LMTSOM THAPAR UNIVERSITY

CORPORATE LEGAL ENVIRONMENT

INDIAN LAWS
RAKESH BHARDWAJ 501204035 9/14/2013

Contents
SALE OF GOODS ACT 1930 ............................................................................................................. 3 CASE EXAMPLE OF SALES AND GOODS ACT 1930 ........................................................................... 4 LAW OF CONTRACT ACT 1872 ........................................................................................................ 7 CASE EXAMPLE OF LAW OF CONTRACT 1872 .................................................................................. 8 COMPANIES ACT 1956 ................................................................................................................... 9 CASE EXAMPLE OF COMPANIES ACT 1956 .................................................................................... 10 NEGOTIABLE INSTRUMENTS ACT 1881 ......................................................................................... 12 CASE EXAMPLE OF NEGOTIABLE INSTRUMENTS ACT 1881-- ............................................................. 13 FACTORIES ACT 1948 ................................................................................................................... 14 CASE EXAMPLE OF FACTORIES ACT 1948 ...................................................................................... 16 Bibliography .................................................................................................................................... 18

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SALE OF GOODS ACT 1930

Definitions . - In this Act, unless there is anything repugnant in the subject of context,(1) "buyer" means a person who buys or agrees to buy goods; (2) "delivery" means voluntary transfer of possession from one person to another; (3) goods are said to be in a "delivered state" when they are in such state that the buyer would under the contract be bound to take delivery of them; (4) "document of title to goods" includes bill of lading dock-warrant, warehouse keeper's certificate, wharfingers' certificate, railway receipt, multimodal transport document, warrant or order for the delivery of goods and any other document used in the ordinary course of business as proof of the possession or control of goods or authorising or purporting to authorise, either by endorsement or by delivery, the possessor of the document to transfer or receive goods thereby represented; (5) "fault" means wrongful act or default; (6) "future goods" means goods to be manufactured or produced or acquired by the seller after making of the contract of sale; (7) "goods" means every kind of moveable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale; (8) A person is said to be "insolvent" who has ceased to pay his debts in the ordinary course of business, or cannot pay his debts as they become due, whether he has committed an act of insolvency or not; (9) "mercantile agent" means a mercantile agent having in the customary course of business as such agent authority either to sell goods, or to consign goods for the purposes of sale, or to buy goods, or to raise money on the security of goods; (10) "price" means the money consideration for a sale of goods; (11) "property" means the general property in goods, and not merely a special property; (12) "quality of goods" includes their state or condition; (13) "seller" means a person who sells or agrees to sell goods; (14) "specific goods" means goods identified and agreed upon at the time a contract of sale is made; and (15) expressions used but not defined in this Act and defined in the Indian Contract Act, 1872, have the meaning assigned to them in that act.

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CASE EXAMPLE OF SALES AND GOODS ACT 1930

Nazir Khan And Anr. vs Ram Mohan Lal An d Anr. on 3 July
ORDER 1. This revision arises out of a suit for recovery of money on foot of a promissory note instituted in the Court of the Judge, Small Cause Court at Allahabad. The promissory note is alleged to have been executed by the defendants for a sum of Rs. 500 and Provides for the repayment of the loan, on demand, with interest at 4 per cent per mensem. The defence was that the execution of the promissory note was admitted by the defendant not subject to additional pleas. The further pleas were to the effect that defendant 2 never borrowed any money, nor did she execute any promissory note, that the promissory note was inadmissible in evidence, for want of proper stamp duty, that defendant 1 borrowed Rs. 50 only and that that was the only consideration that passed. 2. The learned Judge, Small Cause Court, tried only one issue, namely the one as to the admissibility of the document in. suit in evidence and holding that it was inadmissible, dismissed the suit. 3. It appears that the suit was once heard and decreed ex parte. At the defendants' instance, the ex parte decree was sat aside and the suit was restored to its original number in the register and was tried de novo. When the suit was heard ex parte, the then learned Judge, overlooking the fact that the promissory note in suit required a stamp duty of two annas admitted the document into evidence. It bore a stamp duty of one anna only. It was contended on behalf of the plaintiff that as the document had once been admitted into evidence, it was not open to either party to question the sufficiency of the stamp duty at subsequent stages of the suit, in view of the provisions of Section 36, Stamp Act. On this point, the learned Judge, Small Cause Court held and in our opinion rightly, that with the setting aside of the ex parte decree, the order admitting the document into evidence, on the basis of the ex parte evidence, also fell and the Court had to adjudicate on the case, including the question of the admissibility or otherwise of the document, as if it had never been admitted into evidence at all. The view of the learned Judge is in agreement with the case of Webster v. Bosanquet [1912] A.C. 394. 4. The main question however in the case is whether the promissory note being inadmissible in evidence, the plaintiff could rely on the factum of the loan and prove the loan, independently of the document in suit. 5. On this point there is a number of conflicting cases decided by different High Courts. It appears that while all the Courts are agreed that where a plaintiff has a cause of action, independently of a promissory note, which is found inadmissible in evidence, he can sue on the cause of action which he had before the promissory note was given and recover. Opinion is divided as to what should be the case where there was no loan, independently of the promissory note, that is to say, where the entire contract between the parties is embodied in the promissory note. As at present advised, we are of opinion, that Section 91, Evidence Act, would prevent the admission of any oral evidence to prove the loan, the promissory note being inadmissible in evidence

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6. Some of the cases, whether decided in this Court or in other Courts, do not, in our opinion, with all respect, take sufficient note of the provisions of Section 91, Evidence Act, and follow the English authorities : see Farr v. Price 1 East 55. Our law being codified, in our opinion, it is not open to the Courts in India to ignore the enacted law and follow the English law, simply because in certain cases the enforcement of the, law might appear to create a hard case.

7. Being in disagreement with the cases decided in this Court, we are of opinion that the case should be referred to a larger Bench. We do not propose to discuss the case law in our order. It will be sufficient to say that the case of Miyan Bux v. Mt. Bodhiya A.I.R. 1928 All. 371 has no bearing on the case. The latest case of this Court is that of Ram Sarup v. Jasodha Kunwar [1912] 34 All. 158. The earlier ease of Parsotam Narain v. Taley Singh [1903] 26 All. 178 seems to us as laying down the right law. In Madras, the case of Muthu Sastrigal v. Vishvanatha [1914] 38 Mad. 630 and in 'Lahore, the case of Chandra Singh v. Amritsar Banking Co. A.I.R. 1922 Lah. 307 appear to support our view. We would especially draw the attention of the learned Judges before whom this case may go to the opinion of the Madras Judges to be found reported at p. 663 of the case in Muthu Sastrigal v. Vishvanatha [1914] 38 Mad. 630. 8. In order to settle the law for this Court we direct that the record of this case be submitted to the Hon'ble the Chief Justice, for the constitution of a larger Bench for the decision of the question indicated above, namely: Whether it is open to the party, who has lent money on terms recorded in a promissory note, which turns out to be inadmissible in evidence for want of proper stamp duty, to recover his money, by proving orally the terms of the contract, in the teeth of the provisions of Section 91, Evidence Act. 9. The following point of law has been referred to a Full Bench, namely: Whether it is open to the party who has lent money on terms recorded in a promissory note, which turns out to be inadmissible in evidence for want of proper stamp duty, to recover his money by proving orally the terms of the contract in the teeth of the provisions of Section 91, Evidence Act. 10. The facts which have led to the reference are these. The applicants, Nazir Khan and Ismail Shah Khan, brought a suit for recovery of money in the Court of Small Causes at Allahabad, alleging that on foot of a promissory note filed with the plaint, they lent to the two defendants to the suit, who were husband and wife, namely Ram Mohan Lal and Mt. Girindra Kuari a sum of Rs. 500 which was to be repaid with interest at 4 per cent per mensem, on demand. The promissory note bears a stamp duty of one anna only, while under the law for the time being in force, it ought to have borne a stamp duty of two annas.

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11. The defence of defendant 1, who alone appeared was that his wife never executed the promissory note, that he borrowed a sum of Rs. 50 only and that being under pressure for money he executed the promissory note relying on the assurance of the plaintiffs that they would not claim more than Rs. 50 and interest thereon. He further pleaded that he had repaid the money which he had borrowed, with interest. 12. When it was discovered that the promissory note bore insufficient stamp duty the plaintiff sought to prove by oral evidence that he had lent a sum of Rs. 500. 13. The learned Judge of the Small Cause Court held that to establish the loan alleged by the plaintiffs, the promissory note was the only evidence that could be adduced to prove the transaction, having regard to the provisions of Section 91, Evidence Act. In the result, the learned Judge dismissed the suit in its entirety. 14. The plaintiffs filed an application in revision under Section 25, Provincial Small Cause Courts Act and the contention of learned Counsel for the applicants was that the applicants were entitled to prove the factum of the loan. This point was not specifically taken among the grounds of revision, but as the point was supported by cases decided in this Court, the point was allowed to be argued and considered. In the result our answer to the question referred to us by the Division Bench is in the negative, namely in the circumstances set forth in the question referred to us, the plaintiff cannot recover. We direct that the record with our answer and a copy of this judgment be sent to the Bench making the reference.

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LAW OF CONTRACT ACT 1872

In this Act the following words and expressions are used in the following senses, unless contrary intention appears from the context: (a) When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that either to such act or abstinence, he is said to make a proposal; (b) When the person to whom the proposal is made, signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise; (c) The person making the proposal is called the "promisor", and the person accepting the proposal is called "promisee", (d) When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise; (e) Every promise and every set of promises, forming the consideration for each other, is an agreement; (f) Promises which form the consideration or part of the consideration for each other, are called reciprocal promises; (g) An agreement not enforceable by law is said to be void; (h) An agreement enforceable by law is a contract; (i) An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract; (j) A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.

This Act may be called the Indian Contract Act, 1872. Extent, commencement-It extends to the whole of India 1[except the State of Jammu and Kashmir]; and it shall come into force on the first day of September, 1872. Enactments repealed. Nothing herein contained shall affect the provisions of any Statute, Act or Regulation not hereby expressly repealed, nor any usage or custom or trade, nor any incident of any contract, not inconsistent with the provisions of this Act.

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CASE EXAMPLE OF LAW OF CONTRACT 1872

Citi Bank N.A vs Standard Chartered Bank & Others on 8 October, 2003
Primarily the case of SCB against the Citi Bank was for return of money on the ground that for consideration which was paid on 18th and 19th September, 1991, it had not received the transacted securities. That Citi Bank expressly/impliedly warranted that CMF would transfer the Bonds and on its failure to do so, the Citi Bank was obliged to deliver the Bonds. That the action of Citi Bank was fraudulent and amounted to deceit. That 'useless' and 'worthless' SGLs were given which was in its possession and returned the two BRs duly discharged and therefore the Citi Bank was no longer under any obligation to either pay any sum or to deliver any securities much less to refund the money. That SCB returned two BRs duly discharged in exchange of the SGL of CMF at its express desire. The obligation to deliver bonds under BRs was substituted by delivery of the SGL of CMF. Citi Bank similarly claimed complete discharge in its own suit. Citi Bank in its suit claimed for a decree against CMF in case a decree was passed against the Citi Bank in the Suit filed by SCB. The defence taken by the CMF in the two suits was more or less common. In substance it was that all these transactions were part of Hiten Dalal's transactions with SCB and that CMF as well as Citi Bank were merely used as a conduit to pay monies from the Bank of Karad which was basically a Hiten Dalal's account to SCB and from SCB to the Bank of Karad and that all these transactions were in pursuance of an arrangement which Hiten Dalal had with SCB under Learned Special Judge did not accept the Citi Bank's plea that there was a satisfaction accepted and recorded to the original contract between Citi Bank and the SCB in terms of Section 63 of theIndian Contract Act. Submission that the original contract to deliver the 11.5% GOI 2009 Bonds was substituted by the SCB vide their request letter dated 19th September, 1991 and instead to give "SGLs of Canbank Mutual Fund in exchange of the same" was not accepted on the ground that novation of the contract could not be there as CMF was not a party and consented to the transfer of their SGL form in favour of SCB which was in the hands of Citi Bank. Submission made by the counsel appearing for the SCB to the effect that Section 41 of the Contract Act would be more appropriately applicable was accepted as the third party (CMF) failed to perform or the Citi Bank failed to get the promise made by it to be performed by the CMF. That the SCB by returning the two BRs did not dispense with or remit the performance from Citi Bank as satisfaction which it deemed fit in exchange for Citi Bank's obligation to deliver the 11.5% GOI 2009 Bonds of the face value of Rs.50 crores under the two BRs. That SCB voluntarily and unconditionally accepted the SGL of CMF knowing full well that under such SGL it could not obtain Bonds from PDO. That SCB accepted the SGL of CMF knowing full well that it had been dishonoured by the Reserve Bank of India and it is not transferable. That these admitted and established facts clearly bring the case of Citi Bank under Section 63 of the Indian ContractAct. That SCB asked for and accepted the SGL of CMF as satisfaction which it deemed fit for the obligation of the Citi Bank to deliver GOI bonds of the face value of Rs.44,58,05,000/- and therefore the Citi Bank stood discharged from its obligation to deliver the Bonds under Section.

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COMPANIES ACT 1956

The Companies Act 1956 is an Act of the Parliament of India, enacted in 1956, which enabled companies to be formed by registration, and set out the responsibilities of companies, their directors and secretaries. The Companies Act 1956 is administered by the Government of India through the Ministry of Corporate Affairs and the Offices of Registrar of Companies, Official Liquidators, Public Trustee, Company Law Board, Director of Inspection, etc. The Registrar of Companies (ROC) handles incorporation of new companies and the administration of running companies. Since its commencement, it has been amended many times, in which amendment of 1988, 1990, 1996, 2000 and 2011 are notable. Like most of Indian acts, it also extends to the whole India except State of Jammu and Kashmir (SECTION 3). Notwithstanding anything contained in the Act every company, international or indigenous will work under the provisions of the Act. This Act is general in nature and not subrogative. So if a special Legislation applies on a Company, then the Company has to, in addition to Companies Act, must comply the special Legislation. For example, all banking Companies in India has to comply Banking Regulation Act 1949, in addition to the Companies Act 1956.Used in commercial application. The Ministry of Corporate Affairs (MCA) has notified a list of provisions of the Companies Act, 2013 that came into force with effect from 12 September 2013. A cursory review of the list of sections does not indicate any coherent pattern regarding which aspects of the new legislation are being brought into force, and the sections are peppered across various chapters. The only seeming common thread is that most of them do not require rules to be promulgated by the Central Government in order to make them operational. This approach of piecemeal effectiveness is bound to cause significant practical problems given there is no clarity regarding the legislative/regulatory rationale for why these sections have been brought into force first. The social media is abuzz with another curious question posed by some lawyers. Section 465 of the new legislation, which repeals the Companies Act, 1956, has not been notified. Hence, there could be a question as to whether the new provisions notified will operate in addition to the provisions of the 1956 Act. It is not clear as to what would happen in case of a conflict.

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CASE EXAMPLE OF COMPANIES ACT 1956

Sahara India Real Estate ... vs Securities & Exch.Board Of India & ... on 31 August, 2012
JUDGMENT K. S. RADHAKRISHNAN, J. 1. We are, in these appeals, primarily concerned with the powers of the Securities and Exchange Board of India (for short 'SEBI') under Section 55A(b) of the Companies Act, 1956 to administer various provisions relating to issue and transfer of securities to the public by listed companies or companies which intend to get their securities listed on any recognized stock exchange in India and also the question whether Optionally Fully Convertible Debentures (for short 'OFCDs') offered by the appellants should have been listed on any recognized stock exchange in India, being Public Issue under Section 73 read with Section 60B and allied provisions of the Companies Act and whether they had violated the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000 [for short 'DIP Guidelines'] and various regulations of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 [for short 'ICDR 2009'], and also whether OFCDs issued are securities under the Securities Contracts (Regulation) Act, 1956 [for short 'SCR Act']. 2. Sahara India Real Estate Corporation Limited (for short 'SIRECL') and Sahara Housing Investment Corporation Limited (for short 'SHICL), appellants herein (conveniently called Saharas), are the companies controlled by Sahara Group. Saharas have raised almost identical issues on facts as well as on questions of law before us and hence we are disposing off both the appeals by way of a common judgment. 3. SIRECL was originally incorporated as Sahara India C Junxion Corporation Limited on 28.10.2005 as a public limited company under the Companies Act and it changed its name to SIRECL on 7.3.2008. As per the Balance Sheet of the company as on 31.12.2007, its cash and bank balances were Rs.6,71,882 and its net current assets worth Rs.6,54,660. Company had no fixed assets nor any investment as on that date. SIRECL's operational and other expenses for the three quarters ending 31.12.2007 were Rs.9,292 and the loss carried forward to the Balance Sheet as on that date was Rs.3,28,345. 4. SIRECL, in its Extraordinary General Meeting held on 3.3.2008, resolved through a special resolution passed in terms of Section 81(1A) of the Companies Act to raise funds through unsecured OFCDs by way of private placement to friends, associates, group companies, workers/employees and other individuals associated/affiliated or connected in any manner with Sahara Group of Companies (for short Sahara Group) without giving any advertisement to general public. Company authorized its Board of Directors to decide the terms and conditions and revision thereof, namely, face value of each OFCD, minimum application size, tenure, conversion and interest rate. Board of Directors, consequently, held a meeting on 10.3.2008 and resolved to issue unsecured OFCDs by way of private placement, the details of which were mentioned in the Red Herring Prospectus (for short 'RHP') filed with the Registrar of Companies (for short RoC), Kanpur. SIRECL had specifically indicated in the INDIAN LAWS Page 10

RHP that they did not intend to get their securities listed on any recognized stock exchange. Further, it was also stated in the RHP that only those persons to whom the Information Memorandum (for short 'IM') was circulated and/or approached privately who were associated/affiliated or connected in any manner with Sahara Group, would be eligible to apply. Further, it was also stated in the RHP that the funds raised by the company would be utilized for the purpose of financing the acquisition of townships, residential apartments, shopping complexes etc. and construction activities would be undertaken by the company in major cities of the country and also would finance other commercial activities/projects taken up by the company within or apart from the above projects. RHP also indicated that the intention of the company was to carry out infrastructural activities and the amount collected from the issue would be utilized in financing the completion of projects, namely, establishing/constructing the bridges, modernizing or setting up of airports, rail system or any other projects which might be alloted to the company from time to time in future. RHP also highlighted the intention of the company to engage in the business of electric power generation and transmission and that the proceeds of the current issue or debentures would be utilized for power projects which would be alloted to the company and that the money, not required immediately, might be parked/invested, inter alia, by way of circulating capital with partnership firms or joint ventures, or in any other manner, as per the decision of the Board of Directors from time to time. SIRECL, under Section 60B of the Companies Act, filed the RHP before the RoC, Uttar Pradesh on 13.3.2008, which was registered on 18.3.2008. SIRECL then in April 2008, circulated IM along with the application forms to its so called friends, associated group companies, workers/employees and other individuals associated with Sahara Group for subscribing to the OFCDs by way of private placement. We also make it clear that if Saharas fail to comply with these directions and do not effect refund of money as directed, SEBI can take recourse to all legal remedies, including attachment and sale of properties, freezing of bank accounts etc. for realizations of the amounts. We also direct SEBI(WTM) to submit a status report, duly approved by Mr. Justice B.N. Agrawal, as expeditiously as possible, and also permit SEBI (WTM) to seek further directions from this Court, as and when, found necessary.

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NEGOTIABLE INSTRUMENTS ACT 1881

This Act may be called the Negotiable Instruments Act, 1881 . Local extent. Saving of usages relating to hundis, etc. It extends to the whole of India but nothing herein contained affects the' Indian Paper Currency Act, 1871 , (3 of 1871 ). section 21, or. affects any local usage relating to any instrument in an oriental language: Provided that such usages may be excluded by any words in the body of the instrument which indicate an intention that the legal relations of the parties thereto shall be governed by this Act and it shall come into force on the first day of March, 1882 . Bill of exchange". A" bill of exchange" is an instrument in writing, containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument. A promise or order to pay is not" conditional", within the meaning of this section and section 4, by reason of the time for payment of the amount or any instalment thereof being expressed to be on, the lapse of a certain period after the occurrence of a specified event which, according to the ordinary expectation of mankind, is certain to happen, although the time of its happening may be uncertain. The sum payable may be" certain", within the meaning of this section and section 4, although it includes future interest or is pay- able at an indicated rate of exchange, or is according to the course of exchange, and although the instrument provides that, on default of payment of an instalment, the balance unpaid shall become due. The person to whom it is clear that the direction is given or that payment is to be made may be a" certain I person", within the. Drawer, Drawee. The maker of a bill of exchange or cheque is called the drawer"; the person thereby directed to pay is called the" drawee". Drawee in case of need. When in the bill or in any endorsement thereon the name of any person is given in addition to the drawee to be resorted to in case of need, such person is called a" drawee in case of need". Acceptor. After the drawee of a bill has signed his assent upon the bill, or, if there are more parts thereof than one, upon one of such parts, and delivered the same, or given notice of such signing to the holder or to some person on his behalf, he is called the" acceptor". Acceptor for honour. 1[ When a bill of exchange has been noted or protested for nonacceptance or for better security,] and any person accepts it supra protest for honour of the drawer or of any one of the endorsers, such person is called an" acceptor for honour". Payee. The person named in the instrument, to whom or to whose order the money is by the instrument directed to be paid, is called the" payee". Holder in due course." Holder in due course" means any person who for consideration became the possessor of a promissory note, bill of exchange or cheque if payable to bearer, or the payee or indorsee thereof, if 2[ payable to order,] before the amount mentioned in it became payable, and without having sufficient cause to believe that any defect existed in the title of the person from whom he derived his title. Holder". The" holder" of a promissory note, bill of exchange or cheque means any person entitled in his own name to the possession thereof and to receive or recover the amount due thereon from the parties thereto. Where the note, bill or cheque is lost or destroyed, its holder is the person so entitled at the time of such loss or destruction.

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CASE EXAMPLE OF NEGOTIABLE INSTRUMENTS ACT 1881-M/S. Opts Marketing Pvt. Ltd., vs The State Of A.P. on 25 January, 2001
A Single Judge is bound to follow the law laid down by a Division Bench unless a Full Bench or the Supreme Court specifically overruled that decision, or laid down a different law on the same point. In cases where a single Judge feels that there are strong persuasive decisions of other High Court, contrary to the view expressed by the Division Bench of the same Court, he can only refer the case to a Bench of two Judges, but cannot directly make a reference to the Full Bench. It is only a Division Bench that can refer a case to a Full Bench. The Chief Justice always has the power to constitute a Full Bench for deciding any point or case. Bench. Subba Rao, C.J., speaking for the Division Bench of himself and Uma Maheswaram, J, before referring the case to a Full Bench, made a reference to the observations of Bhimasankaram, J in Eswaramma's case (5 supra) that a Single Judge could have referred the case directly to a Full Bench without the necessity of referring it to a Division Bench, observed that as per the Full Bench decision in M. Subbarayudu's case (3 supra) a single judge cannot directly refer the matter to a Full Bench, and that the above said observations of Bhimasankaram, J were made on the basis of the practice in Madras High Court, and that irrespective of the practice in Madras, the procedure laid down by the Full Bench in Subbarayudu's case (3 supra) should be followed. Thus, the practice in Andhra High Court was that a single Judge can refer the case, posted before him for hearing, only to a Division Bench, but not to a Full Bench directly. It is only a Division Bench that can refer the case to a Full Bench Decision, or laid down a different law on the same point. In cases where a single Judge feels that there are strong persuasive decisions of other High Court, contrary to the view expressed by the Division Bench of the same Court, he can only refer the case to a Bench of two Judges, but cannot directly make a reference to the Full Bench. It is only a Division Bench that can refer a case to a Full Bench. The Chief Justice always has the power to constitute a Full Bench for deciding any point or case. The point is answered accordingly. SHANMUGHAM PILLAI23, K. SURENDRAN Vs. P. RAMACHANDRAN NAIR24 and P. Eswara Reddy's case (16 supra) respectively held that when a cheque is issued towards discharge of an antecedent debt or goods supplied earlier, the drawer of the cheque, in case of its dishonour, would not be guilty of an offence under Sec.420 IPC because there was no change in position of the payee after taking the cheque and its dishonour. These decisions were considered in D. RAJ ARORA Vs. R. VISWANATHAN25 and observing: "The learned counsel's general submission that in all cases even if the cheque is dishonoured it does not amount to an offence cannot be universally accepted. It depends on the facts of each case. If there are allegations to the effect that the accused had dishonest intention not to pay even at the time of issuance of the cheque and the act of issuing a cheque which was dishonoured has caused damage to his mind, body or reputation it amounts to cheating."

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FACTORIES ACT 1948

In this Act, unless there is anything repugnant in the subject or context,-

(a) "adult" means a person who has completed his eighteenth year of age; (b) "adolescent" means a person, who has completed his fifteenth year of age but has not completed his eighteenth year; (bb) "calendar year" means the period of twelve months beginning with the first day of January in any year; (c) "child" means a person who has not completed his fifteenth year of age; (ca) "competent person", in relation to any provision of this Act, means a person or an institution recognised as such by the Chief Inspector for the purposes of carrying out tests, examinations and inspections required to be done in a factory under the provisions of this Act having regard to(i) the qualifications and experience of the person and facilities available at his disposal, or (ii) the qualifications and experience of the persons employed in such institution and facilities available therein, with regard to the conduct of such tests, examinations and inspections, and more than one person or institution can be recognised as a competent person in relation to a factory; (cb) "hazardous process" means any process or activity in relation to an industry specified in the 'First Schedule where, unless special care is taken, raw materials used therein or the intermediate or finished products, bye-products, wastes or effluents thereof would(i) cause material impairment to the health of the persons engaged in or connected therewith, or (ii) result in the pollution of the general environment: Provided that the State Government may, by notification in the Official Gazette, amend the First Schedule by way of addition, omission or variation of any industry specified in the said Schedule;

(d) "young person" means a person, who is either a child or an adolescent; (e) "day" means a period of twenty-four hours beginning at midnight; (f) "week" means a period of seven days beginning at midnight on Saturday night or such other night as may be approved in writing for a particular area by the Chief Inspector of Factories; (g) "power" means electrical energy, or any other form of energy, which is mechanically transmitted and is not generated, by human or animal agency;

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(h) "prime-mover" means any engine, motor or other appliance, which generates or otherwise provides power; (i) "transmission machinery" means any shift, wheel, drum, pulley, system of pulleys, coupling, clutch, driving belt or other appliance or device by which the motion of a prime-mover is transmitted to or received by any machinery or appliance; (j) "machinery" includes prime-movers, transmission machinery and all other appliances, whereby power is generated, transformed, transmitted or applied; (k) "manufacturing process" means any process for(i) making, altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning, breaking up, demolishing or otherwise treating or adopting any article or substance with a view to its use, sale, transport, delivery or disposal; or (ii) pumping oil, water, sewage, or any other substance; or (iii) generating, transforming or transmitting power; or (iv) composing types for printing, printing by letter press, lithography, photogravure or other similar process or book-binding; or (v) constructing, reconstructing,, repairing, refitting, finishing or breaking up ships or vessels; or (vi) preserving or storing any article in cold storage ; (l) "worker" means a person employed directly or by or through any agency (including a contractor) with or without the knowledge of the principal employer whether for remuneration or not in any manufacturing process, or in cleaning any part of the machinery or premises used for a manufacturing process, or in any other kind of work incidental to, or connected with the manufacturing process, or the subject of the manufacturing process but does not include any member of the armed forces of the Union; (m) "factory" means any premises including the precincts thereof(i) whereon ten or more workers are working, or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on with the aid of power, or is ordinarily so carried on, or (ii) whereon twenty or more workers are working, or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without the aid of power, or is ordinarily so carried on,- but does not include a mine subject to the operation of the Mines Act, 1952 (XXXV of 1952) or a mobile unit belonging to the armed forces of the Union, a railway running shed or a hotel, restaurant or eating place;

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CASE EXAMPLE OF FACTORIES ACT 1948

M/S. Hotel New Nalanda vs Regional Director, E.S.I. Corpn. on 15 July, 2009
Employees' State Insurance Act, 1948 and it came within the purview of the Act. They, accordingly, asked the Managing Director of the establishment to comply with the provisions of the Act provisionally with effect from May 7, 1991, the date of the inspection. 2. The appellant did not accept the findings recorded in course of the inspection and filed an application under section 75 read with section 77 of the 2 Act (E.I.C. 55/91) before the Employees' Insurance Court, Kozhikode, seeking a declaration that the establishment in question was not covered by the Act and that the applicant/appellant was not bound to observe the provisions of the Act. According to the applicant/appellant, the establishment called M/s. Hotel New Nalanda was a tourist home where rooms were let out to people on monthly or daily rent basis. The establishment never employed more than 8 persons. No manufacturing process was carried on there, much less with the aid of power. The establishment did not constitute a factory as defined under section 2(12) and it was not covered by the E.S.I. Act. The applicant/appellant also pleaded that at the time of inspection there

fact 14 persons were employed in the establishment; the fifteenth person named in the inspection report was the Managing Partner and he could not be counted among the employees in the establishment. The Insurance Court further held there was no satisfactory evidence that there was a refrigerator and a grinder being used in any manufacturing process being carried on in the establishment. On the basis of the second finding the Insurance Court came to hold that the establishment in question was not a factory within the meaning of section 2(12) of the ESI Act and it was not covered by the Act. It, accordingly, allowed the application filed by the appellant by its judgment and order dated April 2, 1998. 7. Against the aforesaid judgment the Regional Director ESI Corporation preferred an appeal (MFA No. 879 of 1998 B) before the High Court. In appeal, the High Court reversed the Insurance Court's finding in regard to use of power in manufacturing process in the establishment. The High Court observed that exhibit D-2, the inspection report, showed the presence of a 4 grinder and a refrigerator in the establishment and found it sufficient to hold that there

Insurance Court that in the establishment in question there was no use of power in the manufacturing process, was quite perverse and hence, it was justified in entertaining the appeal and interfering with the finding. 5 10. The short question that arises for our consideration is whether, having regard to the materials on record, the finding recorded by the Insurance Court can be said to be perverse and fit to be interfered with in appeal under section 82(2) of the Act. 11. On the issue whether power was used in any manufacturing process in the establishment the Insurance Court considered the evidences led by the two sides in considerable detail and rejected the case of the Corporation giving a number of reasons. It pointed out that in the inspection report it was simply stated that a Kelvinator fridge (sic refrigerator) and a one litre grinder were used in the INDIAN LAWS Page 16

manufacturing process. But the report was completely silent in regard to the activities that were termed as `manufacturing process' and the purpose for which the two electrical appliances were used. The report left it completely for the court to presume that the cooking of food was the `manufacturing process took recourse to presuming that the establishment must have kitchen where food would be cooked using the two appliances running with the aid of power. The High Court did not even advert to the reasons given by the Insurance Court for not accepting the Corporation's case on that issue. The Insurance Court had rightly pointed out that the inspection report did not state the process or the work that was called `the manufacturing process'. It did not even say that the refrigerator and the grinder were used in connection with cooking food in the establishment. 13. For holding an establishment to be a `factory' within the meaning of section 2(12) of the Act it must first be established that some work or process is carried on in any part of the establishment that amounts to `manufacturing process' as defined under section 2(k) of the Factories Act, 1948. In case the number of persons employed in the establishment is less than twenty but more than ten then it must further be established that the manufacturing process in the establishment is being carried on with the aid of power. Further, the use of power in the manufacturing process should.

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Bibliography
KANOON.COM, I. LAWS. LAW, M. WIKIPEDIA. INDIAN LAWS.

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