Business Law — Units 1 & 2 Notes

MBA Sem 2 · Business Law MBA 201

Units 1 & 2
Complete Notes

Indian Contracts Act, 1872 · Sale of Goods Act, 1930 · Negotiable Instruments Act, 1881 — Simple language · Deep examples · Exam-ready

Unit 1

The Indian Contracts Act, 1872

Section 2(h) · Section 10 · Sections 13–22 · Sections 73–75 · Sections 124–181

📌 Introduction

What is a Contract?

The Indian Contracts Act, 1872 is India's most important commercial law. It came into force on 1st September 1872 and governs every contract in India — buying, selling, loans, employment, rent — everything. Before this Act, contract disputes were settled by English law and local customs which was confusing. This Act brought clarity and uniformity.

Section 2(h) — Definition"A contract is an agreement enforceable by law."

This definition has two parts — Agreement (offer + acceptance between two parties) and Enforceability (law will back it up). NOT every agreement becomes a contract. Only those that law will enforce.

✅ CONTRACT (Law enforces)

Shopkeeper agrees to supply 100 kg rice to hotel for Rs.5,000. If he doesn't deliver — hotel can sue. Law backs this up!

❌ AGREEMENT (Law doesn't enforce)

Two friends agree to watch a movie together. If one doesn't show up — the other CANNOT sue. No legal enforceability!

🧠

OFFER + ACCEPTANCE = AGREEMENT → AGREEMENT + ENFORCEABILITY = CONTRACT. Every contract is an agreement but NOT every agreement is a contract.

📋 Section 10

10 Essentials of a Valid Contract

Section 10 says — "All agreements are contracts if they are made by free consent of parties competent to contract, for lawful consideration and lawful object, and are not declared to be void." If even ONE essential is missing — the contract may be void or voidable.

① Offer & Acceptance §2(a)(b)

One party makes a clear OFFER and the other ACCEPTS it absolutely without adding any conditions. Counter offer = original offer DIES.

② Legal Intention

Both parties must INTEND the agreement to be legally binding. Business agreements = legal intent assumed. Social/family = no legal intent assumed.

③ Lawful Consideration §2(d)

Something in return — money, goods, service, or a promise. Can be past, present, or future. Need not be adequate (equal in value). No consideration = No contract (with 5 exceptions).

④ Capacity §11

Must be 18+ years, sound mind, not disqualified. Minor's contract = VOID AB INITIO. Lunatic/drunk person's contract = VOID. Famous case: Mohori Bibee 1903.

⑤ Free Consent §13-22

Consent must not be caused by Coercion, Undue Influence, Fraud, Misrepresentation, or Mistake. All these vitiate (spoil) free consent.

⑥ Lawful Object §23

Purpose must not be illegal, immoral, or against public policy. Unlawful object = contract is VOID. No court will enforce it.

⑦ Not Expressly Void

Agreement must not be one declared void by law — wagering agreements §30, restraint of marriage §26, restraint of trade §27 are all void.

⑧ Certainty §29

Terms must be clear and definite. "Sell some rice" is too vague — VOID. "Sell 100 kg Basmati at Rs.80/kg by 15th July" — certain and VALID.

⑨ Possibility §56

Act to be performed must be possible. Agreement to put life into a dead body = impossible = VOID. Doctrine of Frustration — if event makes performance impossible later, contract becomes void.

⑩ Legal Formalities

Some contracts need writing, stamp, or registration by law — sale of land, insurance contracts, negotiable instruments. Most other contracts can be oral.

⚖️ Mohori Bibee v. Dharmodas Ghose (1903)

Ramesh, a 16-year-old, borrowed Rs.10,000 from a moneylender by giving his house as security. Later claimed minority. HELD: A minor's contract is VOID AB INITIO — absolutely void from the very beginning. Moneylender cannot recover money or claim house. This is the most important case on capacity!

Example — Carlill v. Carbolic Smoke Ball Co. (1893)

Company advertised: "Pay Rs.100 to anyone who uses our smoke ball as directed and still gets flu." Mrs. Carlill used it and got flu. Claimed the reward. Company refused. HELD: This was a GENERAL OFFER to the whole world. Her using the ball = acceptance. She wins! This established that performance equals acceptance of a general offer.

⚖️ Sections 13–22

Free Consent — What Vitiates It?

Consent is free when it is not caused by any of these five things. Each has a different EFFECT on the contract. This is one of the most exam-favourite topics!

Element	Section	What it means	Effect on Contract	Example
Coercion	§15	Threatening to commit a crime or unlawfully detaining property to force consent	VOIDABLE at option of coerced party	A threatens B with knife to sign property deed
Undue Influence	§16	Dominant party (doctor, employer, parent) exploits position to get unfair advantage	VOIDABLE at option of influenced party	Doctor tells sick patient: "Give me your house or I won't operate"
Fraud	§17	INTENTIONAL deception — false statements, hiding facts, promises with no intent to keep	VOIDABLE + victim can claim DAMAGES	Selling flood-damaged car as "brand new" without disclosing
Misrepresentation	§18	INNOCENT false statement — person genuinely believes it to be true	VOIDABLE only — NO damages (no bad intent)	Seller genuinely believes land is 500 sq yds, actually 450
Bilateral Mistake	§20	BOTH parties are wrong about an essential fact	VOID — agreement has no legal effect	Both agree to buy/sell a horse that had already died
Unilateral Mistake	§22	Only ONE party is wrong	Generally VALID — law doesn't relieve one-sided mistakes	Buyer thinks he's buying a painting for investment but it's not

🧠

Coercion = Voidable. Undue Influence = Voidable. Fraud = Voidable + DAMAGES. Misrepresentation = Voidable ONLY. Bilateral Mistake = VOID. Unilateral Mistake = VALID.

Ravi & Gangster Case (Exam Question!)

Ravi, under threat from a local gangster, signs agreement to sell his land at a price much lower than market rate. This is COERCION under Section 15 — acts threatened by the gangster are forbidden by IPC. Contract is VOIDABLE at Ravi's option. He can go to court, prove coercion, and get the contract cancelled. He can also recover his land and claim compensation.

📁 Classification

Types of Contracts

✅ Valid Contract

All 10 essentials present. Fully enforceable by law. Both parties can be compelled to perform.

❌ Void Agreement §2(g)

No legal effect ever — DEAD from the start. Minor's contract, wagering, unlawful object. No one can enforce it.

❌ Void Contract §2(j)

Was valid when made but later becomes unenforceable. Example: contract becomes impossible to perform due to fire, flood, government ban.

⚠️ Voidable Contract §2(i)

Valid until the aggrieved party CHOOSES to cancel. Caused by coercion, fraud, undue influence. If aggrieved party does nothing — contract stands!

🚫 Illegal Contract

Forbidden by law. VOID + collateral agreements also affected. Parties may face criminal punishment.

🔄 Quasi Contract §68–72

NOT a real contract. Law IMPOSES obligation to prevent unjust enrichment. No offer or acceptance — law creates the duty automatically.

Quasi Contract — Section 70 (Shweta's Food Case)

Shweta pays Rs.800 for food online. Restaurant delivers it to Mohan by MISTAKE. Mohan eats it. Under Section 70 — Mohan must pay Rs.800 to the restaurant even though there is NO CONTRACT between them. He enjoyed the benefit not meant for him — law imposes obligation. And Shweta gets full refund from restaurant for breach of contract!

5 Quasi-Contract Types§68 Necessaries to incapable person → §69 Pay another's dues and recover → §70 Enjoy benefit of non-gratuitous act → §71 Finder of goods = Bailee's duty → §72 Money paid by mistake must be returned

⚡ Sections 73–75

Breach of Contract & Remedies

Breach means one party FAILS to perform their obligation. There are two types of breach:

Actual Breach

Fails to perform on the actual due date — complete failure, defective performance, or partial performance.

Anticipatory Breach §39

Tells you IN ADVANCE he will NOT perform. You can sue IMMEDIATELY — don't need to wait for the actual due date!

5 Remedies for Breach

Damages — Section 73

Most common remedy. Compensation in money for loss caused by breach. Hadley v. Baxendale Rule (1854) — only FORESEEABLE damages recoverable. Special damages only if defendant KNEW about special circumstances at contract time. Types: Ordinary, Special, Nominal, Exemplary, Liquidated.

Quantum Meruit

"As much as earned." If you did PART of the work and other party cancelled — you can claim reasonable compensation for work ALREADY DONE. Example: Architect completes half the building design, client cancels — architect claims for half the work done.

Specific Performance

Court ORDERS the defaulting party to actually perform as agreed. Used when unique goods or land involved — money is NOT enough. Example: seller agreed to sell a rare ancestral ring — court forces him to hand it over.

Injunction

Court ORDER preventing a party from doing something they promised NOT to do. Used in negative stipulations. Example: famous singer contracted to sing only for one theatre — court stops her from singing for a rival theatre.

Rescission — Section 75

Court CANCELS the contract. Both parties restored to original position. The person who rescinds the contract is entitled to compensation for damages they suffered.

🔗 Sections 124–181

Special Contracts

A. Contract of Indemnity — Sections 124–125

Section 124 — Definition"A contract by which one party promises to save the other from loss caused by the promisor himself or by the conduct of any other person."

Two parties: Indemnifier (promises to compensate) and Indemnified/Indemnity Holder (protected from loss)
Rights of Indemnity Holder §125: Can recover all damages, costs of legal defence, and amounts paid in any compromise
Indian courts allow indemnity holder to claim BEFORE suffering actual loss (Gajanan Moreshwar case)

Example

Ramesh tells Suresh: "Buy goods from Ravi on credit. If Ravi sues you for non-payment, I will indemnify you." Ramesh = Indemnifier. Suresh = Indemnified. If Ravi sues Suresh, Ramesh must pay all damages and legal costs.

B. Contract of Guarantee — Sections 126–147

Section 126 — Definition"A contract to perform the promise or discharge the liability of a third person in case of his default."

Party	Who they are	Role
Principal Debtor	The person who owes the debt	Primarily responsible to pay
Creditor	The person to whom debt is owed	Receives the guarantee
Surety / Guarantor	The person giving the guarantee	Secondarily responsible — pays if debtor defaults

Types: Specific Guarantee (one transaction) vs Continuing Guarantee §129 (series of transactions)
Subrogation §140: After surety pays — he steps into creditor's shoes and can recover from the principal debtor
Surety Discharged when: Contract varied without consent §133 · Creditor releases debtor §134 · Creditor gives extra time to debtor §135 · Creditor loses the security §141

Bank Guarantee Example

Bank lends Rs.5 lakhs to Ramesh (Principal Debtor). Suresh (Surety) promises Bank (Creditor): "If Ramesh doesn't repay, I will pay." Bank later gives Ramesh 3 extra months WITHOUT telling Suresh. Suresh is now DISCHARGED — his liability ends. Bank made changes without his knowledge.

🧠

Indemnity = 2 parties, saves from loss. Guarantee = 3 parties (Surety + Principal Debtor + Creditor), pays if debtor defaults.

C. Contract of Bailment — Sections 148–171

Section 148 — Definition"Delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the direction of the person delivering them."

Bailor — delivers the goods · Bailee — receives the goods
Standard of Care §151: Care that a man of ordinary prudence would take of his OWN goods
Bailee's Duties: Take care · Don't use without permission · Don't mix with own goods · Return goods + any profit (accretion)
Bailee's Rights: Claim expenses · Right of Particular Lien §170 (retain goods until charges paid) · Right of indemnity if goods were defective

Examples of Bailment

Ravi gives car to mechanic for repair → Ravi is Bailor, mechanic is Bailee. Car must be returned after repair. If mechanic uses the car for personal trips without permission → liable for unauthorized use. Friend keeps your luggage free while you travel → Gratuitous bailment for bailor's benefit.

D. Pledge — Sections 172–179

Pledge is a SPECIAL type of bailment where goods are delivered as security for payment of a debt or performance of a promise. Pawnor (pledgor) gives goods. Pawnee (pledgee) holds them.

Pawnee's rights §173: Retain goods until debt + interest + costs paid
Right to sell §176: If pawnor defaults, pawnee can sell goods AFTER giving reasonable notice
Pawnor's right §177: Redeem goods even after default — but BEFORE actual sale — by paying everything owed

Pledge Example

Aarav pawns his gold watch with a moneylender to borrow Rs.20,000. Moneylender = Pawnee holds the watch. After Aarav repays Rs.20,000 + interest, he gets watch back. If Aarav defaults and doesn't pay — moneylender sends reasonable notice and SELLS the watch to recover the loan.

Unit 1 — Quick Revision Table

Topic	Key Point	Section
Contract Definition	Agreement enforceable by law	§2(h)
Minor's Contract	VOID AB INITIO — Mohori Bibee Case 1903	§11
Coercion	Voidable at option of coerced party	§15
Fraud	Voidable + Damages	§17
Misrepresentation	Voidable only, no damages	§18
Bilateral Mistake	VOID	§20
Wagering Agreements	VOID	§30
Breach + Damages	Only foreseeable damages — Hadley v Baxendale	§73
Indemnity	2 parties — saves from loss	§124
Guarantee	3 parties — pays if debtor defaults, Subrogation §140	§126
Bailment	Deliver for purpose + return — ordinary prudent care	§148
Pledge	Security for loan — pawnee can sell after notice	§172

Moving to Unit 2

Sale of Goods Act, 1930 · Negotiable Instruments Act, 1881

Unit 2

Sale of Goods Act, 1930 & NI Act, 1881

In force: 1st July 1930 · Replaced Chapter VII of Indian Contract Act · Governs all sale of goods transactions

§4 Core Concept

Sale vs Agreement to Sell — The Most Important Distinction!

Section 4(1) — Contract of Sale"A contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price."

Point	SALE §4(3)	AGREEMENT TO SELL §4(4)
Ownership	Transfers IMMEDIATELY on contract	Transfers at FUTURE TIME or on condition
Type	EXECUTED contract	EXECUTORY contract
Risk	Passes to BUYER immediately	Stays with SELLER
Goods destroyed	BUYER bears the loss	SELLER bears the loss
Seller can sue for	Full PRICE	DAMAGES only
If seller goes insolvent	Buyer gets goods (owns them already)	Buyer only gets rateable dividend

SALE Example

Ramesh walks into a shop, buys a pen for Rs.50, pays and takes it. Ownership transfers RIGHT NOW at the moment of contract. This is a SALE — Ramesh owns the pen immediately.

Agreement to Sell Example

Ramesh agrees to buy 500 kg wheat from Suresh at Rs.25/kg, to be delivered NEXT WEEK. Ownership will transfer only next week when delivered and paid. This is AGREEMENT TO SELL — becomes a SALE only on delivery.

🧠

Risk ALWAYS follows Property. Before property passes → Seller's risk. After property passes → Buyer's risk. This is the GOLDEN RULE of Sale of Goods Act!

§6 Goods

Types of Goods

Specific Goods

Identified and agreed upon at time of contract. "THIS red Honda City car MH-12-AB-1234." Specific identity established at contract.

Ascertained Goods

Identified AFTER the contract is made. From 100 mangoes, 50 are separated for the buyer. Now they are ascertained.

Unascertained / Generic

"100 kg Basmati rice" — which specific 100 kg is not yet decided. Most common in trade. Property cannot pass until appropriated.

Future Goods §2(6)

To be manufactured, produced, or acquired AFTER the contract. Farmer sells NEXT SEASON'S wheat. Contract is always Agreement to Sell.

Contingent Goods

Depend on an uncertain future event. "I'll sell you those imported machines, IF they arrive next month." If machines don't arrive — contract fails.

⭐ §11–17 Exam Favourite!

Conditions & Warranties — Most Tested Topic!

CONDITION §12(2)

A stipulation ESSENTIAL to the main purpose of the contract. Breach gives the aggrieved party the right to:

REJECT the goods CLAIM DAMAGES

Example

Ordered 2000cc engine car. Dealer sends 1500cc. This is breach of CONDITION — essential term. Ramesh can REJECT the car AND claim damages.

WARRANTY §12(3)

A stipulation COLLATERAL (secondary) to the main purpose. Breach gives only:

CLAIM DAMAGES ONLY CANNOT REJECT

Example

Asked for a free car mat with car purchase. Dealer forgot. This is WARRANTY breach — secondary term. Ramesh CANNOT reject the car. He can only claim the cost of the mat.

Implied Conditions — Automatically Present in Every Sale!

Title §14(a): Seller must have the RIGHT to sell. If seller has no title — buyer can return goods and recover FULL price. Rowland v. Divall (1923) — stolen car sold, buyer recovered full price.
Description §15: Goods sold by description must MATCH the description. Order Darjeeling tea, get ordinary tea → REJECT. Varley v. Whipp (1900) — machine described as "new, used once" was actually old.
Sample §17: Bulk must MATCH sample quality. Hidden defects (not visible on examination) = seller's responsibility.
Merchantable Quality §16(2): Goods must be fit for ORDINARY purpose for which goods of that type are used. Grant v. Australian Knitting Mills (1936) — defective underwear caused skin disease — not merchantable quality.
Fitness for Purpose §16(1): Buyer tells seller SPECIFIC PURPOSE + relies on seller's SKILL + seller is in that BUSINESS → goods must be fit for that specific purpose.

Doctrine of Caveat Emptor — Section 16"Let the Buyer Beware" — buyer must check goods before buying. Seller NOT responsible for defects buyer could discover. 5 EXCEPTIONS where seller IS responsible: (1) Buyer discloses specific purpose §16(1) · (2) Goods sold by description §15 · (3) Goods sold by sample §17 · (4) Seller conceals defects by fraud · (5) Merchantable quality §16(2)

Caveat Emptor — Exam Application

Ramesh buys second-hand TV without testing it. Reaches home and it doesn't work. CANNOT sue seller — Caveat Emptor applies — he should have checked. BUT if Ramesh told the seller "I need this TV for my hotel's lobby" and seller said it was fine — and it wasn't suitable — seller IS LIABLE. Exception ① applies — buyer disclosed specific purpose!

§19–26 Key Rules

Transfer of Property — When Does Ownership Pass?

This is crucial because RISK follows PROPERTY. Who owns the goods bears the risk of loss or damage. Section 19 — property passes when PARTIES INTEND it to pass.

§20

Specific Goods in Deliverable State

Property passes when the CONTRACT IS MADE — even if payment or delivery is postponed. Example: Ramesh agrees to buy THIS specific laptop. Ownership transfers at the moment they agree, even if Ramesh pays next week.

§21

Seller Must Do Something First

Specific goods but seller must do something to put them in deliverable state. Property passes when work is DONE + buyer is INFORMED. Example: Car dealer must install AC first. Property passes only after AC is installed AND Ramesh is told.

§22

Weigh or Measure to Ascertain Price

Seller must weigh/measure goods to calculate price. Property passes when weighing is DONE + buyer INFORMED. Example: Wheat at Rs.30/kg — weigh it first, then property passes.

§23

Unascertained / Future Goods — APPROPRIATION

Property does NOT pass until goods are UNCONDITIONALLY APPROPRIATED — separated and set aside for the specific buyer — with both parties' assent. Example: Ramesh orders 100 kg rice from Suresh's 500 kg stock. Property passes ONLY when Suresh separates 100 kg and both agree "this is Ramesh's rice."

§24

Goods on Approval / Sale or Return

Property passes when buyer: (a) Signifies approval, (b) Does any act adopting the transaction (like re-selling), or (c) Retains goods beyond time limit without rejection. Example: Jeweller sends necklaces on approval — kept 30 days without rejection — property passes by time lapse.

Section 26 — Risk Prima Facie Passes with PropertyUntil property passes → goods at SELLER's risk. After property passes → goods at BUYER's risk. Exception: If delivery delayed through fault of one party — that party bears the risk during the delay.

Rights of Unpaid Seller — Sections 45–54

Unpaid seller = full price not paid OR cheque given has bounced.

① Right of Lien §47

RETAIN possession of goods until price is paid. Refuse to deliver! Lost when goods delivered to carrier, buyer obtains possession, or seller waives lien. Example: Shopkeeper holds goods until buyer pays.

② Stoppage in Transit §50

Buyer goes INSOLVENT + goods still with carrier → seller STOPS and recalls goods. Transit ends when buyer/agent gets actual delivery. Example: Goods in truck → buyer goes bankrupt → seller calls driver to return.

③ Right of Resale §54

Perishables → sell IMMEDIATELY. Others → give NOTICE first, then sell if buyer doesn't pay. Keep profit or recover loss from buyer. Example: Vegetables — perishable — resell immediately without notice!

Rights Against Buyer PersonallySuit for Price §55 (if property passed) · Suit for Damages §56 (if buyer refuses) · Suit for Interest §61 (on overdue payment)

NI Act 1881

Negotiable Instruments Act, 1881

In force from 1st March 1882. A negotiable instrument is a document entitling its holder to a sum of money and is freely transferable. The holder in due course gets a CLEAN TITLE even if the transferor had a defective title. This makes commerce smooth and efficient.

Section 13 — DefinitionA negotiable instrument means a Promissory Note, Bill of Exchange, or Cheque payable either to order or to bearer.

Feature	Promissory Note §4	Bill of Exchange §5	Cheque §6
Contains	Unconditional PROMISE to pay	Unconditional ORDER to pay	Unconditional ORDER to pay
Parties	2: Maker + Payee	3: Drawer + Drawee + Payee	3: Drawer + Bank + Payee
Who pays	MAKER (debtor)	Drawee/Acceptor	BANK (always)
Acceptance needed	NO	YES — drawee must sign	NO
When payable	Specified time	Specified time or demand	ALWAYS on demand
Stamp Duty	REQUIRED	REQUIRED	NOT required
Drawn on	No specific bank	Any person or bank	BANK only

Promissory Note Example

"I, Ramesh, PROMISE TO PAY Suresh or order, a sum of Rs.10,000 on 15th August 2025. Signed: Ramesh, dated 1st June 2025." This is valid. "I OWE Suresh Rs.10,000" — only acknowledgement, NOT a promissory note — no promise to pay!

Bill of Exchange Example

"To: Suresh, Mumbai. PAY Mahesh or order Rs.25,000 sixty days after date. Signed: Ramesh (Drawer)." Ramesh = Drawer. Suresh = Drawee → becomes ACCEPTOR after signing. Mahesh = Payee.

Holder in Due Course (HDC) — Section 9

4 Conditions for HDC① Took instrument for VALUABLE CONSIDERATION (paid for it) · ② Before MATURITY (before due date) · ③ In GOOD FAITH (honest) · ④ WITHOUT NOTICE of any defect in transferor's title

Privilege 1 — Better Title

Gets CLEAN TITLE even if transferor was a thief or had a defective title. Prior fraud doesn't affect HDC!

Privilege 2 — All Parties Liable

ALL prior parties — drawer, all endorsers — are liable to the HDC. Cannot escape!

Privilege 3 — No "No Consideration" Defence

Prior parties CANNOT claim "no consideration was given for the instrument." HDC paid for it — that's enough.

Privilege 4 — Instrument Purged

When an instrument passes through HDC, even subsequent holders also get the HDC benefits. Instrument is "cleaned" of defects!

HDC Example — No Defence Works!

Ram gives cheque to Shyam through fraud (Shyam deceived Ram). Shyam endorses it to Mohan who pays value, acts in good faith, before maturity — Mohan is an HDC. Ram claims fraud. RESULT: Ram CANNOT stop payment to Mohan. Mohan is an HDC and gets the full amount. Ram must pursue Shyam separately for the fraud!

Types of Endorsement — Section 15

Type	How done	Effect
Blank / General	Endorser just signs name	Instrument becomes BEARER — anyone can cash
Special / Full	"Pay to Ramesh. Signed: Suresh"	Only named person (Ramesh) can cash
Restrictive	"Pay to Ramesh ONLY. Signed: Suresh"	No further transfer allowed
Conditional	"Pay to Ramesh if he delivers goods."	Condition added — valid between parties
Sans Recourse	"Pay to Ramesh, sans recourse."	Endorser NOT liable if dishonoured
Partial ❌	Endorsing only part of amount	NOT VALID — cannot be done legally

🧠

Blank = Anyone can cash. Special = Named person only. Partial = NOT VALID — remember this for MCQ questions!

🔴 Section 138 — Very Important!

Cheque Bounce — Section 138 — Criminal Offence!

Section 138 was added to the NI Act in 1988 to make cheque bouncing a criminal offence. This was a major step — earlier bouncing a cheque was only a civil matter. Now it is a CRIME.

When is it an Offence?When a cheque issued for discharge of a LEGALLY ENFORCEABLE DEBT is returned (bounced) by the bank because of insufficient funds OR exceeds arrangement with bank.

⚡ PUNISHMENT

🔒 Imprisonment

Up to 2 YEARS

💰 Fine

Up to TWICE the cheque amount

⚖️ Both

Imprisonment + Fine

Step-by-Step Procedure

Cheque Bounces

Payee presents cheque to bank. Bank returns it with a dishonour memo stating "insufficient funds" or similar reason.

Legal Notice — Within 30 Days

Payee must send a WRITTEN LEGAL NOTICE to the drawer within 30 days of receiving the dishonour memo from bank.

Drawer Must Pay — Within 15 Days

Drawer must make payment within 15 days of receiving the legal notice. This is the last chance to settle without criminal case.

File Complaint — Within 30 Days

If drawer STILL doesn't pay — payee must file a criminal complaint in court within 30 days of expiry of the 15-day notice period. Miss this deadline = case is time-barred!

Complete Example with Dates

Ramesh issues Rs.2 lakh cheque to Suresh. Cheque bounces. Suresh gets bank dishonour memo on 1st January → Must send legal notice by 31st January (30 days) → Ramesh has until 15th February to pay (15 days) → If Ramesh still doesn't pay → Suresh MUST file complaint by 17th March (30 days after 15th Feb) → If Suresh files on 18th March → CASE IS TIME-BARRED!

Types of Cheque Crossing — Sections 123–131A

Type	How to identify	Effect
General Crossing §123	Two parallel lines with or without "& Co." or "Not Negotiable"	Can only be deposited in bank — cannot cash at counter
Special Crossing §124	Specific BANK NAME written between lines	Can only be collected through THAT specific bank
Account Payee	"Account Payee" or "A/c Payee" written	Money credited ONLY to named payee's account — SAFEST
Not Negotiable §130	"Not Negotiable" written between lines	No holder gets BETTER TITLE than transferor. Protects true owner.

Not Negotiable Crossing — Why Important

Ramesh's "Not Negotiable" crossed cheque is STOLEN by Suresh. Suresh transfers it to Mohan (innocent). Mohan presents it to bank. Result: Mohan gets NO better title than Suresh (the thief). Ramesh — the true owner — can recover from Mohan. The "Not Negotiable" crossing PROTECTS the true owner even against innocent subsequent holders!

🧠

Section 138 Formula: 30 days (send notice) + 15 days (pay) + 30 days (file case) = The golden rule everyone must memorise!

Unit 2 — Quick Revision Table

Topic	Key Point	Section
Sale vs Agr. to Sell	Sale = Immediate ownership. AgS = Future ownership. Risk follows property.	§4
Condition	Essential term → Reject + Damages	§12(2)
Warranty	Secondary term → Damages only	§12(3)
Caveat Emptor	Let buyer beware — 5 exceptions where seller IS liable	§16
Property — Unascertained	Passes only on Appropriation (separation + assent)	§23
Unpaid Seller	Lien + Stoppage in Transit + Resale	§45–54
Promissory Note	Promise, 2 parties, maker primarily liable	§4 NI
Bill of Exchange	Order, 3 parties, drawee becomes acceptor	§5 NI
Cheque	Bill on bank, on demand, no stamp, no acceptance	§6 NI
HDC	Value + Good faith + Before maturity = Clean Title always	§9 NI
Section 138	Cheque bounce = Criminal. 30+15+30 day rule.	§138 NI
Not Negotiable	No holder gets better title than transferor	§130 NI

Business Law — Units 3 & 4 Notes

MBA Sem 2 · Business Law MBA 201

Units 3 & 4
Complete Notes

Companies Act, 2013 · Consumer Protection Act, 1986 · Intellectual Property Rights — Deep understanding · Real examples · Exam-ready

Unit 3

The Companies Act, 2013

470 Sections · 7 Schedules · Ministry of Corporate Affairs · ROC Administration

📌 Introduction

What is a Company? Key Features

The Companies Act, 2013 replaced the old Companies Act of 1956 which had become outdated. It was passed to promote transparency, accountability, and investor protection in Indian corporate governance. It introduced revolutionary concepts like One Person Company, Women Directors, Corporate Social Responsibility, and class action suits.

Section 2(20) — Definition"Company means a company incorporated under this Act or under any previous company law." A company is an ARTIFICIAL PERSON — created by law, separate from its members, can own property, sue, and be sued.

Separate Legal Entity

Company ≠ its shareholders. Can own property, enter contracts, sue and be sued in its OWN name. Salomon v. Salomon 1897 is the landmark case.

Limited Liability

Members' liability is limited to unpaid amount on shares. Personal property cannot be used to pay company debts. This is the biggest advantage of incorporation.

Perpetual Succession

"Members may come and go but the company goes on forever." Death, resignation, or bankruptcy of shareholders does NOT end the company.

Artificial Legal Person

Created by law. Can act through its directors and officers. Cannot vote, hold public office, or go to jail. Has ALL legal rights a person has.

Transferability of Shares

Public company shares freely transferable on stock exchange. Private company restricts transfer — needs board approval.

Separate Property

Property of the company belongs to the COMPANY — not shareholders. Even 100% shareholder cannot claim company property as their own!

⚖️ Salomon v. Salomon & Co. Ltd. (1897) — THE MOST IMPORTANT CASE

Mr. Salomon ran a boot-making business as a sole trader. He incorporated a company — Salomon & Co. Ltd. — and sold his business to it. Company went bankrupt. Creditors tried to hold Mr. Salomon personally liable for company debts. House of Lords HELD: The company is a SEPARATE LEGAL ENTITY from its shareholders. Salomon is NOT personally liable. Creditors can only claim from company assets, not from Salomon personally. This case established the concept of corporate veil!

🧠

Salomon Case 1897 = Separate Legal Entity. The company is NOT the same as its owners. Creditors cannot pierce the corporate veil in normal circumstances.

§2(62)(68)(71)

Types of Companies — OPC, Private, Public

🧑 ONE PERSON COMPANY §2(62)

Only 1 member — solo entrepreneur
Minimum 1 director (can be same as member)
No AGM required
Nominee must be appointed (in case member dies)
Convert if capital > ₹50L or turnover > ₹2Cr
Name ends with OPC Pvt. Ltd.

Example

Vikas Digital OPC Pvt. Ltd. — solo digital marketer with full limited liability protection.

👥 PRIVATE LIMITED §2(68)

Members: Min 2, Max 200
Directors: Min 2, Max 15
NO public issue of shares allowed
Share transfer is RESTRICTED
AGM compulsory
Name ends with Pvt. Ltd.

Examples

Zomato Pvt. Ltd. (before IPO), most Indian startups begin as Pvt. Ltd.

🏢 PUBLIC LIMITED §2(71)

Members: Min 7, No maximum
Directors: Min 3, Max 15
CAN raise public funds via IPO
Shares freely transferable on stock exchange
AGM compulsory
Name ends with Ltd.

Examples

Tata Motors Ltd., Reliance Industries Ltd., Infosys Ltd. — shares traded on BSE and NSE.

Feature	OPC	Private Ltd.	Public Ltd.
Min Members	1	2	7
Max Members	1	200	No limit
Min Directors	1	2	3
Max Directors	15	15	15
Public Issue (IPO)	Not allowed	Not allowed	Allowed
Share Transfer	N/A	Restricted	Freely transferable
AGM Required	No	Yes	Yes
Name Suffix	OPC Pvt. Ltd.	Pvt. Ltd.	Ltd.

§3–22 Process

Formation / Incorporation of a Company

The process of legally creating a company. Since 2018, the government introduced the SPICe+ form (Simplified Proforma for Incorporating Company Electronically Plus) for simultaneous multiple registrations in one form.

Promotion

Promoters conceive the idea, do market research, prepare business plan, identify investors, and decide to incorporate. A promoter owes fiduciary duties — must disclose all material facts and profits made. Not an agent of the company.

Incorporation / Registration

File documents with ROC: MoA, AoA, Form INC-9 (declaration), Form DIR-2 (consent), Digital Signature Certificate, address proof, identity proof. ROC issues Certificate of Incorporation — company comes alive on this date!

Capital Subscription (Public Companies only)

Public companies must issue a Prospectus §26 — detailed document inviting public investment. Minimum subscription must be received before shares are allotted. Private companies SKIP this stage.

Commencement of Business — Form INC-20A

Every company with share capital must file INC-20A within 180 days of incorporation — declaring all subscribers paid their share value. Without this — CANNOT start business or exercise borrowing powers!

Example

Ramesh, Suresh, and Mahesh decide to form an IT company. They prepare MoA and AoA, file with ROC. ROC issues Certificate of Incorporation for "RSM Tech Pvt. Ltd." dated 1st April 2024. From THIS DATE, RSM Tech Pvt. Ltd. is a legally alive separate entity — the company's birthday!

🧠

Certificate of Incorporation = Company's Birth Certificate. Company comes into existence ON the date mentioned in the certificate!

§4 Foundation

Memorandum of Association (MoA)

The MoA is the FOUNDATION DOCUMENT or CONSTITUTION of the company. It defines the company's relationship with the OUTSIDE WORLD — what the company is, what it does, what its limits are. Everything the company does must stay WITHIN the boundaries set by the MoA.

Clause	What it states	Example
① Name Clause	Company's name + proper suffix (Pvt. Ltd. / Ltd. / OPC Pvt. Ltd.)	"RSM Technologies Private Limited"
② Registered Office	State where office is located → that state's ROC has jurisdiction	"Registered Office in State of Maharashtra"
③ Objects Clause ⭐	MOST IMPORTANT — defines what company CAN do. Ultra Vires if outside.	"To develop and sell computer software and IT services"
④ Liability Clause	Nature of liability — limited by shares / guarantee / unlimited	"Liability of members is limited"
⑤ Capital Clause	Authorised capital — maximum shares company can issue	"₹10 crore divided into 1 crore equity shares of ₹10 each"
⑥ Association Clause	Founding declaration — signatures of min 2 (private) or 7 (public) subscribers	Names, addresses, signatures of founding members

⚠️ Doctrine of Ultra Vires — Very Important!

Ultra Vires means "Beyond Powers." Any act done by a company that is BEYOND the scope of its MoA (Objects Clause) is Ultra Vires. Such acts are:

ABSOLUTELY VOID Cannot be Ratified Not enforceable by or against company Even 100% shareholder vote cannot save it

⚖️ Ashbury Railway Carriage Co. v. Riche (1875) — Ultra Vires Case

The company's MoA stated its object was to MANUFACTURE railway carriages. The company entered into a contract with Riche to BUILD a railway line (construction — not manufacturing). Riche sued when company refused to perform. HELD: The contract was ULTRA VIRES — beyond the Objects Clause. The contract was VOID. Riche could not sue and could not recover any money. Not even unanimous shareholder approval could save this contract!

🧠

MoA = Constitution of company. 6 clauses. Objects Clause = Boundary. Cross the boundary = Ultra Vires = VOID. Ashbury Case 1875.

§5 Internal Rules

Articles of Association (AoA)

AoA are the INTERNAL RULES AND REGULATIONS of the company — how it will be managed day-to-day. While MoA defines the company's relationship with OUTSIDERS, AoA defines INTERNAL management. AoA is always SUBORDINATE to MoA — if conflict, MoA wins.

Contents of AoA

Share capital — calls on shares, forfeiture, transfer rules
General meeting procedures — notice requirements, quorum, voting procedures
Appointment, powers, duties, and removal of directors
Dividend declaration and distribution of reserves
Accounts, audit, and financial disclosure procedures
Borrowing powers of the board
Winding up procedures

MoA vs AoA — Key Difference

MoA = Relationship with OUTSIDE WORLD. AoA = INTERNAL management rules. MoA is SUPERIOR — AoA cannot override it. Acts beyond AoA are irregular (can be ratified) but acts beyond MoA are Ultra Vires (cannot be ratified).

Doctrine of Indoor Management (Turquand's Rule)

An OUTSIDER dealing with a company in GOOD FAITH can ASSUME that all internal procedures have been properly followed. Cannot be expected to check whether board meetings were held properly.

⚖️ Royal British Bank v. Turquand (1856) — Indoor Management

The company's AoA allowed directors to borrow money IF sanctioned by a general meeting resolution. Directors borrowed money from Royal British Bank WITHOUT passing such resolution. Company refused to repay saying resolution wasn't passed. HELD: The Bank was entitled to ASSUME the internal resolution had been passed. Company MUST repay. An outsider cannot be expected to verify internal compliance — they can trust the external appearance of authority. This is Turquand's Rule!

Exceptions to Turquand's Rule — When it does NOT protect① Persons with ACTUAL KNOWLEDGE of irregularity · ② INSIDERS (directors, shareholders) who know the internal position · ③ Cases of FORGERY — bank always responsible for forged signatures · ④ ULTRA VIRES acts — never protected, always void

🧠

Turquand's Rule = Outsider can trust company's internal compliance. Exceptions: actual knowledge, insiders, forgery, ultra vires. Turquand Case 1856.

§96, §100, §173

Meetings of the Company

AGM — Annual General Meeting §96

Every company EXCEPT OPC must hold
Within 6 months of financial year-end
First AGM within 9 months of first year-end
Gap between 2 AGMs ≤ 15 months
21 days clear notice to all members
Business: Accounts, Dividends, Directors, Auditors

Example

Infosys holds AGM in June/July each year. All shareholders receive 21-day notice. Vote on CEO appointment, dividend, financial statements.

EGM — Extraordinary GM §100

Any meeting other than AGM
For urgent business that cannot wait
Called by BOD, or members with ≥10% shares, or NCLT
21 days notice required
Shorter notice if 95% members agree in writing

Example

Tata Sons called EGM in November 2016 to remove Cyrus Mistry as Chairman. This couldn't wait till next AGM!

Board Meeting §173

Minimum 4 times per year
Gap between meetings ≤ 120 days
7 days notice to all directors
Video conferencing allowed
Quorum = ⅓ of total strength OR 2 directors (whichever higher)

Types of Resolutions

Ordinary Resolution

Passed by simple majority — more than 50% of votes cast. Used for routine decisions: appointment of directors, adoption of accounts, declaration of dividends.

Special Resolution

Passed by at least 75% majority. Required for: MoA/AoA changes, name change, reduction of capital, winding up. Must be filed with ROC within 30 days in Form MGT-14.

🧠

Ordinary = >50%. Special = ≥75%. AGM = 6 months from year-end. EGM = urgent. Board = 4x/year, 120-day gap, 7-day notice.

§149–169

Directors — Appointment, Powers, Duties, Removal

Directors are the BRAIN of the company. They manage the company's affairs on behalf of shareholders. Every director must have a DIN (Director Identification Number) — obtained via Form DIR-3 from MCA. Without DIN, a person cannot be appointed as director.

Type of Company	Minimum Directors	Maximum Directors	Special Requirements
One Person Company	1	15	Can be same as sole member
Private Limited	2	15	—
Public Limited	3	15	At least 1 resident in India (182+ days/year)
Listed Company	3	15	Min ⅓ Independent Directors + 1 Woman Director

Women Director §149(1)

Every listed company AND public company with paid-up capital ≥ ₹100 crore OR turnover ≥ ₹300 crore must have at least ONE woman director on its board. Ensures gender diversity in corporate governance.

Independent Director §149(4)

Listed public companies must have at least ⅓ of total directors as Independent — persons with no material relationship with company, promoters, or management. Protects minority shareholders.

Duties of Directors — Section 166

Act in good faith in best interest of company, employees, shareholders, and community
Exercise independent judgment — not influenced by third parties
Exercise reasonable care, skill, and diligence
Avoid conflicts of interest — don't put personal interest above company's
Not gain personal advantage at company's expense
Not assign their office to any other person

Removal of Directors — Section 169

Shareholders can remove director before term expires by Ordinary Resolution (simple majority)
14 days Special Notice must be given before the meeting
Director has Right to be Heard — cannot be removed without opportunity to defend
Director can make written representation which must be circulated to all members

⚖️ Tata Sons v. Cyrus Mistry (2016)

Shareholders of Tata Sons removed Cyrus Mistry as Executive Chairman via EGM resolution in October 2016 under Section 169. Mistry challenged the removal before NCLT claiming improper procedure. Case went through NCLT → NCLAT → Supreme Court of India. Eventually the removal was upheld. This is the most famous Indian corporate governance case of the decade!

🧠

Removal §169 = Ordinary Resolution + 14-day special notice + Director has right to be heard + Can submit written representation.

§270–365 End of Life

Winding Up of Companies

Winding up = closing down a company. Process: realize all assets → pay all creditors → distribute any surplus to shareholders → strike name off ROC register → company CEASES TO EXIST forever.

Compulsory Winding Up §271

NCLT orders the winding up. Petition by company, creditor, member, ROC, or government.

Grounds:
• Cannot pay its debts (insolvency)
• 5 years of no filings with ROC
• Acts against sovereignty/security of India
• Company passed special resolution for NCLT winding up
• Just and equitable reason

Voluntary Winding Up

Members' Voluntary:

Company is SOLVENT. Directors declare solvency. Members pass Special Resolution. Members appoint their own liquidator. Members control the process.

Creditors' Voluntary:

Company is INSOLVENT. No declaration of solvency. Creditors' meeting called. Creditors appoint and control the liquidator. Creditors protect their interests.

Priority of Payment — Who Gets Paid First?

Priority 1

Secured Creditors

Banks and lenders who have charge/mortgage on company assets. Get paid FIRST from the specific assets charged to them.

Priority 2

Preferential Creditors

Employees' wages and salary for last 4 months. Accrued holiday pay. Government tax dues. Paid before unsecured creditors.

Priority 3

Unsecured Creditors

Suppliers, trade creditors, and others who did not take any security. Paid after secured and preferential creditors.

Priority 4

Shareholders

Get whatever is left AFTER all creditors are paid. Preference shareholders first, then equity shareholders. In insolvency — usually NOTHING left for shareholders.

Example — Voluntary Winding Up

A small Pvt. Ltd. company has had no business for 3 years. Directors check all debts are payable — declare solvency. Members hold EGM and pass Special Resolution for winding up. A Chartered Accountant is appointed as Liquidator. Liquidator sells all assets, collects all debts, pays all creditors in order (secured → preferential → unsecured). Remaining Rs.5 lakhs is distributed to shareholders pro-rata. ROC strikes off name. Company ceases to exist permanently!

🧠

Winding up payment priority: Secured → Preferential → Unsecured → Shareholders. This is the golden sequence — never forget it!

Unit 3 — Quick Revision Table

Topic	Key Point	Case / Section
Separate Legal Entity	Company ≠ shareholders. Cannot hold shareholders personally liable.	Salomon 1897, §2(20)
OPC	1 member, no AGM, convert if ₹50L capital / ₹2Cr turnover	§2(62)
Private Ltd.	2-200 members, restricted transfer, no public issue	§2(68)
Public Ltd.	7+ members, free transfer, IPO allowed	§2(71)
Ultra Vires	Beyond Objects Clause = VOID. Cannot be ratified.	Ashbury 1875, §4
Indoor Management	Outsider can trust internal compliance	Turquand 1856, §5
AGM	Every year, within 6 months, 21 days notice	§96
EGM	Urgent meetings, 21 days notice, 95% = shorter notice	§100
Board Meeting	4x/year, 120-day gap, 7-day notice, video conferencing OK	§173
Special Resolution	≥75% majority. File with ROC within 30 days.	§114
Women Director	Mandatory for listed co. + large public co.	§149(1)
Removal of Director	Ordinary Resolution + 14-day special notice + right to be heard	§169
Winding Up Priority	Secured → Preferential → Unsecured → Shareholders	§326-327

Moving to Unit 4

Consumer Protection Act, 1986 · Intellectual Property Rights

Unit 4

Consumer Protection Act, 1986 + Intellectual Property Rights

🛡️ CPA 1986

Consumer Protection Act, 1986 — Introduction & Definitions

Before this Act, if you bought a defective product, your only remedy was going to a civil court — expensive, slow, and complicated. The Consumer Protection Act, 1986 changed everything. It created a simple, fast, free, and effective consumer dispute resolution system. Came into force on 24th December 1986.

Term	Section	Simple Definition	Key Test
Consumer	§2(1)(d)	Person who buys goods or avails services for PERSONAL USE — not for resale or commercial purpose	Purpose of purchase? Personal = consumer. Resale/commercial = NOT consumer
Trader	§2(1)(q)	Person who sells or distributes goods for sale — includes manufacturer and middlemen	Sells goods commercially? = Trader liable under CPA
Defect in Goods	§2(1)(f)	Any fault, imperfection, shortcoming in quality, quantity, potency, purity, or standard of goods	Fridge stops cooling = defect in quality. Rice 900g labelled 1kg = defect in quantity
Deficiency in Service	§2(1)(g)	Any fault, inadequacy in quality, nature, or manner of performance of a service	Promised repair in 24hrs, took 3 weeks = deficiency
Unfair Trade Practice	§2(1)(r)	Deceptive practices to promote sale — false claims, misleading ads, fake offers	Claiming "miraculous cure" without proof = UFP
Service	§2(1)(o)	Banking, insurance, transport, housing, entertainment, information services	Excludes: free services + personal service contracts (maid/cook)

Complete Real Case — Mr. Rajiv Sharma

Mr. Rajiv Sharma (Delhi resident) buys a refrigerator from CoolTech Electronics for ₹30,000 in 2019 for HOME USE → He is a CONSUMER under §2(1)(d). CoolTech = TRADER under §2(1)(q). Within 2 months, fridge stops cooling → DEFECT IN GOODS under §2(1)(f). Despite repeated complaints, CoolTech does nothing → DEFICIENCY IN SERVICE under §2(1)(g). Sharma files complaint in District Consumer Forum → Forum rules in his favour → CoolTech ordered to refund ₹30,000 + pay ₹5,000 compensation for mental agony!

🧠

Consumer = personal use NOT resale. Defect = fault in goods. Deficiency = fault in service. UFP = deceptive trade practice. KEY difference: Consumer vs Trader is the DOMINANT PURPOSE of the purchase!

§6 — Six Rights

Six Consumer Rights — Section 6

The Consumer Protection Act recognizes SIX fundamental rights of every consumer in India. These are inspired by UN Guidelines for Consumer Protection.

① Right to Safety

Protected from goods/services that are hazardous to life and property. BIS certification for electrical goods, medicines, food products ensures minimum safety standards.

Mr. Sharma: He had the right to receive a safe, working refrigerator.

② Right to Information

Must be told quality, quantity, price, ingredients, expiry date of goods and services. Every product must carry proper MRP, manufacturing date, and complete information.

Example: Hiding true expiry date under a sticker = violation.

③ Right to Choose

Access to variety of goods at competitive prices. No forced purchases. TRAI regulations allowing consumers to choose individual TV channels enforce this right.

Example: Cable operator forcing unwanted channels = violation.

④ Right to be Heard

Consumer's interests must receive due consideration at appropriate forums. If you have a complaint, you must be given a fair opportunity to present your case.

Mr. Sharma: Repeatedly made complaints — CoolTech was required to hear and respond.

⑤ Right to Seek Redressal ⭐

Most Important Right! Access Consumer Disputes Redressal Commission to seek REPAIR, REPLACEMENT, REFUND, and COMPENSATION.

Mr. Sharma exercised this right by approaching District Consumer Forum and got ₹35,000 total relief!

⑥ Right to Consumer Education

Acquire knowledge and skills to be an informed consumer. "Jaago Grahak Jaago" campaign by Department of Consumer Affairs. Schools, colleges spread consumer awareness.

Impact: Educated consumers make better choices, protect themselves from exploitation.

🧠

6 Rights = Safety, Information, Choice, Heard, Redressal, Education. Shortcut: SICHR-E or "Sir ICH RE" to remember all 6!

§9–20 Three-Tier System

Three-Tier Consumer Redressal Machinery

The MOST IMPORTANT feature of CPA 1986. A special three-tier quasi-judicial machinery for quick, cheap, and effective consumer dispute resolution. No heavy court fees. Simple procedures. Consumer-friendly. No compulsion to hire lawyers.

Tier 1

District Consumer Disputes Redressal Forum — Section 10

Jurisdiction (CPA 1986): Claims up to ₹20 lakhs
President: Person qualified to be (or has been) a District Judge
Members: At least 2, one must be a woman
Filing limit: Within 2 years of cause of action
Decision time: Within 3 months (5 months if goods testing needed)
One in every district of India

Mr. Sharma's Case

Sharma's claim = ₹30,000 + ₹5,000 = ₹35,000. Well within ₹20 lakh limit → He correctly filed at District Consumer Forum in Delhi!

Tier 2

State Consumer Disputes Redressal Commission — Section 16

Jurisdiction (CPA 1986): Claims from ₹20 lakhs to ₹1 crore
Also hears: APPEALS from District Forum within 30 days of order
President: Person qualified to be a High Court Judge
Members: At least 2, one must be a woman
One State Commission in every state

Example

Consumer buys flat from builder for ₹60 lakhs. Builder delivers 2 years late with major construction defects. Consumer approaches State Commission (₹60L is between ₹20L and ₹1Cr).

Tier 3

National Consumer Disputes Redressal Commission — Section 20

Jurisdiction (CPA 1986): Claims above ₹1 crore
Also hears: APPEALS from State Commission within 30 days
President: RETIRED JUDGE of Supreme Court of India
Members: At least 4, one must be a woman
Final appeal goes to: Supreme Court of India
Location: New Delhi (National level)

Example

A company buys faulty industrial machinery worth ₹5 crore. Claim exceeds ₹1 crore → National Consumer Disputes Redressal Commission.

Feature	District Forum	State Commission	National Commission
Jurisdiction (CPA 1986)	Up to ₹20 lakhs	₹20L to ₹1 crore	Above ₹1 crore
President qualification	District Judge equivalent	High Court Judge equivalent	Retired Supreme Court Judge
Appeal goes to	State Commission	National Commission	Supreme Court of India
Appeal within	30 days of order	30 days of order	30 days of order

Remedies Available — Section 14

§14(1)(a) — Removal of Defect: Fix/repair the defect in goods. Seller/manufacturer must rectify.
§14(1)(b) — Replacement: Replace defective goods with new goods of similar description, defect-free.
§14(1)(c) — Refund of Price: Return the full price paid by consumer. CoolTech must refund ₹30,000 to Mr. Sharma.
§14(1)(d) — Compensation: Pay for any loss or injury including MENTAL AGONY. Mr. Sharma got ₹5,000 for mental agony.
§14(1)(e) — Stop Unfair Practices: Discontinue unfair trade practice or restrictive trade practice.
§14(1)(f) — Withdraw Hazardous Goods: Remove dangerous goods from sale for public safety.

🧠

District = ₹20L. State = ₹20L to ₹1Cr. National = above ₹1Cr. Appeals ALWAYS within 30 days. Remedies = Repair, Replace, Refund, Compensation, Stop UFP, Withdraw.

💡 IPR Overview

Intellectual Property Rights — Introduction

Intellectual Property Rights (IPR) are legal rights that protect creations of the human mind — inventions, creative works, brand identities, designs, and geographical indicators. Just as you have the right to protect your physical property, the law gives creators the right to protect their intellectual creations.

For businesses, IPR is enormously valuable: Coca-Cola's formula (trade secret), Microsoft Windows (copyright), Samsung phone design (design registration), Apple iPhone features (patent), Nike swoosh (trademark) — these protections are worth billions. India is a signatory to TRIPS (Trade-Related Aspects of Intellectual Property Rights) under WTO.

🔬

PATENT

Inventions
20 years
Must register
Patents Act 1970

Creative works
Life + 60 years
Auto-protected
Copyright Act 1957

TRADEMARK

Brand identity
10 yrs renewable
Must register
TM Act 1999

🌍

GI TAG

Geographic origin
10 yrs renewable
Must register
GI Act 1999

🎨

DESIGN

Aesthetic look
10+5 years
Must register
Designs Act 2000

Patents Act 1970

Patents — Exclusive Right for Inventions

Section 2(m) — Patent Definition"Patent means a patent for any invention granted under the Patents Act, 1970." An exclusive right granted by government to inventor for 20 YEARS in exchange for PUBLIC DISCLOSURE of the invention.

3 Conditions for Patentability — Section 2(j)

🆕

NOVELTY

Must be NEW — not already known or used anywhere in the world. Not part of "prior art" (existing knowledge).

🧠

INVENTIVE STEP

Not OBVIOUS to a person skilled in the relevant field. Must involve creative thinking or technical advancement.

🏭

INDUSTRIAL APPLICATION

Must be USABLE in industry. Pure theoretical concepts with no practical use cannot be patented.

What CANNOT Be Patented — Section 3

Natural phenomena — laws of nature (E=mc²), mathematical formulas
Medical treatment methods for humans or animals
Plants and animals in whole or any part thereof
Computer programs per se (software alone, without technical effect)
Business methods, mathematical methods, mental acts
Agricultural methods and horticulture methods
Atomic energy related inventions

Patent Grant Procedure

File Application

At Indian Patent Office (Mumbai, Delhi, Chennai, Kolkata). Provisional application first to secure priority date, then complete application within 12 months. Include full description, claims, and drawings.

Publication — Section 11A

Application published in Official Patent Journal after 18 MONTHS from filing. Becomes public knowledge. Third parties can file pre-grant oppositions.

Request for Examination — Section 11B

Applicant must request examination within 48 MONTHS of filing date. If not requested — application is treated as withdrawn.

Examination

Patent Examiner checks novelty, inventive step, industrial applicability. If objections — applicant must respond within 12 months.

Grant — Section 43

Patent granted and published in Patent Journal. Valid for 20 years from date of filing. Renewable annually by paying fees.

Compulsory Licence — Section 84Government can allow OTHERS to use a patented invention WITHOUT the patent holder's consent when: (1) Not available to public at reasonably affordable prices · (2) Reasonable requirements of public not satisfied · (3) Invention not being manufactured in India

⚖️ Natco Pharma v. Bayer Corporation (2012) — Compulsory Licence

Bayer's cancer drug Nexavar was priced at ₹2.8 lakh per month — completely unaffordable for most Indians. Natco Pharma applied for a Compulsory Licence to manufacture the same drug at ₹8,880 per month (97% cheaper!). HELD: Compulsory Licence GRANTED. Bayer's patent rights yielded to PUBLIC HEALTH interest. This was a landmark case showing that in India, public health is more important than corporate patent monopoly!

🧠

Patent = New + Inventive + Industrial. 20 years. Must register. Cannot patent: natural laws, formulas, treatment methods, plants, animals, software alone. Compulsory Licence §84 for public interest.

Copyright — Automatic Protection for Creative Works

Copyright protects ORIGINAL creative works. The KEY feature — copyright arises AUTOMATICALLY when an original work is created in tangible form. No registration required (though registration provides better legal evidence in court).

What Copyright Protects — Section 13Literary works (books, novels, software, databases) · Dramatic works (plays, scripts, choreography) · Musical works (compositions, notes) · Artistic works (paintings, photos, sculptures, architecture) · Cinematograph Films (motion pictures including sound) · Sound Recordings (any recording of sounds)

✅ What Copyright Protects

J.K. Rowling's specific words, sentences, and descriptions in Harry Potter. The exact plot, characters, and scenes. Her EXPRESSION of the idea of a young wizard going to magic school.

❌ What Copyright DOES NOT Protect

The IDEA of a young wizard going to magic school. Another author can write a completely different story about a young wizard. Ideas, facts, and concepts are FREE for all to use!

Duration of Copyright — Section 22

Type of Work	Duration	Example
Literary / Dramatic / Musical / Artistic	Lifetime of author + 60 years after death	Tagore (died 1941) → Copyright till 2001. After that = Public domain.
Cinematograph Films	60 years from year of publication	A film released in 2000 → Copyright till 2060.
Sound Recordings	60 years from year of publication	An album released in 1990 → Copyright till 2050.
Government Works	60 years from year of publication	—

5 Rights of Copyright Owner — Section 14

① Reproduction Right

No one can copy, photocopy, scan, or reproduce the work without permission. Making photocopies of an entire textbook = violation.

② Communication Right

Right to broadcast, stream, perform publicly. Streaming a copyrighted movie on YouTube without licence = violation.

③ Translation Right

Right to translate into other languages. Translating a novel from English to Hindi and selling without permission = violation.

④ Adaptation Right

Right to convert novel to film, play to novel, etc. Making Bollywood film based on English novel without film rights = violation.

⑤ Distribution Right

Right to issue copies to public. Selling pirated DVDs or illegal downloads = violation.

Film Protection — Pathaan 2023 Example

When "Pathaan" was released in January 2023, piracy websites uploaded the full movie within hours. YRF (Yash Raj Films — the producer) took immediate action: (1) Filed civil suit for infringement claiming damages. (2) Filed criminal complaint under Section 63 — imprisonment up to 3 years + fine. (3) Applied to court for search and seizure orders for pirated copies. (4) Filed complaint with Cyber Crime Cell for online piracy. (5) Reported illegal websites to hosting providers and ISPs. Result: Websites taken down, persons responsible arrested. All 5 copyright owner rights were invoked!

🧠

Copyright = AUTOMATIC at creation. No registration needed. Life + 60 years. 5 rights. Protects EXPRESSION not IDEAS. Film copyright = producer is first owner §17.

Trade Marks Act 1999

Trade Marks — Protecting Brand Identity

Section 2(zb) — Trade Mark Definition"Trade mark means a mark capable of being represented graphically and which is capable of distinguishing the goods or services of one person from those of others and may include shape of goods, their packaging and combination of colours."

What CAN be registered as TM

Words: TATA, AMUL, 5G, NOKIA
Logos: Apple logo, Nike swoosh, McDonald's arches
Shapes: Coca-Cola bottle's unique shape
Colours: Cadbury's purple colour for chocolates
Sound marks: Intel's chime, Nokia ringtone, MGM lion's roar
3D marks: Shape of Toblerone chocolate

What CANNOT be registered §9

Non-distinctive marks that describe the goods themselves
Marks identical or similar to existing marks for same goods
Marks that are deceptive or misleading
National flags and government emblems
Generic words — cannot trademark "Computer" for a computer company
Marks against public morality

Trademark Registration Procedure

File Application

At Trade Marks Registry (Mumbai, Delhi, Chennai, Kolkata, Ahmedabad). Include the mark, class of goods/services (45 international classes), applicant details.

Examination

Registry examines for absolute grounds (distinctiveness, non-deceptiveness) and relative grounds (conflict with existing marks). Issues Examination Report.

Publication in TM Journal

If accepted, mark published in Trade Marks Journal for 4 months. During this period anyone can file an opposition.

Opposition (if any)

If opposition filed — both parties heard. Registrar decides. If no opposition filed or opposition dismissed — proceed to registration.

Registration — Section 23

Certificate of Registration issued. Valid for 10 years. RENEWABLE FOREVER by paying renewal fees every 10 years. Use ® symbol after registration.

Amul Trademark Infringement Example

AMUL is a registered trademark of GCMMF (Gujarat Co-operative Milk Marketing Federation) for dairy products. If any company starts selling dairy products under the name "AMOL" or "AMUL DAIRY" (confusingly similar name) — GCMMF can: (1) File a lawsuit for TRADEMARK INFRINGEMENT — using registered mark without permission. (2) File for PASSING OFF — even if mark not registered, if consumers get confused. Court can order: injunction to stop using the name, destruction of all packaging, payment of damages, and accounting of profits made by infringer!

Feature	Patent	Copyright	Trade Mark
What protected	Inventions (product/process)	Original creative expression	Brand identity (marks/logos)
Law	Patents Act, 1970	Copyright Act, 1957	Trade Marks Act, 1999
Duration	20 years from filing	Life + 60 years	10 years (renewable forever)
Registration	COMPULSORY	OPTIONAL (auto-protection)	COMPULSORY for ® rights
Key requirement	Novel + Inventive + Industrial	Original expression	Distinctive, not generic
Symbol	Patent Number	© (Circle C)	® registered / TM unregistered
Indian example	New drug molecule	Bollywood film, novel, song	TATA, AMUL, Infosys logos

Geographical Indications (GI) — GI Act, 1999

A GI tag is used on products that have a specific geographical origin and possess qualities or reputation due to that origin. No manufacturer outside the specified region can use the GI tag name.

Famous Indian GI Tags

Darjeeling Tea (West Bengal) · Basmati Rice (Punjab, Haryana, UP, Uttarakhand, J&K) · Kolhapuri Chappals (Maharashtra) · Kancheepuram Silk (Tamil Nadu) · Nagpur Oranges (Maharashtra) · Channapatna Toys (Karnataka) · Bikaneri Bhujia (Rajasthan) · Chanderi Fabric (Madhya Pradesh). If someone in Mumbai sells "Darjeeling Tea" without actual origin from Darjeeling — they violate the GI tag and can be prosecuted!

🧠

GI = Geographic origin + quality from that origin. Darjeeling Tea, Basmati Rice are the most famous examples. No one can use GI name without actual origin from that place!

Unit 4 — Quick Revision Table

Topic	Key Point	Section
Consumer	Personal use, NOT resale or commercial	§2(1)(d) CPA
Defect in Goods	Fault in quality, quantity, potency, purity, standard	§2(1)(f) CPA
Deficiency in Service	Fault in quality, nature, manner of performance	§2(1)(g) CPA
6 Consumer Rights	Safety, Information, Choice, Heard, Redressal, Education	§6 CPA
District Forum	Up to ₹20 lakhs, District Judge president	§10 CPA
State Commission	₹20L to ₹1Cr, HC Judge president, appeals in 30 days	§16 CPA
National Commission	Above ₹1Cr, Retired SC Judge, appeals in 30 days	§20 CPA
Remedies §14	Repair, Replace, Refund, Compensation, Stop UFP, Withdraw	§14 CPA
Patent	New + Inventive + Industrial. 20 years. Compulsory registration.	§2(j)(m) Patents
Compulsory Licence	Govt. can allow use without consent — public interest	§84 Patents
Copyright	Auto on creation. Life+60 yrs. 5 rights. Expression not ideas.	§13,14,22 Copyright
Trade Mark	Distinctive brand mark. 10 yrs renewable. ® after registration.	§2(zb),9,23 TM
GI Tag	Geographic origin products — Darjeeling Tea, Basmati Rice	GI Act 1999

Business Law — Units 3 & 4 Notes

MBA Sem 2 · Business Law MBA 201

Units 3 & 4
Complete Notes

Companies Act, 2013 · Consumer Protection Act, 1986 · Intellectual Property Rights — Deep understanding · Real examples · Exam-ready

Unit 3

The Companies Act, 2013

470 Sections · 7 Schedules · Ministry of Corporate Affairs · ROC Administration

📌 Introduction

What is a Company? Key Features

Separate Legal Entity

Company ≠ its shareholders. Can own property, enter contracts, sue and be sued in its OWN name. Salomon v. Salomon 1897 is the landmark case.

Limited Liability

Members' liability is limited to unpaid amount on shares. Personal property cannot be used to pay company debts. This is the biggest advantage of incorporation.

Perpetual Succession

"Members may come and go but the company goes on forever." Death, resignation, or bankruptcy of shareholders does NOT end the company.

Artificial Legal Person

Created by law. Can act through its directors and officers. Cannot vote, hold public office, or go to jail. Has ALL legal rights a person has.

Transferability of Shares

Public company shares freely transferable on stock exchange. Private company restricts transfer — needs board approval.

Separate Property

Property of the company belongs to the COMPANY — not shareholders. Even 100% shareholder cannot claim company property as their own!

⚖️ Salomon v. Salomon & Co. Ltd. (1897) — THE MOST IMPORTANT CASE

🧠

Salomon Case 1897 = Separate Legal Entity. The company is NOT the same as its owners. Creditors cannot pierce the corporate veil in normal circumstances.

§2(62)(68)(71)

Types of Companies — OPC, Private, Public

🧑 ONE PERSON COMPANY §2(62)

Only 1 member — solo entrepreneur
Minimum 1 director (can be same as member)
No AGM required
Nominee must be appointed (in case member dies)
Convert if capital > ₹50L or turnover > ₹2Cr
Name ends with OPC Pvt. Ltd.

Example

Vikas Digital OPC Pvt. Ltd. — solo digital marketer with full limited liability protection.

👥 PRIVATE LIMITED §2(68)

Members: Min 2, Max 200
Directors: Min 2, Max 15
NO public issue of shares allowed
Share transfer is RESTRICTED
AGM compulsory
Name ends with Pvt. Ltd.

Examples

Zomato Pvt. Ltd. (before IPO), most Indian startups begin as Pvt. Ltd.

🏢 PUBLIC LIMITED §2(71)

Members: Min 7, No maximum
Directors: Min 3, Max 15
CAN raise public funds via IPO
Shares freely transferable on stock exchange
AGM compulsory
Name ends with Ltd.

Examples

Tata Motors Ltd., Reliance Industries Ltd., Infosys Ltd. — shares traded on BSE and NSE.

Feature	OPC	Private Ltd.	Public Ltd.
Min Members	1	2	7
Max Members	1	200	No limit
Min Directors	1	2	3
Max Directors	15	15	15
Public Issue (IPO)	Not allowed	Not allowed	Allowed
Share Transfer	N/A	Restricted	Freely transferable
AGM Required	No	Yes	Yes
Name Suffix	OPC Pvt. Ltd.	Pvt. Ltd.	Ltd.

§3–22 Process

Formation / Incorporation of a Company

Promotion

Incorporation / Registration

Capital Subscription (Public Companies only)

Commencement of Business — Form INC-20A

Example

🧠

Certificate of Incorporation = Company's Birth Certificate. Company comes into existence ON the date mentioned in the certificate!

§4 Foundation

Memorandum of Association (MoA)

Clause	What it states	Example
① Name Clause	Company's name + proper suffix (Pvt. Ltd. / Ltd. / OPC Pvt. Ltd.)	"RSM Technologies Private Limited"
② Registered Office	State where office is located → that state's ROC has jurisdiction	"Registered Office in State of Maharashtra"
③ Objects Clause ⭐	MOST IMPORTANT — defines what company CAN do. Ultra Vires if outside.	"To develop and sell computer software and IT services"
④ Liability Clause	Nature of liability — limited by shares / guarantee / unlimited	"Liability of members is limited"
⑤ Capital Clause	Authorised capital — maximum shares company can issue	"₹10 crore divided into 1 crore equity shares of ₹10 each"
⑥ Association Clause	Founding declaration — signatures of min 2 (private) or 7 (public) subscribers	Names, addresses, signatures of founding members

⚠️ Doctrine of Ultra Vires — Very Important!

Ultra Vires means "Beyond Powers." Any act done by a company that is BEYOND the scope of its MoA (Objects Clause) is Ultra Vires. Such acts are:

ABSOLUTELY VOID Cannot be Ratified Not enforceable by or against company Even 100% shareholder vote cannot save it

⚖️ Ashbury Railway Carriage Co. v. Riche (1875) — Ultra Vires Case

🧠

MoA = Constitution of company. 6 clauses. Objects Clause = Boundary. Cross the boundary = Ultra Vires = VOID. Ashbury Case 1875.

§5 Internal Rules

Articles of Association (AoA)

Contents of AoA

Share capital — calls on shares, forfeiture, transfer rules
General meeting procedures — notice requirements, quorum, voting procedures
Appointment, powers, duties, and removal of directors
Dividend declaration and distribution of reserves
Accounts, audit, and financial disclosure procedures
Borrowing powers of the board
Winding up procedures

MoA vs AoA — Key Difference

Doctrine of Indoor Management (Turquand's Rule)

An OUTSIDER dealing with a company in GOOD FAITH can ASSUME that all internal procedures have been properly followed. Cannot be expected to check whether board meetings were held properly.

⚖️ Royal British Bank v. Turquand (1856) — Indoor Management

🧠

Turquand's Rule = Outsider can trust company's internal compliance. Exceptions: actual knowledge, insiders, forgery, ultra vires. Turquand Case 1856.

§96, §100, §173

Meetings of the Company

AGM — Annual General Meeting §96

Every company EXCEPT OPC must hold
Within 6 months of financial year-end
First AGM within 9 months of first year-end
Gap between 2 AGMs ≤ 15 months
21 days clear notice to all members
Business: Accounts, Dividends, Directors, Auditors

Example

Infosys holds AGM in June/July each year. All shareholders receive 21-day notice. Vote on CEO appointment, dividend, financial statements.

EGM — Extraordinary GM §100

Any meeting other than AGM
For urgent business that cannot wait
Called by BOD, or members with ≥10% shares, or NCLT
21 days notice required
Shorter notice if 95% members agree in writing

Example

Tata Sons called EGM in November 2016 to remove Cyrus Mistry as Chairman. This couldn't wait till next AGM!

Board Meeting §173

Minimum 4 times per year
Gap between meetings ≤ 120 days
7 days notice to all directors
Video conferencing allowed
Quorum = ⅓ of total strength OR 2 directors (whichever higher)

Types of Resolutions

Ordinary Resolution

Passed by simple majority — more than 50% of votes cast. Used for routine decisions: appointment of directors, adoption of accounts, declaration of dividends.

Special Resolution

Passed by at least 75% majority. Required for: MoA/AoA changes, name change, reduction of capital, winding up. Must be filed with ROC within 30 days in Form MGT-14.

🧠

Ordinary = >50%. Special = ≥75%. AGM = 6 months from year-end. EGM = urgent. Board = 4x/year, 120-day gap, 7-day notice.

§149–169

Directors — Appointment, Powers, Duties, Removal

Type of Company	Minimum Directors	Maximum Directors	Special Requirements
One Person Company	1	15	Can be same as sole member
Private Limited	2	15	—
Public Limited	3	15	At least 1 resident in India (182+ days/year)
Listed Company	3	15	Min ⅓ Independent Directors + 1 Woman Director

Women Director §149(1)

Independent Director §149(4)

Listed public companies must have at least ⅓ of total directors as Independent — persons with no material relationship with company, promoters, or management. Protects minority shareholders.

Duties of Directors — Section 166

Act in good faith in best interest of company, employees, shareholders, and community
Exercise independent judgment — not influenced by third parties
Exercise reasonable care, skill, and diligence
Avoid conflicts of interest — don't put personal interest above company's
Not gain personal advantage at company's expense
Not assign their office to any other person

Removal of Directors — Section 169

Shareholders can remove director before term expires by Ordinary Resolution (simple majority)
14 days Special Notice must be given before the meeting
Director has Right to be Heard — cannot be removed without opportunity to defend
Director can make written representation which must be circulated to all members

⚖️ Tata Sons v. Cyrus Mistry (2016)

🧠

Removal §169 = Ordinary Resolution + 14-day special notice + Director has right to be heard + Can submit written representation.

§270–365 End of Life

Winding Up of Companies

Winding up = closing down a company. Process: realize all assets → pay all creditors → distribute any surplus to shareholders → strike name off ROC register → company CEASES TO EXIST forever.

Compulsory Winding Up §271

NCLT orders the winding up. Petition by company, creditor, member, ROC, or government.

Voluntary Winding Up

Members' Voluntary:

Company is SOLVENT. Directors declare solvency. Members pass Special Resolution. Members appoint their own liquidator. Members control the process.

Creditors' Voluntary:

Company is INSOLVENT. No declaration of solvency. Creditors' meeting called. Creditors appoint and control the liquidator. Creditors protect their interests.

Priority of Payment — Who Gets Paid First?

Priority 1

Secured Creditors

Banks and lenders who have charge/mortgage on company assets. Get paid FIRST from the specific assets charged to them.

Priority 2

Preferential Creditors

Employees' wages and salary for last 4 months. Accrued holiday pay. Government tax dues. Paid before unsecured creditors.

Priority 3

Unsecured Creditors

Suppliers, trade creditors, and others who did not take any security. Paid after secured and preferential creditors.

Priority 4

Shareholders

Get whatever is left AFTER all creditors are paid. Preference shareholders first, then equity shareholders. In insolvency — usually NOTHING left for shareholders.

Example — Voluntary Winding Up

🧠

Winding up payment priority: Secured → Preferential → Unsecured → Shareholders. This is the golden sequence — never forget it!

Unit 3 — Quick Revision Table

Topic	Key Point	Case / Section
Separate Legal Entity	Company ≠ shareholders. Cannot hold shareholders personally liable.	Salomon 1897, §2(20)
OPC	1 member, no AGM, convert if ₹50L capital / ₹2Cr turnover	§2(62)
Private Ltd.	2-200 members, restricted transfer, no public issue	§2(68)
Public Ltd.	7+ members, free transfer, IPO allowed	§2(71)
Ultra Vires	Beyond Objects Clause = VOID. Cannot be ratified.	Ashbury 1875, §4
Indoor Management	Outsider can trust internal compliance	Turquand 1856, §5
AGM	Every year, within 6 months, 21 days notice	§96
EGM	Urgent meetings, 21 days notice, 95% = shorter notice	§100
Board Meeting	4x/year, 120-day gap, 7-day notice, video conferencing OK	§173
Special Resolution	≥75% majority. File with ROC within 30 days.	§114
Women Director	Mandatory for listed co. + large public co.	§149(1)
Removal of Director	Ordinary Resolution + 14-day special notice + right to be heard	§169
Winding Up Priority	Secured → Preferential → Unsecured → Shareholders	§326-327

Moving to Unit 4

Consumer Protection Act, 1986 · Intellectual Property Rights

Unit 4

Consumer Protection Act, 1986 + Intellectual Property Rights

🛡️ CPA 1986

Consumer Protection Act, 1986 — Introduction & Definitions

Term	Section	Simple Definition	Key Test
Consumer	§2(1)(d)	Person who buys goods or avails services for PERSONAL USE — not for resale or commercial purpose	Purpose of purchase? Personal = consumer. Resale/commercial = NOT consumer
Trader	§2(1)(q)	Person who sells or distributes goods for sale — includes manufacturer and middlemen	Sells goods commercially? = Trader liable under CPA
Defect in Goods	§2(1)(f)	Any fault, imperfection, shortcoming in quality, quantity, potency, purity, or standard of goods	Fridge stops cooling = defect in quality. Rice 900g labelled 1kg = defect in quantity
Deficiency in Service	§2(1)(g)	Any fault, inadequacy in quality, nature, or manner of performance of a service	Promised repair in 24hrs, took 3 weeks = deficiency
Unfair Trade Practice	§2(1)(r)	Deceptive practices to promote sale — false claims, misleading ads, fake offers	Claiming "miraculous cure" without proof = UFP
Service	§2(1)(o)	Banking, insurance, transport, housing, entertainment, information services	Excludes: free services + personal service contracts (maid/cook)

Complete Real Case — Mr. Rajiv Sharma

🧠

Consumer = personal use NOT resale. Defect = fault in goods. Deficiency = fault in service. UFP = deceptive trade practice. KEY difference: Consumer vs Trader is the DOMINANT PURPOSE of the purchase!

§6 — Six Rights

Six Consumer Rights — Section 6

The Consumer Protection Act recognizes SIX fundamental rights of every consumer in India. These are inspired by UN Guidelines for Consumer Protection.

① Right to Safety

② Right to Information

③ Right to Choose

④ Right to be Heard

⑤ Right to Seek Redressal ⭐

⑥ Right to Consumer Education

🧠

6 Rights = Safety, Information, Choice, Heard, Redressal, Education. Shortcut: SICHR-E or "Sir ICH RE" to remember all 6!

§9–20 Three-Tier System

Three-Tier Consumer Redressal Machinery

Tier 1

District Consumer Disputes Redressal Forum — Section 10

Mr. Sharma's Case

Sharma's claim = ₹30,000 + ₹5,000 = ₹35,000. Well within ₹20 lakh limit → He correctly filed at District Consumer Forum in Delhi!

Tier 2

State Consumer Disputes Redressal Commission — Section 16

Example

Consumer buys flat from builder for ₹60 lakhs. Builder delivers 2 years late with major construction defects. Consumer approaches State Commission (₹60L is between ₹20L and ₹1Cr).

Tier 3

National Consumer Disputes Redressal Commission — Section 20

Example

A company buys faulty industrial machinery worth ₹5 crore. Claim exceeds ₹1 crore → National Consumer Disputes Redressal Commission.

Feature	District Forum	State Commission	National Commission
Jurisdiction (CPA 1986)	Up to ₹20 lakhs	₹20L to ₹1 crore	Above ₹1 crore
President qualification	District Judge equivalent	High Court Judge equivalent	Retired Supreme Court Judge
Appeal goes to	State Commission	National Commission	Supreme Court of India
Appeal within	30 days of order	30 days of order	30 days of order

Remedies Available — Section 14

§14(1)(a) — Removal of Defect: Fix/repair the defect in goods. Seller/manufacturer must rectify.
§14(1)(b) — Replacement: Replace defective goods with new goods of similar description, defect-free.
§14(1)(c) — Refund of Price: Return the full price paid by consumer. CoolTech must refund ₹30,000 to Mr. Sharma.
§14(1)(d) — Compensation: Pay for any loss or injury including MENTAL AGONY. Mr. Sharma got ₹5,000 for mental agony.
§14(1)(e) — Stop Unfair Practices: Discontinue unfair trade practice or restrictive trade practice.
§14(1)(f) — Withdraw Hazardous Goods: Remove dangerous goods from sale for public safety.

🧠

District = ₹20L. State = ₹20L to ₹1Cr. National = above ₹1Cr. Appeals ALWAYS within 30 days. Remedies = Repair, Replace, Refund, Compensation, Stop UFP, Withdraw.

💡 IPR Overview

Intellectual Property Rights — Introduction

🔬

PATENT

Inventions
20 years
Must register
Patents Act 1970

Creative works
Life + 60 years
Auto-protected
Copyright Act 1957

TRADEMARK

Brand identity
10 yrs renewable
Must register
TM Act 1999

🌍

GI TAG

Geographic origin
10 yrs renewable
Must register
GI Act 1999

🎨

DESIGN

Aesthetic look
10+5 years
Must register
Designs Act 2000

Patents Act 1970

Patents — Exclusive Right for Inventions

3 Conditions for Patentability — Section 2(j)

🆕

NOVELTY

Must be NEW — not already known or used anywhere in the world. Not part of "prior art" (existing knowledge).

🧠

INVENTIVE STEP

Not OBVIOUS to a person skilled in the relevant field. Must involve creative thinking or technical advancement.

🏭

INDUSTRIAL APPLICATION

Must be USABLE in industry. Pure theoretical concepts with no practical use cannot be patented.

What CANNOT Be Patented — Section 3

Natural phenomena — laws of nature (E=mc²), mathematical formulas
Medical treatment methods for humans or animals
Plants and animals in whole or any part thereof
Computer programs per se (software alone, without technical effect)
Business methods, mathematical methods, mental acts
Agricultural methods and horticulture methods
Atomic energy related inventions

Patent Grant Procedure

File Application

Publication — Section 11A

Application published in Official Patent Journal after 18 MONTHS from filing. Becomes public knowledge. Third parties can file pre-grant oppositions.

Request for Examination — Section 11B

Applicant must request examination within 48 MONTHS of filing date. If not requested — application is treated as withdrawn.

Examination

Patent Examiner checks novelty, inventive step, industrial applicability. If objections — applicant must respond within 12 months.

Grant — Section 43

Patent granted and published in Patent Journal. Valid for 20 years from date of filing. Renewable annually by paying fees.

⚖️ Natco Pharma v. Bayer Corporation (2012) — Compulsory Licence

🧠

Patent = New + Inventive + Industrial. 20 years. Must register. Cannot patent: natural laws, formulas, treatment methods, plants, animals, software alone. Compulsory Licence §84 for public interest.

Copyright — Automatic Protection for Creative Works

✅ What Copyright Protects

J.K. Rowling's specific words, sentences, and descriptions in Harry Potter. The exact plot, characters, and scenes. Her EXPRESSION of the idea of a young wizard going to magic school.

❌ What Copyright DOES NOT Protect

The IDEA of a young wizard going to magic school. Another author can write a completely different story about a young wizard. Ideas, facts, and concepts are FREE for all to use!

Duration of Copyright — Section 22

Type of Work	Duration	Example
Literary / Dramatic / Musical / Artistic	Lifetime of author + 60 years after death	Tagore (died 1941) → Copyright till 2001. After that = Public domain.
Cinematograph Films	60 years from year of publication	A film released in 2000 → Copyright till 2060.
Sound Recordings	60 years from year of publication	An album released in 1990 → Copyright till 2050.
Government Works	60 years from year of publication	—

5 Rights of Copyright Owner — Section 14

① Reproduction Right

No one can copy, photocopy, scan, or reproduce the work without permission. Making photocopies of an entire textbook = violation.

② Communication Right

Right to broadcast, stream, perform publicly. Streaming a copyrighted movie on YouTube without licence = violation.

③ Translation Right

Right to translate into other languages. Translating a novel from English to Hindi and selling without permission = violation.

④ Adaptation Right

Right to convert novel to film, play to novel, etc. Making Bollywood film based on English novel without film rights = violation.

⑤ Distribution Right

Right to issue copies to public. Selling pirated DVDs or illegal downloads = violation.

Film Protection — Pathaan 2023 Example

🧠

Copyright = AUTOMATIC at creation. No registration needed. Life + 60 years. 5 rights. Protects EXPRESSION not IDEAS. Film copyright = producer is first owner §17.

Trade Marks Act 1999

Trade Marks — Protecting Brand Identity

What CAN be registered as TM

Words: TATA, AMUL, 5G, NOKIA
Logos: Apple logo, Nike swoosh, McDonald's arches
Shapes: Coca-Cola bottle's unique shape
Colours: Cadbury's purple colour for chocolates
Sound marks: Intel's chime, Nokia ringtone, MGM lion's roar
3D marks: Shape of Toblerone chocolate

What CANNOT be registered §9

Non-distinctive marks that describe the goods themselves
Marks identical or similar to existing marks for same goods
Marks that are deceptive or misleading
National flags and government emblems
Generic words — cannot trademark "Computer" for a computer company
Marks against public morality

Trademark Registration Procedure

File Application

At Trade Marks Registry (Mumbai, Delhi, Chennai, Kolkata, Ahmedabad). Include the mark, class of goods/services (45 international classes), applicant details.

Examination

Registry examines for absolute grounds (distinctiveness, non-deceptiveness) and relative grounds (conflict with existing marks). Issues Examination Report.

Publication in TM Journal

If accepted, mark published in Trade Marks Journal for 4 months. During this period anyone can file an opposition.

Opposition (if any)

If opposition filed — both parties heard. Registrar decides. If no opposition filed or opposition dismissed — proceed to registration.

Registration — Section 23

Certificate of Registration issued. Valid for 10 years. RENEWABLE FOREVER by paying renewal fees every 10 years. Use ® symbol after registration.

Amul Trademark Infringement Example

Feature	Patent	Copyright	Trade Mark
What protected	Inventions (product/process)	Original creative expression	Brand identity (marks/logos)
Law	Patents Act, 1970	Copyright Act, 1957	Trade Marks Act, 1999
Duration	20 years from filing	Life + 60 years	10 years (renewable forever)
Registration	COMPULSORY	OPTIONAL (auto-protection)	COMPULSORY for ® rights
Key requirement	Novel + Inventive + Industrial	Original expression	Distinctive, not generic
Symbol	Patent Number	© (Circle C)	® registered / TM unregistered
Indian example	New drug molecule	Bollywood film, novel, song	TATA, AMUL, Infosys logos

Geographical Indications (GI) — GI Act, 1999

A GI tag is used on products that have a specific geographical origin and possess qualities or reputation due to that origin. No manufacturer outside the specified region can use the GI tag name.

Famous Indian GI Tags

🧠

GI = Geographic origin + quality from that origin. Darjeeling Tea, Basmati Rice are the most famous examples. No one can use GI name without actual origin from that place!

Unit 4 — Quick Revision Table

Topic	Key Point	Section
Consumer	Personal use, NOT resale or commercial	§2(1)(d) CPA
Defect in Goods	Fault in quality, quantity, potency, purity, standard	§2(1)(f) CPA
Deficiency in Service	Fault in quality, nature, manner of performance	§2(1)(g) CPA
6 Consumer Rights	Safety, Information, Choice, Heard, Redressal, Education	§6 CPA
District Forum	Up to ₹20 lakhs, District Judge president	§10 CPA
State Commission	₹20L to ₹1Cr, HC Judge president, appeals in 30 days	§16 CPA
National Commission	Above ₹1Cr, Retired SC Judge, appeals in 30 days	§20 CPA
Remedies §14	Repair, Replace, Refund, Compensation, Stop UFP, Withdraw	§14 CPA
Patent	New + Inventive + Industrial. 20 years. Compulsory registration.	§2(j)(m) Patents
Compulsory Licence	Govt. can allow use without consent — public interest	§84 Patents
Copyright	Auto on creation. Life+60 yrs. 5 rights. Expression not ideas.	§13,14,22 Copyright
Trade Mark	Distinctive brand mark. 10 yrs renewable. ® after registration.	§2(zb),9,23 TM
GI Tag	Geographic origin products — Darjeeling Tea, Basmati Rice	GI Act 1999

Units 1 & 2Complete Notes

What is a Contract?

10 Essentials of a Valid Contract

Free Consent — What Vitiates It?

Types of Contracts

Breach of Contract & Remedies

5 Remedies for Breach

Special Contracts

A. Contract of Indemnity — Sections 124–125

B. Contract of Guarantee — Sections 126–147

C. Contract of Bailment — Sections 148–171

D. Pledge — Sections 172–179

Unit 1 — Quick Revision Table

Moving to Unit 2

Sale vs Agreement to Sell — The Most Important Distinction!

Types of Goods

Conditions & Warranties — Most Tested Topic!

Implied Conditions — Automatically Present in Every Sale!

Transfer of Property — When Does Ownership Pass?

Rights of Unpaid Seller — Sections 45–54

Negotiable Instruments Act, 1881

Holder in Due Course (HDC) — Section 9

Types of Endorsement — Section 15

Cheque Bounce — Section 138 — Criminal Offence!

Step-by-Step Procedure

Types of Cheque Crossing — Sections 123–131A

Unit 2 — Quick Revision Table

Units 3 & 4Complete Notes

What is a Company? Key Features

Types of Companies — OPC, Private, Public

Formation / Incorporation of a Company

Memorandum of Association (MoA)

Articles of Association (AoA)

Contents of AoA

Meetings of the Company

Types of Resolutions

Directors — Appointment, Powers, Duties, Removal

Duties of Directors — Section 166

Removal of Directors — Section 169

Winding Up of Companies

Priority of Payment — Who Gets Paid First?

Unit 3 — Quick Revision Table

Moving to Unit 4

Consumer Protection Act, 1986 — Introduction & Definitions

Six Consumer Rights — Section 6

Three-Tier Consumer Redressal Machinery

Remedies Available — Section 14

Intellectual Property Rights — Introduction

Patents — Exclusive Right for Inventions

3 Conditions for Patentability — Section 2(j)

What CANNOT Be Patented — Section 3

Patent Grant Procedure

Copyright — Automatic Protection for Creative Works

Duration of Copyright — Section 22

5 Rights of Copyright Owner — Section 14

Trade Marks — Protecting Brand Identity

What CAN be registered as TM

What CANNOT be registered §9

Trademark Registration Procedure

Geographical Indications (GI) — GI Act, 1999

Unit 4 — Quick Revision Table

Units 3 & 4Complete Notes

What is a Company? Key Features

Types of Companies — OPC, Private, Public

Formation / Incorporation of a Company

Memorandum of Association (MoA)

Articles of Association (AoA)

Contents of AoA

Meetings of the Company

Types of Resolutions

Directors — Appointment, Powers, Duties, Removal

Duties of Directors — Section 166

Removal of Directors — Section 169

Winding Up of Companies

Priority of Payment — Who Gets Paid First?

Unit 3 — Quick Revision Table

Moving to Unit 4

Consumer Protection Act, 1986 — Introduction & Definitions

Six Consumer Rights — Section 6

Three-Tier Consumer Redressal Machinery

Units 1 & 2
Complete Notes

Units 3 & 4
Complete Notes

Units 3 & 4
Complete Notes