Business Law व्यावसायिक कायदे

BCom Semester 4 · 4 chapters · 4 with notes

Chapters

5Consumer Protection Act, 2019Notes
6Companies Act, 2013: Formation of a CompanyNotes
7Memorandum and Articles of AssociationNotes
8Company Meetings and ManagementNotes

BCom Semester 4 · Business Law · Chapter 5

Consumer Protection Act, 2019

Quick summary

The Consumer Protection Act, 2019 replaced the 1986 Act from 20 July 2020. It protects consumers against defective goods, deficient services, unfair trade practices and misleading advertisements, including in e-commerce. It sets up the Central Consumer Protection Authority (CCPA), three-tier Consumer Disputes Redressal Commissions, product liability rules and mediation.

Key points

Consumer (ग्राहक) (Sec 2(7)) – a person who buys goods or hires services for consideration, including online, teleshopping, direct selling or multi-level marketing; it includes the user with the buyer's approval. A person who buys for resale or commercial purpose is not a consumer (buying for self-employment to earn a livelihood is allowed).
Six consumer rights: right to safety, to be informed, to choose, to be heard, to seek redressal and to consumer awareness.
Consumer Protection Councils – Central, State and District councils to promote and protect consumer rights (advisory bodies).
Central Consumer Protection Authority (CCPA) – a regulator that can investigate unfair trade practices, order recalls and refunds, stop misleading advertisements and impose penalties.
Penalty for misleading advertisements – CCPA may fine a manufacturer or endorser up to ₹10 lakh (up to ₹50 lakh for repeat offences); an endorser can also be barred from endorsing for up to 1 year (3 years for repeat).
Consumer Disputes Redressal Commissions: District, State and National. Pecuniary limits (as revised by the 2021 rules, based on the value of goods/services paid): District – up to ₹50 lakh; State – above ₹50 lakh up to ₹2 crore; National – above ₹2 crore. Check the current notified limits.
A complaint can be filed where the complainant resides or works, and online through e-Daakhil; no lawyer is needed.
Limitation period – within 2 years from the date the cause of action arose.
Appeals: District → State (within 45 days) → National (within 30 days) → Supreme Court (within 30 days).
Product liability – the manufacturer, product service provider or seller is liable for harm caused by a defective product.
Mediation – disputes may be settled through consumer mediation cells attached to the Commissions.
E-commerce – covered by the Consumer Protection (E-Commerce) Rules, 2020: display of seller details, return and refund policy, grievance officer, no fake reviews.

Important terms

Defect – any fault or shortcoming in quality, quantity, purity or standard of goods.
Deficiency – any fault or shortcoming in the quality or manner of performance of a service.
Unfair trade practice – deceptive methods to promote sale, e.g. false claims, fake discounts, not issuing a bill.
Restrictive trade practice – practices that manipulate price or supply, e.g. tie-in sales.
Complainant – a consumer, a registered consumer association, the Central or State Government, the CCPA, or legal heir of a deceased consumer.

Key facts

Basis	CPA 1986	CPA 2019
Regulator	None	CCPA
Redressal bodies	Forums (District) / Commissions	Commissions at all three levels
E-commerce	Not covered	Covered
Product liability	Not specific	Separate chapter
Filing place	Where opposite party resides	Where complainant resides or works
Mediation	No	Yes

5 important questions

Q1. Who is a consumer under the CPA 2019?

A person who buys goods or avails services for consideration, offline or online, for personal use, including a user with the buyer's approval. A person buying for resale or commercial purposes is excluded.

Q2. What is the CCPA?

The Central Consumer Protection Authority, set up under the CPA 2019 to protect consumers as a class. It investigates violations, orders recalls and refunds, and penalises false or misleading advertisements.

Q3. Explain the rights of consumers.

Outline the six rights with an example each (safety – ISI mark, information – MRP and expiry date, choice, hearing, redressal, education); also responsibilities of consumers (take a bill, check standards, file genuine complaints).

Q4. Explain the three-tier redressal machinery under the CPA 2019.

Outline: composition, pecuniary jurisdiction, territorial jurisdiction, filing a complaint, time limits, reliefs (replacement, refund, compensation, removing defects, stopping unfair practice), appeals and their time limits.

Q5. Explain the important new features of the CPA 2019.

Outline: CCPA, e-commerce coverage, product liability, filing from home and e-filing, mediation, penalties for misleading ads and endorsers, enhanced pecuniary limits, unfair contracts, faster disposal.

Exam tip

Learn the pecuniary limits and appeal time limits as a small table; they are often asked as short notes. Note that limits can be revised by rules, so mention the year of the figures.

Companies Act, 2013: Formation of a Company →

BCom Semester 4 · Business Law · Chapter 6

Companies Act, 2013: Formation of a Company

Quick summary

The Companies Act, 2013 governs how companies are formed, managed and wound up in India. A company is an artificial person created by law, with a separate legal entity and perpetual succession. This topic covers the meaning and features of a company, its main types, and the stages of formation: promotion, incorporation and commencement of business.

Key points

Company (कंपनी) (Sec 2(20)) – a company incorporated under the Companies Act, 2013 or any previous company law.
Features: artificial legal person, separate legal entity (Salomon v. Salomon & Co. Ltd, 1897), limited liability, perpetual succession, common seal (now optional since 2015), transferability of shares (restricted in private companies), separation of ownership and management, can sue and be sued in its own name.
Lifting the corporate veil – courts may look behind the company to the persons in control in cases of fraud, tax evasion or enemy character.
Types by members: private company (Sec 2(68)) – minimum 2, maximum 200 members, restricts share transfer and cannot invite the public; public company (Sec 2(71)) – minimum 7 members, no maximum; One Person Company (OPC) (Sec 2(62)) – a single member who must name a nominee.
Minimum directors: public 3, private 2, OPC 1; maximum 15 (more by special resolution).
Types by liability: company limited by shares, limited by guarantee, unlimited company.
Other types: government company (51% or more held by government), holding and subsidiary, listed company, small company, Section 8 (not-for-profit) company, foreign company.
Promotion – idea, investigation, assembling resources, preparing documents. The promoter stands in a fiduciary relation to the company.
Incorporation (registration) – apply to the Registrar of Companies (ROC) through the MCA portal using the SPICe+ form (name reservation, DIN, PAN, TAN, GST and bank account in one integrated form), with e-MoA and e-AoA, declarations and fees. The ROC issues the Certificate of Incorporation with a Corporate Identity Number (CIN); it is conclusive evidence of incorporation (Sec 7).
Commencement of business (Sec 10A) – a company with share capital must file a declaration (form INC-20A) within 180 days of incorporation that subscribers have paid for their shares.
Stages of formation:
Capital subscription – for a public issue, prospectus, minimum subscription and allotment (see Issue of Shares).
Pre-incorporation contracts – contracts by promoters before incorporation; the company may adopt them after incorporation under the Specific Relief Act, 1963.

Important terms

Promoter (प्रवर्तक) – the person who conceives the idea of a company and takes steps to form it (Sec 2(69)).
Registrar of Companies (ROC) – government officer who registers companies.
DIN – Director Identification Number, a unique number for each director.
Prospectus – a document inviting the public to subscribe to securities (Sec 2(70)).

Key facts

Basis	Private company	Public company
Minimum members	2	7
Maximum members	200	No limit
Minimum directors	2	3
Share transfer	Restricted	Freely transferable
Invitation to public	Not allowed	Allowed
Name ends with	Private Limited	Limited

5 important questions

Q1. Define a company and state its features.

A company is an artificial person incorporated under the Companies Act, 2013 (Sec 2(20)). Features: separate legal entity, limited liability, perpetual succession, transferable shares, own property, can sue and be sued.

Q2. What is a One Person Company?

A company with only one person as its member (Sec 2(62)). It needs a nominee, at least one director, and enjoys limited liability; only a natural person who is an Indian citizen can form it.

Q3. Distinguish between a private and a public company.

Use the table above and add points on prospectus, quorum, managerial remuneration limits and number of directorships.

Q4. Explain the stages in the formation of a company.

Outline: promotion (role and duties of promoter), incorporation (SPICe+, documents, declarations, certificate of incorporation, CIN), commencement of business (Sec 10A declaration within 180 days), capital subscription for public issues.

Q5. Explain the doctrine of separate legal entity with the Salomon case.

Outline: meaning; Salomon v. Salomon & Co. Ltd (1897) – Salomon was a secured creditor of his own company and was paid first; effects – own property, own debts, own contracts; exceptions – lifting the corporate veil (fraud, tax evasion, enemy character, sham companies).

Exam tip

Always quote the Companies Act, 2013 section numbers for definitions (2(20), 2(62), 2(68), 2(71)). Filing forms change often, so write "SPICe+ form on the MCA portal" rather than old form numbers.

← Consumer Protection Act, 2019 Memorandum and Articles of Association →

BCom Semester 4 · Business Law · Chapter 7

Memorandum and Articles of Association

Quick summary

The Memorandum of Association (MoA) and the Articles of Association (AoA) are the two basic documents of a company. The MoA is its charter – it fixes the company's name, office, objects, liability and capital, and its relationship with the outside world. The AoA contains the internal rules for running the company. This topic covers their contents, alteration, and three doctrines: ultra vires, constructive notice and indoor management.

Key points

Memorandum of Association (पार्षद सीमानियम) (Sec 2(56), Sec 4) – the charter of the company that defines the scope of its powers.
Name clause – ending with "Limited" or "Private Limited"; must not be identical or undesirable.
Registered office clause – the State in which the office is situated.
Object clause – the objects for which the company is formed.
Liability clause – limited by shares, by guarantee or unlimited.
Capital clause – the authorised share capital and its division into shares.
Subscription (association) clause – subscribers' names and the shares they take.
For an OPC, the nominee clause.
Clauses of the MoA:
Alteration of MoA (Sec 13) – by special resolution; change of name needs Central Government (ROC) approval; change of registered office from one State to another needs Regional Director approval; change in objects of a company that raised money by prospectus needs public notice and an exit option to dissenting shareholders; alteration of capital is under Sec 61.
Articles of Association (पार्षद अंतर्नियम) (Sec 2(5), Sec 5) – rules and regulations for internal management: share capital and transfer, calls, forfeiture, meetings, voting, directors, dividends, accounts and audit.
Model Articles are given in Schedule I (Table F for a company limited by shares). A company may adopt them fully or partly.
Entrenchment provisions (Sec 5(3)) – provisions that can be changed only by a stricter procedure than a special resolution.
Alteration of AoA (Sec 14) – by special resolution; conversion of a public company into a private company also needs Central Government approval (delegated to the Regional Director). Articles cannot override the Act or the MoA.
Doctrine of ultra vires – an act beyond the objects of the MoA is void and cannot be ratified even by all shareholders (Ashbury Railway Carriage and Iron Co. v. Riche, 1875).
Doctrine of constructive notice – outsiders are deemed to know the contents of the MoA and AoA, as they are public documents.
Doctrine of indoor management – outsiders acting in good faith may assume that internal procedures have been followed (Royal British Bank v. Turquand, 1856). Exceptions: knowledge of irregularity, negligence, forgery, act beyond the Articles.

Important terms

Special resolution – passed when votes in favour are at least three times the votes against (Sec 114(2)).
Charter – the basic document that gives a body its powers.
Ultra vires – beyond the powers.
Table F – model Articles for a company limited by shares.

Key facts

Basis	Memorandum	Articles
Nature	Charter, fundamental document	Internal rules (bye-laws)
Scope	Relation with outsiders	Relation of company with members and among members
Position	Supreme; subordinate only to the Act	Subordinate to MoA and the Act
Alteration	Difficult, needs approvals in many cases	Easier, by special resolution
Ultra vires act	Void, cannot be ratified	Can be ratified by members

5 important questions

Q1. What is the Memorandum of Association?

It is the charter of a company that defines its name, registered office, objects, liability, capital and subscribers. It lays down the limits within which the company can act.

Q2. State the doctrine of indoor management.

Outsiders dealing with a company in good faith are entitled to assume that the internal procedures required by the Articles have been properly carried out (Turquand's case). It protects outsiders, unlike constructive notice which protects the company.

Q3. Explain the contents of the Memorandum of Association.

Outline the six (seven for OPC) clauses with their legal requirements and an example of each; mention the forms in Table A–E of Schedule I.

Q4. Distinguish between the Memorandum and the Articles of Association.

Use the table above and add points on legal requirement, contents, effect of acts beyond them and who it binds.

Q5. Explain the doctrine of ultra vires and its effects.

Outline: meaning; Ashbury case; effects – the act is void, the company cannot be sued or sue on it, directors are personally liable, an injunction can be obtained by members, property bought may be protected; difference between ultra vires the company, the directors and the Articles.

Exam tip

Quote the three famous cases – Ashbury (ultra vires), Turquand (indoor management) and Salomon (separate entity). They are expected in every company law answer.

← Companies Act, 2013: Formation of a Company Company Meetings and Management →

BCom Semester 4 · Business Law · Chapter 8

Company Meetings and Management

Quick summary

A company works through its shareholders in general meetings and through its Board of Directors. This topic covers the kinds of meetings – board meetings, annual general meeting, extraordinary general meeting – with notice, quorum, resolutions and minutes, and the management of a company: directors, their appointment, duties, and key managerial personnel under the Companies Act, 2013.

Key points

Board meeting (Sec 173) – the first within 30 days of incorporation; at least four meetings a year, with a gap of not more than 120 days between two meetings. Notice of at least 7 days. Quorum (Sec 174) – one-third of total strength or 2 directors, whichever is higher. Meetings may be held by video conferencing.
Annual General Meeting (AGM) (Sec 96) – every company except an OPC must hold one each year. The first AGM within 9 months from the close of the first financial year; later AGMs within 6 months of the end of the financial year, with a gap of not more than 15 months.
Business at an AGM (ordinary business) – adoption of financial statements and reports, declaration of dividend, appointment of directors in place of those retiring, appointment and remuneration of auditors. All other business is special business.
Extraordinary General Meeting (EGM) (Sec 100) – for urgent special business; called by the Board, or on requisition by members holding at least 10% of paid-up voting capital.
Notice (Sec 101) – at least 21 clear days in writing or electronically; shorter notice with consent of members as provided.
Quorum (Sec 103) for a public company: 5 members present in person if members are up to 1,000; 15 if 1,000 to 5,000; 30 if more than 5,000. For a private company: 2 members.
Ordinary resolution (Sec 114(1)) – votes in favour exceed votes against. Special resolution (Sec 114(2)) – votes in favour are at least three times the votes against, with notice saying it is a special resolution.
Minutes (Sec 118) – a record of proceedings, signed and kept within 30 days; they are evidence of the meeting.
Proxy (Sec 105) – a person appointed to attend and vote for a member; a proxy cannot speak and votes only on a poll.
Director (संचालक) (Sec 2(34)) – a person appointed to the Board. Needs a DIN. Maximum 20 directorships, of which not more than 10 in public companies (Sec 165).
Women director – required for listed companies and certain public companies. Independent directors – at least one-third of the Board in listed companies (Sec 149).
Resident director – at least one director must stay in India for 182 days or more in a financial year.
Key Managerial Personnel (Sec 2(51)) – CEO/MD/manager, Company Secretary, whole-time director and CFO.
Duties of directors (Sec 166) – act as per the Articles, in good faith, with due care and skill, avoid conflict of interest, not make undue gains, not assign their office.

Important terms

Agenda – list of items to be discussed at a meeting.
Quorum – minimum number of members who must be present for a valid meeting.
Poll – voting where votes are counted by shares held.
E-voting – electronic voting, compulsory for listed companies and those with 1,000 or more members.

Key facts

Meeting	Who calls	Notice	Time rule
Board meeting	Chairman / Company Secretary	7 days	4 a year, gap ≤ 120 days
AGM	Board	21 clear days	Within 6 months of year end, gap ≤ 15 months
EGM	Board / requisitionists	21 clear days	When needed

5 important questions

Q1. What is a quorum?

The minimum number of members who must be present for a meeting to transact business validly. For a public company with up to 1,000 members, the quorum is 5 members personally present (Sec 103).

Q2. Distinguish between an ordinary and a special resolution.

Ordinary: votes in favour more than votes against. Special: votes in favour at least three times the votes against, and the notice must state it is a special resolution. Special resolutions are used for altering MoA/AoA, changing the registered office between States, etc.

Q3. Explain the provisions relating to the Annual General Meeting.

Outline: who must hold it; time limits; place and time (business hours, not on a national holiday, at the registered office or within the same city); notice; ordinary business; Tribunal (or Central Government) power on default; penalties.

Q4. Explain the requisites of a valid meeting.

Outline: proper authority to call, proper notice, quorum, chairman, agenda, resolutions, minutes, proxies and voting by show of hands, poll or e-voting.

Q5. Explain the appointment and duties of directors.

Outline: first directors, appointment by members at a general meeting, additional, alternate and casual vacancy directors, nominee directors, independent and women directors, DIN; duties under Sec 166; disqualification (Sec 164); removal (Sec 169).

Exam tip

Time limits (30 days, 120 days, 9 months, 6 months, 15 months, 21 days) carry easy marks; make a small table and revise it before the exam.

← Memorandum and Articles of Association