be a certificate of Address which contain photo issued by MP or MLA or Gazetted Officer. In case of rural areas, Tehsildar on letterhead or by Sarpanch or its equivalent authority, is accepted as valid proof of address. 

Aadhar Update 

There are various methods to update aadhar which are as follows:

  • Online update

  • By visiting the enrolment centre

In case of a change in the demographic details, the person may move to the permanent office and approach the operator for the change. The person needs to carry with him the 2 identity proofs which consist of it’s permanent address.

Document Verification is done by the operator keeping the following highlights in mind:

  • Verification is done in those fields which require documentary evidence.
  • Verification is normally done by the verifier who is appointed by UIDAI or Registrars present at enrolment centre or update centre. 
  • The verification procedure followed must also include DDSVP Committee Recommendations followed in the process of enrolment.

Form Filling and Acknowledgement

Form filling and acknowledgement is done by the operator on update client as requested by the resident. Handles spelling, language issues, transliteration, etc. Biometric sign off will be provided by the operator after the update request.

After this the resident gets an acknowledgement receipt with Update Request Number (URN) which can be easily tracked.

Aadhar Card Scan

Aadhar card scan can be done with the help of QR code by using a scanner.

Step by step process to scan QR code given in aadhar:

Step 1. UIDAI Secure QR Code – Windows Client

The person applying must download the UIDAI Smart QR Code Reader. Then double click the installer. After that click on Install button. On the successful installation, a prompt will pop up. Then open the UIDAI Smart QR Code Reader 4.0 for use.

Step 2. Handhold Scanner Device

The device is used for scanning the Secure QR code available on Aadhaar Letter/e-Aadhaar for displaying the demographic details including photograph of the Resident.

Step 3. Scan the QR Code using Scanner Device 

  •  type mobile number and email in the boxes given to verify.

Linking Bank Account with Aadhar

There are various ways in which bank account can be linked with aadhar:

Through net banking 

Step 1. Firstly login to www.onlinesbi.com

Step 2. Enter your user ID and password. 

Step 3. Under the option “My Account”, click on the “Update Aadhaar with Bank accounts(CIF)”.

Step 4. Then enter profile password for Aadhaar Registration.

Step 5. A page will open where you will be asked to enter your Aadhaar number twice.

Step 6: Select “submit” button after entering your Aadhaar number.

Step 7: On successful linking of your Aadhaar with PAN a message will be displayed on your monitor screen.

Linking in a bank

In order to prevent the deactivation of the account, the Account holders can get their account linked with Aadhaar. Here is how it can be done easily:

  • Fill the bank account Aadhaar linking application form. In order to find the Aadhar linking form visit your bank’s official website. If it is not available on the website, please visit a bank branch near you.
  • Mention the bank account details and Aadhaar number.
  • Attach a self-attested photocopy of Aadhaar card with the form.
  • Submit the form and the Aadhaar copy at the counter.
  • You will be asked to furnish your original Aadhaar card for verification.
  • Your application will be accepted and it may take a few days to link your bank account with Aadhaar card.
  • Once it is linked, you will get a notification on your registered mobile number.

The main objective behind linking the Aadhar with the bank account is that all the benefits and subsidies under government programs can be easily transferred to the bank account holder without any hurdle and with efficiency.

Linking Aadhar with PAN card 

Step 1. Register at the income tax e filing portal, in case you are not already registered. 

Step 2. The e-Filing portal must be logged in, under the Income Tax Department by entering the login ID, password and date of birth.

Step 3: When the site is logged in, a pop up window will appear asking you to link your PAN card with Aadhaar card. If you don’t see the popup,then move your cursor to blue tab on the top bar named ‘profile settings’ and click on ‘link aadhaar’. 

Step 4: Verify the essential details such as name, gender and date of birth, which was already mentioned as per the details submitted during registration on the e-Filing portal. 

Step 5: After the details match, enter your Aadhaar number and captcha code and click on the “link now” button.

Step 6: You will receive a pop up mail on the successful linking of aadhaar with PAN card. 

Aadhar card centre near me

In order to enrol for Aadhaar for yourself or for your family member, you will be required to visit an Aadhaar Enrolment Center. In case your Demographic details (Name, Address, DoB, Gender, Mobile Number, Email)is not up-to-date in your Aadhaar, you can get the same updated by visiting an Aadhaar Enrolment Center. Aadhaar holders children, who have turned as 15 years or others in need of updating Biometrics details including Fingerprints, Iris & Photograph are required to visit an Enrolment center too. Please get valid Address proof documents.

Find for a nearest Enrolment centre by selecting any of the following given mode:

Search By:

Aadhar card Problem

As every coin has two faces, aadhar brings with itself lots of efficiency and transparency but at the same time it carries with it some disadvantages leading to the problems faced by the citizens. Some of the most common problems are stated below:

  1. Misprints and spelling mistakes. 
  2. Chances of leak of identity and demographic information.
  3. Biometric authentication is time consuming and not 100% accurate. 
  4. Bank accounts linked with aadhar are likely to get hacked. 
  5. Mis-match of gender and facial photograph.
  6. Address error.
  7. Relationship error.
  8. Name error.
  9. Lack of Awareness.

Aadhar legislation and Article 21 of the Constitution

Article 21 of the Constitution pertains to the right to life and personal liberty, wherein right to life includes right to privacy also. So with the coming up of Aadhar legislation it was felt by the people that capturing biometric information and recording demographic information is the interference in their privacy, thereby the state is infringing the citizen’s right to life under Article 21 (Part III) of the constitution. 

In the case of KS Puttaswamy v. UOI which is also known as ‘Aadhar case’ was first filed by ninety-two year old Justice KS Puttaswamy, the 1st petitioner, who contended that Aadhar legislation must not be enforced on the citizens. On the ground that it was an infringement of the right to privacy of the citizens by the government and lack the legislative backing. In 2017 a judgement delivered by the Supreme Court passed a judgement wherein right to privacy was added to Article 21 of the constitution and passed a legislation called Aadhar Act so as to back the project by UIDAI.

Conclusion 

Wherefore, it is well said that the grass always looks greener on the other side. Such procedure to collect data by the government is not only done in India but also in other countries like China. Earlier, when such legislation was absent there were various problems faced in governance like transferring subsidies under government policies, etc. Now, when it is implemented it is hampered because of the lack of awareness, procedural flaws etc. 


Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.

LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join:

https://t.me/joinchat/J_0YrBa4IBSHdpuTfQO_sA

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Crossfit v. Online Fitness Program v. LawSikho

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This article is written by Ramanuj Mukherjee, CEO, LawSikho.

I joined this amazing thing called CrossFit a few years back. It was the most expensive gym membership I ever bought, at 6,000 per month but it was also crazy effective. It was really hard. 

The whole idea of CrossFit is that after a warm-up, which is usually more than the actual workout most people do in normal gyms, for about 10-15 minutes, you push your body so hard that you are in tremendous pain. It’s called the pain zone. 

After that, you do cool down exercise and its done. The whole thing takes about 50-60 minutes. 

What is so special about this workout? Why are people all over the world going crazy about it?

This work out is addictive. Because you are pushed to a pain zone, your body releases lots of good hormones, especially Dopamine, when you are done. You feel amazing, and you want to go back to do more.

All over the world, there are tons of other gyms and trainers who have adopted the same technique now, and incorporated elements of CrossFit in their work out.

So I was going to a CrossFit gym for 3 months. It began to transform my body. However, I had to travel quite a bit to get to the CrossFit gym, as there were only half a dozen of them in my city back in 2015. Then I had to stop as it became impossible to keep going for it.

I used to miss many days. I used to reach late. Some days I was so tired as I pulled an all-nighter that I could not do the extremely demanding work out with full intensity.

But I was still going for it. Why did I stop?

I quit it when my trainer wrote me off as a lazy person. He told me so to my face. 

I needed encouragement to hang on. I would not have stopped if my trainer believed in me and pushed me. Maybe a call or two and a word of encouragement when I missed sessions for an entire week! That would have done wonders. Or when I traveled, he could give me a list of exercises to do. He didn’t even tell me about the WoD apps that could auto-generate a travel WoD for me.

He just said this is not for everyone, you are lazy and unless you get serious you will not see the results you want.

So I decided I could not carry on with CrossFit. 

I tried many other things after that but nothing quite worked that well. I missed the rigor and growth I experienced in CrossFit. I told you that it is addictive!

Fast forward to 2019. I bought an online course that has a lot of elements of CrossFit, called Body Alchemy. It is an online course, for which I paid a few thousands. In return, I got a few pdfs and video demos of exercises. The PDFs contain week wise workout plans, for a total of 8 weeks. 

I have finished all 8 weeks, though it took me 3 and a half months to do what should have taken 2 months. Then I am repeating the program from the beginning. I have finished the first week so far. I can’t believe what amazing progress I have made! 

If I could do 4 rounds of a certain workout when I began, now I can do 7 rounds. Stamina, flexibility and strength have increased tremendously. I feel I have never been so strong and fit in my life. Today morning when I was putting on my t-shirt, the sleeves were tight, because that is how much my muscles had grown since I bought the t-shirt 2 months back! It felt amazing.

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I have achieved the goal with which I had gone to a CrossFit gym but through a very different kind of program. 

What is the difference? What changed now? I do not even have a personal coach to show me the ropes!

One is that I have control over this. I work out in my bedroom after I wake up. The program requires very little equipment and whatever I need is right there in my bedroom. Mostly, a pull-up bar. And a yoga mat. I also bought some cones for agility exercises. I do not have to travel anywhere, I am not dependant on anyone else. In 45 minutes, I am done with my work out. No being stuck in a jam on my way to the gym, or worrying about finding parking.

Also, the program is self-paced. If I miss working out for a week, maybe because I am travelling or so, I can get back next week. No harm. No foul. I just pick up from where I left. I try not to have a large gap between workouts and try to do at least 3 sessions every week no matter what. 

Self-paced programs that give me the freedom to choose my frequency are just lovely.

Still, I am not on my own. I have a well-structured agenda for each day, created by a world-class expert! I just have to do one work out at a time, and not worry about what do I do today. The warm-ups are specified, so are the workout and burn out exercises. There are even extra credits workouts, which I do when I am not completely exhausted.

I had personal coaches many a time, who came home to train me. But I find this even more effective. A coach can have a bad day, he can slack off or not prepare the right exercise chart, but a pre-planned program has none of those drawbacks. 

And finally, it costs a lot less than going to a physical CrossFit gym.

And some people told me that it is useless to do online fitness programs. Sorry dude, you know nothing about it.

I will continue to do this program just as I have done since June, and I know that by my next birthday in August, I will look and feel very different. I love this! I wish I found this before.

This experience has really fortified my trust in online courses. I always knew online courses are amazing, but I guess earlier there were not such amazing programs available yet. Finally, the fitness industry is getting disrupted with amazing online programs.

And there are those people who say that you cannot learn law from an online course.

Well, that is true for many poor courses that are not well-designed, in which course creators do not invest enough time and work, and which are meant for being cheap tools for CV beautification.

You can’t expect such courses to actually enhance your legal skills! If you pay peanuts, you get monkeys.

We have a very different breed of courses. We teach you two skills every week, through practical assignments, personal feedback, and live classroom sessions. 

And I learned an important lesson from my CrossFit trainer, but from what he didn’t do. 

This is now a critical component of our program.

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A guide to Contract of Guarantee

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This article is written by Suryash Kumar, graduated from Bangalore Institute of legal studies. The article talks about the Contract of Guarantee.

Guarantee contract

Contract of Guarantee is a specific performance contract. It is called specific performance because it is an equitable relief. This is not the usual legal remedy where compensation for damages is adequate. Damages and specific performance are both remedies available upon breach of obligations by a party to the contract; the former is a ‘substitutional remedy’, and the latter a ‘specific remedy’.

The law prescribes that in an event where the actual damage for not performing the contract cannot be measured or monetary compensation is not adequate, one party can ask the court to direct the other party to fulfil the requirements of the contract.

It is also a discretionary relief, that is, it is left to the court to decide whether specific performance should be given to a party asking for it.

Why Contract of Guarantee is Specific performance?

Contract of Guarantee is Specific performance because the remedy is not the damages awarded by the court. The party has to fulfil its obligation under the contract i.e. perform a certain action he promised to do, instead of just paying money for his failure to fulfil obligations under the contract. It is the guarantor who commits to pay in case of default by the person for whom he has guaranteed. The nature of relief is of specific nature since guarantor has to perform the specific obligation, which he had undertaken under the agreement i.e. pay the assured.

Contract of Guarantee

Section 126 defines the Contract of Guarantee– A contract of guarantee involves three parties. It relates to the performance of contract on behalf of the third person whereby fulfilling his obligation under the contract by the guarantor

The person who gives the guarantee is called the ‘’Surety’’; the person in respect of whose default the guarantee is given is called the ‘’Principal Debtor’’, and the person to whom the guarantee is given is called the “Creditor”. A guarantee may be either oral or written. 

Purpose of Contract of Guarantee

It enables a person to get a loan, or goods on credit or employment. Some person comes forward and ensures the lender or the supplier or the employer that he may be trusted and in case of any untoward incident, “I undertake to be responsible”.

In the old case of Birkmyr v Darnell the court said: Where a collateral guarantee arises when two persons come to shop, one of them to buy, the other to give credit, thereby promising the seller stating if he doesn’t pay I will’’. This is a collateral guarantee.

In English law, a guarantee is defined as ‘’a promise to pay for the debt, default or failure of another’’. “Guarantees are a backup when the principal fails the guarantee act as second pockets’’.

Parties

The person who gives the guarantee is called the Surety, the person in respect of whose default the guarantee is given is called the Principal Debtor and the person to whom the guarantee is given is called the Creditor.

Independent liability different from guarantee

There must be a conditional promise to be liable on the default of the principal debtor. A liability which is incurred independently of a default is not within the definition of guarantee. 

This principle was applied in Taylor v Lee where a landlord and his tenant went to the plaintiff’s store. The landlord said to the plaintiff: Mr Parker will be on our land this year, and you will sell him anything he wants, and I will see it paid.

This was held to be an original promise and not a collateral promise to be liable for the default of another and, therefore, not a guarantee.

Essential Features of Guarantee

  1. Principal debt: “A contract of guarantee is a tripartite agreement which contemplates the principal debtor, the creditor and the surety’’. There should exist an independent debt. It is critical that there should be a principal debtor who has taken debt from the creditor. There can’t be a surety without a principal debtor.
  2. Consideration: One of the essential elements of contract is consideration which should be present in a contract of guarantee. It can be in any form which largely benefits the principal debtor.

Illustration: A sells and delivers goods to B. C afterwards requests A to forbear to sue B for the debt for a year, and promise that, if he does so, C will pay for them in default of payment by B. A agrees to forbear as requested. This is a sufficient consideration for C’s promise. 

  1. Misrepresentation and concealment: A contract of guarantee is not a contract uberrimae fides or one of complete good faith.. Where a customer had a precarious credit position. The surety wasn’t aware of this and acted as a guarantor of the customer. It was held that the bank is under no obligation to disclose this fact to the surety. However, it is the duty of a party taking guarantee to provide the surety with important facts so that he can make an informed decision. Facts which will affect his responsibility under the contract of guarantee.
  2. Writing not necessary: Section 126 says that a guarantee may be either oral or written. In England, guarantee is not enforceable unless it is “In writing and signed by the party to be charged”.

The extent of the Surety’s Liability

Section 128 speaks about one of the cardinal principles relating to the contract of guarantee. It states that the liability of the surety is co-extensive with that of the principal debtor. The surety may, however, by an agreement place a limit upon his liability.

Section 128- The liability of the surety is co-extensive with that of the principal debtor unless it is otherwise provided by the contract.

Illustration- A guarantees to B the payment of a bill of exchange by C, the acceptor. The bill is dishonoured by C. A is liable not only for the amount of the bill but also for any interest and charges which may have become due on it.

  1. Co-extensive: The first principle governing surety’s liability is that it is co-extensive or common with that of the principal debtor. He is liable for the whole amount for which the principal debtor is liable and he is liable for no more. Where the principal debtor acknowledges liability and this has the effect of extending the period of limitation against him the surety also becomes affected by it.
  2. Condition precedent: Where there is a condition precedent to the surety’s liability, he will not be liable unless that condition is first fulfilled. Section 144 to an extent is based on this principle: Where a person gives a guarantee upon a contract that creditor shall not act upon it until another person has joined it as co-surety, the guarantee is not valid if that other person does not join.

An illustration in point is National Provincial Bank of England v Brackenbury: The defendant signed a guarantee which was intended to be a joint and several guarantees of three other persons with him. One of them did not sign. There is no agreement between the bank and the co-guarantors to dispense with his signature, the defendant was held not liable.

Proceeding against surety without exhausting remedies against the debtor

The defendant guaranteed a bank’s loan. A default had taken place, the defendant was sued. The trial court decreed that the bank shall enforce the guarantee in question only after having exhausted its remedies against the principal debtor. The Supreme Court overruled it stating that the very object of the guarantee is defeated if the creditor is asked to postpone his remedies against the surety. Solvency of the principal is not a sufficient ground for restraining execution of the decree against the surety.

Suit against surety alone

A suit against the surety without even prosecuting the principal debtor has been held to be maintainable. In this case, the creditor, in his affidavit, had shown sufficient reasons for not proceeding against the principal debtor. 

Death of Principal debtor

A suit was filed against the principal debtor and surety. The suit against the principal debtor was found to be void ab initio because of his death even before the institution of the suit. The surety was held to be not discharged.

  1. Surety’s right to limit his liability or make it conditional

The surety may restrict his liability in the agreement. He can do this by expressly declaring his guarantee to be limited to a fixed amount. In such a case the surety cannot be liable for any amount beyond what is stated in the agreement. There might be a possibility that the principal debtor owes a greater amount but the surety will not be responsible for the amount exceeding what is stated in the agreement.

Impossibility of main contract

A loan for development and maintenance of bee culture was guaranteed. The surety undertook to be liable jointly and severally to pay off his instalments in case of failure on the part of the debtor. The bees died in consequence of a viral infection. There was a total failure of business. The debtor became disabled from paying instalments. The surety could not escape liability under the doctrine of impossibility of performance.

The creditor’s right to recover money from the guarantor doesn’t depend on the possibility of guarantor able to recover the amount from the principal debtor.

Continuing Guarantee 

Continuing Guarantee- A guarantee which operates on a number of transactions within a particular period, is called a ‘’Continuing Guarantee’’.

This type of guarantee includes a number of transactions over a period of time. A creditor can hold the surety responsible for the default of the principal debtor for transactions that happen within a period of time.

Illustration- A guarantees payment to B, a mobile dealer, to the amount of $100, for any mobile he may supply to C as required by C over a period of time. B supplies C with mobile above the value of $100, and C pays B for it. Afterwards B supplies C with mobile to the value of $200 . C fails to pay. The guarantee given by A was a continuing guarantee, and he is accordingly liable to B to the extent of $100.

The essential feature of a continuing guarantee is that it doesn’t restrict to a specific number of transactions, but to any number of them and makes the surety liable for the unpaid balance at the end of the guarantee.

In Chorley & Tucker the distinction is explained: “A specific guarantee provides for securing of a specific advance or for advances up to a fixed sum, and ceases to be effective on the repayment thereof, while a continuing guarantee covers a fluctuating account such as ordinary current account at a bank, and secures the balance owing at any time within the limits of the guarantee…’’

A guarantee for the conduct of a servant appointed to collect rents has been held by the Calcutta High Court to be a continuing guarantee.

Joint -Debtors and suretyship

Section 132- This Section speaks about a situation when there are two guarantors who are liable to the creditor as joint-debtors. It says that the liability of the creditor is not affected by any private arrangement (Order of their liability) between the two debtors regarding one being the surety of the other even if the creditor knows of this arrangement. The creditor is not concerned with their mutual agreement that on would be a principal and the other surety.

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Discharge of Surety From Liability 

When the surety is no longer liable under the agreement the surety is said to be discharged from liability. 

The Act recognises the following modes of discharge:

  • By Revocation (Section-130)Revocation of continuing guarantee: The surety can revoke continuing guarantee by notifying the creditor with respect to the future transactions. 

Revocation becomes effective for the future transactions while the surety remains liable for transactions already entered into.

Illustration- A guarantees for B making purchases from C to an extent of 10000rupees. After one month A revokes guarantee by giving notice to C. A will be liable for the supplies till the point he revoked his guarantee. Let’s say until revocation C supplied B with goods worth 6000rupees. A is under obligation to pay 6000 to C.

  • By death of surety (Section 131): A continuing guarantee is also terminated by the death of the surety unless parties have expressed contrary intention.The termination is only with respect to the future transactions and the heirs of surety are liable for transactions that have already taken place. 
  • By variance (Section 133)- The contract of guarantee once formed becomes a contract of utmost good faith. This duty is imposed on the creditor. The surety is held discharged when, without his consent, the creditor makes any charge in the nature or terms of his contract with the principal debtor. ‘’The surety is discharged as soon as the original contract is altered without his consent’’.
  • Discharge of surety by release or discharge of principal debtor (Section 134) – A surety can be discharged if there is any contract between principal debtor and the creditor, which releases the principal debtor. Any act or failure on creditor’s part which has the legal effect of discharging the principal debtor also absolves surety.

Illustration- A contracts with B for a fixed price to build a house for B within a given time, B supplying the necessary timber, C guarantees A’s performance of the contract. B omits to supply the timber. C is discharged from his suretyship.

  • Release of principal debtor: The Section provides for two kinds of discharge from liability. The first one where creditor enters into an agreement with the principal debtor by which the latter is released, the surety is discharged. Where the creditor arrives at a compromise and releases the principal debtor, the surety is likewise released. 
  • Act or omission: The second scenario envisaged by the Section is when the creditor does ‘’any act or failure the legal effect of which is the absolve the principal debtor,’’ the surety would also be released from his liability. For example, Where the payment of rent due under a lease is guaranteed and the creditor terminates the lease, the effect would be the release of the surety also. 

Discharge: (Section 135) Discharge of surety when creditor compounds with, gives time to or agrees not to sue principal debtor-. A contract where the creditor and principal debtor arrive at an arrangement which results in creditor making a composition with grants principal debtor with more time or undertakes not to sue the principal debtor absolves the surety. For this to operate the surety shouldn’t have assented to this arrangement between creditor and principal debtor.

The Section provides for three modes of discharge from liability: 

  • Composition 
  • Promise to give time, and 
  • Promise not to sue the principal debtor 

Composition 

If the creditor makes a composition with the principal debtor, without consulting the surety, the latter is discharged. Composition results in altering the original contract, and, therefore, the surety is discharged. 

For Example- A settlement was entered into between the principal borrower and bank for one-time settlement without reference to the guarantor. The court said that this resulted to novation of the contract between the creditor and principal debtor to the exclusion of guarantor. The liability of the guarantor ceased to exist. 

Promise to give time- Promise to give time: when there is a fixed time, according to the agreement for the repayment of the debt. It is one of the duties of the creditor towards the surety not to allow the principal debtor more time for payment. Although, giving time to the principal will benefit the surety but it will be against the spirit of the contract of guarantee, without the consent of the surety. 

Thus, where the principal debtor was to make payment for gas supplied within fourteen days and on one occasion he having failed to pay, the supplier took a promissory note from him, this amounted to extension of time and thereupon the surety was discharged. 

By impairing surety’s remedy (Section 139): The creditor shouldn’t act in a way which is prejudice to surety’s interest. The remedy of the surety shouldn’t be affected by creditor’s action otherwise surety may be discharged.

It is one of the fundamental duties of the creditor not to do anything inconsistent with the rights of the surety. A surety after paying off the creditor, to secure his payment from the principal debtor. 

This responsibility also directs the creditor to preserve the securities, if any, which he has against the principal debtor. 

In Darwen&Pearce, The principal debtor was a shareholder in a company. His shares were partly paid and the payment of the unpaid balance was guaranteed by the surety. The shareholder defaulted in the payment of calls and the company forfeited his shares. 

By reason of the forfeiture, the shares became the property of the company. If they had not been forfeited they would have belonged to the surety on payment of the outstanding calls. Thus, the forfeiture deprived the surety of his right to the shares and he was accordingly discharged. 

Rights of Surety

Rights against the principal debtor 

Right of Subrogation(S.140)

Rights of surety on payment or performance- The surety after paying the creditor or fulfilling his obligation under the contract takes the place of the creditor. He has all rights vested in him which the creditor had against the principal debtor.

When the surety has carried out all his obligations under the contract, he is conferred with all the rights which the creditor had against the principal debtor. The surety steps into the shoes of the creditor.

In Babu Rao Ramchandra Rao v Babu Manaklal Nehmal: “If the liability of the surety is coextensive with that of the principal debtor, his right is not less coextensive with that of the creditor after he satisfies the creditor’s debt’’.

Rights before payment

The surety may possess certain rights even before payment. We have a case where the Calcutta High Court decided on similar lines. The surety found that the amount had become due, the principal debtor was disposing of his personal properties one after the other lest the surety, after paying, may seize them and sought a temporary injunction to prevent the principal debtor from doing so. The court granted the injunction. 

  1. Right to indemnity:

Section (145) Implied promise to indemnify surety- In every contract of guarantee, there is an implicit promise by the principal debtor to save the surety from harm. The surety is entitled to claim from the principal debtor whatever sum he had agreed to pay under the guarantee, but no sums which he wasn’t obligated to pay under the contract. 

Illustration: A guarantees to C, to the extent of 2000 rupees, payment for the rice to be supplied by C to B. C supplies to B rice to a less amount than 2000 rupees, but obtains from A payment of the sum of 2000 rupees in respect of the rice supplied. A cannot recover from B more than the price of the rice actually supplied. 

Rights Against creditor

  • Right to securities- Surety’s right to benefit of creditor’s securities(Section 141): Surety has a right over the security which the creditor has in his possession at the time when the contract of guarantee was constructed. It doesn’t matter whether surety was aware of the security or not. The creditor, if without the consent of the surety gets rid of the security, the surety’s obligation is reduced to the extent of the value of the security disposed of.

The Section identifies the general rule of equity as observed in a case that the surety is entitled to redress which the creditor has against the principal debtor, including enforcement of every security. 

On paying off the creditor the surety is exactly in the same positions as the creditor was against the principal debtor. The right exists irrespective of the fact whether the surety knows of the existence of such security or not. 

The plaintiffs lent to B and P, who were traders, $300 for the payment of which the defendant became surety. At the time of the loan B and P assigned by deed as security for the debt, the lease of their business premises and plant, fixtures and things thereon. The plaintiff had the right to sell on default by giving a month’s notice. The default took place, but the defendant did not enter into possession. He received notice of the debtor’s insolvency but allowed them to continue in possession. Consequently, the assets were seized and sold by the receiver. It was held that the plaintiffs, by their omission to seize the property assigned on default, had deprived themselves of the power to assign the security to the surety. He was, therefore, discharged to the amount that the goods were worth. 

  1. Right of set-off: If the creditor owes anything to the principal debtor, the amount owed can be adjusted in the creditor’s claim against the surety. The surety can charge from the amount to be given to the creditor if the creditor has to pay the principal debtor back.
  2. Right to share reduction:Reduction here refers to insolvency. A gives loan to B, C is the guarantor. Subsequently, B becomes insolvent. The property of B is attached to recover the loan he had taken. The official receiver in this particular case will create a list of creditors and pay them proportionate to the sum lent by them. The surety can ask the receiver about the amount given to A. The amount received by A through this process can be deducted by the surety.

For example, B was given the loan by the A of rupees 10,000/-, C, who is a surety in this contract gave a guarantee. A, became insolvent and when his property and assets was realised, when it was distributed by the official receiver and assignee, A got 1,000/- rupees. Now surety who is C in this case when he will make a payment to the A of rupees 10,000/-will ask the A to deduct the rupees 1,000/- which he has received from the official receiver and assignee. This right is the right available with the surety and it is known as a right to share reduction.

Right against Co-sureties

Where a debt has been guaranteed by more than one person, they are called co-sureties. 

The released co-surety will remain liable to others for contribution in the event of default.

  • Right to contribution( Section 146): Co-sureties liable to contribute equally-.This Section says when there are two or more co-sureties then each has to contribute equally to the debt or a part of the debt. If there is no inconsistent agreement between the co-sureties.

Illustration: A and B are co-sureties for the sum of 2000 rupees which has been given to D by the bank. D defaults, A and B are liable 1000 rupees each among themselves.

  • Liability of co-sureties bound in different sums: Co-sureties who have different obligations with respect to the amount is liable to pay equally as long as it isn’t beyond their respective obligation.

Illustration: A, B and C as sureties for D, enter into three several Bonds each in a different penalty, namely, A in the penalty of 10,000 rupees, B in that of 20,000 rupees, C in that of 40,000 rupees, conditioned for D’s duly accounting to E. D makes default to the extent of 30,000 rupees. A, B and C are liable to pay 10, 000 rupees.


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Right to Equality : A Fundamental Right

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This article is written by Shruti Goel, a 5th-year student of B.L.S LLB in Government Law College, Mumbai. This article is about the Right to equality under the Indian Constitution. 

Introduction

Part III of the Indian Constitution guarantees certain basic rights to all the citizens of India irrespective of their caste, race, birthplace, religion or gender. These basic rights are known as Fundamental Rights which are justifiable. Dr. B. R. Ambedkar referred these as the most citizen part of the constitution. These are deemed an essential part of the constitution as they protect the rights and liberties of the citizens of the country against any misuse or intrusion by the government with the power delegated to them in a democracy. These are the negative obligations of the state and citizens. These rights try to achieve the goals set out in the Preamble, of justice, liberty, equality, fraternity, and dignity.

The fundamental rights are classified under six heads under the constitution:

  1. Right to equality (Art. 14 – Art 18)
  2. Right to freedom (Art. 19 – Art 22)
  3. Right against exploitation (Art.23- Art. 24)
  4. Right to freedom of religion (Art 25- Art.28)
  5. Right to minorities (Cultural and educational rights) (Art 29- Art 30)
  6. Right to constitutional remedies (Art. 32 – Art. 35)

Here, we are going to discuss in detail the provision of the Right to equality embedded in Article 14 to Article 18.

What is Right to equality?

“As long as poverty, injustice and gross inequality persist in the world, none of us can truly rest” – Nelson Mandela

Democracy can only thrive and flourish where the individuals in the society are treated equally and without discrimination. Thus, it was felt by the framers of the Constitution to incorporate such provision to remove the hurdle of existing social and economical inequalities and enable the diverse communities of the country to enjoy the rights and liberties guaranteed under the constitution. It was believed to be essential to remove inequalities based on religion, social norms, age-old traditions practiced in parts of India, like untouchability, casteism, race discrimination, etc. 

  • The Right to equality means the absence of legal discrimination only on grounds of caste, race, religion, sex, and place of birth and ensures equal rights to all citizens. 
  • It is considered basic feature of the Indian Constitution.
  • The Right to equality is both a positive equality as well as a negative right.

                                         RIGHT TO EQUALITY                                                       Positive Right             Negative Right

(demands to be treated equally)                                           (prohibits unequal treatment)                                                                                                    treatment)

Under the Indian Constitution, Right to equality is divided under the following subheadings:

  1. Equality before law (Article 14)
  2. Prohibition of discrimination on grounds of religion, caste, race, sex or place of birth (Article 15)
  3. Equality of opportunity in matters of public employment (Article 16)
  4. Abolition of untouchability (Article 17)
  5. Abolition of titles (Article 18)

Under the Right to Equality, Article 14 provides a general application whereas Art. 15, Art. 16, Art. 17 and Art. 18 have a specific application. 

Right to equality under Article 14

‘The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India.’

  • Article 14 tries to achieve ‘equality of status’ for all people.
  • It aims at establishing the ‘rule of law’ in India.
  • This guarantee available to both citizens and non- citizens.
  • It applies to all persons, natural as well as juristic.

Right to equality (Article 14)

Equality before the law    Equality protection of laws                     

Equality before law

  • It is taken from English Common law.
  • This implies the absence of any special privileges in any person.
  • Implies no discrimination before the law on inapposite grounds like rank, office, etc.
  • It means that “the law should be equal and should be equally administered, that like should be treated alike.” (JENNINGS)
  • States that every individual is subject to the jurisdiction of ordinary courts irrespective of their rank or position.

Equal protection of the laws

  • It is corollary from equality before the law.
  • It is based on the last clause of the first section of the 14th Amendment of the US Constitution.
  • It directs that equal protection should be secured to all persons within the territorial jurisdiction.
  • This implies that such protection should be without any favor and discrimination.
  • This implies equal treatment in similar circumstances, both in the privileges and liabilities imposed by the law.
  • It is a positive obligation of the state which it should achieve by bringing about necessary social and economic changes, to ensure every person enjoys such equal protection.

Rule of law

The principle of Article 14, ‘equality before the law’ to a large extent based on the concept of Rule of law as coined by A. V. Dicey. It states that all individuals, government and other institutions should obey and be governed by law and not by any arbitrary action by an individual or group of individuals. Whatever be the rank or position of a person, he should come under the jurisdiction of ordinary courts and not of any special courts. It also states that governmental decisions should be based on legal and moral principles embedded in the supreme law, in the case of India, the Indian Constitution. This theory of Dicey has three pillars, they are:

  1. Supremacy of law

There should be an absence of arbitrary power and that no person should be punished except for a breach of law. An offense should be proved by the authorities of the country before the ordinary courts to punish him according to legal procedure.

2. Equality before law

All individuals, irrespective of their rank or position (poor or rich, officials or non-officials, etc.) should be subjected to ordinary law of land which is administered by ordinary courts. It seeks to ensure that law is administered and enforced in a just and fair manner. It has also been embedded in Preamble and Article 7 of the Universal Declaration of Human Rights. It implies ‘law gives equal justice to all’.

3. The Predominance of legal spirit

Dicey believed that there should be an enforcing authority to enforce effectively the above two principles. According to him, such enforcing authority should be ‘courts’.

Exceptions to Rule of law

  • Delegated Legislation

Parliament neither have the time to go into minute details of every law, nor the diverse technical expertise which is needed for complicated and specific laws. Thus, parliament designs the framework and outline principles and objectives of the bill and extensive details and rules are afterward added by the cabinet and the executive.

  • Administrative adjudication

Parliament has established certain tribunals and department which are equipped with some judicial and quasi judicial powers to decrease the burden of traditional courts and also to provide with technical knowledge required to adjudicate such cases. Establishment of such tribunals and departments are a departure from the traditional notion of rule of law.

The framers of the Constitution intended that India should be governed by the rule of law. Thus, traces of rule of law can be found in the Preamble, fundamental rights and other articles of the constitution.

Underlying Principle

The underlying principle behind the right to equality is not the same treatment to all but the equal treatment to the aspects which are similar and different treatment to the aspects which are different because not all humans are similar in every aspect.

To remove inequalities, there needs to be some reasonable classification of humans so that policies can be formulated accordingly which can help diminish inequalities as far as possible. It is the duty of the State to diminish inequalities by making certain socio-economic policies in favor of those who according to State need such benefits for their upliftment. But, it should be noted that all humans should be treated humanely and there should not be any classification on the basis of the humane aspect of the individuals. To achieve the objectives behind the provisions of Article 14, equals should be treated equally and unequal should be treated differently and for that reason, legislative classification is necessary.

Legislative Classification

For effective implementation of laws, it is necessary for legislation to group individuals according to their equal and unequal aspects. Such classification is necessary because not every law has universal application to all persons, the reason being the differences in social, cultural and economical conditions. Varying needs of different individuals require to be differently approached by the law. For public welfare, property, person, and occupations require appropriate legislation to make certain that different needs are dealt with differently. In fact, general treatment of unequal conditions might lead to inequalities in society. Thus, such special classification by the legislature on reasonable grounds becomes necessary to reduce inequalities in society. There are many instances of such special laws applying only to a particular class or classes of people like Delhi Special Police Act 1946 (applying particularly to the occupation of police), Minimum Wages Act 1948 (applying to minimum wage system of certain employments), etc. Article 14 permits reasonable classification but prohibits class classification.

Test of valid classification
  • The classification must be just and reasonable and should be in relation to the need and purpose of law in respect of which classification is made.
  • The object of classification should be lawful. In the case of Subramanian Swamy v.CBI, it was held that ”if the object itself is discriminatory, then the explanation that classification is reasonable having a rational relation to the object sought to be achieved is immaterial.”
  • When certain classes of individuals are not included in the ambit of a particular law, there must be a reasonable basis for such exclusion. 
  • A test was formulated to ensure that the classification is valid and is not arbitrary or against the right to equality. Following two conditions should be fulfilled for a valid classification:
  • Intelligible differentia (Intelligent reason for classification)
  1. Intelligible differentia means difference which is apparent and capable of being understood.
  2. Classification distinguishing persons or things that are grouped together from others left out of the group should be based on an intelligent reason.
  3. Classification must be based on a just objective to be achieved.

(2) Rational Nexus (Relationship between classification and desired result)

  1. The differentia must have a rational relation to the object of the statute in question.

Application of article 14

Certain important principles have been laid down in some landmark judgments to further explain the concept of Article 14 and legislative classification. Some of which are mentioned below.

I. Single person laws

  • Charanjit Lal Chowdhury v. Union of India 
  • Facts- Central Government issued an ordinance which later became an Act named ‘The Sholapur Spinning and Weaving Co. (Emergency provision) Act 1950’ when due to mismanagement and neglect of the company a mill was closed. The action of the company led to the scarcity of essential commodities in the country apart from unemployment and unrest. 
  • Argument- it was augmented by the petitioner that the Act was violative of Article 14 because a single company was subjected to disabilities.
  • Supreme court dismissed the petition and held that a law can be constitutional even though it relates to a single individual if, on account of some special circumstances, or reasons applicable to him and not applicable to others, that single individual can be treated as a class by himself.

II. Classification without a difference

  • P. Rajendran v. State of Madras
  • Facts- There is a provision relating to district-wise seat distribution in the State Medical colleges according to the proportion of population in a district to the total population of the state.
  • The Court struck down the provision and held that any scheme of admission should be devised to select the best available talent for admission as it is discriminatory to select a less talented candidate against a talented candidate just on a population basis. The district-wise seat distribution doesn’t meet the objective.

III. Special courts and procedural inequalities

  • Maganlal Chhaganlal (P) Ltd. v. Municipal Corpn. Of Greater Bombay
  • Facts- Validity of certain provisions of amended Bombay Municipal Corporation Act 1888 and of Government Premises (Eviction) Act 1955, was questioned as certain powers were conferred by the said acts on the authorities to proceed with special eviction proceedings against the unauthorized occupants of the governmental and corporation premises. 
  • Argument – Availability of two procedures, one under CPC and one under the above two acts, with no guidelines as to which to follow. Thus, in violation of Art 14.
  • SC held that when the statute authorizes the executive to make classification, some guidance should be provided by such statue whether in form of Preamble or objectives or other analogous provisions. When sufficient guidance is provided by the act, it is sufficient indication for authorities to proceed under the special procedure according to objective of the Act and not according to procedure of the ordinary civil court. Thus, the act cannot be struck down only because it provides for special procedure.

IV. Procedural fairness

  • Maneka Gandhi v. UOI’1978
  • Facts- Maneka Gandhi was issued a passport under the Passport Act 1967. The regional passport officer, New Delhi, issued a letter addressed to Maneka Gandhi, in which she was asked to surrender her passport under section 10(3)(c) of the Act in public interest, within 7 days from the date of receipt of the letter. Maneka Gandhi immediately wrote a letter to the Regional Passport Officer, New Delhi seeking in return a copy of the statement of reasons for such order. However, the Ministry of External Affairs refused to produce any such reason in the interest of the general public.
  • SC held that Article 14 requires observance of principles of natural justice and the requirement of reasoned decisions.

 V. Administrative discretion 

  • When classification is left to the discretion of the executive in a statue, certain guidelines or policies should be there as to how to exercise such discretion in the statue. 
  • If no guidelines are given such an act will be held violative of Article 14 and such legislation would be struck down by the court.
  • It is not necessary for the legislation to expressly lay down such guidance, it can be inferred from its Preamble, objectives and other analogous provisions.

VI. Basis of Classification

  • Classification can be based on geographical or territorial grounds, historical considerations, nature and position of a person, nature of the business, reference of time, object of the law, etc.
  • Provided that the classification has a nexus with the object of the legislation.
  • Case Law- P. Rajendran v. State of Madras as discussed above.

VII. Expanding horizons of equality

  • According to recent trends in the judgments of the Supreme Court, the reasonableness of the State action is required to meet the demands of Article 14. It is the duty of the State to make policies and laws which try to diminish inequalities and make equal opportunities available to those who are equal and different for those who are unequal.
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Prohibition of discrimination on grounds of religion, caste, race, sex or place of birth (Article 15)

Discrimination on the grounds of religion,race,etc.

ARTICLE 15(1)

‘The State shall not discriminate against any citizen on grounds only of religion, race, caste, sex, place of birth or any of them.’

  • It is available against State
  • Protection under this provision can be taken by any citizen when he is subjected to discrimination in relation to any rights, liabilities or privileges conferred to it by the constitution.
  • Nain Sukh Das v. State of U.P

Supreme Court quashed a State law that approved elections on the basis of separate electorates for members of different religious communities as such discrimination was based on religion.

  • A cause of action is available only when such discrimination is on the above-mentioned grounds, and when discrimination is not based on the above mentioned ground, the law is considered to be valid.

Religious or racial disabilities in connection with access to shops, tanks ,etc.

ARTICLE 15(2)

‘No citizen shall, on grounds only of religion, race, caste, sex, place of birth or any of them, be subject to any disability, liability, restriction or condition with regard to-

(a) access to shops, public restaurants, hotels and palaces of public entertainment; or

(b) the use of wells, tanks, bathing ghats, roads and places of public resort maintained wholly or partly out of State funds or dedicated to the use of the general public.’

  • Word ‘shop’ is construed in a generic sense and will include every place where goods are sold or services are rendered.
  • It should be noted that under Art. 15(2)(b), a cause of action arises only when such facilities are maintained wholly or partly by State funds or dedicated to the use of the general public.
  • This guarantee is available only when such discrimination is on above-mentioned grounds only and if such grounds are not the basis of discrimination law will be considered valid.
  • R. C. Poudyal v. Union of India 

The court upheld the reservation of one seat in State Legislative Assembly in favor of Sangha contending that it is not just a religious community but also a cultural and historical community. It was asserted that it was the effect and operation of the law which is important to find out if there are any grounds of discrimination rather than its purpose or motive.

Special provisions for women and children

ARTICLE 15(3)

‘Nothing in this article shall prevent the State from making any special provision for women and children.’

  • It implies that the Parliament has the right to make special provision.
  • This article is an exception to the rule against discrimination.
  • The intention of the framers of the constitution was to protect the interests of children and women because these sections were considered comparatively weaker sections of the society and the need for such provision was felt for their upliftment.
  • The language of the clause is in absolute terms and gives the power to State to make any special provisions and laws for the protection of their interest. Such special provisions are not restricted in any sense and need not be measures that are beneficial in a strict sense.
  • Rajesh Kumar Gupta v. State of U.P

In the selection of primary school teachers, reservations of up to 50 percent for women was upheld by the court.

  • Reservation- Widest possible interpretation should be given to these provisions for the upliftment of women and children, provided that such reservation doesn’t exceed 50 percent of the total.

Special provisions for socially and economically backward classes

ARTICLE 15(4)

‘Nothing in this article or in clause (2) of Article 29 shall prevent the State from making any special provision for the advancement of any socially and educationally backward classes of citizens or for the Scheduled Castes and the Scheduled Tribes.’

  • Added by the Constitution (1st Amendment) Act 1951 as a result of the judgment of Supreme Court in State of Madras v. Champakam Dorairajan
  • It doesn’t force the State to take any specific action for its fulfillment. It is just an enabling section.
  • This guarantee is available only to citizens of India.
  • For the application of this provision following two issues should be taken into consideration first:
  • Determination of Backward classes
  1. The definition of ‘backward classes’ is not given anywhere in the Indian Constitution.
  2. However, Art. 340 in the constitution empowers the President to constitute a commission to look into the matters and conditions of socially and economically backward classes
  3. It was held time and again by the Supreme Court that caste cannot be the only criterion in the determination of the class. Caste can be one of the factors of determination of class of SEBC’s but not the sole dominant factor.
  4. Poverty also cannot be the sole factor for the determination of the class of SEBC’s. All other factors should be taken into consideration while determining such class.

2) Quantum of reservation of such classes

It was held in the given case that reservation of 68 percent made by the impugned order is inconsistent with Article 15(4) as it only enables the government to make special provisions and not exclusive provisions.

It was contended that national interest would suffer if competent and talented students are excluded from taking admissions in higher education.

‘Carrying forward’ rule of unfulfilled quota to the next two succeeding year was adopted by the Central Government in the Central services for SC’s and ST’s, if suitable candidates were not available. It was invalidated because the accumulation of the unfilled quota resulted in 64 percent in the present case. It was construed that an exception cannot substantially dilute the general rule as Article 15(4) is considered an exception to Article 15(1).

The exemption was given to SC’s and ST’s from passing a departmental test for some years for the purpose of their promotion in the department. In a particular year, the reservation for them was 68 percent.

The court upheld the exception stating that Article 15(4) is not an exemption to Article 15(1). Rather, Article 15(4) is a direction to the State to enforce the concept of equality in society. The State could make adequate reservations for the upliftment of its citizens.

It was held in this case that except for any extraordinary circumstances, total reservation should not exceed 50 percent. Moreover, such quota will not include those SEBC’s who get selected on merit and will be adjusted towards the open category.

Such limit only applies to the reservation and not to concessions, exemptions, and relaxation.

‘Carry forward’ rule is permissible as long as the limit is observed.

 Reservation to educational institutions

ARTICLE 15(5)

‘Nothing in this article or in sub-clause G of clause 1 of Article 19 shall prevent the state from making any special provisions, by law, for the advancement of any socially and educationally backward classes of citizens and scheduled castes or tribes in so far as such special provisions relate to their admission to educational institutions including private educational institutions, whether aided or unaided by the state, other than the minority educational institutions referred to in clause 1 of Article 30.’

  • It was added by the Constitution (93rd Amendment) Act’ 2006
  • Special provisions can be made after this amendment only by law and not by executive action.
  • Central Educational Institutions (Reservation in Admission) Act 2006 was introduced after this amendment. A petition was filed challenging the validity of the act and of the amendment stating that such provision is violative of Art. 15(4). It was held by the court that such provision and act doesn’t invalidate Article 15(4) of the constitution.
  • The court suggested review of the reservation after every 10 years and negated the notion of application of the provision of time limit to the Act of reservation.

Equality of opportunity in matters of public employment (Article 16)

(1) There shall be equality of opportunity for all citizens in matters relating to employment or appointment to any office under the State.

(2) No citizen shall, on grounds only of religion, race, caste, sex, descent, place of birth, residence or any of them, be ineligible for, or discriminated against in respect of , any employment or office under the State.

(3) Nothing in this article shall prevent Parliament from making any law prescribing, in regard to a class or classes of employment or appointment to any office under the Government of, or any local or other authority within, a State or Union territory, any requirement as to residence within that State or Union territory prior to such employment or appointment.

(4) Nothing in this article shall prevent the State from making any provision for the reservation of appointments or posts in favor of any backward class of citizens which, in the opinion of the State, is not adequately represented in the services under the State.

[(4A) Nothing in this article shall prevent the State from making any provision for reservation in matters of promotion with consequential seniority to any class] or classes of posts in the services under the State in favour of the Scheduled Castes and the Scheduled Tribes which, in the opinion of the State, are not adequately represented in the services under the State.]

[(4B) Nothing in this article shall prevent the State from considering any unfilled vacancies of a year which are reserved for being filled up in that year in accordance with any provision for reservation made under clause (4) or clause (4A) as a separate class of vacancies to be filled up in any succeeding year or years and such class of vacancies shall not be considered together with the vacancies of the year in which they are being filled up for determining the ceiling of fifty percent . reservation on the total number of vacancies of that year.]

(5) Nothing in this article shall affect the operation of any law which provides that the incumbent of an office in connection with the affairs of any religious or denominational institution or any member of the governing body thereof shall be a person professing a particular religion or belonging to a particular denomination.’ 

Article 16(1)

  • Equal opportunity should be there in matters relating to employment and appointment to any office under the State for all citizens.
  • It provides only the right to equal ‘opportunity’ which means it confers only a right to be considered for such employment and appointment to any office of the State.
  • There is no rule of equality between separate and independent classes of services.
  • Requisite conditions and qualifications can be laid down by the State required for a particular designation. 
  • The selection procedure for such employments and appointments should not be arbitrary and should be based on some reasonable grounds.
  • Guarantee of employment in this clause also covers:
  1. Initial appointments
  2. Promotions
  3. Termination
  4. Matters relating to salary, gratuity, pensions, etc.
  • Guarantee of appointment in this clause also covers: Termination or removal from services.
  • Article 16 is a facet of principle of right to equality enshrined in Article 14 as stated in Indra Sawhney v. UOI case by SC. Thus, enables reasonable classification by the State for providing opportunities for the upliftment of backward classes.

Article 16(2)

  • Prohibits discrimination in respect of any appointment under the State on the grounds of
  1. Religion
  2. Race
  3. Caste
  4. Sex 
  5. Descent
  6. Place of birth
  7. Residence

Reservation of posts in favor of Hindus, Muslims, and Christians was held to be violative of Art. 16(2).

Article 16(3)

  • Parliament is conferred with the power to regulate the extent to which State can depart from the law laid down in clause (2).
  • Such power is restricted only to State appointments and not the Union appointments.

Article 16(4)

  • Reservation of appointments or posts for any backward classes which in the opinion of State not adequately represented in the services under the State.
  • It can only be exercised to reserve posts for ‘backward class’.
  • As there is no definition of backward class in the Constitution, it has been left on the State to determine whether a particular class is backward or not, provided, it is based on some reasonable criteria. If it is based on irrelevant considerations, it can be challenged in court.

Article 16 (4-A)

  • It was added by the Constitution (77th Amendment) Act, 1995
  • It was added after the Mandal Commission case, to make the judgment inapplicable on SCs and STs.
  • It provides reservations with respect to promotions in favor of SCs and STs.
  • It is an enabling section and is not a fundamental right and the state should try to balance it with Art. 14 and Art 16(1).

Article 16 (4-B)

  • It was added by the Constitution (81st Amendment) Act, 2000.
  • It was introduced to overcome the disability of the State to make special recruitment drives after the Mandal Commission case.
  • Introduced the exception to 50 percent limit for the purpose of filling the backlog vacancies.
  • It is not just confined to SCs and STs.

Article 16(5)

  • Appointments related to posts of religious institutions may be restricted to persons of that particular religion and will not be considered violative of Article 16(1).

Abolition of Untouchability (Article 17)

‘“Untouchability” is abolished and its practice in any form is forbidden. The enforcement of any disability arising out of “Untouchability” shall be an offense punishable in accordance with the law.’

  • The word “untouchability” in this clause has been used in inverted commas which indicates that word should not be construed in a literal or grammatical sense but with reference to its historical background in the country.
  • Under Art. 35 of the constitution, Parliament has been given the power to make laws prohibiting such acts of untouchability.
  • Exercising the powers and duties conferred in Art. 17 and Art. 35, the following acts, were made by Parliament from time to time:

            In 1955- Untouchability (Offences) Act’1955 

                                                            (punishments under the act were felt inadequate)

In 1965, Committee on Untouchability, Economic and Educational Development of SCs

                (to recommend amendments to present Act)

In 1976, Act was amended and renamed as “Protection of Civil Rights Act’1955”. (‘Civil Rights’ were defined in the act as any  right accruing to a person by reason of abolition of untouchability under Art.17.) 

Abolition of titles (Article18)

‘(1)No title, not being a military or academic distinction, shall be conferred by the State.

(2)No citizen of India shall accept any title from any foreign State.

(3)No person who is not a citizen of India shall, while he holds any office of profit or trust under the State, accept without the consent of the President any title from any foreign State.

(4)No person holding any office of profit or trust under the State shall, without the consent of the President, accept any present, emolument, or office of any kind from or under any foreign State.’

The constitutional validity of four awards introduced by Government of India which are, Bharat Ratna, Padma Vibhushan, Padma Bhushan and Padma Shri was challenged before the court. SC upheld the constitutional validity of these award stating that such awards don’t violate the provisions of Art. 18 as they do not come under the ambit of titles. It held they could not be added as a prefix or suffix to the names of the awardees.

Conclusion

The right to equality is considered basic feature of the Indian Constitution and plays an important role in achieving social and economic justice in our society where upliftment of certain classes is considered necessary for our country to flourish. Its emphasis on the fundamental unity of individuals by providing equal opportunities and treatment to all. All other privileges and liberties follow from the right to equality. It provides every individual of the country with all the elements essential for the development of its personality.

Thus, courts that are considered the guardians of the Constitution make certain that the right to equality is construed in widest connotation so as to achieve the ends intended by the framers of the Constitution. 


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Litigation v. Arbitration

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This article is written by Archna Nair, pursuing a Certificate Course in Arbitration: Strategy, Procedure and Drafting from Lawsikho.com. Here she discusses “Litigation v. Arbitration”.

Introduction

To begin with a small example, two MNCs have a contract with each other related to a matter of developing and marketing pharmaceutical products. The contract also contains a dispute resolution clause, but not so efficient. The clause lacks in: which laws will be applicable to resolve the dispute, what will be the jurisdiction, who will appoint and what is the number of arbitrators, etc. A dispute arises later regarding the subject matter of the contract and one of the parties want to resolve the dispute through the arbitration agreement embedded in their business contract. However, the other party is reluctant and keeps on hindering the proceedings of arbitration by filing for an application or interim relief in the court. Now a procedure which should have taken only 3 months to resolve, took 3 years in court to be completely resolved and finally receive a judgment. 

This particular example has two phases:

  • One that how arbitration, one of the ways to dispose off any dispute speedily, can become ineffective.
  • Second, how parties do not prefer an actual litigation process, as it can take years to be finally disposed off. 

How is litigation different from arbitration?

In the above example, it can be seen that both arbitration and litigation can take time for a judgment to be delivered. Both have their own pros and cons. So which one is the better option? Is arbitration really speedy and cheap? The answer is, it depends. It really does depend on who the parties are, what the subject matter of the dispute is, whether they have a dispute resolution or an arbitration clause. If the parties are huge MNCs having no time and lots of money, they should probably go for arbitration. But if the parties are not much concerned about time, but want the judgment in their favour by setting a proper precedent, it is always better to go for litigation. Once again, if the parties are really concerned about their reputation, then they should probably go with the arbitration, as it is more of a private nature. But if the parties really want to have a good precedent and need a legal and binding effect, it is always better to go with the litigation procedure.

Hence, both have their own pros and cons. It really depends on the party or the general counsel of any corporate as to which process is to be chosen. But having a strong arbitration clause is always effective and can turn out to be in your favour if carefully drafted. Applying a mediation clause in the first instance of the dispute, it always proves to be most effective. It really helps one party to understand the point of view of the other party. 40% of the disputes are resolved at this stage itself. The next step is negotiation or conciliation. If all these procedures prove to be ineffective, then the second-last resort is arbitration, last resort being litigation. 30-40% of the cases in our country is arbitral and can be efficiently resolved by this process. The huge pile-up of cases in our country might be reduced through arbitration.

Although there is a screening mechanism through 2002 amendment of Legal Services Authority Act, wherein the court has the power to redirect the cases mandatorily to Alternate Dispute Resolution (ADR), it is not quite effective. However, if there is a mandatory requirement to go to arbitration in the first instance, rather than putting it on the discretion of the courts, the burden on courts may be reduced. Therefore, if all disputes that are arbitral in nature can be referred to ADR mechanism first and then if they do not give desired results, the parties may move to the court. This would reduce the burden on courts to a great extent. India is yet new to ADR, although it is making good progress and at a fast pace too. In the coming years, through better and new law enactments, ADR can be strengthened in India.

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Arbitration in India

Arbitration in India is governed by the Arbitration and Conciliation Act, 1996. This Act only codifies arbitration and conciliation. Mediation and negotiation are still not codified mechanisms in India, although the parties can have such proceedings without being legally bound by the final decision. The parties need to be bound by an arbitration agreement for the mechanism to be applicable. Generally, it is the corporate entities that prefer ADR mechanisms, although now even government entities prefer it.

Arbitration being yet an upcoming resolution mechanism in India, not many parties resort to arbitration. It is generally corporate disputes or trade disputes or commercial disputes that are majorly resolved through ADR or rather an arbitration. Other private disputes such as family disputes are not brought under the purview of the Act. The Act avoids certain issues that are not arbitral in nature:

  • Criminal offences
  • Matrimonial disputes
  • Guardianship disputes
  • Insolvency and winding up disputes
  • Testamentary disputes
  • Tenancy disputes

According to the landmark case of Booz-Allen & Hamilton Inc. v. SBI Home Finance Ltd. & Ors.,

“The three facets of arbitrability, relating to the jurisdiction of the arbitral tribunal, are as under : 

(i) Whether the disputes are capable of adjudication and settlement by arbitration? That is, whether the disputes, having regard to their nature, could be resolved by a private forum chosen by the parties (the arbitral tribunal) or whether they would exclusively fall within the domain of public fora (courts). 

(ii) Whether the disputes are covered by the arbitration agreement? That is, whether the disputes are enumerated or described in the arbitration agreement as matters to be decided by arbitration or whether the disputes fall under the `excepted matters’ excluded from the purview of the arbitration agreement. 

(iii) Whether the parties have referred the disputes to arbitration?”

In a recent judgment by Supreme Court, it was held that if an arbitration agreement is not sufficiently stamped, then it cannot be said to be in existence and the parties cannot appoint an arbitrator or enforce the agreement.

Through one of the latest pro-arbitration judgments, the Supreme Court iterated in the case of    A. Ayyasamy v. A. Paramasivam & Ors., that a mere allegation of fraud would not render a case non-arbitral in case of existence of a valid arbitration agreement.

Although ADR is new to India, it is making good progress towards implementing the mechanism efficiently.

Arbitration Mechanism in Foreign Countries

In much of the developed countries like the USA, UK, etc., the laws related to ADR is not much different than that of India. The only difference is that now they have strong and established precedents as a result of years of implementation of the arbitration laws. Nevertheless, even these developed countries face challenges in the implementation of arbitration laws. Arbitration in itself is similar around the globe, but it is the countries making it applicable in their countries that make it effective through various legislations. 

As per the reports of the International Chamber of Commerce, the African countries have recorded a 40% increase in the use of ADR mechanism since 2016. Central and West Asia have recorded an increase of over 26%. Meanwhile, the developed countries like the USA and UK has recorded an increase of around 4-8%.

NITI Aayog has also released a report on how efficient ADR mechanism has been in India and how to make it more efficient in the coming future.

Pros and Cons of Arbitration and Litigation

Pros

Cons

Speed

  • Arbitration proceedings generally have to be concluded within 3 months and can be extended up to 1 month on the discretion of the court. This is if there are no bogus filings in the court by any of the parties and both parties actually want to conclude dispute speedily.

  • Whereas lawsuits in courts might take years to conclude, given the burden on the courts due to huge pile-up of cases in our country.

Lack of Discovery

    • Due to speedy disposal of cases in arbitration, various evidence at certain times go unnoticed or even certain cross-examinations take place in a hasty manner, rendering the discovery of various evidence in jeopardy.

    • Whereas in litigation, the proceedings are generally held in an extensive manner, resulting in going deep into the case and discovery of various evidence.

Cost

  • Due to the speedy conclusion of cases, the cost of proceedings can be reduced through arbitration. Also, the procedure would not be prolonged unnecessarily as the procedural aspect like presenting the evidence can only take place at particular stages of the proceedings.
  • Whereas due to the amount of time that litigation generally takes to conclude a lawsuit is high, hence increasing the costs.

Limited Appeal

  • In arbitration, appeals can only be filed for limited reasons, as given in Sec. 34 of the Arbitration and Conciliation Act.
  • Whereas, in litigation, the parties have an option to file for an appeal or file for an injunction as the law provides for, as there is no time limitation in litigation procedures.

Specialized Decision-Makers

  • The arbitrators are chosen by the parties of the arbitration. Such arbitrators have a fair knowledge about a particular area of law, which in turn helps in a situation of complex cases.
  • Whereas in litigation, the judges seldom have the knowledge or have very little knowledge about a particular area of law, which also, in turn, makes it hard for the advocates of the parties.
 

Privacy

  • The main reason any party chosen arbitration is privacy in the dispute. Certain parties would not want to hinder their reputation by going for a public hearing in the courts. 
  • Whereas in case of litigation, the hearings are always public and susceptible to media coverage, which might tarnish the party’s reputation.
 

Forum Selection

  • The parties have an option to choose the number and also the seat and venue of the arbitration procedure. This helps in flexibility to carry out the hearings of the case according to the convenience of the party.
  • Whereas in litigations, the dates and venues are strictly fixed and cannot be changed according to the convenience of the parties.
 

Conclusion on whether the arbitration will overtake litigation in India. What does the future hold?

So will arbitration overtake litigation in India? And is arbitration better than litigation? The answer is, as mentioned before, it depends. It depends on the parties to the dispute and how speedily and efficiently they want the proceedings to be concluded. The question arbitration overtaking litigation seems to be very bleak because if we look into the statistics of even the developed countries, arbitration procedure hasn’t marginally reduced litigation. Although these countries have seen a steep rise in the arbitration proceedings as compared to the past, and also diverting many private entities to go for arbitration rather than litigation. This, in turn, has reduced the burden of the courts in general. Therefore, similarly in India arbitration can help to reduce the burden of courts to a great extent. India can also choose to have business courts like that of the United States. India currently has commercial courts, which is not so efficient and for that matter always overcrowded. Also having a screening system to mandatorily refer arbitral matters to arbitration is a measure to reduce the burden of courts along with the efficient disposal of the cases.

Therefore, both arbitration and litigation have their own pros and cons. It is the parties who have to decide which method could be more beneficial for them, depending on the subject matter and certain other requirements. Hence, both arbitration and litigation can work hand-in-hand to ease the pile-up of cases, making both the mechanisms equally important and efficient.

References

  1.  Civil Appeal No.5440 Of 2002
  2. 2019 SCC Online SC 515
  3. Civil Appeal Nos 8245 & 8246 of 2016

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Consequences of Purchasing Shares Beyond the Limits in the Takeover Code without Issuing an Open Offer?

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This article is written by Khushnum Motafram, pursuing a Diploma in M&A, Institutional Finance and Investment Laws (PE and VC transactions) from Lawsikho.com.  Here she discusses “Consequences of Purchasing Shares Beyond the Limits in the Takeover Code without Issuing an Open Offer?”.

Introduction

With the ever-changing global scenario, increase in use of M&A transactions for restructuring the companies, complexity of takeover market and growing number of domestic and cross- border acquisitions, the Securities and Exchange Board of India replaced the old SEBI (SAST) Regulations, 1997 with the new SEBI [Substantial Acquisition of Shares and Takeover (SAST)] Regulations, 2011 (“Takeover Code”). The main objective for enforcement of the said Takeover Code was to prevent hostile takeovers and protection of minority shareholders in a listed company by providing them an exit opportunity upon acquisition of shares by the acquirer. The said Takeover Code regulates the market of listed companies by stipulating the procedure for acquisition of shares beyond a given threshold. It also regulates the procedure and provisions pertaining to open offer size and price, a time-bound process for making an open offer, exemption from making an open offer etc.

Takeover Code Guidelines

1. Definitions

Clause 2(1)(a) of the Takeover Code describes an acquirer means a person, who directly or indirectly, either acquires or agrees to acquire, by himself or with other person acting in concert, shares or voting rights in, or control over a target company.

Clause 2(1)(q) of the Takeover Code describes person acting in concert to be a person has a common objective of acquiring shares or voting rights of the target company, directly or indirectly with the acquirer, pursuant to an agreement or understanding, whether formal or informal. Furthermore, Clause 2(1) (q)(2) provides a list of entities which would fall within the purview of a person acting in concert. 

As per Clause 2(1)(e) of the Takeover Code, control shall mean right to appoint majority of the directors in a company or to control the management or policy decisions exercisable by a person or person acting individually or in concert, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements. However, the director of the target company shall not be considered to be in a position of control by virtue of holding such a position.

2. Applicability

The Takeover Code is applicable to those companies whose shares are listed on the stock exchange. The said code is also applicable to the unlisted company which has a listed subsidiary. Basically, Takeover Code comes into effect on acquisition of shares, voting rights or control of the target company by an acquirer company, either individually or with persons acting in concert beyond a certain prescribed percentage holding. On such acquisition of shares, it becomes imperative for the acquirer company to comply with certain provisions pertaining to open offer for acquiring the shares of such target company. 

3. Provisions pertaining to Offer Letter

  • As per Clause 3(1) of the Takeover Code, the acquirer along with the persons acting in concert proposing to acquire shareholding of the target company in order to entitle them to 25% or more of the voting rights in that target company would be required to make a public announcement of the open offer for acquiring shares of the target company. For example: If the acquirer holds 3% of the shareholding in the target company, then the acquirer is not supposed to make an open offer if he wishes to acquire 21% shareholding in the target company. But, in case the acquirer wishes to acquire 22% shareholding in the target company, the acquirer shall be bound to make a public announcement of the open offer for acquiring such shares. However, as per Clause 7, the minimum offer size shall in no case fall below 26% of the total shares of the target company, as of the tenth working day from the closure of the tendering period. In case, the total number of shares increases as on the tenth working day, the offered size shall be accordingly increased so that it becomes 26% of the total shares of the target company. 
  • As per Clause 3(2) of the Takeover Code, no acquirer, together with the persons acting in concert, already holding 25% or more of the shareholding in the target company but less than the maximum permissible non-public shareholding in the target company (i.e. 75%), shall acquire more than 5% of the total shares of the target company in any financial year, unless a public announcement of an open offer for acquiring shares of the target company is made by the acquirer company in accordance with the provisions of the Takeover Code. Continuing with above example, if the acquirer is already holding 26% shares in the target company and wants to acquire 5% of the shares of the target company, then such acquirer company needs to make an open offer amounting to 26% of the increased shares. However, the open offer cannot go beyond such percentage as would amount to increase in shareholding of the acquirer company beyond maximum permissible non-public shareholding. 
  • As per Clause 6 of the Takeover Code, an acquirer can make a voluntary open offer in case its shareholding along with the person in the concert is more than 25% but less than 75%. In such a voluntary open offer, the acquirer can make an offer for not less than 10% of the total shares of the target company. However, the acquirer is prohibited from acquiring shares of the target company if the acquirer, individually or together with the persons acting in concert, acquired shares in the target company not attracting public announcement of the open offer, during the preceding 52 weeks. In such an event, the acquirer shall be required to wait for at least 52 weeks to make a voluntary open offer. 

3. Objective of Open Offer

The objective behind the making of an open offer is to allow the shareholders of the target company an exit opportunity who do not wish to continue with the target company post-acquisition by the acquirer company. Furthermore, it also allows shareholders to exit from the target company in an event where the acquirer decides to delist the shares of the target company from the stock exchange in accordance with the SEBI (Delisting of Equity Shares) Regulations, 2009 before the reduction in the liquidity of their shareholding.

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Consequences

Non-adherence to the Takeover Code by the acquirer company in event of acquisition of shares beyond the trigger limit amounts to non-compliance with the provisions of the Takeover Code. Such an event causes considerable loss to the existing investors in the target company. The small investors are highly effected in such an event as they are not provided with an exit opportunity in an untimely and inadequate disclosure of acquisition of shares. 

SEBI has time and again slapped non-adhering acquirer companies with a penalty for purchasing shares beyond the limits in the takeover code without issuing an open offer. Few of the instances are given hereinbelow which articulates the strict demeanour of the SEBI towards non-compliance with the provisions of Takeover Code: 

  1. SEBI imposed a penalty of INR 3.4 million on five individuals for violation in compliance with the disclosure norms under Takeover Code with regards to change in their shareholding in the Parichay Investments in 2019. Upon investigation, SEBI found that all the individuals’ shareholding crossed the threshold of 5% and the change in the holding was more than 2% on several occasions.

     

  2. In June 2018, SEBI imposed a penalty of INR 1 billion on the three promoters of Man Industries (India) Limited for not making a public announcement of the open offer to the company’s shareholders.
     
  3. In March 2018, SEBI imposed a penalty of INR 6 lakhs on 11 individuals for failing to make a public announcement of an open offer for acquiring shares of Shreenath Industries Investment Limited under Clause 3(1) of the Takeover Code.

     

  4. In July 2017, SEBI imposed a penalty of INR 25 lakhs on one individual for the delay in making an open offer to the shareholders of Enbee Trade & Finance Limited, thereby violating the provisions of Takeover Code.

     

  5. In September 2015, SEBI imposed a penalty of INR 5 lakhs on four entities, including one individual for not making a timely public announcement of public offer to the shareholders of the Himachal Fibers Limited.

     

  6. Reliance Industries Limited (RIL): The combined holding of the Reliance Group was 6.62% in Larsen & Toubro (L&T) in March 2011. Their shareholding reduced to 3.92% is October 2011. However, RIL increased their stake to more than 10% in L&T without public announcement of an open offer under Clause 3(2) of the Takeover Code. They then sold their entire lot to Aditya Birla Group. Upon complaint received from Investors Grievance Forum, SEBI investigated the matter and confirmed that RIL was guilty of a violation of the disclosure requirement under the Takeover Code and therefore imposed a penalty of INR 4.75 lakhs.

Conclusion

Thus, in conclusion, purchasing shares beyond the limits in the takeover code without issuing an open offer has severe consequences and penalties that are levied upon by SEBI. 


Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.

LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join:

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Doctrine of Frustration : Facts you need to know about

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This article is written by Suryash Kumar, graduated from Bangalore Institute of legal studies. The article talks about the various aspects of Doctrine of frustration.

Origin of the Doctrine of frustration

The doctrine of frustration of contract owes its origin to Roman law. Its application was seen in the Roman Contract law, where the parties were discharged because the thing has been destroyed or the purpose of the contract has become unattainable.

The Origin of Frustration of Contract is closely related to the English Rule: Subsequent impossibility of performance cannot be a valid defence by the defendant in cases of breach of an obligation under the contract. This rule was laid down in: Paradine vs Jane, 1647 (82) ER 897: 1647 Alyen 26. Brief facts of the case are: Jane was sued for rent due to Paradine. The defendant argued that the German Prince had invaded the area where the property was situated (Occupied the property), therefore he couldn’t use the property to make any profits. He had planned to pay the rent out of the profits which he would have made, had he used the property.

The defence was not held valid; as the obligation under the contract was absolute with no exception whatsoever. Though the defendant’s proposition was a reasonable and strong one- he couldn’t have done anything about the situation- the Judge held that responsibility under the contract should be honoured under all circumstances.

The Doctrine of frustration was evolved as a response to the aforementioned doctrine. There were cases where the contract couldn’t be performed through no fault of the defendant, and the rigidity of the English rule was found to be unreasonable, unfair, hence an exception to this rule was necessary. The doctrine of Frustration was incorporated in the contract law as a remedy to the above situation.

Meaning

A contract is an agreement or set of obligations to be fulfilled by the parties to the contract. Sometimes, subsequent to the construction of contract an unforeseen circumstance may arise, which render the performance of the contract impossible. The object of the contract ceases to exist. This change in circumstance is not caused by the parties and it changes the nature of obligations, different from what was contemplated by the parties.

As with most laws in India, the contract act is influenced by English laws/doctrines(The act was passed when India was under colonial rule), this doctrine constitutes the Indian Contract Act,1872, as Section 56 (Agreement to do impossible act). 

It speaks about two impossibilities i.e. Initial impossibility and Subsequent Impossibility. Initial impossibility undergirds the fundamental proposition that ‘’An agreement to do something that is intrinsically impossible is void’’. For example, an agreement to bring a person back to life who is dead, being impossible of performance, is void.

Subsequent Impossibility as the term suggests something that happens later, i.e. after the parties have got into a contract. Sometimes, it happens that at the time when the contract was constructed, the performance of the contract wasn’t an issue, but subsequently, because of the change in circumstances or factors, the performance becomes impossible or unlawful. An example here would be where a contract is made for the import of goods, and the import is thereafter forbidden by a Government Order.

Application of Doctrine under different scenarios:

In Taylor vs Caldwell, the court pointed out that the rule stated in Paradine vs Jane ‘’is only applicable when the contract is positive and absolute, and not dependent on any contingency either explicit or implicit’’.

 Facts were as follows: the defendants agreed to let the plaintiffs operate on their premises for a concert. Subsequently, before the scheduled concert the premise was destroyed by fire without any fault of either party. It was held that the contract was not absolute, because its performance depended on the existence of the hall. It was, therefore, ‘’subject to a tacit understanding that the parties shall be expunged in a case, preliminary to breach, accomplishment becomes impossible from the exterminating of the thing without fault of the contractor’’.

This decision brought to the fore- the constant struggle between two conflicting doctrines-the principle of inviolability of contract which supports the principle of the paramountcy of contract and the principle that a contract is discharged when the common object or assumption has been annihilated by certain happenings or incidents.

Not Limited to Tangible Things 

Furthermore, Krell v Henry (Coronation case) highlights that the above principle is not restricted to physical impossibilities. It also extends to cases where the performance of the contract is achievable tangibly, but the purpose for which the parties had constructed the agreement has failed to materialise. To better illustrate this point, we should discuss the facts of Krell v Henry, which are:

The defendant agreed to rent a flat from the plaintiff for two days, on which days it had been announced that the crowning would take place, and, therefore, a parade would pass along that place. Some portion of the rent was paid before the event. Later, the parade was dropped because the King was ill, the defendant objected to pay the remaining amount.

The court concluded that the real intention of the parties, which was given effect by the contract, was to have a view of the parade. This was the cornerstone of the contract; With the Coronation process not taking place on the given date, the object of the contract was frustrated. As a result, the plaintiff was not qualified to recover the balance of the rent. It is a perfect example of the court not restricting itself to physical possibilities.

Frustrating Events

  1. Destruction of subject-matter: The doctrine applies where the actual and specific subject-matter of the contract has ceased to exist. Taylor vs Cadwell best illustrates this point.
  2. Supervening illegality: Performance of the contract becomes impossible in the manner and the time contemplated ensuing from the change in circumstance. If the legislature passes law after the contract is constructed to deal with the changed situation, which makes the contract frustrated. A, a company in India dealing with exports and imports of dry fruits. A gets into an agreement with B, a supplier of dry fruits in Pakistan. Subsequently, war breaks out between India and Pakistan, as a result, the legislature passes a law, thereby making the imports from Pakistan illegal, the contract is frustrated by supervening illegality. 
  3. Death or Incapacity of Party: When there is a contract that depends on the particular skill or specific act of the promisor, his death or incapacity terminates the contract. A classic case on this point would be Robinson vs Davison: A contract between the plaintiff and the defendant’s spouse(famous pianist), that she will be performing i.e. playing the piano at a concert organized by the plaintiff on a particular day. On the morning of the said day, she apprised the defendant that she was ill, and will not be playing the piano. The concert had to be postponed and this was a loss for the plaintiff. The court dismissed the case stating that she had the option to not play if she was sick to do so. The contract was clearly contingent on the fact that she was well enough to perform.
  4. Delay: The contract can also be frustrated by the inordinate delay. However, the delay must be serious which defeats the purpose of the contract. In Bank Line Ltd v Arthur Capel & Co where the ship was to be chartered for 12 months from April 1915 to 1916. The vessel was requisitioned until September 1915. It was held that the contract was frustrated by the delay. Freights had risen and it would be unfair to the owner if the old contract was enforced.
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Limits of the Doctrine

The norm is that the parties will be held responsible for breach of the obligation under the contract and the parties getting discharged due to frustration is an exception. Acting in consonance with this approach, the courts have made an observation that change of circumstances must be ‘’such as to upend the object of the contract. Some impediment or some deviation is very common in all transactions, and it cannot be assumed that any agreement has been made on the implied understanding that such a thing will not take place to any extent’’.

‘’Commercial hardship’’ or ‘’Bad bargain’’ is an important limit to the doctrine. 

Davis Contractors Ltd v Fareham UDC perfectly illustrates this point. Brief facts of the case are: Davis Contractors agreed with Fareham UDC to build 78 houses over eight months. Time taken to complete the project was 22 months because the plaintiff was short on labour and materials.

The plaintiff’ contended the delay had increased the costs, and the delay was caused due to circumstances beyond anybody’s control. They pleaded to the court to declare the contract frustrated, therefore were entitled to quantum meruit for the value of work done. The decision was in favour of the defendant. No doubt that the contract had become more onerous but in no way, this can be interpreted as the frustration of contract. This is what lord Reid stated as the difference between the contract becoming more onerous and it becoming frustrating.

Doctrine of Frustration in India

Section 56 of the Indian Contract Act: As with most laws in India, the contract act is influenced by English laws/doctrines(The act was passed when India was under colonial rule). This doctrine constitutes the Indian Contract Act,1872, as Section 56( Agreement to do impossible act). An agreement to do something, which was possible or lawful when the contract was constructed, but subsequently, becomes impossible or unlawful without any fault of either party, then such an act will be void.

Major Indian Case related to this doctrine

Satyabrata Ghose v Mugneeram Bangur and Company & Anr.: The defendant company launched a scheme related to developing the land into a housing colony. The plaintiff was granted a plot on payment of advance money. The company committed to constructing the roads and drains necessary for improving the land, thereby making it suitable for building and residential purposes. Following the completion of development work, the purchaser was to pay the remaining amount to complete the conveyance. Meanwhile, a large part of the land was taken over by the State during the Second World War for war purposes. The company attempted to rescind the contract on the ground of supervening impossibility.

Held: The court dismissed the defendant’s suit stating that the ‘’impossibility’’ under Section 56( Agreement to do impossible act) doesn’t mean in the physical or literal context. It refers to change in circumstances which completely upsets the very foundation upon which the parties rested their bargain. The requisition orders, it must be noted were temporary in nature. There was no timeline mentioned within which the project had to be completed. With the absence of any deadline whatsoever in the contract, and when it was natural for some restrictions to be in effect during the war, thereby causing difficulties and delay in the project. This delay caused by the requisition order didn’t affect the fundamental objective or struck at the roots of the adventure.

Sushila Devi vs Hari Singh

This case expanded the scope of the Doctrine of Frustration. ‘’Impossibility’’ under Section 56 of the Contract act should not be restricted to humanely possible scenarios. In this case, lease of certain property was the subject matter of the agreement. Later, because of partition the property to be leased became a part of Pakistan, thereby making the terms of agreement impossible.

Grounds Of Frustration

  1. Destruction of subject-matter:The doctrine of impossibility is befitting ‘’where the specific subject-matter of the contract is annihilated. ‘’Taylor vs Cadwell’’ as discussed previously is a good example.
  2. Change of circumstances: A contract will frustrate ‘’where certain situations arise which make the accomplishment of the contract impossible in the way contemplated’’. Justice Kapur of the Punjab High Court in Pameshwari Das Mehra v Ram Chand Om Prakash explained the principle thus: ‘’It is clear that if there is entirely unforeseen occurrence the critical point that has to be pondered upon, whether this occurrence has influenced the responsibility of the parties in the contract to such an extent as to make it virtually impossible or even perilous or hazardous. If that be the case, the occurrence not having been brought about by the fault of either party, the courts will not enforce the contract’’. For example, A ship was chartered to load cargo but on the day she should have proceeded to her berth, an explosion occurred in the auxiliary boiler, which made it impossible for her to undertake the voyage at the scheduled time, the House of Lords held that frustration had occurred in the circumstances.
  3. Non-occurrence of contemplated event: There are times when the performance of contract is entirely possible, but only if a specific event occurs, which if doesn’t affect the core objective of the contract. It makes the purpose of the contract unattainable.The coronation case is the best example here. This has been discussed earlier in the article.
  4. Death or incapacity of party:’’A party to a contract is exempted from the obligation if it is contingent upon the survival of a given person, if that person dies’’. The essence of these type of cases that it requires individual to use his particular skill, in this case the promisor, his death or incapacity puts an end to the contract. An illustration where A contract between painter, and the person to draw his picture on a particular date. The painter dies before that date, hence the parties are automatically discharged.
  5. Government, Administrative or Legislative intervention: Contract will be dissolved when by the operation of legislative or administrative action which strikes the objective or purpose of the contract, thereby changing the fundamental nature of the contract. Thus, where a vendor of land could not complete the sale-deed because he was no longer the owner due to a law which came into effect, it was held that the contract had become impossible of performance.
  6. Intervention of War: War or War like situations has often raised difficult questions for the courts. In a particular case, appellants had agreed to sell to the respondents three hundred tons of groundnuts.The usual route at the date of the contract was via Suez Canal. The shipment was to be in November/December, but due to certain geopolitical development the canal was closed until April next year. It was stated that the appellants could have shipped through the alternate route which was Cape of Good Hope. Appellants refused to ship goods via Cape. The appellant’s argument was that it was a tacit understanding between the parties in the contract that the shipment should be via Suez. It was held that such an understanding was wrong. What the appellants could have done was shipped the shipment through Cape route,and they were bound by law (Sale of Goods Act,1893) to do this. Although this would have been more expensive for the appellants, but it didn’t render the contract fundamentally or radically different, hence there was no frustration of contract.

Application to leases: The “English Law’’ on application to leases is unsettled. In India this was discussed by the Supreme Court in Raja Dhruv Dev Chand v Raja Harmohinder Singh, where it was observed ‘’Authorities in the courts in India have generally taken the view that Section 56 of the Contract Act is not applicable when the rights and obligations of the parties arise under a transfer of property under a lease’’. This was one of the cases arising out of the partition of the country into India and Pakistan. The lease in question was that of an agricultural land for one year only. The rent was paid and the lessee was given possession. Before the land could be used for any crops, came partition which left the land in Pakistan and the parties migrated to India. The action was to recover the rent paid. It wasn’t successful because the respective judges pointed out that completed transfers are completely outside the scope of Section 56.

In a subsequent case of Sushila devi v Hari Singh the Supreme Court concluded that In this particular case there is no concluded contract since no deed was written or registered. It was an agreement to lease and that came within the scope of Section 56.There was frustration of the Contract as the parties could not go to give or take possession.

Effects of frustration

Frustration should not be self-induced: The frustration should not be caused because of any of the parties’ fault or action.One of the case illustrates this points where the exporter had an export licence to supply 3000 tons of sugar beet pulp pellets. They had applied to the government to increase their quota but that was refused. After exporting 1500 tons to the first buyer with an option to supply 1500 tons later. They also contracted with another buyer to supply them with 1500 tons of sugar . This was clearly beyond their limit under the licence. To get out of this exporters apportioned the 1500 tons between the two buyers equally. One of the buyers sued the exporters for the breach of the contract. The suppliers pleaded frustration. 

This was not accepted, though the court referred to the principle stated in the American Uniform Commercial code that in such a situation the seller may apportion supplies in any case which is prudent and just but found no basis for applying the principle into English law.

The case of Thompson v . ASDA-MFI Group plc

This case represents an interesting scenario relatively ignored by the texts. How to the English Law should be interpreted where a party claims to be excused from performance because of his own action, not directly amounting to breach of the contract,has brought about a situation in which the contract provides for discharge of his obligations. The discharging term may be a condition precedent. For example where an estate agent’s entitlement to the commission was dependent on the sale of the principal’s property from which the principal withdrew. Or it may be a condition subsequent, as in New Zealand Shipping Co. ltd, where a shipbuilding contract had become void after a delay in delivery which the buyers alleged was caused by the builders’ own actions.

Thompson concerned a condition subsequent. In this case, a company which offered shares to its own employees and employees of its subsidiary and after an employee of a subsidiary had accepted the offer, the company’s subsidiary was sold to a bidder and the employee was informed that the scheme lapsed but he sued the company for breach of contract. Rule 5 of the scheme provided that the right to exercise an option depended on the option holder being employed by ASDA or its subsidiaries.

In order to attract the principle that a party is not to rely on his own act in not fulfilling a condition subsequent and thereby bringing a contract to an end, the act has to amount to a breach of duty owed to the other party under the contract. If a term cannot be implied into a contract that a party would not do an act which, if done, would prevent the fulfilment of a condition precedent or would cause a condition subsequent to be fulfilled, the contract takes effect according to its tenor.

In keeping the above principle in mind, the court held that the Company is not liable. If ASADA were so bound, it would be incapable of exercising other contractual rights, such as dismissing the plaintiff for misconduct, without incurring liability under the option contract.

  • Frustration operates Automatically: Frustration operates independently and is conditioned to discharge the parties in a contract in certain circumstances. “irrespective of the parties affected, their dispositions and their interest and circumstances’’.

The legal effect doesn’t depend on the parties’ intention or opinions, or even knowledge, as to the event. This is particularly true of Indian law as Section 56 of the Contract act ‘’lays down a rule of positive law and does not leave the matter to be determined according to the intention of the parties.

  • The adjustment of rights: The rights of the parties are adjusted under Section 65 of the Act.

Issues affecting the Operation of the Doctrine

  1. Negligence: When the frustration is caused by the negligence of one of the parties’. It also depends upon the particular facts of a case whether negligence will affect the operation of the doctrine.
  2. In circumstances where the incident leading to the frustration is anticipated and provided for by inserting a force majeure clause into a contractual agreement, frustration shall not apply. This is the case, however, only if the said clause adequately covers all eventualities.

In Jackson v. Union Marin Insurance Co. ltd, it was held that such an extensive damage was not covered under the expressed exceptions.The contract was frustrated.

Conclusion

The Doctrine of Frustration came into existence to deal with certain situations, where through no fault of the parties’, the contract was frustrated. The law is dynamic and takes shape according to the needs of the society. Perhaps, to an extent doctrine of Frustration brings clarity on the conflicting positions: the paramountcy of contract which supports the principle of absolute liability and the principle that a contract is discharged when the common object or assumption has been destroyed by the change of circumstances.


Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.

LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join:

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How to land internships in top law firms 

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This article has been written by Anubhav Garg, a student of Delhi Metropolitan Education, Noida and reviewed and edited by Ramanuj Mukherjee, CEO, LawSikho. This article talks about how to get internships in tier 1 firms, and highlights the common pitfalls & common mistakes law students make in this context. In this article, we will go into details of how to write cover letters, CV making, interview tips and guidelines on how to excel in your internship. 

I attended this splendid session on “How to get an internship in a big law firm”. The panel constituted of Mr. Nipun Bhatia, Mr. Shewtank Sharma, and Ms. Arpita Sharma.

Internships play a crucial role in our careers and having an internship experience in tier 1 law firms like SAM, CAM, Luthra & Luthra, AZB, J Sagar, Khaitan and Co, or Trilegal can give you a major competitive edge over others. However, getting internships at these law firms is notoriously difficult. 

Big law firms take in thousands of interns every year, but tens of thousands apply for internships every single month. Most internships are allotted to those coming through recommendations from very highly placed people and shortlisted candidates forwarded by recruitment committees of a handful of famous law schools. 

The rest of us continue to try by sending out innumerous internship applications to various law firms including mid-size and smaller law firms, hoping for even one response, which often delude us.

For all the law students like me, who struggle to get an internship at top law firms because we belong to non-NLU colleges, this event was highly enriching. I am listing some of the major takeaways below. If this helps you in any way, give me a shout out by leaving your comment below. I will be very grateful!

How and when to apply?

You can easily find the email address and contact numbers for the purpose of applying for internships/jobs in the top-notch law firms on Lawctopus and JustDial. Also on their own website you will find email ids of different partners. You can utilize them to send your CV and for the purpose of follow-up.

Start applying at least 3-4 months prior and if you are a non-NLU student, try to apply for the non-internship season. There are some months when law firms hardly get any application for internships. This is the best time to intern, provided you can manage holidays from your college. 

These months are July, August, September, October, November and to an extent, December. August and September are the months when even big law firms do not get too many applications.

During peak internship months, you may be better off interning at smaller law firms or boutique firms will smaller set ups, preferably doing long term internships, where you are more likely to find a mentor and learn some hands on work.

Interning during off-season will benefit you in multiple ways: 

  • It will give you better odds of getting selected as fewer students are applying at that time and your application will not come under the pile of NLU students as it would have if you might have applied at any other time.
  • It will improve the quality of work you will be doing in these firms due to the same reason for being short on interns. The same work would have been delegated to someone senior to you or someone with better credentials but as you are interning in the time these factors will affect you comparatively less. This will bring you more responsibility and better exposure to learn and grow professionally and network with high designated people.
  • You will face less competition in the firm in making yourself visible to superiors/seniors and shining in the crowd. It will be much easier for you to create a long-lasting impression in front of even partners. After all, even they sometimes need the help of an intern for some odd jobs. You have to compete against fewer people to work on the major transactions, cases, projects and therefore you are more likely to secure your end goal, a PPO or at least a call back. 

Common mistakes in a cover letter

Your cover letter is your first communication with the organization. The cover letter is seen by HR even before your CV and we are very well aware of the fact that the first impression is the last impression. HR will only bother to see your CV if your cover letter is good enough to make him consider you. So, how can you make your internship application stand out in the eyes of an HR who has just five seconds each for 1000+ applications? Here are some tips and common mistakes to avoid doing in your cover letter.

Not mentioning the kind of work you are interested in

People often forget to mention the kind of work they are looking to do during an internship, such as IPR, corporate commercial or litigation. This may get you rejected when they do not have a good fir for you, but a lot of times it can help you to stand out and get the right opportunity. If in the HR’s judgment you are a snug fit for the work available, you are likely to get in. Do not be scared to write what your genuine interests are in the cover letter. This also reduces your odds of getting a reply. Give a crisp introduction in your cover letter itself about what kind of work you are looking for in an internship, and what you have already done in that area in order to stand out so far. 

This may get you disqualified in a few places, but it will help to attract attention from the right people. For example, if you have decided to become a tax lawyer, have done courses on tax law, written articles on the subject, attended conferences about tax law and did some internships around tax law already, your CV would tell a story. It will help if you are clear that you want a tax internship only, as the HR will happily place you with the tax teams if such a thing is possible within their system.

Not mentioning relevant information

Mention what course you are pursuing, in which college and year you are in, the subjects you have studied, for what time period you need an internship. Make important information stand out by putting it in bold or italics. Make sure formatting is good, even while you are highlighting some information, and that your cover letter does not look ugly.

This way, you are making the job of HR easier and it also makes the statement that you are a thoughtful person who understands what are other people’s needs and how they operate. 

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Lack of proper formatting

This is the biggest pitfall a lot of people fall into. Making cover letters in simple plain text with huge walls of text shows you in poor light. No HR would bother to go through that literature and your chances of landing an internship will reduce drastically. Appropriate formatting is something which many cover letters and CVs lack, so you can use it to make your application stand out. 

Proper formatting includes making your cover letter easy to read through bullet points, tables etc. instead of long paragraphs. As I previously said, highlight the important and basic information like your college, year, subjects, your USP, etc. This clearly implies that you know how to present things in a concise but still effective manner and you know how to utilize limited space to the best of your advantage.

Common mistakes in CV

Another crucial aspect of getting an internship in a tier 1 law firm is a brilliant CV. 

For the HR, you are only as good as your CV is. Below are some common mistakes even the professionals and experienced people commit while making their CV. 

Experience column

Many students in the internship column just mention the names of organizations and the time period they have interned there. That is not of any use for HR. Also write what were your major takeaways from those internships, in what areas of law and projects you have worked there, etc in a few bullet points.

Also, bring a hardcopy of your work samples with you so that you can give better references of your previous internship experience, if you ever have to appear for an interview. Be careful to not reveal any sensitive information or client names. Lawyers are supposed to take confidentiality very seriously.

No Relevance 

Research about the organization you are applying in, about their operations, major transactions they have worked on, the projects they were involved in, their USPs (uniques selling points), the kind of services they provide, the market segment they dominate, etc and then link your skills, qualifications and other credentials with them to establish your relevance to the organisation. 

This will tremendously increase your chances of getting a reply because this will show the HR that you have bothered to learn about the firm or company, and that you understand their methods/operations. It shows that you are really interested to work there and you won’t take much time to settle in their working environment. This will also help you in your interview in answering the questions like “Why do you want to work here?”, “Why should I hire you?” etc.

Many students write every single moot court, MUNs, PDs, YPs they have ever done to add weight in their CV. By doing this, you are not adding anything in your CV other than monotony. Always remember that in CV, less is more. Don’t even write every single workshop or course you have taken. Just write those which are somehow relevant to the organization’s areas of operations. Write about the best stuff, leave out mediocre achievements unless very directly relevant to the organization.

Underestimating hobbies

A lot of people underestimate the hobbies column of their CV by writing things they have never done/don’t know about thinking that HR will never come to the hobbies part after seeing their other credentials. Please don’t do that, because if HR figured out that you have lied in your CV, your selection is not happening. 

But have you ever wondered why there is even a hobby column in the CV? Why HRs would be interested in knowing what you do in your free time when they never want you free? 

Hobbies column is there so that HR has a better opportunity to judge your personality and lite up the conversation a bit by talking about something other than your professional aspects. This helps him judge your behavior, sociability, authenticity, honesty and other aspects of your character.

Maintain the difference between being persistent and being pushy

There is nothing bad in following up with the HR managers and calling them once or twice a week but don’t make ruckus by invading their personal space like Instagram, snapchat, Whatsapp etc. Restrict yourself to the mediums like official email ids and contact numbers. At best, if they are receptive, you can drop a message in Linkedin.

Also, whenever you call an HR or any official pertaining to your internship, make sure that you are in-network zone and have a pen & paper ready with you. These small things make an ocean of difference. 

Once they pick your call, after greetings and telling your name, ask them is it the right time to talk, this etiquette will go a long way. Don’t sound stupid by asking questions that you can research on the web on your own.

Interview Tips

The next stage, once you get a reply from the organization, you may be asked for an interview. Below you will find some tips for killing it in your interview, securing a high-end internship & an opportunity to work with the industry pioneers.

Grooming

  • Make sure that you don’t look very shabby. Get your hairs and nails trimmed. 
  • Iron your clothes properly and shine your shoes
  • A hanky is a must-have. Your tie should be proper. 
  • Avoid using very strong perfumes/deodorants. But you can use a lite one. 
  • Your tie should be properly tied with no creases and should be matching with the rest of your outfit.
  • Make sure your hands look clean. The areas around the nails should be clean. Also, wipe your hand with a hanky to clean the sweat so while shaking hands with the interviewer it doesn’t feel weird.

Be on time

Make a provision of at least an hour and take the most convenient transportation like a cab/auto so that your shoes and the iron of your clothes don’t get spoiled while hustling in the bus/train. Punctuality is the most admired thing in any organization and it makes a statement that you are a good planner and responsible person. Also if you are badly dressed it gives the impression that you lack the basic etiquettes of an interview and unprepared. 

Don’t forget to greet the receptionists in a professional manner and after taking your place in the lobby, don’t start listening to music. Don’t check your phone, again and again, showing that you have other important places to go. You don’t know who might be watching you while you were waiting in the lobby. Do not carry books with you for revision! 

Research about the firm

As I have also mentioned previously, it is a must to have good knowledge about the organization you are interviewing in. You should be aware of that organization’s current events, about their operations, major transactions they have worked on, the projects they were involved in, their USPs (uniques selling points), the kind of services they provide, the market segment they dominate, etc

This helps you in establishing your relevance to the organization in the interview and it also makes HR see you as a solution to the problems they are facing. It creates the impression that you are passionate about working there as you have so much knowledge about it. 

Remember H.C.C.

HR interviews are about your personality and character and not about your academics and other credentials. HR is satisfied with your credentials that’s why you are sitting in that interview. There may be technical interviews that would be taken by lawyers. Sometimes both may happen together, or one after another. Apart from testing your knowledge, they would want to see that you are as good in real life as you look on paper and that’s why they take interviews in person. 

Always remember HCC: Honest Confident and Calm.

Lack of confidence shows that you are incompetent and unprepared. So, be confident in your communication but also speak steadily and politely. Don’t exaggerate or lie in the interview, that is the worst thing you can do to yourself. If you don’t know the answer to any question then tell the interviewer, “I am sorry sir but I don’t know the answer to this question. I would surely make it a point to learn about this.” This will show the interviewer that you have guts to accept and improve your failures and also you are coachable and humble.

Don’t panic if you answer any question wrong or make any other mistake. Politely apologize and allow the interviewer to move on to the next question. If they don’t, consider if something remains unaddressed that should be addressed. If not, make a move to the next topic. It shows that you can handle stressful situations well and can maintain your cool and make rational decisions. 

For technical round of interview, prepare extensively about all the things mentioned in your CV. If you said that you have done a certain work in an internship before, or took a certain course in your CV, you better be able to answer technical questions regarding the same in your interview.

Imagine that you wrote in your CV that you did a course on trademark law, but when asked questions about how to deal with a trademark filing related objection you are clueless, that would not work well. If they ask you about famous trademarks and special rule regarding the same, you would better answer. Make sure your concepts in such matters are very clear.

Questions you can ask HR

Remember that interviews are a two-way street, your interviewer asks you questions to evaluate your personality and proficiency and you can also ask your interviewer some logical questions to ascertain whether this internship will serve your purpose or not. It also makes a statement that you are clear-sighted about your goals and has everything organized and planned. 

You get the opportunity to ask questions at the end of the interview. You must prepare at least two questions that demonstrate your interest in the internship, your drive to excel in the role, and the fact that you’ve done some homework. Some examples of good questions to ask the interviewer are as follows: 

  • What are your expectations from me in the first month?
  • If I perform upto your expectations, is there a possibility of extension of this internship?
  • What can I do to prepare myself well before I join this internship?
  • What is the work culture of the company like?
  • What are the parameters on which you judge the performance of an intern?

Do you have any questions?

What are the challenges you are facing to get internships? Please leave your questions below, and we would be very happy to update this article with answers to those questions.


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The post How to land internships in top law firms  appeared first on iPleaders.

AIBE: Mock Test for Bar Exam Preparation Part 2

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AIBE: Mock test 2, Solve the Mock Test to strengthen your Preparation for All India Bar Exam and increase your chances of clearing the paper.

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Mock Test 2 

1.) Insurance is: 

A.) Contract of Indemnity 

B.) contingent contract 

C.) contract of guarantee 

D.) wagering contract 

2.) X agrees to pay Rs. 5000 to Y if Y’s car is burnt. It is : 

A.) void 

B.) voidable contract 

C.) valid contract 

D.) wagering contract 

3.) Which of the following is not an essential requirement of a valid contingent contract: 

A.) The happening of the event must be outside the control of the parties 

B.) The event must be uncertain 

C.) The performance must be conditional 

D.) The event must be an act of God 

4.) A offers to B, by letter, to sell his car for Rs.2 lakhs. The letter is written on 4th March, posted on 5th March and reaches B on 8th March. The communication of offer completes on: 

A.) 5th March 

B.) 8th March 

C.) 4th March 

D.) 9th March 

5.) An agreement without free consent is : 

A.) Illegal agreement 

B.) valid contract 

C.) voidable contravt 

D.) void contract 

6.) When two parties negotiate on an arms length basis and have no individual or fiduciary relationship with one another, which of the following grounds of challenge to the contract is least likely to succeed: 

A.) Undue Influence 

B.) coercion 

C.) misrepresentation 

D.) Fraud 

7.) Which of the following are examples of a fiduciary relationship? 

A.) Master and servant 

B.) Solicitor and client 

C.) Doctor and Patient 

D.) All of the above 

8.) In an application for temporary relief the plaintiff will have to establish that: 

A.) Prima facie case is in his favour 

B.) he may suffer irreperable loss 

C.) Balance of convenience is in his favour 

D.) All of the above 

9.) An Agreement in restraint of marriage of any person other than a minor is a : 

A.) Legal Contract 

B.) Void contract 

C.) Fraudelent Contract 

D.) Voidable Contract 

10.) A Contingent contract dependent on the happening of an impossible event is : 

A.) void contract 

B.) voidable contract 

C.) valid contract 

D.) illegal contract 

11.) Consideration must be at the desire of : 

A.) Promisee 

B.) Stranger 

C.) Promisor 

D.) Third Party 

12.) Which of the following agreements with minor is/are not valid : 

A.) Agreement imposing an obligation on the minor 

B.) Agreement for agreement for supply of necessities 

C.) benefits of the minors 

D.) all of these 

13.) Which section of the Indian Contract Act defines the term ‘agreement’? 

A.) 2(b) 

B.) 2 ( e ) 

C.) 2 ( c ) 

D.) 2 (d) 

14.) Under the Specific Relief Act, no suit for recovery of possession of immovable property can be instituted: 

A.) Against a public company 

B.) Against a private company 

C.) Against the government 

D.) Against all of these 

15.) Which section of the Specific Relief Act lists out the situations when an injunction cannot be granted by a court? 

A.) Section 41 

B.) Section 40 

C.) Section 37 

D.) Section 29 

16.) Which of the following contracts cannot be specifically enforced : 

A.) Execution of a formal deed of partnership 

B.) contract for the construction of any building or execution of any other work on land 

C.) contract which determinable in its nature 

D.) Contract to execute a mortgage or furnish any other security for repayment of any loan which the borrower is not willing to repay at once 

17.) The Sale of Goods Act applies to the sale of the following: 

A.) Negotiable Instrument 

B.) Land 

C.) Tangible movable goods 

D.) Immovable property 

18.) As per the Negotiable Instruments Act, a bill of exchange, cheque and a promissory note can: 

A.) Be negotiated by endorsement 

B.) None of the instruments can be endorsed 

C.) Only promissory notes can be endorsed 

19.) A paid some money to B by mistake which was in fact Only bills of exchange and promissory notes due to C, in this case : 

A.) A is not entitled to recover money as there is no contract between A and B 

B.) A is not entitled to recover money as the mistake makes the arrangement between A and B void 

C.) A is entitled to recover money since he paid by mistake 

D.) B is not liable to pay as he did not ask for such payment 

20.) A’ promises to marry B if after 3 years they are both living in the same city. This agreement is: 

A.) Void, being in restraint of marriage 

B.) void, being against public policy 

C.) Void, having an unlawful objective 

D.) Perfectly valid 

21.) Notion of freedom and liberty imbibed in our Constitution, are taken from which historical occurrence: 

A.) Russian Revolution 

B.) Chinese Revolution 

C.) French Revolution 

D.) American Revolution 

22.) Around 70% of Constitution accepted at its inception was sourced from : 

A.) British Indian Government Act, 1930 

B.) Government of India Act, 1935 

C.) Indian Act, 1945 

D.) British Laws Act, 1935 

23.) Who passed the Objectives Resolution for Constitutional Assembly debates : 

A.) Sardar Vallabhbhai Patel 

B.) B. R. Ambedkar 

C.) Jawaharlal Nehru 

D.) Dr. Rajendra Prasad 

24.) Which Article of the Constitution assigns English as the official language in the High Courts & Supreme Court: 

A.) Article 368 

B.) Article 379 

C.) Article 348 

D.) Article 365 

25.) Which landmark judgement first held that ‘Basic Structure’ of the Constitution cannot be altered: 

A.) Minerva Mills case 

B.) IR Coelho case 

C.) Kartar Singh case 

D.) Keshavananda Bharati case 

26.) Under the Indian Constitution, how many fundamental duties are there : 

A.) 6 

B.) 7 

C.) 9 

D.) 11 

27.) Prof. K C Wheare describes government as enshrined in the Constitution as ; 

A.) Federal 

B.) Unitary 

C.) Quasi-federal 

D.) Unitary in form and Federal in spirit 

28.) Constitution of India is subject to controls by: 

A.) Parliamentary 

B.) Judiciary 

C.) Executive 

D.) Not subjected to any of these but governs the functioning of all the above organs 

29.) Self government or Gram Panchayat later included in the Constitution, was a vision of:

A.) Lal Bahadur Shastri 

B.) Chandrashekar Azad 

C.) Mahatma Gandhi 

D.) Jawaharlal Nehru 

30.) In case of violation of fundamental rights, an aggrieved person can file a _____ in the Supreme Court : 

A.) Writ petition 

B.) Appeal 

C.) Complaint 

D.) Notification 

31.) If it is proved that a woman’s death occurred within 7 years of her marriage and that she was subjected to cruelty by her husband or his relatives, there is a presumption of: 

A.) Culpable homicide 

B.) Murder 

C.) Dowry death 

D.) All of the above 

32.) If A, a citizen of India commits a crime in foreign land, is A subject to Indian laws : 

A.) Yes 

B.) No 

C.) Depends on the laws of that particular country 

D.) Only if the victim is also an Indian citizen 

33.) A Muslim wife claiming compensation for husband can opt for remedies under: 

A.) The Muslim Women (Protection of Rights on Divorce) Act 

B.) Code of Criminal Procedure 

C.) Constitution 

D.) Both (a) & (b) 

34.) An adoption made by a Hindu male without the consent of his wife is : 

A.) Void 

B.) Voidable 

C.) Valid 

D.) Invalid 

35.) Which one of the following is not included in the term ‘Hindu’ used in the Hindu Marriage Act, 1955: 

A.) Sikhs 

B.) Jains 

C.) Parsis 

D.) Buddhists 

36.) On the ground of fosterage a Muslim marriage is : 

A.) Void (Batil) 

B.) Valid (Sahih) 

C.) Irregular (Fasid) 

D.) Muta 

37.) Which section of the CPC provides for institution of an inter-pleader suit? 

A.) Section 87 

B.) Section 88 

C.) Section 89 

D.) Section 90 

38.) Which one of the following is not a suit of civil nature under C.P.C. : 

A.) A suit against deprivation from attending social functions 

B.) A suit for arrears of salary 

C.) A suit for right of burial 

D.) A suit for restitution of conjugal rights 

39.) Which one of the following is not required in filing a representative suit under Order 1 Rule 8 of the C.P.C.: 

A.) Numerous parties 

B.) Same interest 

C.) Leave of the court 

D.) Written permission of those who are being represented 

40.) Provision for inter-pleader suit is available under : 

A.) Constitution 

B.) Indian Penal Code 

C.) Civil Procedure Code 

D.) Criminal Procedure Code 

41.) Mesne profits’ as defined under C.P.C means : 

A.) those profits which a person in wrongful possession of property received or might have received with ordinary diligence, and with interest 

B.) those profits which the person in wrongful possession of property actually received including profits due to improvements made by such person 

C.) those profits which the person in wrongful possession of such property actually received or might have received but without any interest on such profits 

D.) those profits which the person in wrongful possession of such property actually received 

42.) Foreign judgment as defined under section 2(6) of CPC means : 

A.) judgment given by an Indian Court in respect of foreigners 

B.) judgment given by a foreign court 

C.) both (a) & (b) 

D.) neither (a) nor (b) 

43.) Are arrest and attachment possible in a civil case, before a court issues a judgment? 

A.) No, arrest is possible in criminal cases only but attachment is possible in civil cases. 

B.) Both are possible in civil cases if there is a danger that the defendant may abscond or that he may transfer his property outside the jurisdiction of the court 

C.) Neither is possible 

D.) Arrest is possible in civil cases before judgment, but attachment only occurs in execution of judgment 

44.) Where the local limits of jurisdiction of courts are uncertain, the place of institution of suit shall be decided according to the provision of : 

A.) Section 17 of C.P.C. 

B.) Section 18 of C.P.C. 

C.) Section 19 of C.P.C. 

D.) Section 20 of C.P.C. 

45.) In proceeding under provisions of Code of Criminal Procedure an Executive Magistrate may require any person to execute a bond for keeping peace for such period, not exceeding : 

A.) One Year 

B.) Two Years 

C.) Three Years 

D.) Six Months 

46.) When the person who would otherwise be competent to compound an offence under the provisions of Code of Criminal Procedure is dead, then : 

A.) Offence cannot be compounded 

B.) Offence can be compounded by any of the eye-witnesses 

C.) Legal representative of such person can compound the offence without the consent of the Court 

D.) Legal representative of such person can compound the offence with the consent of the Court 

47.) A private person may arrest a person who : 

A.) Is reported to be a criminal 

B.) In his presence commits a non-cognizable offence 

C.) In his presence commits a cognizable and non-bailable offence 

D.) In his presence commits a bailable offence 

48.) Is plea bargaining permissible under Indian law? The main characteristic of the Code of Criminal Procedure, 1973 is : 

A.) No, there is a compounding procedure under Code of Criminal Procedure but that is different from plea bargaining. 

B.) No, plea bargaining would be against public policy. 

C.) It has been introduced under the Code of Criminal Procedure for certain categories of offences. 

D.) It is permissible only in the case of hardened criminals 

49.) Who can commute the sentence of imprisonment for life under the Code of Criminal Procedure : 

A.) The appropriate Government 

B.) The President of India 

C.) The Governor of the State 

50.) Which Sections of the Code of Criminal Procedure provide for Trial before a Court of Session : 

A.) Sections 225 to 237 

B.) Sections 238 to 243 

C.) Sections 251 to 259 

51.) Who among the following is not empowered to tender pardon to an ‘accomplice’ under 

the Code of Criminal Procedure 

A.) Metropolitan magistrate 

B.) Chief Judicial Magistrate 

C.) Magistrate of the First Class 

D.) Magistrate of Second Class 

52.) A complaint case is commenced by 

A.) Filing a complaint before the Executive Magistrate 

B.) Writing a letter to the Superintendent of Police or the Commissioner, as the case may 

C.) Filing an FIR 

D.) Filing a complaint before the Judicial Magistrate 

53.) A conditional order for removal of public nuisance under the Code of Criminal Procedure may be passed by 

A.) District Magistrate 

B.) Executive Magistrate specially empowered 

C.) sub divisional 

D.) Any of the above authorities 

54.) Under which Section of the Code of Criminal Procedure an accused person can himself 

be a competent witness 

A.) Section 311 

B.) Section 313 

C.) Section 315 

D.) Section 319 

55.) Who among the following is not empowered to tender pardon to accomplice under the code of criminal procedure 

A.) Metropolitan Magistrate 

B.) Magistrate of Second Class 

C.) Chief Judicial Magistrate 

D.) Magistrate of the First Class 

56.) The Indian Evidence Act came into force on the territory of Goa on 

A.) 15.08.1972 

B.) 01.06.1964 

C.) 01.08.1872 

D.) 01.01.1964 

57.) Indian Evidence Act is applicable to 

A.) Judicial proceedings in courts 

B.) Proceedings before the arbitrator 

C.) Proceedings before tribunals 

D.) All the above 

58.) Are admissions conclusive proof? 

A.) Yes 

B.) No, but usually they are sufficient evidence of the facts admitted, and they 

C.) No 

D.) Depends on the circumstances 

59.) Are extra-judicial admissions admissible in court? 

A.) Yes, under certain circumstances 

B.) No, but usually they are sufficient evidence of the facts admitted, and they 

C.) No, the admission must be made before a magistrate 

D.) Both b and c 

60.) Facts in issue as per the Indian Evidence Act means : 

A.) Fact, existence or non-existence of which is not disputed by the parties 

B.) Fact, existence or non-existence of which is disputed by the parties 

C.) Fact, existence or non-existence of which is admitted by the parties 

D.) All the above 

61.) Section 25 of Indian Evidence Act has no application in departmental proceedings. The 

statement is 

A.) Fully correct 

B.) Partly correct 

C.) None of these 

62.) Is active euthanasia legal in India? 

A.) Yes, it is part of the right to die 

B.) No 

C.) Only when the patient is approaching permanent vegetative state 

D.) Yes, it is part of the right to life 

63.) P instigates Q to cause the death of R. P gives a gun to Q to shoot R. Q shoots at R in the presence of P causing R’s death. Which of the following statement is correct? 

A.) P should be prosecuted for attempt to murder or attempt to commit culpable homicide. 

B.) Both P is liable for prosecution for murder or culpable homicide. 

C.) P has abetted the murder of R. 

D.) P is not liable as he was only in the preparation phase and did not himself attempt the killing 

64.) Supreme Court of India stuck down Section 303 of I.P.C. as unconstitutional in which of the following cases 

A.) Machhi Singh vs State of Punjab 

B.) Bachan Singh vs State of Punjab 

C.) Santa Singh vs State of Punjab 

D.) Mithu vs State of Punjab 

65.) A, with a guilty intention, abets a child or a lunatic to commit an act which would be an offenc, if committed by a person capable by law of committing an offence, and having the same intention as A. whether A commits abetting 

A.) Yes 

B.) No 

C.) Either (a) or (b) 

D.) None of the above 

66.) A, on grave and sudden provocation, fires a pistol at Z, under such circumstances that if he thereby caused death he would be guilty of culpable homicide not amounting murder.what offence A has committed 

A.) Attempt to commit culpable homicide 

B.) Attempt to commit murder 

C.) Abetment of culpable homicide 

D.) Neither (a) nor (b) 

67.) Sexual intercourse of a woman with her consent is considered rape if she is under the age of 

A.) 16 

B.) 17 

C.) 18 

D.) 21 

68.) How many persons must be involved in an act of robbery, if it is to qualify as a dacoity? 

A.) Four 

B.) Between Two-three 

C.) Five or above 

D.) None of these 

69.) Which of the following cases established ‘Doctrine of absolute liability in India 

A.) M. C. Mehta v. Union of India 

B.) Keshavananda Bharati v. State of Kerala 

C.) IR Coelho v. Union of India 

D.) Bank Nationalisation case 

70.) Intangible property such as patents, trademarks and copyrights constitute: 

A.) Real property 

B.) Movable property 

C.) Immovable property 

D.) Do not constitute property at all 

71.) The Indian Parliament enacted Consumer Protection Act in December, 1986. It came into force on: 

A.) May 15 , 1972 

B.) May 25, 1969 

C.) April 25, 1987 

D.) April 15, 1987 

72.) Donoghue v. Stevenson is a landmark case for which of the following areas of study: 

A.) Equality in American Constitutional law 

B.) Neighbour principle in Tort law 

C.) Gross Negligence in Criminal law 

D.) Right to life in Indian Constitutional law 

73.) Consumers Dispute Redressal Forum to be known as the District Forum established by: 

A.) Union government 

B.) State government 

C.) Special Appellate Body 

D.) Both (a) & (b) 

74.) The word ‘dealer’ as per the Motor Vehicles Act, includes a person engaged in: 

A.) in the repair of motor vehicles 

B.) in the business of hypothecation, leasing or hire-purchase of motor vehicle 

C.) in building bodies for attachment to chassis 

D.) All of the Above 

75.) As per the Factories Act, the floor of ever work room should be cleaned once every 

A.) Day 

B.) Month 

C.) Week 

D.) Hour 

76.) As per the Factories Act, a person who has not completed his 15th year of age is a/an : 

A.) Adolescent 

B.) Teenager 

C.) Child 

D.) Adult 

77.) Which law governs the methods to fix minimum wages in scheduled industries: 

A.) Industrial Dispute Act 

B.) Minimum Wages Act 

C.) Trade Union Act 

D.) Workman’s Compensation Act 

78.) In which landmark case did the Supreme Court lay down guidelines for protection of women at workplace against sexual harassement. 

A.) Kartar Singh case 

B.) Vishaka v. State of Rajasthan 

C.) IR Coelho case 

D.) Indira Gandhi case 

79.) Maximum number of members in a public company are: 

A.) Unlimited 

B.) Fifty 

C.) Five hundred 

D.) Two thousand 

80.) The doctrine of constructive notice is: 

A.) A principle of company law stating that outsiders must have read publicly available document of the company. 

B.) Ignorance of law is no excuse 

C.) Is a way of providing deemed service to a party if he avoids service of court processes 

D.) None of these 

81.) When shares are transferred to X from Y, X becomes a __________ of the company: 

A.) Shareholder 

B.) Promoter 

C.) Both (a) & (b) 

D.) None of these 

82.) Shares of which kind of company are freely transferable? 

A.) Public Company 

B.) Government company 

C.) Private company 

D.) Foreign company 

83.) What is the meaning of the principle Kompetenz-kompetenz? 

A.) It refers to the freedom of contract of parties 

B.) It refers to the ability of the arbitration tribunal to decide on its own jurisdiction 

C.) It refers to the equal competence of all sovereign states with respect to international affair 

D.) None of the above 

84.) The source of professional ethics for Indian advocates can be traced to: 

A.) Advocates Act, 1961 

B.) Bar Council of India Rules 

C.) Both (a) & (b) 

D.) None of these 

85.) Is it permissible for a lawyer to charge fees as a proportion of the relief secured by the party 

A.) Yes 

B.) No, it is prohibited under all circumstances as per BCI Rules. It is permitted in public interest litigation 

C.) It is permitted in criminal cases 

86.) State Bar Councils can frame their own rules regarding enrolment of advocates as per the provision of 

A.) Advocates Act, 1961 

B.) Bar Council Rules Act 

C.) Indian Bar Act 

D.) None of these 

87.) Bar Council of India was established by: 

A.) An act of the Government of England 

B.) Vidhan Sabha 

C.) Presidential Order 

D.) Parliamentary Statute 

88.) For the purpose of computation of limitation period, the date on which a particular instrument was executed will by default be presumed to be made with references to: 

A.) English calendar 

B.) Gregorian calendar 

C.) Roman calendar 

D.) Egyptian calendar 

89.) Can delay in filing a suit be condoned under Limitation Act? 

A.) No. Limitation Act does not allow any condonation. 

B.) Yes, under Section 5. 

C.) It can be condoned by the High Court only, pursuant to its inherent power. 

D.) Only when the plaintiff shows sufficient cause. 

90.) ‘Mandamus’ is a writ issued by the Court : 

A.) Asking a public official or any authority to perform specific legal duties 

B.) Enquiring into the legality of claim of any person to public office 

C.) Asking a person who has detained any other person, to appear before a court 

D.) Against any lower court not to do any act excess of their jurisdiction 

91.) How many members are nominated to the State Legislative Council by the Governor 

A.) 1/3rd 

B.) 1/12 th 

C.) 1/8th 

D.) 1/6th 

92.) The relationship between Ministers and Civil Servants in India emerged as a result of: 

A.) Government of India Act, 1935 

B.) Montague-Chelmsford Reforms, 1919 

C.) Indian Constitution, 1950 

D.) Morley-Minto Reforms, 1909 

93.) A statutory corporation is: 

A.) A corporate entity but which is constituted and governed by a separate legislation instead of companies Act 

B.) Similar to a ministry of the government 

C.) An entity which enjoys sovereign immunity 

D.) Owned by the Government, but governed by the Companies Act. 

94.) Part II of the Arbitration and Conciliation Act, 1996 is applicable to: 

A.) Arbitrations conducted outside India 

B.) Arbitrations where both parties are foreigners but which are conducted in India 

C.) Conciliation 

D.) International commercial arbitatrations 

95.) International commercial arbitration is defined under section ________ of the Arbitration and conciliation Act 

A.) Section 2(e) 

B.) Section 2(f) 

C.) Section 2(g) 

D.) Section 2(h) 

96.) Arbitration agreement means: 

A.) It means a written agreement by the parties to submit to arbitration all or certain dispute which have arisen or which may arise between them in respect of a defined legal relationship, contractual or not 

B.) It means an agreement by the parties to submit to arbitration all or certain disputes which have arisen oe which may arise between them in respect of a defind legal relationship which is not contractual 

C.) An oral arbitration agreement 

D.) None of these 

97.) Section-115 of the Civil Procedure Code provides for the following 

A.) Reference 

B.) Review 

C.) Revision 

D.) Appeal to the Supreme Court 

98.) Which one of the following cases deals with issues pertaining to second appeal 

A.) Madan Lal Vs. Bal Krishna 

B.) Sudhir G. Angur Vs. M. Sanjeev 

C.) Sheodan Singh Vs. Daryao Kunwar 

D.) Harshad Chiman Lal Modi Vs. D.L.F. Universal Ltd. 

99.) A, who is accused of murder, alleges that by grave and sudden provocation, he was deprived of the power of self control. B denies this fact. 

A.) The burden of proof must be shared by both ‘A’ and ‘B’ 

B.) The burden of proof is on ‘B’ 

C.) The burden of proof is on prosecution 

D.) The burden of proof is on ‘A’ 

100.) Examination which is conducted after the cross-examination of a witness by the party who has called him 

A.) Main examination 

B.) Additional examination 

C.) Re-examination 

D.) Re-cross- examination 

Answers 

1.) A 2.) C 3.) D 4.) B 5.) C 6.) C 7.) D 8.) D 9.) B 10.) A 11.) C 12.) B 13.) B 14.) C 15.) A 16.) C 17.) C 18.) A 19.) C 20.) D 21.) C 22.) B 23.) C 24.) C 25.) D 26.) D 27.) C 28.) D 29.) C 30.) A 31.) C 32.) A 33.) D 34.) D 35.) C 36.) A 37.) B 38.) A 39.) D 40.) C 41.) A 42.) B 43.) B 44.) B 45.) A 46.) D 47.) C 48.) C 49.) A 50.) A 51.) D 52.) D 53.) D 54.) C 55.) B 56.) B 57.) A 58.) B 59.) A 60.) B 61.) A 62.) B 63.) B 64.) D 65.) A 66.) A 67.) A 68.) C 69.) A 70.) B 71.) D 72.) B 73.) B 74.) D 75.) C 76.) C 77.) B 78.) B 79.) A 80.) A 81.) A 82.) A 83.) B 84.) C 85.) B 86.) A 87.) A 88.) B 89.) A 90.) A 91.) A 92.) B 93.) A 94.) A 95.) B 96.) A 97.) C 98.) A 99.) D 100.) C 


Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.

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The post AIBE: Mock Test for Bar Exam Preparation Part 2 appeared first on iPleaders.

Do you think our Courses are too Expensive?

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A lot of you complain that you are not able to take up LawSikho courses due to time and money issues. Well, there is no reason in that case for you to not attend our free training sessions. Would you like that?

We are about to have a kickass live online training session with a very experienced independent litigator, Advocate Dhruv Kumra. He is a great litigation strategist and I just love every conversation I ever had with him. Imagine a person who is always thinking about how to draft and argue better, truly innovative, very technically sound, great at coaching his juniors and has been doing so for more than a decade. That is Dhruv Kumra, a walking encyclopedia on everything related to litigation – both civil and criminal.

When we are stuck with a complex issue for our civil and criminal law courses, we always take his inputs.

Being a very busy lawyer, he rarely gets the time to teach, but I insisted that he takes time out for just an hour this Sunday, between 12 noon and 1 pm, to do a public webinar jointly with me.

And you can attend it free of cost. Just set a bunch of alarms so you don’t miss it. We will share the link of the webinar on our Telegram group. Please join the group here:https://t.me/joinchat/J_0YrBa4IBSHdpuTfQO_sA.

What are we going to discuss?

Here is the broad agenda:

How to improve your drafting for litigation

  • How to avoid the most common pitfalls of drafting in litigation?
  • How to make facts and law very clear for the judge?
  • What is the connection between drafting and litigation strategy?
  • How to cure mistakes in drafting after filing?
  • How to draft prayers effectively?
  • How to address evidence in favour and against you in your draft?
  • How to find good templates to start with?
  • How to review a draft?

Hope to see you on Sunday! Reply to his mail if you need any information or assistance. You can also just let me know what sessions you want me to organize in future, for free, by replying to this mail!

Looking forward to hearing from you! 

Here are the courses in which we are currently taking enrollment:

DIPLOMA

Diploma in Companies Act, Corporate Governance and SEBI Regulations

Diploma in Entrepreneurship Administration and Business Laws

EXECUTIVE CERTIFICATE COURSE

Certificate Course in Real Estate Laws 

Certificate Course in Arbitration: Strategy, Procedure and Drafting

Certificate Course in Securities Laws, Insider Trading and SEBI Litigation 

Certificate Course in Media and Entertainment Law: Contracts, Licensing and Regulations

Certificate Course in Legal Practice Development and Management

Certificate Course in Advanced Civil Litigation: Practice, Procedure and Drafting 

Certificate Course in Advanced Corporate Taxation

LIBRARY

Master Access by LawSikho

TEST PREPARATION

Judgment Writing and Drafting Course for Judicial Services

Dream Job Bootcamp

LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join:

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Validity of Email Contracts in India

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This article has been written by Vijayaditya Reddy, a student of NALSAR University.

Introduction

The time and place of formation of a contract is crucial as they can have an effect on the rights of the individuals and are also essential in determining the jurisdiction over the case if any dispute arises. Contracts formed by e-mails are not clear considering the fact that it is vague as to when the contract has been formed. Assuming that the postal rule applies to e-mail contracts as well, by analogy, an e-mail contract is formed and is binding on the offeror when the acceptor sends the e-mail of acceptance and is binding on the acceptor when his/her acceptance reaches the offeror. And assuming that the postal rule does not apply to e-mail contracts, under the normal law of contracts, the contract is said to be completed and binding when the acceptance is received by the offeror. 

But the question of why one should apply the postal rule to e-mail contracts arises as there is no good reason to do so. The postal rule was introduced because of the time lag between the communication of offer and acceptance. Hence there is no point in applying this rule to  instantaneous modes of communication such as e-mails. The Indian Contract Act does not settle the matter. While it does not particularly discuss the idea of e-mail contracts anywhere, it in no way restricts them. This brings forward my two main research questions:

https://lawsikho.com/course/diploma-advanced-contract-drafting-negotiation-dispute-resolution
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Can e-mail contracts considered to be valid contracts in india and what are the essentials for these contracts to be executed?

With the recent growth of e-commerce sector and the surge in online transactions being made over the internet, formation of contracts online via emails has become quite common in India. Can offer and acceptance exchanged via e-mails give rise to a binding contract? Are such contracts recognised by the Indian Contract Act, 1872 and can they be enforced in a court of law?

Although the Indian Contract Act has not discussed the idea of e-mail contracts, it has also not prohibited such contracts per se. E-mail contracts are similar to any other form of contracts and are therefore governed by the provisions of the Indian Contract Act. Therefore any e-email contract cannot be executed or validly enforced until and unless it satisfies all the required fundamental requirements. 

  1. First, the terms and conditions of the contract must be agreed to by both the parties on the acceptance of an issued offer. 
  2. Second, intention to create a legally binding contract must be present.
  3. Third, the vital element of consideration must be agreed upon.

Therefore, all the statutes which relate to e-mail contracts must be read along with, and not in place of the Indian Contract Act. 

The Information Technology Act, 2002

The Information Technology Act (IT Act) has recognised e-mail contracts as legally valid and binding. It particularly mentions that a contract cannot be deemed invalid solely on the basis of it being an online exchange of offer and acceptance. Section 10A of the Information Technology Act hints at the validity of e-mail contracts. 

Section 10A of the IT Act: “Where in a contract formation, the communication of proposals, the acceptance of proposals, the revocation of proposals and acceptances, as the case may be, are expressed in electronic form or by means of an electronic record, such contract shall not be deemed to be unenforceable solely on the ground that such electronic form or means was used for that purpose.”

In the field of business, formation of contracts via emails is exponentially increasing. Especially when taken into account the case of online businesses, this is the only means of carrying out transactions.

Not only does the Information Technology act recognise the validity of e-mail contracts, it has also given a statutory recognition to digital signatures (also known as electronic signatures). The Ministry of Communication and Information Technology ascertained that the validity of digital signatures is same as that of handwritten signatures. 

The Indian Evidence Act, 1872

E-mail records can be admissible as evidence in courts under the Indian Evidence Act. Hence issue of an offer or acceptance via mails can give rise to binding contracts and these electronic records can be used an evidence in courts to enforce the contracts. 

Section 85A of the Evidence Act:The Court shall presume that every electronic record purporting to be an agreement containing the [electronic signature] of the parties was so concluded by affixing the [electronic signature] of the parties.

Formation of contracts online via emails has been recognized and given validity to by the Indian courts time and again. For instance, in the case of Trimex International FZE Limited, Dubai v. Vendata Aluminium Ltd.[1], the parties thoroughly agreed to the terms of the contract via emails. The Supreme Court upheld the validity of this contract and further observed that, “Once the contract is concluded orally or in writing, the mere fact that a formal contract has to be prepared and initiated by the parties would not affect either the acceptance of the contract so entered into or implementation thereof, even if the formal contract has never been initiated.” The Indian Contract Act has acknowledged that conventional agreements which contain oral contracts entered into by competent parties with free consent and a lawful object for a lawful consideration and are not illegal or void. Hence no provision in the Indian Contract Act forbids e-mail contracts as long as all the essentials of a valid contract are present. 

How to avoid contractual obligation?

However, contractual obligation can be avoided during exchange of e-mails by placing disclaimers at the top of the mail or at the end of the mail. Disclaimers such as “This e-mail is not an acceptable offer and doesn’t evidence an intention by the sender to enter into a contract” or “Unless and until we agree on other material terms regarding this potential transaction and both sign a written agreement reflecting them, it’s not my intent for our email exchanges to constitute a binding contract” prevent the parties from entering into a binding contract as these disclaimers can be used as admissible evidence in Indian courts under the Evidence Act to prove the absence of intention of one of the parties to enter into a contract.

Should the postal rule apply to e-mail contracts?

There are many similarities between e-mails and posts and hence it is might not seem wrong to argue that the postal rule be applied to e-mail contracts as well. Nevertheless, such application is not right and the arguments against it abundant. It has to be noted that from the very beginning of the introduction of postal rule, its application has limited to only one mode of communication – Posts. Even the courts have shown little to no interest in extending its application but have rather limited its scope. The courts have limited the scope of the postal rule by developing exceptions to the rule itself and by denying to extend its application to other faster modes of communication such as e-mails.

E-mails are considered to be non-instantaneous by many commentators, for they pass through various servers before reaching the intended recipient. So do telephone calls as they pass through various exchanges and service providers but are still considered to be instantaneous. Why should the information transmission process determine whether a mode of communication is instantaneous or not. Moreover, the sender of an e-mail knows if his message has been sent or not unlike the sender of a post who will have no information even his letter has gone astray. Considering all the positions, e-mails are more likely to fall into the category to which the postal rule does not apply rather than falling into the category to which the postal rule applies. Hence it is not surprising that most of the commentators have written against the extension of the postal rule to e-mail contracts. 

Conclusion

The exact time and place at which the contract has been concluded are important as they can have an effect on the rights of the individuals and are also needed to determine the jurisdiction over the case in case any dispute arises. It is still debatable as to when the contract via e-mail is concluded and binding. The ‘when’ and ‘where’ questions remain unanswered. There are not enough case laws to ascertain the answers. Till the time these questions are answered, email contracts replete with uncertainty. 

While the juridical groundwork administering e-mail contracts is still developing and may not yet effectively cover all facets forming part of such agreements, it is undeniable that many Indian courts recognize the extensive inclination to e-commerce and reliance on the internet. The prevailing legal judicial and legislative intent appears to be that any legally valid acts would maintain their validity even if performed online or electronically provided that such contract satisfies all the essentials of a valid contract.

Endnote

[1] 2010 (1) SCALE 57

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