INDIAN CONTRACT ACT 1872

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 INTRODUCTION
The Indian Contract Act, 1872 prescribes
the law relating to contracts in India and is the
key act regulating Indian contract law. The Act
is based on the principles of English Common
Law. It is applicable to all the states of India..
It determines the circumstances in which
promises made by the parties to a contract
shall be legally binding.
 The Indian Contract Act is one of the oldest
mercantile laws of our country. It came into effect on
the 1st of September 1872 and is applicable to the
whole of India with the exception of Jammu &
Kashmir. Containing a total of 266 sections it is the
principal law regulating contracts in India
• Under Section 2(h), the Indian Contract Act defines a
contract as an agreement enforceable before the law.
IMPORTANCE OF INDIAN CONTRACT ACT, 1872
Law of contract is the most important branch of
mercantile law. It determines the circumstances under
which promises made by the contracting parties shall be
legally binding on them. It specifies the remedies that
are available against a person who fails to perform the
contract entered into by him, in a Court of law. It also
defines the conditions under which the remedies are
available.
History of Indian
Contract Act 1872

.
 Indian Contract Act, 1872
The Indian Contract Act, 1872 prescribes the law relating to contracts
in India and is the key act regulating Indian contract law. The Act is
based on the principles of English Common Law. It is applicable to all
the states of India.. It determines the circumstances in which promises
made by the parties to a contract shall be legally binding. Under
Section 2(h), the Indian Contract Act defines a contract as an
agreement which is enforceable by law.
 History of Indian Contract Act

The Indian contract act 1872 section 1-75 came into force on 1
sep. 1872. it applies to the whole of Indian except the state of
Jammu and Kashmir. Indian contract act, 1872 is the main source
of law regulating contracts in Indian law, as subsequently
amended. It contains 266 sections.
 Different Phases of Indian Contract Act

 Phase I: Before 1872, there was the English common law which
was applied to Indian citizens heterogeneously leading to many
inconveniences. To stop this, statuses were enacted to regulated
contracts where parties were Muslim and Hindus. If both
parties were Hindus, they were regulated by the Hindus law and
in case of Muslim, by Muslim laws and usages.
 Phase II (1872 & 1929): The Indian contract act came into force on the 1st
day sep, 1872. The contract law contained sections 1-266 in total, divided into
different groups, viz.
• General principles of law of contract Sec.1-75
• Sales of Goods Sec.76-123
• Indemnity & Guarantee Sec.124-147
• Bailment & pledge Sec.148-181
• Contract of Agency Sec.182-238
• Partnership Sec.239-266
 Phase III: on and after 1930. Sec. 76-123 relating to sales of
goods were repealed in 1930 and a separate act, called the
Sales of Goods Act, was enacted.

• Sec. 239-266 relating to partnership were repealed in 1932

and a separate Act, called the Partnership Act, was enacted.
 ESSENTIAL ELEMENTS OF A VALID
CONTRACT
• Offer and Acceptance
• Consensus ad idem
• Free Consent
• Capacity of the parties
• Lawful Consideration
• Lawful object
• Intention to create legal relations
• Legal formalities
• Offer and Acceptance: There must be a ‘lawful offer’
and ‘lawful acceptance’ of the offer, thus resulting in an
agreement.
• Consensus ad idem: For a valid agreement, there must
be a complete identity of minds between the contracting
parties.
• Free Consent: The contracting parties must give their
consent freely. It must not be given due to coercion,
undue influence, fraud, misrepresentation or mistake.
The absence of free consent would affect the legal
enforceability of a contract.
• Capacity of the parties: The parties making the
contract must be legally competent in the sense that
each must be of the age of majority, of a sound mind,
and not expressly disqualified from contracting
(Section 11).
• Lawful Consideration: An agreement to be
enforceable by law must be supported by
consideration. Each of the contracting parties must
give as well as get something. Moreover, the
consideration must be lawful.
• Lawful object: The object of the agreement must be
lawful. It is considered unlawful if it is (i) illegal (ii)
immoral, (iii) fraudulent, (iv) of a nature that, if
permitted, it would defeat the provisions of any law, (v)
causes injury to the person or property of another, or
(vi) opposed to public policy.
• Intention to create legal relations: There
must be an intention among the parties that
the agreement should be attached by legal
consequences and create legal obligations.
• Legal formalities: The agreement must
comply with the necessary formalities as to
writing, registration, stamping etc. if any
required in order to make it enforceable by
law.
Classification Of
Contract
BUSINESS LAW

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 Classification Of Contract
The classification of contract is done on the basis
of:
• Enforceability/ Validity
• Formation
• Performance
 Types Of Contract On Basis Of
Validity
• Valid Contract
• Void Contract
• Void-able Contract
• Contract un enforceable by Law
 Valid Contract
A contract that complies with all the essentials of
a contract and is binding and enforceable on all
parties is said to be valid contract.
A valid contract is a written or expressed
agreement between two parties to provide a
product or service.
 Void Contract
A contract which is legally enforceable when
entered but become void due to supervening
impossibility of performance.
Void Contract is not void from beginning , it
become void at subsequent stage before the
performance due to the occurrence of an event.
 Voidable Contract
A voidable contract is a formal agreement
between at least two parties that may not be
legally enforceable.
An agreement which is enforceable by law at the
option of one or more of the parties but not at the
option of other or others is a voidable contract.
 Contract Un enforceable by Law
Contract un enforceable is a contract which is
good in substance but because of some technical
defect cannot be enforced by law is called
unenforceable contract. These contracts are
neither void nor voidable.
 Types of Contract on Basis of
Formation
• Express contract
• Implied contract
• Quasi Contract
 Express Contract
The Contracts where there is expression or
conversation are called Express Contracts. It
may be in written or oral form.
 Implied Contract
An implied contract is an agreement created by
actions of the parties involved, but it is not
written or spoken. This is a contract assumed to
have been drawn. In this case, there is neither
written record nor any actual verbal agreement.
A form of an implied contract is an implied
warranty provided automatically by law.
 Quasi Contract
In case of Quasi Contract there will be no offer and
acceptance so, actually there will be no Contractual relations
between the partners. Such a Contract which is created by
Virtue of law is called Quasi Contract. Sections 68 to 72 of
Contract Act read about the situations where court can create
Quasi Contract.
• Sec. 68: When necessaries are supplied
• Sec. 69: When expenses of one person are paid by another
person.
• Sec. 70: When one party is benefited by the activity of
another party.
• Sec. 71: In case of finder of lost tools.
• Sec. 72: When payment is made by mistake or goods are
delivered by mistake.
 Types of Contract on Basis of
Performance
• Unilateral contract
• Bilateral contract
• Executory contract
• Executed contract
 Unilateral Contract
In a unilateral, or one-sided, contract, one party,
known as the offeror, makes a promise in exchange
for an act (or abstention from acting) by another
party, known as the offeree. If the offeree acts on the
offeror's promise, the offeror is legally obligated to
fulfill the contract, but an offeree cannot be forced
to act (or not act), because no return promise has
been made to the offeror. After an offeree has
performed, only one enforceable promise exists, that
of the offeror.
 Bilateral Contract
A bilateral contract is a is a reciprocal
arrangement between two parties where each
promises to perform an act in exchange for the
other party's act.
 Executory Contract
A contract which has yet not been fully
performed. Something still left to be performed.
 Executed Contract
The contract where all the parties to the contract
have performed their obligations arising from the
contract, it is said that the contract is executed.
This contract is completely done by both parties.
OFFER
.
 According to section 2(a),
when a person made a
proposal, when he signifies to
another his willingness to do
or to abstain from doing
something.
 Types of Offer
• Express offer
• Implied offer
• Specific offer
• General offer
• Cross offer
• Counter offer
• Standing offer
Express offer
When offer is given to another person either in
writing or in oral.
Implied offer
When offer is given to another person neither in
writing nor in oral.
Specific offer
When offer is given to a specific person.
General offer
When offer is given to entire world at a large.
Cross offer
When both the persons are making identical offers
to each other in ignorance of other’s offer.
Counter offer
When both the persons are making offers to each
other which are not identical in ignorance of
other’s offer.
Standing offer
An offer which remains continuously enforceable
for a certain period of time.
 Legal Rules
• Offer must be given with an intention to create a legal
relationship.
• Offer must be definite.
• There is a clear cut difference between offer,
invitation to offer, invitation to sale.
• Offer must be communicated.
• Mere statement of price of price is not an offer.
ACCEPTANCE
 ACCEPTANCE
• Section 2(b) states that when a person made a
proposal to another to whom proposal is made,
if proposal is assented there to, it is called
acceptance
• An accepted proposal is called a promise
• Acceptance may be express or implied
• Express- words spoken or written

• Implied- accepted by conduct

 Legal rules for acceptance
• Acceptance must be absolute and unqualified/
unconditional

• Acceptance must be communicated to the offeror

• Acceptance may be made within reasonable time

• Acceptance must be according to the mode prescribed.

• The acceptor must be aware of the proposal at the time of

offer
• Acceptance must be given before the offer
lapses or before the offer is revoked

• Acceptance can’t be implied from silence

• Acceptance can be given to any person in case of

general offer

• Acceptance may be given to specific person in

case of specific offer
 CONSIDERATION
• According to Section 2(d) of the Indian Contract Act, 1872,
consideration is defined as follows:
• “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 abstain from doing
something, such act or abstinence is called a consideration
for the promisee.”
Legal rules regarding consideration
1. Consideration must move at the desire of the promisor.
2. Consideration may move from the promisee or any other person.
3. Consideration may be past, present or future.
4. Consideration must be real and not illusory.
5. Consideration must not be something which the promisor is legally
bound to do.
6. Consideration need not be adequate.
7. Consideration must not be illegal, impossible, uncertain,
ambiguous, fraudulent, immortal or opposed to public policy.
CAPACITY TO
CONTRACT

EDVIN S MAVELIL
ROLL NO. 08
 Meaning & Definition…
• According to section 11 of the contract
act:
“ Every person is competent to contract who
is of the age of majority according to the
law to which he is subject, & who is of
sound mind, and is not disqualified from
contracting by any law to which he is
subject.”
 MINOR
• Who is a minor – Acc. To sec 3 of
Indian majority act, 1875, a minor is
a person who has not attained the
age of 18 years.
 Persons of UNSOUND MIND…

• Acc to sec 12:

“ A person is said to be of sound mind
for the purpose of making a contract
if, at the time when he makes it, he
is capable of understanding it & of
forming a rational judgment as to its
effect upon his interest.”
 Unsoundness may be
categorized as:
• Idiots – has completly lost his mental
powers
• Lunatic – the person losses the
capacity due to the illness of brain or
mental bodily distress.
• Drunkenness
 Persons disqualified from
contracting
• Alien enemy
• Foreign sovereign (prior sanction of central govt)
• Corporations – (artificial persons)
• Insolvents- all property in hand of Official
assignee. He can enter into contract when court
passes an order of discharge
• Convicts – persons who are sentenced to
imprisonment cannot enter into contract during
that period).
FREE CONSENT
.
Section 13 defines consent as two or more persons are said
to consent when they agree upon the same thing in the same
sense. According to section 14 consent is said to be free
when it is not caused by
• Coercion
• Undue influence
• Fraud
• Misrepresentation
• Mistake
COERCION
• Coercion is committing or threatening to commit any act forbidden by
the Indian Penal Code, or the unlawful detaining or threatening to
detain any property to the prejudice of any person, whatsoever with
the intention of causing any person to enter into an agreement.
UNDUE INFLUENCE
• Undue influence is the improper use of any power possessed over the
mind of the contracting party. According to section 16 a contract is
said to be affected by undue influence when:
• The relations subsisting between the parties are such that one of the
parties is in a position to dominate the will of other.
• Use the position to obtain an unfair advantage over the other.
Essentials of undue influence
• There are two persons.
• The relations are satisfying between them.
• One must dominate the other.
• There must under advantage.
• It involves the moral pressure.
FRAUD
According to section 17 fraud means and includes any of the
following acts
• Committed by a party to a contract or by any one with his connivance
or by his agent with the intent to deceive another party there to or to
induce him to enter into contract.
• (a) A suggestion as to fact of that which is not true by one who does
not believe it to be true.
• (b) An active concealment of a fact by one having knowledge or belief
of the fact.
• (c) Any other act fitted to deceive.
• (d) A promise made without any intention of performing it.
MISREPRESENTATION
• Misrepresentation is the false representation made innocently without
any intention of deceiving the other party. It may include two things:
• (a) Wrong statement of a material fact not known to be false
• (b) Non-disclosure of facts where there is a legal duty to disclose
without any intention to deceive
Mistake of Law
• This mistake may relate to the mistake of the Indian laws, or it can be a
mistake of foreign laws. If the mistake is regarding Indian laws, the rule is
that the ignorance of the law is not a good enough excuse. This means
either party cannot simply claim it was unaware of the law.
• However, ignorance of a foreign law is not given a similar treatment.
Ignorance of the foreign law is given some leeway, the parties are not
expected to know foreign legal provisions and their meaning. So a mistake
of foreign law is in fact treated as a mistake of fact under
the Indian Contract Act.
Mistake of Fact
• Then there is the other type of mistake, a mistake of fact. This is when both
the parties misunderstand each other leaving them at a crossroads. Such a
mistake can be because of an error in understanding, or ignorance or
omission etc. But a mistake is never intentional, it is an innocent
overlooking. These mistakes can either be unilateral or bilateral.
Bilateral Mistake
• When both parties of a contract are under a mistake of fact essential to
the agreement, such a mistake is what we call a bilateral mistake. Here
both the parties have not consented to the same thing in the same sense,
which is the definition of consent. Since there is an absence of consent
altogether the agreement is void.
• For example, A agrees to sell to B his buffalo. But at the time of the
agreement, the buffalo had already died. Neither A nor B was aware of
this. And so there is no contract at all, i.e. the contract is void due to a
mistake of fact.
Unilateral Mistake
• A unilateral mistake is when only one party to the contract is under a
mistake. In such a case the contract will not be void. So the Section 22 of
the Act states that just because one party was under a mistake of fact the
contract will not be void or voidable. So if only one party has made a
mistake of fact the contract remains a valid contract.
• For example: A agreed to buy certain wheat from B believing that they
were old. Infact wheat offered were new. It was held that A could not
avoid the contract on the ground that he had a mistaken impression as to
the oldness of wheat.
Legality of object

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 LEGALITY OF OBJECT

The contract to be legally valid must contain lawful object.

According to section 10 of the
act, “all agreements are contract if they are for lawful
consideration and with a lawful object.
Lawful object means, intention to do something permissible
within the provisions of law”.
For example, A in consideration of Rs. 10 lac from B agrees to
Kill C. The object of this agreement is
killing, which is illegal and punishable under Indian Penal
Code.
.
Unlawful Consideration and Unlawful Object: Under the following circumstances an
agreement
would be unlawful:
1. It is forbidden by law:-If the object or consideration of an agreement is forbidden by
law,
the agreement is void. For example, A agrees to sell certain goods to B after knowing
very
well the goods are to be smuggled out of the country. Here the object is forbidden by
law.
2. It defeats the provisions of any other law:-Where the enforcement of a particular is
of
such a nature that it would defeat the provisions of any statutory law which is in force,
the agreement is void.
3. It is fraudulent: - Fraud is punishable under the provisions of the law. Thus an
agreement
made with an object of defrauding or deceiving another will be void.
4. It involves an injury to a person or property of other:- Agreements made with an
object of putting some person in to criminal or wrongful harm or damaging his
property or
reputation is void
5. It is Immoral: - If the object of an agreement is considered as
immoral in the opinion of
the court, such agreement will be void on account of unlawful object.
6. It is against public policy: - Any agreement which goes against
public policy and
adversely affect public welfare public decency and public interest will
be void. The court
has declared the following agreements oppose to public policy.
a. Trading with alien enemy
b. Trafficking in public office
c. Interfering with course of justice
d. Marriage brokerage agreements
e. Agreement creating interest against professional duty.
f. Agreement in restraint of parental duty.
g. Agreement in restraint of Trade
 ILLEGAL
AGREEMENTS

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 MEANING
• An illegal agreement under the common law
of contract, is one that the court will not
enforce because the purpose of the
agreement is to achieve an illegal end. The
illegal end must result from performance of
the contract itself. The classic example of such
an agreement is a contract for murder
 EXAMPLE
• Agreements that obstruct legal procedures
• Agreements to commit crimes
• Agreements that injure public
service
• Agreements made without
required license etc.
 UNLAWFUL AGREEMENTS
1. Illegal Agreements
2. Immoral Agreements
3. Agreement opposing public policy
• An agreement which interfaces with administration of govt.
• An agreement interfeing with the administration of justice
• An agreement interfering with administration of personal
liberties
4. Wager
 WAGER
• According to Sec.30, a wager contract is a
contract in which one person promises to
another to pay money or money’s worth by
the happening of an uncertain future event in
consideration for other person’s promise to
pay if the event does not happen.
 UNLAWFUL OBJECT
• If the object of an agreement is the
performance of an unlawful act, the
agreement is unenforceable.
• For a contract to be valid only if the object and
the consideration should be legal
• The word object means purpose or design
PERFORMANCE OF CONTRACTS
PERFORMANCE OF CONTRACTS
Who must perform?
Sec.37: “The parties to a contract must either
perform, or offer to perform their respective
promises, unless such performance is dispensed with
or excused under the provisions of this Act, or of any
other law.”
Representative’s Liability: Promises bind the legal
representative of the deceased promisor.
Ashok promises to deliver goods to Babu on a
certain day on payment of Rs.1000. Ashok dies
before that day. Ashok’s representative is bound to
deliver the goods to Babu who in turn is bound to
pay the amount to Ashok’s representative.
 Contract is said to be performed
Actual Performance
Attempted Performance / Tender of
Performance / Offer of Performance
 What is Tender of Performance?
 It is also called “offer of performance.” It is when the
parties to a contract offer to perform their respective
promises.
Essentials of a valid tender of performance:
 It must be unconditional: X offers to give his house to
Y, if Z permits. Offer is conditional, hence not a valid
tender.
 Offer must be made by promisor or representative.
It must be unconditional
It must be made at proper time and place
A person to whom the tender is made must be given
opportunity of inspection of goods or articles
 The tender must be whole and not of the part
 The tender must be in proper form – tender of money
in current coins
The tender must be made to proper person
Tender for the delivery of goods must be for the
quantity and quality as stipulated in the contract
 A tender made to one of the several joint promisees
has the same legal consequences as a tender to all of
them
 Must be made at reasonable time & place.
 Offer cannot be of the part of performance. For
example, a stakeholder not bound to accept less than
what is actually payable.
 Promisor is bound by his promise to deliver the same
thing and promisee has opportunity to examine the
same.
 In case of joint promises, the tender is valid.
 It must be made to promisee or his duly authorized
agent.
 By whom must the contracts be performed
By the Promisor
By the Agent
By the representative
By Third Person ( Sec.41)
 DISCHARGE OF CONTRACT
1. Discharge by Performance
a) Actual Performance
b) Attempted Performance
2. Discharge by Agreement or Consent
a) Novation
b) Rescission
c) Alteration
.
d) Remission
e) Waiver
f) Merger
3. Discharge by Impossibility of Performance
* Known to parties
* Unknown to parties
* Death or in capacity of personal services
* Change of law
* Outbreak of war
.

4. Discharge by Lapse of Time

5. Discharge by Operation of law
* Death
* Merger
* Insolvency
6. Discharge by Breach of Contract
a) Actual Breach
b) Anticipatory Breach
 Remedies for Breach of Contract
• The Indian Contract Act lays out all the
provisions for the performance of a contract. It
also contains the provisions in case of breach of
contract by either party.
• When a promise or agreement is broken by any of
the parties we call it a breach of contract. So
when either of the parties does not keep their end
of the agreement or does not fulfill their
obligation as per the terms of the contract, it is a
breach of contract. There are a few remedies for
breach of contract available to the wronged party.
• Recession of Contract
As per section 65 of the Indian Contract Act,
the party that rescinds the contract must restore
any benefits he got under the said agreement. And
section 75 states that the party that rescinds the
contract is entitled to receive damages and/or
compensation for such a recession.
• Sue for Damages
Section 73 clearly states that the party who has
suffered, since the other party has broken
promises, can claim compensation for loss or
damages caused to them in the normal course
of business.
• Sue for Specific Performance
This means the party in breach will actually
have to carry out his duties according to the
contract. In certain cases, the courts may insist
that the party carry out the agreement.
So if any of the parties fails to perform the contract,
the court may order them to do so. This is a
decree of specific performance and is granted
instead of damages.
• Injunction
An injunction is basically like a decree for
specific performance but for a negative contract.
An injunction is a court order restraining a person
from doing a particular act.
• Quantum Meruit
Quantum meruit literally translates to “as
much is earned”. At times when one party of
the contract is prevented from finishing his
performance of the contract by the other party,
he can claim quantum meruit.
So he must be paid a reasonable remuneration
for the part of the contract he has already
performed. This could be the remuneration of
the services he has provided or the value of the
work he has already done.
Quasi-contracts

.
It is not at all a contract.

Q.C is an obligation created by law, regardless of

an agreement.
• Quasi contract is not a contract at all. A contract is intentionally entered
into by other the other parties.

• A quasi contract on the other hand is created by law.

• It resembles a contract in that a legal obligation is imposed on a party who

is required to perform it.

• It rests on the ground of equity that “ a person shall not be allowed to

enrich himself unjustly at the expense of another.
Eg :- In case of plumber who accidently install a sprinkler system in the lawn of the
wrong house. The owner of the house had learned the previous day that his
neighbour was getting new sprinkler . That morning, he sees the plumber is
installing them in his own lawn . Pleased at the mistake , he says nothing, and then
refuses to pay when the plumber hands him the bill now it’s comes under quasi
contract because the man already knew that the sprinkler were being installed
mistakenly ,so court would may him pay because of quasi contract
Types of Quasi contracts:
1. Supply of necessities (Sec.68).
2. Payment by an interested person (Sec.69)3.
3. Obligation to pay for non gratuitous act (Sec.70)4.
4. Responsibility of finder of goods (Sec.71)
5. Mistake or Coercion (Sec.72)
(i) Claim for necessaries supplied to person incapable of contracting (Sec 68):

If a person is incapable of entering into a contract, or anyone whom he is legally bound to support

is provided by another person with necessaries suited to his condition in life, the supplier is

entitled to recover the price from the property of such incapable persons. Example:

X supplies the wife and children of Y, a lunatic with necessaries suitable to their conditions in life.

X is entitled to be reimbursed from Y’s property

 ii) Payment by an interested person (Sec 69):

A person who is interested in the payment of money which another is bound by law to pay, and who therefore pays it is entitled to be reimbursed by

the other.

Example:

The consignee suffered loss due to fire in the wagon during transit. The insurer made good the loss. The claim was allowed as per Section 39.
 (iii) Obligation to pay for non-gratitous act (Sec 70):

Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so

gratuitously and such other persons enjoys the benefit thereof, the latter is bound to make compensation to the

former in expect of or to restore the thing so done or delivered.

Example:X, a tradesman, leaves goods at Y’s house by mistake; Y treats the goods as his own. He is bound to

pay X for them.

(iv) Responsibility of finder of goods (Sec 71):
Under Section 71 of the Act, a person who finds goods belonging to another and takes them into his custody is subject to
the same responsibility as a bailee.
(v) Liability for money paid or things delivered by mistake or under coercion (Sec 72):
At fast Section 72 of the Indian Contract Act, 1872 provides that a person to whom money has been paid or anything
delivered by mistake or under coercion must repay or return it.
Example:
A railway company refuses to deliver certain goods to the consignee, except upon the payment of illegal charge for
carriage. The consignee pays the sum charged to obtain the goods to he is estimated recover so much of the charges as
was illegal excessive.
 Indemnity (sec 124)
• A contract by which one party promise to
another to save him from loss caused to him
by the conduct of the promisor himself or by
the conduct of any other person is called a
contracts of indemnity
 Essential features of indemnity
1.There are two person the indemnifier the
indemnified or the indemnity holder
2.Their must be loss either by the promisors
conduct or by any another persons conduct
3.It is a contingent contract by nature
4.It is may be express or implies
 Guarantee (sec 126)
• A contract of guarantee is a contract to perform
the promise, or discharge the liability ,of a third
person in cause of his default, the person who
gives the guarantee is known as the surety the
person in respect of whom the guarantee is
given is known as principle debtor ,and the
person to whom the guarantee given is known as
the principle creditor
• Guarantee maybe either oral or written
 Essential features of guarantee
• Concurrence of three contracts
• Primarily liability is that of the principle debtor
• In cause the debtor is a minor ,the surety is
liability become primary
• All the essentials of valid contracts
• It maybe written or oral
• There need not to be full disclosure of facts to
the surety before he gives the guarantee
CONTRACT OF AGENCY

.
 AGENT

According to Sec 182 defines an ‘Agent’ as “a person

employed to do any act for another or to represent
another in dealings with third person” . The person
for whom such act is done or who is represented is
called the principal. The relationship between the
agent and the principal is called “agency”
 Who Can Be An Agent
Any person who is of the age of majority
according to the law to which he is subject
and who is of sound mind, may an agent.
The function of an agent is to bring his principal
into connectional relations with third parties.
The agent is merely a connecting link between
the principal and third parties
Modes of creating contract of Agency
1. Express Agency (sec186)
A person may be appointed agent, either by
word of mouth or by writing. No particular
form is required for appointing an agent
2. Implied Agency (sec187
An agency which arises from the conduct,
situation or relationships of parties
a) Agency by Estoppels (sec237
When a person has by his conduct or
statements induced others to believe that a
certain person is his agent, he is estopped from
subsequently denying it.
b). Agency by holding out (sec189
Though part of the law of estoppel,
some affirmative conduct by the principal is
necessary in creation of agency by holding out
c). Agency of necessity (sec189) –
This arises where there is no express or
implied appointment of a person as agent for
another but he is forced to act on behalf of a
particular person
6. Agency by ratification (sec197)– Where an
agent does an act for his principal but without
knowledge or authority or where he exceeds
the given authority, the principal is not held
bound by the transaction
 Rights Of An AGENT
1.Right to remuneration:An agent is entitled to his
agreed commission or remuneration and if there is no
agreement, to a reasonable remuneration.
2. Right of Retainer: It can only be claimed on money received
by him in the business of the agency. He can not therefore,
retain, sums received by him in one business for his
commission or remuneration in other business on behalf of
the same principle.
3. Rights of Lien(Sec 221):In the absence of any contract to the
contrary, an agent is entitled to retain goods, papers, and
other property, whether movable or immovable of the
principal received by him until
4.Right of Indemnification(Sec 222-224) :- The
principal is bound to indemnify an agent
against the consequences of all lawful acts
done by the agent in exercise of authority
conferred upon him
5. Right to Compensation for injury caused by
principal’s neglect (Sec 225) :- The principal
must make compensation to his agent in
respect of injury caused to such agent by the
principal’s neglect or want of skill
 Duties of Agent
1. To Conduct the business of agency according
to the principal’s directions
2. To render proper accounts (Section 213)
Rendering account does not mean showing
the account supported by the vouchers
3. In cases of difficulty to communicate with
the principal (Section 214)
4. Not to make any secret profits
5. Not to deal on his own account
6. Agent not entitled to remuneration for
business misconducted
 WAGERING

A wager is a bet; a contract by which two parties

or more agree that a certain sum of money, or
other thing, shall be paid or delivered to one of
them, on the happening or not happening of an
uncertain event.
 WHEN ARE WAGERS ALLOWED BY LAW?

• The law does not prohibit all wagers.

• Each of the parties must have the right to dispose of

the thing which is the object of the wager.

• Each must give a perfect and full consent to the

contract.
• There must he equality between the parties.

• There must be good faith between them.

• The wager must not be forbidden by law. In general,

it seems that a wager is legal and maybe enforced in
a court of law, if it be not:
 ESSENTIALS OF WAGERING

• Mutual chances of gain and loss:

There must be two parties, or two sides, and mutual
chances of gain and loss,[iii] i.e., one party is to win
and the other to lose upon the determination of the
event.
• Two parties:
There must be two persons, either of whom is
capable of winning or losing.
• Uncertain Event:
Uncertainty in the minds of the parties about the
determination of the event in one way or other is
necessary.
• No interest other than stake:
Neither party should have any interest in the
happening of the event other than the sum or stake he
will win or lose
• either party to have control over the event:
Lastly, neither party should have control over the
happening of the event one way or the other. “If one
of the parties has the event in his own hands, the
transaction lacks an essential ingredient of a wager.
SALES OF GOODS ACT
THE SALE OF GOODS ACT 1930

Law relating to sale of goods was originally

contained in chapter VII of Indian Contract
Act.

Separate Law for sale of goods enacted in

1930

Contains provisions originally included in the

Contract Act (Sec. 76 – 132)
GOODS

Include every kind of movable property other than

actionable claim or money

Includes
•Shares
•Growing crops
•Water
•Gas
•Electricity
•Copy right
CONTRACT OF SALE

Is a contract whereby the seller transfers or agrees to

transfer the property in goods to the buyer for a price.

Where the right of ownership in the goods is transferred from

the seller to the buyer, the contract is called a sale.

Where the transfer of ownership in the goods is to take

place at a future time or subject to some conditions
thereafter to be fulfilled the contract is called an
agreement to sell.
ESSENTIAL ELEMENTS OF THE ACT

.
Sale and Agreement to sell
 The section 4(1) of the Sale of Goods Act, 1930
states a contract of sale of goods as follows:

‘A contract of sale of goods is a contract whereby

the seller either transfers or agrees to transfer the
property in goods to the buyer for a decided
price.’
Sale

Here the property in goods is transferred at once to the

buyer from the seller.

The Section 4(3) of the Act says that “where under a

contract of sale the property in the goods is transferred
from the seller to the buyer, the contract is then known
as a sale.”
ESSENTIAL OF A CONTRACT OF SALE OF GOODS

(1) At least two parties: To make a contract of sale there must be at least two
parties. These parties must be distinct, that is, a buyer and a seller. These
parties should be also competent to make a contact. In this context the word
‘buyer’ means any person who buys or agrees to buy the goods and the word
‘seller”’ means any person who sells or agrees to sell the goods.

(2) Goods : the subject-matter of the contract of sale of goods, must be some
goods the purpose of this contract is to transfer the property in these goods
from the seller to the buyer. And the googs forming the subject-matter of
contract should be monable. The regulation of transfer of immovable property
does not come within the purview of sale of Goods act.
(3) Price-the consideration : In a contract of sale the consideration is price. The
price must be money when the goods are sold in exchange for goods, this is
not sale but only a barter. But price or consideration may by partly in money
and partly in goods.

(4) General property : In a contract of sale the object is to transfer general

property, from the seller to the buyer, in the goods. General property in the
goods in different from special property in the goods. If a person has the
ownership of the goods, it means, he has the general property in the goods. If
the owners of the goods pledges these goods with a money-lender, the
moneylender has special property in the goods.
5) In a contract of sale all the essential elements of a valid contract
must be present, namely, agreement, intention to create legal
relationship, capacity to make contract, free consert, lawful
consideration, lawful object, etc.
Agreement To sale
Agreement to Sale is a contract where one party agrees to sell some property to
another party at a future date, subject to the terms and conditions mentioned in
the agreement.

This contract contain the description of the property (moveable or immoveable),

sale price, time of sale, the conditions that need to be complied before and after
the sale, any contingencies, cancellation clauses, etc.

An Agreement to Sale is not a Sale Deed and the purchaser does not
automatically become the owner of the property unless that property is
specifically handed over by the seller as per the provisions of the Agreement to
Sale.
 CONDITIONS AND WARRANTIES
Conditions
A condition is a stipulated essential to the main purpose of the
contract, breach of which gives rise to a right to treat the
contract as repudiated.
A contract of sale cannot be fulfilled unless the condition to it,
is fulfilled.
In case of breach of condition, the aggrieved party can reject
the contract.
Kinds of conditions
1. Express conditions
A conditions that has been expressly provided for
agreed upon by both the parties at the time of the contract of
sale
2. Implied conditions
Conditions are said to be implied when the law
incorporates their existence as implicit to a contract of sale
unless otherwise agreed upon between parties
Implied conditions are of following types
• Condition as to title
• Condition as to description
• Condition as to sample
• Condition as to sample as well as description
• Condition as to quality or fitness
• Condition as to merchantability
Warranties
A warranty is a stipulation collateral to the main purpose of the
contract, the breach of which gives rise to a claim for damages
but not to a right to reject the goods and treat the contract as
repudiated
The main contract can be fulfilled even if the warranty is not
fulfilled.
In case of breach of warranty, the aggrieved party can only
claim for damages.
Kinds of warranties
1. Express warranties
A warranty is said to be express when the term of the
contract expressly provides for it.
2. Implied warranties
An implied warranty is one which the law incorporates
into a contract of sale. Following are the implied warranties
• Warranty as to quiet
• Warranty against encumbrances
• Warranty to disclose the dangerous nature of good
Transfer
of
Property
Transfer of
Property
• According to the Transfer of Property
Act 1882

Transfer of Property“ means an act by

which a person conveys property to
one or more persons. The act of
transfer may be done in the present or
for the future.
The person may include an
individual, company or
association or body of
individuals, and any kind of
property may be transferred,
including the transfer of
immovable property.
• The Phrase “ TRANSFER OF
PROPERTY IN GOODS “ means
Transfer of ownership of the Goods
from one person to another.
• It may happen either in present or
future
• It also said transfer of ownership or
possesition / agrees to transfer
 TRANSFER OF PROPERTY

• Time and period

• Type and nature of
property
• Nature of ownership
• consents
 BUSINESS LAW
RIGHTS AND DUTIES OF BUYERS AND SELLERS
 RIGHTS OF BUYER
• 1. To have delivery of the goods as per contract. (Sec. 31 & 32)

• 2. To reject the goods when they are not of the description, quality or
quantity as specified in the contract (Sec 37).

3. To repudiate the contract when goods are delivered in installments

without any agreement to that effects [ Sec. 38 (1)]

4. To be informed by the seller, when the goods are to be sent by so that

he may arrange for their insurance [Sec 39 (30)]
• 5. To have a reasonable opportunity to examine the goods
for ascertaining whether they are in conformity with the
contract. (Sec. 41)

6. To sue the seller for recovery of the price, if already

paid, when the seller fails to deliver the goods.

7. To sue the seller for damages if the seller wrongfully

neglects or refuses to deliver the gods to the buyer ( Sec
57)

8. To sue the seller for specific performance

 DUTIES OF BUYER
• 1.To accept the delivery of goods, when the seller is willing to make the delivery as
per the contract (Sec. 31)

2. To pay the price in exchange for possession of the goods

3. To apply for delivery of the goods. (Sec. 35)

4. To demand delivery of the goods at a reasonable hour [Sec 36 (4)

• 5. To accept delivery of the goods in installments and pay for
them, in accordance with the contract. [(Sec. 38 (2)]

6. To bear the risk of deterioration in the course of transit, when

the goods are to be delivered at a place other than where they
are sold ( Sec 40)

7. To inform the seller in case the buyer refuses to accept or

rejects the goods ( Sec 43)
 RIGHTS OF THE SELLER
• 1. To reserve the right of disposal of the goods until certain conditions
are fulfilled. ( Sec 25 (1)]

2. To assume that the buyer has accepted the goods , where the buyer

3. To deliver the goods only when applied for by the buyer ( Sec 35)
• 4. To make delivery of the goods in installments, when so agreed
(Sec 39 (1)]

5. To exercise lien and retain possession of the goods, until

payment of the price ( Sec 47 (1)]

6. To stop the goods in transit and resume possession of the

goods, until payment of the price ( Sec 49 (2) and 50]

7. To resell the goods under certain circumstances ( Sec 54)

 DUTIES OF THE SELLER

• 1. To make the arrangement for transfer of property in the goods

to the buyer.

2. To ascertain and appropriate the goods to the contract of sale

3. To pass an absolute and effective title to the goods, to the

buyer.

4. To deliver the goods in accordance with the terms of the

contract ( Sec 31)
• 5. To ensure that the goods supplied conform to the
implied / express conditions and warranties.

6. To put the goods in a deliverable state and to deliver

the goods as and when applied for by the buyer ( Sec 35)

7. To deliver the goods within the time specified in the

contract or within a reasonable time and a reasonable
hour. [ Sec 36 (2) and (4)]
Remedies For Breach
- Sale of goods Act
 For the Buyers
• Suit for damages for non delivery.
• Suit for specific performance.
• Suit for breach of warranty.
• Suit for interest.
 For the Sellers
• Suit for price.
• Suit for damages.
 For both buyer and seller
• Suit for repudiation of contract before date or anticipatory
breach.
• Interest by way of damages or special damages.
TOPIC: DUTIES OF AN UNPAID SELLER
UNPAID SELLER
A seller of goods is an unpaid seller within the meaning of the Sale of Goo
ds Act 1979 when the whole price has not been paid or tendered or when a
bill of exchange or other negotiable instrument has been received as condit
ional payment and the condition on which it was received has not been fulf
illed by reason of the dishonour of the instrument or otherwise
 DUTIES OF THE UNPAID SELLER

 Duty to inform the buyer in case of dishonor of cheque or other

negotiable instrument.
It is the duty of the seller that he informs the buyer of the dishonor of
cheque before exercising his rights as an unpaid seller. As according to
Negotiable Instrument Act, Section 138 (2), after the dishonor of the cheque
has occurred, it is the duty of the payee or the holder to give a notice in
writing to the drawer of cheque within 30 days of the information by the bank
that the cheque has been dishonored and thus make a demand for such
payment.
 Duty to deliver back the goods after the payment has been made
after the exercise of right to stoppage in transit.
In general it is the duty of the seller to deliver the goods and
the buyer to accept them which may be altered by changing the terms
and conditions of the contract.
But in case of an unpaid seller, he has the right to stop the goods in
transit and the right to lien if there is any default in the payment by the
buyer.
 Duty to give notice to the carrier or bailee in possession
of the goods, or to his principal for stoppage in transit.
Section 52 of the act empowers the unpaid seller to
exercise his right to stoppage in transit by taking actual
possession of the goods or by giving a notice of his claim to
the carrier or bailee who is in the possession of the goods.
 Duty to maintain the goods in a deliverable state.
When the seller exercises his right to stoppage in transit or right to
lien, he needs to make sure after the default is rectified, that the goods
are in deliverable state and of the same quality and quantity as
promised in the contract as the sale is not generally cancelled by the
mere exercise of right to lien or stoppage in transit.
 Duty to give notice to the buyer of his intentions to re-sell.
The unpaid seller has the right to re-sell the goods in the cases when the goods are
of perishable nature or when he sends a notice to the buyer during the exercise of
his right to lien or stoppage that he intends to re-sell the goods.
If even after the notice the buyer does not make the payment within a reasonable
time, the seller has the right to re-sell the goods and recover the damages for any
loss due to breach of contract from the buyer
 Duty to exercise his right to lien and right to withhold delivery
only for payment of price.
The right to lien can be exercised by the unpaid seller only for the price
due by the buyer and not for any other charges like rent for maintenance
or other expenses.
 Duty to bear the expenses of redelivery when exercising
his right to stoppage in transit.
It is well explained in section 52 clause 2 that when the carrier
or other bailee who is in the possession of the goods in transit,
redelivers those goods to the seller on account of notice given
by him, he shall bear the expenses of such redelivery. That is
to say that the costs of redelivery shall be borne by the seller
himself and not the bailee or the carrier.
Characteristic's of negotiable instrument
 Negotiable instrument
• A negotiable instrument is a piece of paper which entitles a person

to a certain sum of money and which is transferable from one to

another person by a delivery or by endorsement and delivery

Ex: Check book

 CHARACTERISTICS
1) FREE TRANSFERABILITY OR EASY NEGOTIABILITY
 the property ( right to ownership) in these instruments passes by either endorsement and delivery or by delivery merely
and no further evidence of transfer is needed.

2) TITLE OF HOLDER IS FREE FROM ALL DEFECTS.

 A person who takes negotiable instrument Bonafede and for value gets the instrument free from all defects in the title.
 3) TRANSFERER CAN SUE IN HIS OWN NAME WITHOUT GIVING
NOTICE TO THE debtor

 A bill of exchange, promissory note, cheque represents a debt that is an ‘actionable claim’ and

implies the right of the creditor to recover something from his debt.

 The creditor can either recover his amount himself or can transfer his right to another person.

 In case of transfer or agreement of an ordinary ‘actionable claim’ evidenced by an entry by the

creditor in his own account book under the transfer of property act, notice to the debtor is necessary

inorder to make the transferee entitles to sue in his own name.

 4) presumptions
certain presumptions applicable to all Negotiable instrument.
Sec 118 and 119 lay down the following pressumptions
(a) For consideration
(b) As to date
(c) As to time of acceptance
(d) As to transfer
(e) As to time of endorsement
(f) As to stamps
(g) As to holder in due course
(h) As to dishonour
PARTIES TO A NEGOTIABLE
INSTRUMENT
Maker/drawer, drawee, payee, holder, holder in due course, endorser, endorsee,
endorsement, drawee in the case of need, Acceptor for honour, who are parties to a
negotiable instrument is explained below.

Maker/Drawer
The person who makes or executes the note promising to pay the amount stated
therein.
Drawee
The person directed to pay the money by the drawer. The drawee is the paying bank
in case of cheque.

Payee
Payee is the person whose name is written on the promissory note or bill of
exchange or cheque. The payee is entitled to receive amount mentioned in the note
or bill or cheque.
Holder
Holder is either the payee or some other person to whom he may have endorsed the
promissory note or bill of exchange or cheque. A person cannot be a holder unless
he is the payee or indorsee (endorsee) thereof.

Endorser
A signature of the owner (the holder of the instrument) would serve the legal rights
to transfer an instrument to another party. The holder of the instrument who transfers
his right to another party by endorsement is called endorser.
Endorsee
If the endorser adds a direction to pay the amount mentioned in the instrument to, or
to the order of, a specified person, the person so specified is called the “endorsee” of
the instrument.

Endorsement
If the endorser signs his name only, it is called endorsement in blank. If the
endorsement contains the instructions of endorser to pay the amount mentioned in
the instrument to, or to the order of, a specified person, the endorsement is called
endorsement in full.
Drawee in the case of need
In addition to drawee’s name, the name of a person is given in the bill or
endorsement, to have resorted in case of need. Such person is called drawee in case
of need.
Acceptor for honour

In the event of refusal of acceptance of bill by the original drawer or in cases of

providing better security when demanded by notary public, with the consent of the
holder some other person who is originally not liable for payment of bill, may
accept it for honor of any party liable on the bill . Such acceptor is called ‘Acceptor
for honour”.
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 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.”
NEGOTIABLE INSTUMENTS
ACT,1881
CAPACITY OF PARTIES TO A NEGOTIABLE
INSTRUMENT
 NEGOTIABLE INSTUMENT:

The word Negotiable instrument means ‘transferable by delivery’, and the word
instrument means ‘a written document by which a right is created in favour of some
person’.

• Example: promissory note, bills of exchange, cheque etc.

 Capacity of the parties

• Every person capable of contracting may bind himself and be bound by the making,
drawing, acceptance endorsement, delivery and negotiation of a promissory note, bill
of exchange or cheque.

• But such incompetent persons may have rights under a negotiable instrument, but can
incur no liability under it.
 Capacity of parties
• Minor
• Insolvent
• Person of unsound mind
• Partner
• Agent
• Joint stock company
 CHEQUE
Def.
"Cheque is an instrument in writing containing an
unconditional order, addressed to a banker, sign by the
person who has deposited money with the banker,
requiring him to pay on demand a certain sum of money
only to or to the order of certain person or to the bearer
of instrument."
 DIFFERENT KINDS / TYPES OF
CHEQUES
1. Bearer cheque
2. Order cheque
3. Uncrossed / Open Cheque
4. Crossed Cheque
5. Anti-Dated Cheque
6. Post-Dated Cheque
7. Stale Cheque
1. Bearer Cheque
When the words "or bearer" appearing on the face of the
cheque are not cancelled, the cheque is called a bearer
cheque.

2. Order Cheque
When the word "bearer" appearing on the face of a
cheque is cancelled and when in its place the word "or
order" is written on the face of the cheque, the cheque is
called an order cheque.
3. Uncrossed / Open Cheque
When a cheque is not crossed, it is known as an "Open
Cheque" or an "Uncrossed Cheque".

4. Crossed Cheque
Crossing of cheque means drawing two parallel lines on
the face of the cheque with or without additional words
like "& CO." or "Account Payee" or "Not Negotiable".

5. Anti-Dated Cheque
If a cheque bears a date earlier than the date on which it
is presented to the bank, it is called as "anti-dated
cheque".
6. Post-Dated Cheque
If a cheque bears a date which is yet to come (future
date) then it is known as post-dated cheque.

7. Stale Cheque
If a cheque is presented for payment after three months
from the date of the cheque it is called stale cheque. A
stale cheque is not honoured by the bank.
Bill of Exchange
• As per the Indian Negotiable Instruments Act. 1881
“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.”
Parts Of A Bill Of Exchange
• Date
• Term
• Amount
• Stamp
• Parties
Parties to a Bill Of Exchange
• Drawer: The person who orders a bank to withdraw money from an account to
pay a designated person a specific sum according to the term of the Bill.
• Drawee: The person on whom the Bill is drawn (The Debtor). He is the person
who accepts the Bill of Exchange. To him the bill is considered as Bill payable.
• Payee: The person to whom the Bill-money is payable. In most of the cases the
drawer of payable. In most of the cases the drawer of the Bill himself is the Payee.
To him The Bill is considered as Bill Receivable.
Advantages of Bill of Exchange

• A Bill of Exchange is used in settlement of debts.

• It fixes the date of payment.
• It is a written and signed acknowledgement of debt.
• A debtor enjoys full period of credit.
• A drawer can convert the bill into cash by getting it discounted with
the bank.
Special Features of Bill of Exchange

• A Bill Of Exchange is an instrument in writing.

• It must be signed by the maker.
• It contains an unconditional order.
• The order must be to pay money and money only.
• The sum payable must be specific.
• The amount must be paid within a stipulated time.
• The name of the drawee must be clearly mentioned.
• It must be dated and stamped.
Types of Bill Of Exchange
i. Payable at sight, on demand or presentation.
ii. Payable after a certain time in the future. It is also known as Term
Bill.
Acceptance of a Bill Of Exchange

The Drawee signs across the face of the Bill with or without the words,
“Accepted”. This denotes his acceptance of the Bill. Such acceptance may be:
1. General or Unqualified
2. Qualified.
General or Unqualified :
• Here the Drawee accepts to pay the whole amount mentioned in the Bill
without any condition.
Qualified
• Here the Drawee accepts to pay the Bill subject to some conditions
regarding amounts, tenor of the Bill.
Difference Between Bill Of Exchange And
Promissory Notes

I. A bill of exchange is an unconditional order to pay money . A

promissory note is an Unconditional promiseto pay money.
II. A bill is drawn by a creditor on his debtor. A promissory note is made by
a debtor and sent to his creditor.
III. A bill does not become operative unless it is accepted by the person on
whom it is drawn. There is no need for acceptance Of a promissory note
as it is made By the debtor himself.
IV. There are three parties to a bill-drawer of the bill, acceptor of bill and
receiver of money. There are two parties to promissory note-maker of the
note and receiver of the money.
 PROMISSORY NOTE
Definition
According to sec 4 “ a promissory note is an
instrument in writing containing an
unconditional undertaking, signed by the
maker, to pay a certain sum of money to or to
the order of , a certain person, or to the bearer
of the instrument”
 Parties to a promissory note

1.The maker or drawer

2.The payee

In case of transfer of promissory note

1.The endorser
2.The endorsee
Essentials of promissory note

1.It must be in writing.

2. It must contain a promise or undertaking to
pay.
3. The promise to pay must be unconditional.
4.It must be signed by he maker.
5.The maker must be a certain person.
 The word ‘company’ was derived from the Latin
words Com=with or together : Panis =bread .
 A company can be defined as an "artificial
person", invisible, intangible, created under law,
with a discrete legal entity, perpetual succession
and a common seal.
DEFINITION
Sec 3(1)(i) of the Companies Act, 1956 defines a
company as “a company formed and registered
under this act or an existing company. Existing
company means a company formed and
registered under any of the earlier company
laws.”
 Seperate Legal Entity
 Artifical Person
 Perpetual Existence
 Common Seal
 Limited Liability
 Capacity To Sue Or To Be Sued
 Transferability Of Shares
 Passed in Lok sabha: December 18, 2012
 Passed in Rajya Sabha: August 08, 2013
 Total number of sections: 470
 Total number of chapters: 29
 Total number of schedules: 7
 Effective from September 12, 2013
 To promote the development of the economy
 To encourage transparency and accountability
 To promote high standards of corporate governance
 To recognize new concepts and procedures to support
business while protecting interests of all the
stakeholders
 To set up institutional structure in the form of various
authorities, bodies and panels (NCLT and NCLAT)
 To enforce stricter action against fraud and gross non -
compliance with company law provisions
Nature and types of companies
 Nature of company
• Separate legal entity
• Limited liability
• Perpetual succession
• Common seal
• Transferability of share
• Separate property
• Capacity to sue and be sued
• ARTIFICIAL PERSON
1. SEPARATE LEGAL ENTITY
 A company is in low regarded as an entity separate from its
member.
 In other words , it has an independent corporate existence.
Any of its member can enter into contracts with it in the same
manner as any other individual can and he can not be held
liable for the act of the company even if he holds virtually the
entire share capital.
 The company’s money and property belong to the company not
to the shareholders.
2. LIMITED LIABILITY
• In a company limited by shares, the liability of member is
limited to the unpaid value of the shares.
• Company limited by guarantee is a incorporated firm
without share capital, and in which the liability of its
members is limited to the amount each one of them
undertakes to contribute at the time the firm is wound up.
3. Perpetual succession
• Member may come and go but the company can go on
forever. It continues to exist even if all its members are
dead. The existence of company can be terminated only by
law
4. Common seal
• Common seal is the official signature of the company.
• Any document on which common seal is affixed, is deemed
to be signed by the company.
5. Transferability of share
• In case of a public company the shares are freely
transferable but in the case of a private company there
will be certain restriction on the transferability of shares.
6. Separate property
• As a company is a legal person distinct from its
members, It is capable of owning ,enjoying and
disposing of property in its own name. Although its
capital and assets are contributed by its shareholders,
they are not the private and joint owner of its property.
7. Capacity to sue and be sued
• A company being a separate legal entity has the legal entity to
sue others such as members, directors, debtors, outsiders etc.
Similarly, a company may also be sued by others such as
members, directors, creditors, outsiders.
8. ARTIFICIAL PERSON
• A company is an artificial person.
• But it is not a fictitious person. A company does exist but only
in the eyes of law. In other words, a company exists only in
contemplation of law.
Types of company
ON THE BASIS OF INCORPORATION
1. Chartered companies:
• Companies set up as a result of a royal charter granted by a king
or queen of a country are known as chartered companies.
Example: east india company, the bank of england etc.
2. Statutory companies:
• Companies set up by special acts of parliament or state
legislatures are called statutory companies. Example: reserve bank
of india, life insurance corporation of india, unit trust of india etc..
3. Registered companies:
• Companies registered under the indian companies act, 1956 or
under any of the previous companies acts are called registered
companies. Most of the companies in india belong to this
category.
 ON THE BASIS OF LIABILITY
1. Companies with Limited Liability:
• It is a company where the liability of the shareholder remains
limited to the nominal value of the shares held by him.
2. Unlimited Companies:
• Here the liability of its members is unlimited. In other words,
their liability extends to their private properties also.
Unlimited companies are almost non-existent these days.
3. Companies limited by guarantee:
• In a guarantee company the liability of a shareholder is
limited to the amount he has voluntarily undertaken to
contribute towards the assets of the company to meet out
any deficiency at the time of it winding up. Such a company
may or may not have a share capital.
 ON THE BASIS OF NUMBER OF MEMBERS
1. Private company :
• A company which has a minimum paid-up capital of rs 1,00,000 or
such higher paid up capital as may be prescribed, and by its
articles
a) Restricts the right to transfer its shares, if any
b) Limits the number of its members to 50.
c) Prohibits any invitation to the public to subscribe for any shares
in, or debentures of, the company,
d) Prohibits any invitation or acceptance of deposits from persons
other than its members, directors or their relatives.
2. Public company :
• A public company means a company which
a) Has a minimum paid-up capital of rs. 5 lakh or such higher
paid-up capital, as may be prescribed.
b) Is a private company which is a subsidiary of a company which
is not a private company.
 ON THE BASIS OF CONTROL
1. Holding company:
Holding company is the company which holds and control
the other company.
2. Subsidiary company:
It is the company which is holded by other is known as
subsidiary of other.
 ON THE BASIS OF OWNERSHIP
1. Government companies :
• The company which is owned by government. Paid up
capital of the govt in these companies is minimum 51%.
2. Non government (foreign company) :
• The companies registered outside the india and run business
within india.
 Memorandum of Association
Memorandum of Association (MOA) is the supreme
public document which contains all those information
that are required for the company at the time of
incorporation.
 It can also be said that a company cannot be
incorporated without memorandum. At the time of
registration of the company, it needs to be registered
with the ROC (Registrar of Companies)
. It contains the objects, powers, and scope of the
company, beyond which a company is not allowed to
work, i.e. it limits the range of activities of the company.
Any person who deals with the company like
shareholders, creditors, investors, etc. is presumed to
have read the company, i.e. they must know
the company’s objects and its area of operations.
The Memorandum is also known as the charter of
the company.
 There are six conditions of the Memorandum
•Name Clause – Any company cannot register with a
name which CG may think unfit and also with a name that
too nearly resembles with the name of any other company.
•Situation Clause – Every company must specify the
name of the state in which the registered office of the
company is located.
•Object Clause – Main objects and auxiliary objects of
the company.
•Liability Clause – Details regarding the liabilities of the
members of the company.
•Capital Clause – The total capital of the company.
•Subscription Clause – Details of subscribers, shares
taken by them, witness, etc.
 Articles Of Association
• It is the second important document required
to be filed with the registrar for the
registration f the company.
• Articles regulate the internal management of
a company.
• They defines the powers of its officers.
• Articles are like partnership deed in a
partnership.
 Registration of articles
• According to sec 7(1) at the time of incorporation
of a company there shall be filed with the registrar
with whose jurisdiction the registered office of a
company is proposed to be situated , the
memorandum and articles of the company duly
signed by all the subscribers to the memorandum
in the prescribed manner.
 Importance of articles of association
• It is a business document
• It provides the regulation to manage the
company.
• It is an agreement between the shareholders
and between the company and its
shareholders.
• It is considered to be a very important
document for the administration and manage
the company.
 Forms
• The articles of a company shall be in
respective forms specified in tables F,G,H,I
&Jin schedule 1 as may be applicable to such
company sec(5(B)) and which are as follows
• Table f articles of association of a ltd by shares
• Table g articles of association of a ltd by
guarantee and having share capital.
• Table h articles of association of a ltd by
guarantee and not having share capital.
• Table i articles of association of an unlimited
co and having share capital.
• Table j articles of association of an unlimited
co and not having share capital.
contents of articles

• The execution or the adoption of the

preliminary contract.
• The share capital and its division into different
classes of shares
• Rights and different classes of share holders
• Payment of underwriting commission
• Lien on share
• Calls on shares
• Transfer of shares
• Transmission of shares
• Forfeiture of shares
• Alteration of shares
• Conversion of hares into stock
• Capitalisation of profit
• Buy back of shares
• Buy back of shares
• General meetings
• Adjournment of meeting
• Voting rights
• Proxy appointment
• Bod
• Proceedings of the firm etc…
 PROSPECTUS
DEFINITION

• Section 2(70) of the Companies Act, 2013 defines a

prospectus as “A prospectus means Any documents
described or issued as a prospectus and includes any
notices, circular, advertisement, or other documents
inviting deposit from the public or documents
inviting offer from the public for the subscription of
shares or debentures in a company.”
• A prospectus also includes shelf prospectus and red
herring prospectus. A prospectus is not merely an
advertisement.
 WHICH COMPANIES ARE REQUIRED TO
ISSUE PROSPECTUS
• Every public listed company who intends to offer
shares or debentures of the company to the public.
• Every private company who ceases to be a private
company and converts into a public company and
intends to offer shares or debentures of the company
to the public.
 REQUIREMENTS OF A PROSPECTUS

• It should be in writing
• It should be issued by or on behalf of a body
corporate
• It should be issued to public
• It should contain invitation to public for making
deposits or for subscription of shares in or
debentures of a body corporate
 CONTENTS OF A PROSPECTUS
1. Address of the registered office of the company.
2. Name and address of company secretary, auditors, bankers,
underwriters etc.
3. Dates of the opening and closing of the issue.
4. Declaration about the issue of allotment letters and refunds
within the prescribed time.
5. A statement by the board of directors about the separate bank
account where all monies received out of shares issued are to
be transferred.
6. Details about underwriting of the issue.
7. Consent of directors, auditors, bankers to the issue, expert’s
opinion if any.
8. The authority for the issue and the details of the resolution
passed therefore.
9. Procedure and time schedule for allotment and issue of securities.
10. Capital structure of the company.
11. Main objects and present business of the company and its
location.
12. Main object of public offer and terms of the present issue.
13. Minimum subscription, amount payable by way of premium, issue
of shares otherwise than on cash.
14. Details of directors including their appointment and remuneration.
15. Disclosure about sources of promoter’s contribution.
16. Particulars relation to management perception of risk factors
specific to the project, gestation period of the project, extent of
progress made in the project and deadlines for completion of the
project.
 VARIOUS CATEGORIES OF PROSPECTUS

1.Abridged Prospectus
2.Deemed Prospectus
3.Shelf Prospectus
4.Red Herring Prospectus
5.Statement In Lieu of Prospectus
 (1) ABRIDGED PROSPECTUS
• [Sec.2(1)]: Abridged prospectus means a
memorandum containing such salient features of a
prospectus as may be specified by the SEBI by
making regulations in this behalf. No form of
application for the purchase of any of the securities
of a company shall be issued unless such form is
accompanied by an abridged prospectus.
• A copy of the prospectus shall, on a request being
made by any person before the closing of the
subscription list and the offer, be furnished to him.
 (2) DEEMED PROSPECTUS

• Section-25 provides that where a company allots or

agrees to allot any shares or debentures with a view
to these being offered for sale to the public, any
document by which the offer of sale to the public is
made, shall for all purposes be deemed to be a
prospectus issued by the company.
 (3) SHELF PROSPECTUS
• Section-31 Any class or classes of companies, as the
Securities and Exchange Board may provide by
regulations in this behalf, may file a shelf prospectus
with the Registrar at the stage of the first offer of
securities.
• It indicate a period not exceeding one year as the period
of validity of such prospectus which shall commence
from the date of opening of the first offer of securities
under that prospectus, and in respect of a second or
subsequent offer of such securities issued during the
period of validity of that prospectus, no further
prospectus is required.
 (4) RED HERRING PROSPECTUS

• “Red-herring prospectus" means a prospectus that

does not have complete particulars on the price of
the securities offered and quantum of securities
offered.
• The front page of the prospectus displays a bold red
disclaimer stating that information in the prospectus
is not complete and may be changed.
 (5) STATEMENT IN LIEU OF PROSPECTUS

• A public company, which does not raise its capital

by public issue, need not issue a prospectus. In such
a case a statement in lieu of prospectus must be filed
with the Registrar 3 days before the allotment of
shares or debentures is made.
• It should be dated and signed by each director or
proposed director and should contain the same
particulars as are required in case of prospectus
proper.
Membership in a Company
• Companies Act, 2013 defines ‘Member’ under
section 2(55)
• By definition, the term “Member” in relation to a
company means, one who has agreed to become
the member of the company by entering his
name into the ‘Register of Members’.
• Every person who has agreed in writing to
become a part of the company and also holds
shares of the company is considered the
‘Member of the Company’ and is said to hold
membership in a company.
• The name of the member of the company is
entered as ‘Beneficial owner in the record of
depository’.
In order to acquire the membership of the
company, the following two elements must be
presented:

• An Agreement to become a member.

• Entry of the name of the person so agreeing,

in the Register of members of the company.
 Modes of Acquiring Membership

• Subscribing to MOA
• Agreement in Writing
• Holding Shares
 Subscribing to MOA

• If a person agrees to sign the memorandum and

pledge his presence on the board of members, he
becomes the member of the company.
• Names of the people who have agreed to join the
membership of the company should be entered
in Register of Members.
• Along with the agreement, if they’ve agreed to
share the company’s shares they become the
Shareholders of the Company.
 Agreement in Writing
• A person would become the member of the
company if he ‘agrees in writing’ and gets his name
entered in the register of members of the company.
• A shareholder would also become a member of the
company if he ‘agrees in writing’, and by the
following methods:
– By transfer of shares
– By transmission of shares
– By Estoppels (Membership Without sufficient
Cause).
 Holding Shares

• A person becomes a member of the company

if his name is entered as a beneficial owner of
the records of the depository and also holds
equity share capital of the company. In such
cases, the person needn’t apply ‘in writing’ to
become a member of the company.
 Removal of Membership
Terminating a member of the company can result in removal
from the ‘Register of Members’. The following are the modes
of removing a member of the company:
Transfer of Membership
• Here, the shares of a member are transferred to another
person by the company in the name of the transferee.
• The name of the transferor is removed from the Register of
Members.
• After transferring all the shares from the person to another
person, the person is legally removed from the company.
Transmission of Membership
• On the death of a shareholder/member of the company,
his/her legal heir or representative becomes a member.
Surrender of Membership
• A person is removed from the membership
once he/she surrenders his shares, which
requires ‘Acceptance on part of Board’.
Forefeiture of Membership
• On account of Loss or selling of a share, the
member is terminated from the company.
Share Buy Back
• The person is terminated from the company if
the company buys back its shares.
 Liabilities of Members
A ‘Liability’ is a state of being legally responsible for
something. This term is usually used in an organization to
emphasize the responsibilities of a member of the
company. The following are the liabilities of the member
of a company:
• To make shares if he/she is allotted as per the Act.
• To pay call money or pay the due amount of shares.
• To abide by the decision of majority when they act
‘bonafide’.
• To contribute to the Asset of the company in case of
winding up and when the shares are partly paid up.
 Who can become a shareholder
Shareholders are otherwise known as the members of a
company. Under the Companies Act, 2013, any person can
become a shareholder and a person could mean an individual,
body corporate, an association or a company irrespective of
its incorporation.
•Minor
•Hindu Undivided Family (HUF)
•Company
•Partnership Firm
•Trust
•Public Office
•Foreign National / NRI
•State or Central government
•Limited Liability Partnership
Meeting and its
proceeding
 Statutory meeting

• Every company limited by shares and every

company limited by guarantee and having a share
capital shall, within a period of not less than one
month nor more than six month from the date at
which the company is entitled to commence
business, hold a general meeting of members of the
company .this meeting is called the ‘statutory
meeting’
• List of members
• Discussion of matters relating to formational
aspects
• Adjournment
• Consequences of default
Annual general meeting

• Every company shall in each year hold in

addition to any other meeting a general
meeting as its annual general meeting and
shall specify the meeting as such in the
notice calling it.There shall not be an
interval of more than 15 months between
one annual general meeting of the company
and the next.
Extraordinary general meeting
• A statutory meeting and an annual general
meeting of a company are called ordinary
meetings. Any meeting other than
• These meeting is called an extraordinary
general meeting
• It is called for transacting some urgent or
special business which cannot be postponed
till the next annual general meeting.
Requisties of a valid meeting
• Proper authority
• Notice of meeting
• Quorum
• Chairman
• Minutes of meeting
• Proper authority
the proper authority to convene a general meeting of a
company is the board of directors. The board should pass
a resolution to call the general meeting, at a duly
convened meeting of the board.

• Notice of meeting
• A general meeting may be called by giving a notice of
less than 21 days if it is so agreed
• In case of a annual general meeting by all the members
entitled to vote
• In case of any other meeting of a company having a
share capital, by members holding not less than 95%of
the paid up share capital as given a right to vote
• In a company not having share capital by members
having not less than 95% of the voting power
exercisable at the meeting.

• Quorum
• Quorum means the minimum number of members
who must be present in order to constitute a valid
meeting and transact business threat. The quorum is
generally fixed by the articles. If the articles of a
company do not provide for a longer quorum.
• 5 members personally present in the case of a public
co.and 2 in the case of any other co.shall be the
quorum for a meeting of the co.
• If within half an hour a quorum is not present ,the
meeting if called upon the requisition of members
shall stand dissolved. In any other case it shall stand
adjourned to the same day, place and time in the next
week.
• Chairman
• A chairman is necessary to conduct a meeting. He
is the presiding officer of the meeting. Unless the
article of a company otherwise provide , the
members personally present at the meeting shall
elect one of themselves to be the chairman ,it shall
be taken forthwith. In such case, the chairman
elected on a show of hands shall exercise all the
power of the chairman.
• Minute of meeting
• Minutes of proceeding of meetings-every co. shall
keep a record of all proceedings of every general meeting
and of all proceedings of every meeting of the BOD.
• Minute book- the book in which the record of the
proceedings of a meeting is kept is known as the minute
book.
• Numbering of pages-the pages of every minute
book shall be consecutively numbered
• Signing of minutes- each pages of the minute book
which records proceedings of board meeting shall be
intialled or signed by the chairman of the same
meeting or the next succeeding meeting.

•
Importances of meeting
• Discussion on state of affairs
• Ratification of act done by the directors
• Company is separate from the members.
• To coverage and give direction on action
taken by the directors
WINDING UP OF A
COMPANY
 DEFINITION
• Winding up of companies is the process
whereby its life is ended and its property
administered for the benefit of its creditors and
members.
A company may be wound up in any of 3 ways
• Compulsory winding up
• Voluntary winding up
• Voluntary winding up subject to the supervision of
the court
COMPULSORY WINDING UP BY COURT
Section 305 of the companies ordinance that a
company may be wound up by the court on the
following grounds are there:
• If the company has, by special resolution,
resolved that the company should be wound up
by the court.
• if the company is unable to pays its debts.
• the company does not commence its business
within a year from its incorporation, or suspends
its business for a whole year.
• When the period fixed for duration of the
company by memorandum or articles expires or
the event if any occur on the occurrence of which
the memorandum or articles provide that the
company is to be dissolved.
• The court is of opinion that it is just and equitable
that the co should be wound up.
• The company has being used for unlawful
purposes or any purpose prejudicial to in
compatible with peace, welfare, security, public
order, good order morality.
• The company is used or act against the security of
the nation.
• If the company ceases to have a member.
 Procedure for winding up
• Date of commencement of winding up
• Hearing of petition
• Intimation of official liquidator
 Voluntary winding up
Winding up by members or creditors without any
intervention of the court is voluntary winding
up.

Types of voluntary winding up

• Members voluntary winding up
• Creditors voluntary winding up
 Members voluntary winding up

• This is where the shareholder of company decide to

put company into liquidation, and there are enough
assets to pay all the debt of the company i.e.
company is solvent.
• Members voluntary winding up takes place only
when the company is solvent .
• Its initiated by the members and is entirely
managed by them.
 Creditors voluntary winding up

• Where the company proposes to wind up voluntarily

and the directors are not in a position to make the
statutory declaration of solvency ,the winding up is
referred to as creditors voluntary winding up.
WINDING UP UNDER THE SUPERVISION OF THE
COURT

 Court only supervises winding up procedure.

 Resolution for winding up is passed by
members in the general meeting.
 Liberty granted to creditors, contributories or
others to apply to court for some relief.
 The court may also appoint liquidators, in addition
to already appointed, or remove any such liquidator.
 The court may also appoint the official liquidator, as
a liquidator to fill up the vacancy.
LIQUIDATOR

A liquidator is the officer appointed when a company goes into

winding-up or liquidation who has responsibility for collecting in
all of the assets under such circumstances of the company and
settling all claims against the company before putting the company
into dissolution.
 DUTIES OF A LIQUIDATOR

 Realising the assets of the insolvent company and achieving the best
possible price
 Address outstanding claims against the limited company and satisfy
the claims as set-out by law
 Distributing the returns to the company’s creditors in order of
priority
 Acting in the best interests of the creditors (not the directors).
 POWERS OF A LIQUIDATOR
• To carry on the business of the company so far as may be
necessary for the beneficial winding up of the company
• To do all acts and to execute, in the name and on behalf of the
company, all deeds, receipts and other documents, and for
that purpose, to use, when necessary, the company’s seal
• To sell the immovable and movable property and actionable
claims of the company by public auction or private contract,
with power to transfer such property to any person or body
corporate, or to sell the same in parcels
• To sell the whole of the undertaking of the company as a
going concern
CONT…

• To raise any money required on the security of the assets of the

company;
• To institute or defend any suit, prosecution or other legal proceeding,
civil or criminal, in the name and on behalf of the company;
• To invite and settle claim of creditors, employees or any other
claimant and distribute sale proceeds in accordance with priorities
established under this Act;
• To inspect the records and returns of the company on the files of the
Registrar or any other authority;
 How a liquidator paid?
A liquidator is paid for the work that they do. Their payment
can be in the form of a pre-agreed fixed sum, an hourly rate, or as a
percentage of the assets they realise. This payment should be
agreed at the creditors’ meeting or with the creditors’ committee.

The level of payment the liquidator receives should be based on:

• The complexity of the case
• How effectively they carry out their duties
• Any extra responsibility the liquidator takes on
• The value and nature of the assets
• In law, a liquidator is the officer appointed when
a company goes into winding-up or liquidation who has
responsibility for collecting in all of the assets under such
circumstances of the company and settling all claims against the
company before putting the company into dissolution. Liquidator
is a person officially appointed to 'liquidate' a company or
firm.His duty is to ascertain and settle the liabilities of a company
or a firm.If there are any surplus assets, they are distributed to the
contributories.
 minimum wages act , 1948

• The minimum wages act is a act of parliament concerning Indian labour law that sets
the minimum wages that must be paid to skilled and unskilled workers
 OBJECTIVES OF MINIMUM WAGES ACT
• TO PROVIDE MINIMUM WAGES TO THE WORKERS WORKING IN
ORGANISED SECTOR
• TO STOP EXPLOITATIONOF THE WORKERS
• TO EMPOWER THE government to take steps for fixing minimum wages and to
revising it in a timely manner
• To apply this law on most of the section In organized sector
 WAGES[SEC.2(h)]
• Minimum wage :all the remuneration capable of being paid in money terms for
work done if terms of contract were full filled.
• Consists of basic+ dearness allowance + house rent allowance
• Every 5 years, basic rates of every industry are decided by minimum wages
committee
• Dearness allowance changes every 6 months and is decided by government
 Different mininmum wages fixed by the govt

• Different employments
• Different classes (eg: skilled, unskilled, semi skilled )
• Adults, adolescents, children's and apprentices
• Different localities
 Who all are eligible

• Permanent employees
• Contract employees
• Casual workers
• Part time workers
• Trainees ,workers on probation
• apprentices
• Disabled workers
• Foreign workers
 The workmen’s compensation act 1923

• The Workmens Compensation Act, 1923 is one of the important social security
legislations. It aims at providing financial protection to workmen and their
dependants in case of accidental injury by means of payment of compensation by
the employers.
DEFENITIONS (SEC 2)

 COMMISSIONER

 DEPENDANT

 EMPLOYER

 DISABLEMENT

 WAGES

 WORKMAN
COMMISSIONER

• Sec.2(1)(b) A Commissioner means a Commissioner for Workmen’s

Compensation appointed under section 20
DEPENDENT

• Means any of the following relatives of a deceased workman, namely

• (i) a widow, a minor legitimate or adopted son, and unmarried legitimate or
adopted daughter, or a widowed mother; and
• (ii) if wholly dependent on the earnings of the workman at the time of his death, a
son or a daughter who has attained the age of 18 years and who is infirm;
• (iii) if wholly or in part dependent on the earnings of the workman at the time of
his death,(a) a widower,(b) a parent other than a widowed mother,(c) a minor
illegitimate son, an unmarried illegitimate daughter or a daughter legitimate or
illegitimate or adopted if married and a minor or if widowed &minor,(d) a minor
brother or an unmarried sister or a widowed sister if a minor,(e) a widowed
daughter-in-law,(f) a minor child of a pre-deceased son,(g) a minor child of a pre-
deceased daughter where no parent of the child is alive, (h) a paternal grandparent
if no parent of the workman is alive.
EMPLOYER (Sec 2(1) e)

• Any body of persons whether incorporated or not

• Any managing agent of an employer; and

• The legal representative of a decease employer

DISABLEMENT

• Disablement means any loss of capacity to work or move

• May result in loss or reduction of his earning capacity

• Disablement may be

• Total {sec.2.1(g)} or Partial {sec 2.1(l)}

• Temporary or permanent
Partial disablement 2.1 (g)

This means any disablement as reduces the earning capacity of a workman as a result of
some accident. It may be temporary or permanent.

Temporary partial disablement means any disablement as reduces the earning capacity of a
workman in any employment in which he was engaged at the time of the accident resulting
in the disablement.

Permanent partial disablement is one which reduces the earning capacity of a workman in
every employment which he was capable of undertaking at that time of injury.
Total disablement-2.1(l)

• ‘Total disablement’ means such disablement, whether of a temporary or permanent

nature, as incapacitates a workman for all work which he was capable of
performing at the time of the accident resulting in such disablement
WAGES (sec 2.1(m) )

• “wages” includes any privilege or benefit which is capable of being estimated in

money, other than travelling concession or a contribution paid by the employer to
the workman towards any pension or provident fund or a sum paid to a workman
to cover any special expenses entailed to him by the nature of his employment
WORMEN (sec 2. (1) )

• Any person who is:

• (a) a railway servant as defined in clause (34) of section 2 of The Railways Act
1989not permanently employed in administrative, district or sub-divisional office
of a railway and employed in any such capacity as is specified in schedule II or,

• (b) a master, seaman, or other member of the ship or crew

• It does not include a person whose employment is of a casual nature

ENTITLEMENT
• Every employee (including those employed through a contractor but excluding
casual employees), who is engaged for the purposes of employers business and
who suffers an injury in any accident arising out of and in the course of his
employment, shall be entitled for compensation under the Act.
• Workers employed in any capacity specified in Schedule II of the Act which
includes Factories, Mines, Plantations, Mechanically Propelled Vehicles,
Construction Work and certain other Hazardous Occupations and specified
categories of Railway Servants.
• The Act extends to the whole of India except the States/Union Territories of
Arunachal Pradesh, Mizoram, Nagaland, Sikkim and Daman & Diu and
Lakshadweep.
• The coverage of this Act is also to cooks employed in hotels and restaurants
• The Act does not apply to members of the Armed Forces of the Union &
workmen who are covered by the ESI Act
Employer’s Liabilities For Compensation[Sec.3]

• An employer is liable to pay compensation to workman for:

1. Personal injury by accident- An employer is liable to pay compensation to

workman if personal injury is caused to him by accident arising out of & in the
course of his employment.

2. Occupational diseases- workers employed in certain occupations are exposed to

certain diseases which are inherent in those occupation.
Employer is not Liable For Compensation

 in respect of any injury which does not result in the total or partial disablement
of the workman for a period exceeding three days;
 in respect of any injury, not resulting in death or permanent total disablement,
caused by an accident which is directly attributable to –
(i) the workman having been at the time thereof under the influence of drink or
drugs, or
(ii) the willful disobedience of the workman to an order expressly given, or to a rule
expressly framed, for the purpose of securing the safety of workmen, or
(iii) the willful removal or disregard by the workman of any safety guard or other
device which he knew to have been provided for the purpose of securing the safety
of workmen
Doctrine of Notional Extension
• The expression in the course of his employment', connotes not only actual work
but also any other engagement natural and necessary thereto, reasonably extended
both as regards work-hours and work-place. It refers to the time during which the
employment continues. . However, this is subject to the theory of notional
extension of the employer's premises so as to include an area which the workman
passes and re-passes in going to and in leaving the actual place of work. There
may be some reasonable extension in both time and place and a workman may be
regarded as in the course of his employment even though he had not reached or
had left his employer's premises. This is also called as the Doctrine of Notional
Extension. The doctrine of notional extension could not be placed in a strait jacket;
it was merely a matter of sound common sense as to when and where and to what
extent this doctrine could be applied.
Amount Of Compensation[Sec.4]

The amount of compensation payable to a workman depends on:

• the nature of injury caused by accident,

• the monthly wages of the workman concerned, and

• the relevant factor for working out lump sum equivalent of compensation amount
as specified in Schedule IV.

• There is no distinction between an adult and a minor worker with respect to the
amount of compensation.
Compensation For Death

• In case of death resulting from injury, the amount of compensation shall be equal
50% of the monthly wages of the deceased workman multiplied by the relevant
factor.

• Or an amount of Rs 80,000/- whichever is more

Compensation For Permanent Total Disablement

• In case of permanent total disablement resulting from the injury, the amount of
compensation shall be 60% of the monthly wages of the injured workman
multiplied by the relevant factor or Rs 90,000/- thousand whichever is more.
Compensation For Permanent Partial Disablement

Where permanent partial disablement occurs, the amount of compensation payable

shall be as follows:

• in case of an injury specified in part II of the schedule I, the amount of

compensation shall be such percentage of the compensation which would have
been payable is the percentage of loss of earning capacity caused by that injury.
Compensation For Temporary Disablement(Total or Partial)

• If the temporary disablement, whether total or partial results from the injury, the
amount of compensation shall be a half monthly payment of the sum equivalent to
25% of the monthly wages of the workman to be paid in accordance with the
provisions.
• The half monthly payment shall be payable on the sixteenth day from the date of
disablement
• In cases where such disablement lasts for a period of 28 days or more
compensation is payable from the date of disablement
• In other cases After the expiry of a waiting period of three days from the date of
disablement.
Compensation to be paid when due & penalty for default[Sec.4A]

• As per this section, compensation has to paid as soon as it is due

• In case the employer does not accept the liability of paying the compensation, he
is bound to make provisional payment to the extent of the liability he accepts.
Such amount has to be deposited with the commissioner or paid to the workman.
If he defaults, the commissioner may order:
the payment of the amount with interest at12 % per year
if the default to be unjustifiable then the commissioner may order payment of a
further sum not exceeding 50% of the amount due, by way of penalty.
Distribution of Compensation[sec.8]
• The compensation payable for death and
• The compensation payable to a woman or person of legal disability shall be
through the commissioner only.
 Employer can make advance payment directly to dependents in case of death
equivalent to three months salary of the deceased person.
 Employer is exonerated from his liability if he deposits the compensation
amount with the commissioner within the stipulated time.
The commissioner shall call all dependents of the deceased and determine the
method for distribution of compensation among them.
 If no dependents are found then amount shall be refunded to the employer.
On request by the employer the commissioner shall furnish the details of
disbursement.
Notice & Claim[Sec.10]

To claim the compensation:

• The claimant shall give notice of accident to the employer or by entering in the
notice book within the reasonable period.
• Every such notice shall give the name and address of the person injured, the cause
of the injury and the date on which the accident happened and
• Submit the claim application to the commissioner within two years from the date
of accident.
• In case of occupational disease the accident is deemed to have occurred on the
first day of disease.
• Defect if any in the notice or not giving notice or delayed application will not bar
the claim for compensation.
Commissioners[Sec.20]

The State Government may, by notification in the Official Gazette, appoint any
person to be a Commissioner for Workmen's Compensation for such area as may be
specified in the notification.
• Any Commissioner may, for the purpose of deciding any matter referred to him
for decision under this Act, choose one or more persons possessing special
knowledge of any matter relevant to the matter under inquiry to assist him in
holding the inquiry
• Every Commissioner shall be deemed to be a public servant within the meaning of
the Indian Penal Code (45 of 1860)
Trade Union 1926
 "Trade Union" means any combination, whether
temporary or permanent, formed primarily for the
purpose of regulating the relations between workmen
and employers or between workmen and workmen, or
between employers and employers, or for imposing
restrictive conditions on the conduct of any trade or
business

 Trade unions are formed to protect and promote the

interests of their members. Their primary function is
to protect the interests of workers against
discrimination and unfair labor practices.
DEFINITION OF TRADE UNION

A trade union is such an organisation

which is created voluntarily on the
basis of collective strength to secure
the interests of the workers.
SCOPE OF THE ACT
This Act provides for the registration of
trade unions and in certain respects in
define the law relating to registered Trade
Unions. The act applies to registered Trade
Unions.
COVERAGE OF THE ACT

This act specifies the mode of their

registration:. The act was passed to regulate

a)Conditions governing the registration of a

trade union.
b) Obligation imposed upon a registered
trade unions and
c) Rights and Liabilities of Registered
Trade unions.
RIGHTS & LIABLITIES OF TRADE
UNION

 Objects on which general funds may be spent

 Constitution of a separate fund for political
purposes
 Criminal conspiracy in trade disputes
 Immunity from civil suit in certain cases
 Enforceability of agreements
 Right to inspect books of Trade union
 Rights of minors to membership of trade union
Objective of Trade union

 Wages Salaries
 Working conditions
 Discipline
 Personnal policies
 Welfare
 Employee-Employer relation
 Negotiating machinery
 Safeguarding organisational health and interest of
the industry