Business Environment & Law

Module I LEGAL ENVIRONMENT OF BUSINESS

Business Environment Business environment is a set of political-legal, economic, social and technological forces that are largely outside the control and influence of a business, and that can potentially have both a positive and a negative impact on the business.

Factors affecting Business Environment:

y y y y y y y

Social how consumers, households and communities behave and their beliefs. Legal the way in which legislation in society affects the business. Economic how the economy affects a business. Political how changes in government policy might affect the business. Technological how the rapid pace of change in production processes and product innovation affect a business. Ethical what is regarded as morally right or wrong for a business to do. International what changes are taking place in the international environment.

What is Law?
Law means any rule of conduct, standard or pattern, to which actions are required to conform. Law is a major force in business decision making. It consists of rules and regulations to provide firmness to mutual relations.

Importance of Law for Business:

Study of business laws will answer the following questions: yWhat is legal and illegal? yWhat form of business is to be adopted? yWhat sanctions are required? yHow a business is to be conducted? yHow the disputes will be settled?

Legal Environment of Business: The legal environment provides the legal framework within which business is to function.

Components of Legal Environment of Business : yIndustrial Policy yTrade Policy yIntellectual Property Rights yBusiness Laws yLabour Laws yCapital Market Regulation yTaxation

Module 2 INDIAN CONTRACT ACT OF 1872

What is law

Social perspective

Historical Perspective

Political Perspective
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y School of Thoughts:
y Salmond: Law is a body of principles recognized and

applied by the state in administration of justices.

y Black stone: Law in its most general and

comprehensive sense signifies a rule of action and is applied indiscriminately to all kinds of actions whether animate or inanimaterational or irrational

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SOURCES OF LAW

PRINCIPAL yCustoms yJudicial Decisions(Precedents) yStatutes yPersonal Law (Goverened by Vedas,Quran)

SECONDARY
yJustice yEquity yGood Conscience

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y NEED FOR STUDY OF THE STREAM:

y IGNORANTIA JURIS NON EXCUSAT

This maxim implies ignorance of Law is no excuse. We need to study, the law of land.

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Indian Contract Act, 1872

Contract: Section 2 (h) : Every agreement and promise enforceable at law is a contract. Contract = agreement + enforceability at law. Agreement : Section 2(e) : every promise and every set of promise forming consideration for each other is an agreement. agreement = offer + acceptance agreement = social agreement +legal agreement y Case in point : y Balfour vs Balfour (1919)

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y CLASSIFICATION OF CONTRACTS
y On the basis of enforceability y Valid Contracts y Void Contracts y Voidable Contracts y Ilegal Contracts y On the basis of mode of creation y Expressed y Implied Contracts y Quasi Contracts
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y On the basis of extent of execution

y Executed Contracts y Executory Contracts

y On the basis of form of Contracts

y Formal Contracts y Simple Contracts

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y 1. 2. 3. 4. 5. 6. 7. 8.

ESSENTIAL ELEMENTS OF A CONTRACT

Offer and Acceptance Legal Relationship Lawful Consideration Competency to contract Consent between the parties Legality of Objects Certainity of Objects Possibility of Performance/ Discharge of Contract 9. Legal formalities

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OFFER AND ACCEPTANCE RULES OF OFFER

Must be clear,definite , complete and final. It must not be vague . Eg. A monetary dealing Must be communicated to the offeree. An opportunity of making him accept or reject must be given. May be by express words oral or written. Or implied by conduct. Eg : Offer for sale of car, a chartered bus for passengers. May be general or specific. Eg : IPO to General Public, Specific tender bids.
y

*It Must be distinguished from :Invitation to make an offer . eg auction.

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If not accepted on time Makes a counter offer Revoca tion of OFFER

Nonfulfillment of
not accepted in mode prescribed

condition

Offeree rejects Offeree dies before acceptance 19

y Case :

Lalman Shukla Vs Gauri Dutt ( 1913) Facts of the case: y Gauri Dutt s son was lost. y Lalman shukla, a servant was set to trace the child

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y Acceptance y Rules of acceptance y -May be expressed by words written or spoken or implied from the

conduct.

y -Must be in the mode prescribed . eg : fax, e- mail. y -Must be unqualified and absolute y -Must be communicated to the Offeror y -Mere silence does not amount to acceptance y -Must be made within a reasonable time and before the offer lapsed

is revoked.

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y Case in point :

Carlill Vs Carbolic Smoke Ball Co.( 1893) Facts: y CSB came with an add to reward 100pounds to anyone contrcating influenza after using the smoke balls. y Mrs. Carlill contracts and files a suit
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y 2. Legal Relationship:

Intention among the parties that the agreement should be attached by legal consequences and create legal obligations. Intentions of both the parties are taken into consideration. Not a social agreement
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y 3.Lawful Consideration y Section 2 (d) : When at the desire of the promisor

, promisee or any other person has done or abstained from doing or promises to do abstains from doing such act or abstinence is called a consideration for the promise.
y Consideration is at the desire of the promisor y Consideration may move from promisee or any

other person.

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y Rules y -Every contract must be supported by

consideration y -May be an act of abstinence or promise. y -Must be mutuality y -Must be real and not vague. y -Must be full return for the promise. y -Must be something person is bound to perform for the promise.
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y When not necessary y -Made out of natural love and affection y -Done as voluntary act. y -To pay a time barred debt y Case in point : y Chinnaya Vs Ramayya

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y COMPETENCY TO CONTRACT y *SECTION 10 and section 11: y Following persons are qualified to contract: y *Must be a major y *Must be of Sound Mind y *Must not be disqualified by law from contracting to

which they are subject.

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Minors *Minors agreement is void abinitio. *Can be a beneficiary or a Promisee. *Cannot be ratified on attaining Majority *No compensation awarded under the agreement. *No specific performance allowed. *Parents Guardian not liable
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y Legal concepts under minors for discussion : y Restituition- only a beneficiary y Estoppel.eg - sale of scooter cant be defensive

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II.

PERSONS OF UNSOUND MIND ARE CAPABLE OF CONTRACTING WHEN THEY BECOME SOUND.

III. DISQUALIFIED PERSONS. y CONVICTS y ALIENS y CORPORATIONS y FOREIGN NATIONALS

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CASE : MOHIRIBIBI VS DHARMODAS GHOSH Facts: Mortogage of Rs. 20000/- and received Rs. 8000/-.
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y FAQ y Mr. D a minor borrowed a sum from M by

executing a mortogage deal in favour of M. Subsequently D absconded. M filed a suit for recovery . will he succeed. Quote relevant case law.

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Undue influence (SEC 16)

Coercion ( SEC 15)

Fraud
(SEC 17

Free consent

Mistake (SEC 20&21)`

Misrepresen tation ( SEC 18)

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y Coercion : y Doing of any Act forbidden by Indian Penal Code. y *Main Components: y There must be

a Contract made .

y Contract must be made to under threat. y Can be rescinded because it is executed under threat. y Eg : agreement under a gun point.
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UNDUE INFLUENCE:

Relations between the parties are such that one of the parties is in a position to dominate the other and uses that position to obtain unfair advantage over the other. Eg : Undue Influence in Relations

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y Misrepresentation :
y Is unintentional and has the following features: y A representation or assertion y Such assertion induced the party to act. y Statement was made with a honest belief turned to be untrue. y Assertion related to a matter of fact. y Eg : A detergent : washes whiter than whitest

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Fraud : Main constituents are : yA false representation.

yIntentions

that the other party should Act.

yThe party being deceived must be indeminified because

there no other relief.

yThe statement must have been made after the belief that it

was actually false.

yEg : Sale of an unfit horse
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y Mistake :
y Mistake implies an erroneous belief.

Types: y Mistake of law y Mistake of Fact Mistake of Law can be of two types: a) Mistake of law of the country is based on the maxim ignorance of law is no excuse b) Mistake of foreign law is based on premise of bilateral mistake.
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y Mistake of Fact is of two types:

y Bilateral Mistake caused by both the parties.

y Unilateral Mistake caused by one of the contracting parties.

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LEGALITY OF OBJECTS Every agreement of which object is unlawful is forbidden by law. Could be either when : -Forbidden under any Statutes -Implies Injury to any person / Property -Court Regards it immoral or opposed to Public Policy .

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y y y y y y y y y y y y y

AGREEMENTS OPPOSED TO PUBLIC POLICY ARE : -RELATED TO TRADING WITH ENEMY -COMMIT CRIME -INTERFERENCE WITH ADMINISTARTION OF JUSTICE -RELATED TO RESTRAINT OF LEGAL PROCEEDINGS. -RELATED TO SALE OF PUBLIC OFFICES. -RESTRAINT OF PARENTAL RIGHTS. -RESTRICTING PERSONAL LIBERT Y -RESTRAINT OF MARRIAGE( LOWE VS PEERS) -MARRIAGE BROKERAGE AGREEMENTS. -INTERFERING WITH MARITAL DUTIES . -RESTRAINT OF REVENUE AUTHORITIES. -RESTRAINT OF TRADE (S.B. FRASER &CO. VS BOMBAY ICE MFG. CO.)

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y FAQ

promises to obtain for B an employment in the public service and B promises to pay Rs. 1000 to A Is this a valid contract? ( 5 marks) y A is a dealer in different kinds of oil. He says to B . I will sell you a hundred tonnes of oil . Is this a valid contract? ( 5 marks)
y A

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DISCHARGE OF CONTRACT / PERFORMANCE OF CONTRACT

A CONTRACT IS TERMINATED OR DISCHARGED BY : 1. -PERFORMANCE ( FULFILLMENT OF DUTIES)
2. 3. 4. 5. 6.
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-MUTUAL CONSENT OR AGREEMENT -LAPSE OF TIME -OPERATION OF LAW -IMPOSSIBILTY OF PERFORMANCE -THRU A BREACH OF CONTRACT. - BY MATERIAL ALTERATION

7.

PERFORMANCE OF CONTRACT RULES OF PERFORMANCE: CONTRACT TO BE PERFORMED BY THE PROMISOR , IN CASE OF DEATH BY THE LEGAL HEIR OR REPRESENTATIVES. A STRANGER TO A CONTRACT CANNOT SUE FOR PERFORMANCE. MUST BE DEMANDED BY THE PARTY TO WHOM THE PROMISE IS MADE. WHEN THE PROMISEE HAS REFUSED TO PERFORM HIS SIDE OF PROMISE, IT CAN BE PUT TO AN END BY THE PROMISOR.( ARTIST PERFORMANCE). MUST BE PERFORMED BY THE PROMISOR/ PROMISEE (IN CASE OF ARTIST)
44 DEVOLUTION OF JOINT RIGHTS

DISCHARGE BY MUTUAL AGREEMENT COULD BE : -Thru novation: substitution of a new contract

-Alteration -Recission :discharge at any other time before end -Remission acceptance of a lesser sum -Waiver : abandon
DISCHARGE BY LAPSE OF TIME Time barred debt to be accounted

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DISCHARGE BY OPERATION OF LAW -By merger -By unauthorized alteration of items of a written document -By insolvency DISCHARGE BY IMPOSSIBILTY -Could be at the time of contract ( eg : act of magic) -Or supervining impossibility ( eg : singer falls ill) Exceptions : -Difficulty of performance -Commercial impossibility( higher profits not realized) Strikes, lockouts

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y Supervining impossibility

y Contract which becomes impossible subsequent to

the formation is called supervining impossibilty. For the doctorine to apply the following should be fulfilled : y Act should have become impossible y Act was such that the promisor could not prevent y Impossibilty was not self induced by the promisor / promisee.
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DISCHARGE BY BREACH COULD BE : ACTUAL OR ANTICIPATORY

Case in point : HOCESTER VS DE LA TOUR

Facts of the case : -De la tour hired hocester as their courier agents in month of april. -Contract was signed and to be commenced from the month of june. -During the month of may they sent a letter and repudiated the contract . -Hocester sued them for breach of contract

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y REMEDIES FOR BREACH:

y RESCIND THE CONTRACT y SUIT FOR DAMAGES y SUIT FOR SPECIFIC PERFORMANCE y SUIT FOR INJUNCTION y SUIT FOR QUANTUM MERUIT

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y RESCIND THE CONTRACT

y WHEN THERE IS BREACH ODF CONTRACT BY

ONE PARTY , THE AGGREIVED PARTY MAY RESCIND THE CONTRACT. WHEN RECISSION IS GRANTED THE OTHER PARTY IS ABSOLVED OF ALL THE OBLIGATIONS OF THE CONTRACT.

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y SUIT FOR DAMAGES y THE PRINCIPLE FOR CLAIM SAYS: y DAMAGES FOR BREACH ARE INTENDED TO

COMPENSATE THE AGGREIVED PARTY AND NOT PUNISH THE GUILTY OF BREACH

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Types of Damages

LIQUIDATED

UNLIQUIDATED

1. ORDINARY EG : SALE OF GOODS 52

2. SPECIAL

3) EXEMPLARY OR VINDICTIVE AND 4).NOMINAL

Sue for damages Underlying principle: Damages to be made good by the party who has broken the contract. Case in point : HADLEY VS BAXENDALE -Hadley sent a broken mill shaft to the repairman through a courier Baxendale. -

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SPECIFIC PERFORMANCE :

The principle states where damages are not adequate remedy to measure the loss, the court may on a petetion filed by aggreived party direct the party to perform his part of promise.
IS NOT ORDERED WHERE:
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MONETARY COMPENSATION IS ENOUGH CONTRACT NOT CERTAIN IS OF PERSONAL NATURE MADE BY COMPANY IN EXCESS OF POWERS. REQUIRES CONTINOUS SUPERVISION OF THE COURT.

INJUNCTION : AN ORDER OF A PERSON RESTRAINING HIM FROM DOING A PARTICULAR ACT . IT COULD BE PROHIBITORY OR MANDATORY. IS A MODE OF SECURING SPECIFIC PERFORMANCE OF NEGATIVE TERMS OF THE CONTRACT Case in Point Lumley Vs Wagner Facts of the Case : -W agreed to sing a t ls theatre and nowhere else -W in breach of contract agreed to sing for Z. SUED W. DECIDE!!! ( handle specific performance and Injunction)

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y Quantum Meruit : y Means as much as earned or reasonable

remuneration. Principle states that: Person claims reasonable remuneration for the services rendered by him where there is no express promise to pay the same. Eg : worker on daily piece rate system. Co-author completes half the manuscript
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y
1. 2. 3. 4. 5.

The claim under this principle arises in following way :

When one party leaves the contract midway or refuses to perform When a contract is not divisible and there is part performance. When an indivisible contract is completed but badly. Expressed or implied contract without mentioning the remuneration. When a contract becomes void

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y QUASI CONTRACTS: y Inspite of the fact there was no legal relationship,

contract entered but the conduct and relationship of the parties impose a obligation on one party and conferring a right on the other.
y Eg : finder of the lost goods

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y Principle of quasi contract states : y A quasi contract rests on the contract of equity that a

person shall not be allowed to enrich himself at the expense of another . y It is therefore also called as the principle of restitution.

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y LAW OF CONTRACT - SPECIAL CONTRACTS

y

INDEMNITY AND GUARANTEE

y INDEMNITY ( SEC 124) y A CONTRACT BY WHICH ONE PARTY

PROMISES TO SAVE THE FROM LOSS CAUSED TO HIM BY CONDUCT OF PROMISOR HIMSELF OR ANY OTHER PERSON IS CALLED CONTRACT OF INDEMNITY y EG : A CONTRACTS TRO INDEMNIFY B AGAINST ANY LEGAL ACTION TAKEN BY C FOR rs. 2000/. y Parties : Indemnifier and Indemnified

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y Contract of Idemnity has the

following features:
y It is a contract between two parties y One person promises to save the other from loss y Such loss can be caused by promisor himself or

any other person y There is an element of futurity or contigency since it will arise only if the loss in the contract has happened.
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CONTRACT OF GUARANTEE ( SEC 126)

A CONTRACT OF GUARANTEE IS A CONTRACT TO PERFORM THE PROMISE OR DISCHARGE THE LIABILITY OF A THIRD PERSON IN CASE OF DEFUALT. EG ; BANK GUARANTEE WHEN IS CONTRACT OF GUARANTEE INVALID? -WHEN GUARANTEE IS OBTAINED BY MISREPRESENTATION -WHEN OBTAINED BY CONCEALMENT -WHEN CONDITION OF CO-SURETY JOINING NOT BEING FULFILLED -WHEN THE CONTRACT OF GUARANTEE LACKS ONE OR MORE OF THE ESSENTAIL ELEMENTS OF CONTRACT.

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y Difference between Contract of guarantee and

idemnity y 1. Idemnity is a contingent contract. In guarantee it is on actual liability. y 2. Liability is primary for ideminifier. Liability is secondary for surety. y 3,. Idemnity is between two parties. Guarantee is between three parties.

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CONTRACT OF BAILMENT AND PLEDGE SECTION 148 BAILMENT MEANS DELIVERY OF GOODS TO ANOTHER PERSON FOR A CERTAIN PURPOSE OR FOR A CERTAIN PERIOD. BAILOR BAILEE ESSENTIALS DELIVERY OF GOODS BY ONE PERSON TO ANOTHER FOR SPECIFIC PURPOSE AGREED BETWEEN THE PARTIES THAT AS SOON THE PURPOSE IS ACHIEVED GOODS SHALL BE RETURNED/ DISPOSED THE OWNERSHIP REMAINS WITH THE BAILOR, THE POSSESSION GOES TO THE BAILEE HANDING OVER GODOWN KEYS FOR STORING MATERIAL
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y Duties of Bailor y To disclose known defects in the goods y Not to make any unauthorised use of goods bailed y Duty to return the goods . y To return any accretion to the goods y Not to set up any adverse title gainst the bailor.

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y Rights of the Bailee y To enforce bailor duty y Delivery of goods to bailor without title y Right of action against third parties. y Right of lien( Lien could be particular on particular

commodity or general on previous dues with various commodities)

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y PLEDGE ( SECTION 172)

y PLEDGE IS A CONTRACT y WHEREBY ARTICLE IS DEPOSITED

WITH THE

LENDER AS SECURITY y REPAYMENT OF LOAN OR PERFORMANCE OF THE PROMISE. y ARTICLE MUST BE MOVABLE
y -THE DEPOSITOR IS PAWNOR
y -THE DEPOSITEE IS PAWNEE.

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y Difference between Bailment and Pledge: y Bailment can be for any purpose , pledge is specific

security. y Bailment lien can be exercised on goods , In pledge goods can be sold after due period. y Goods can be used, as the contract permits, In pledge goods cant be used.

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y LAW OF AGENCY y AN AGENT IS A PERSON WHO IS

EMPLOYED TO BRING HIS PRINCIPAL INTO CONTRACTUAL RELATIONS WITH THE THIRD PARTIES. y -Parties Involved : Agent, Principal, Third Parties. y -CLASSES OF AGENTS : Special or general ( with relation to third Parties)
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y Personal liability of the agent to the Third Party: y Where it is agreed y Where the principal is residing abroad y Where he signs a negotiable instrument in his own

name. y Where the agent acts for a minor principal. y Agent liable for breach of warranty

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Module 3 LAW OF TORTS

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y DEFINITION Tort law is a body of law that addresses,

and provides remedies for, civil wrongs not arising out of contractual obligations. FEATURES y INJURY MUST HAVE SUSTAINED: Compensated in the event that someone's carelessness, recklessness or unintentional misconduct has resulted in injury
y REMEDY provides a remedy to all parties who are

injured as a result of a civil wrong.

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y NEGLIGENCE has resulted in Injury y INTENTIONS must not be Malafide y Two or MORE THAN TWO PARTIES involved.

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y Situation defining tort y 1. A doctor while carrying surgery leaves the scissors

inside the patient. y 2. Falling of a window pane on a tresspasser from a hotel top. y 3. Minor driving a car and hits an accident. Guardian to be held liable.

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y TORT AND CONTRACT y The area of law that developed in the English

Common Law other than breach of contract, which imposes a duty by operation of law on all persons to avoid harm to others. y The breach of this obligation gives the injured person a right to be compensated for damages suffered.

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y LIABILITIES y CIVIL LIABILIT Y y Arising in the normal course of damage y VICARIOUS LIABILIT Y y Arising when a the doer is different from the main

culprit

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y Case in point :

DONOGHUE VS STEVENS (Law of Torts and Sale of Goods Act , 1930 are applicable)

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Module 4 SALE OF GOODS ACT OF 1930

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SECTION 4 STATES SALE OF GOODS IS A CONTRACT WHEREBY THE SELLER : TRANSFERS OR AGREES TO TRANSFER THE PROPERTY IN GOODS TO THE BUYER FOR MONEY CONSIDERATION. ALL ESSENTIAL ELEMENTS TO CONTRACT MUST BE PRESENT.
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y Essentials to the Contract y A contract y Between two parties y To transfer or agree to transfer y The property in goods y From the seller to buyer y For a price( monetary consideration)

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SALE AND AGREEMENT TO SELL: DISTINCTION -PROPERTY

IN GOODS : IN SALE AT THE TIME OF CONTRACT . IN AGREEMENT TO SELL ON FULFILLMENT OF CONDITIONS.

TYPE OF CONTRACT: SALE IS EXECUTED. AGREEMENT TO SELL IS EXCUTORY. LOSS/DESTRUCTION OF GOODS: IN SALE LOSS TO BE FALLS ON BUYER. IN AGREEMNT TO SELL LOSS FALLS ON SELLER. -BREACH : IN SALE SUIT FOR DAMAGES PLUS ANY OTHER PERSONAL REMEDY/ SUIT FOR CONVERSION. IN CASE OF AGREEMENT TO SELL ONLY SUIT FOR DAMAGES

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y Classification of goods GOODS y

EXISTING GOODS Specific goods Generic Goods Ascertained Goods Unascertained Goods

FUTURE GOODS

CONTINGEN GOODS
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y 1. Existing Goods y Goods which physically exist and are owned or

possessed by the seller at the time of sale y Can be : y Specific Goods which are identified like buying a LG Microwave y Generic Goods which are defined by description like choosing between LG, Samsung, whirlpool microwave.
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y Ascertained goods: Specific goods identified at

time of sale. y Unascertained goods: generic goods unidentified at the time of sale. y 2. Future Goods y These goods are to be produced or manufactured at a latter point of time y 3. Contingent goods are like future and unascertained goods. However execution of such contract is depended on the happening or nonhappeneing of an event.
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y DOCTRINE

OF CAVEAT EMPTOR

y .The Principle states that it is the duty of the buyer to be

careful while purchasing goods of his requirement and in the absence of any enquiry from the buyer , the seller is not liable to disclose every defect in the goods of which he may be cognizant.

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y Illustration y X purchases a horse from Z , who needed the horse

for riding but did not make complete enquiry, the horse was fit for carriage. Hence X can neither reject nor claim compensation.

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CASE IN PT: WARD VS HOBBS

FACTS : -HOBBS AUCTIONED PIGS IN THE MARKET. -

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y EXCEPTIONS TO DOCTORINE OF CAVEAT

EMPTOR: y -SELLER MAKES FALSE REPRESENTATION. y -SELLER CONCEALS MATERIAL FACTS. y -GOODS BOUGHT FROM A SELLER WHO DEALS IN THOSE GOODS.

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y TRANSFER OF PROPERT Y y Depends on three stages y Transfer of Property in goods y Transfer of possession of goods y Passing of the risk

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y The Principle: y PROPERT Y IN GOODS MEANS OWNERSHIP

OF GOODS . THE TERM PROPERTY IN GOODS MUST BE DISTINGUISHED FROM POSSESSION OF GOODS WHICH REFERS TO CUSTODY OR CONTROL OF GOODS y For eg : A carrier or servant entrusted with goods is not the owner of the goods.
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y Rules regarding transfer of property

y 1. Goods must be ascertained : No property

in goods can pass if the goods are unascertained goods. y 2. Intention to pass the property: Intention depends on the terms of the contract, conduct of the parties and the circumstances of the situation

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Transfer of title by non-owners This is based on the maxim NEMO DAT QUOT NONHABET implies no one can give what he has not got. This is intended to safeguard the interest of the true owner. However it has the following exceptions:

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EXCEPTIONS: 1. TITLE BY ESTOPPEL 2.SALE BY MERCANTILE AGENT 3. SALE BY A JOINT OWNER 4. SALE BY PERSON IN POSSESSION UNDER VOIDABLE CONTRACT 5. SALE BY SELLER IN POSSESSION AFTER SALE 6. SALE BY BUYER IN POSSESSION AFTER SALE 7. SALE BY AN UNPAID SELLER.

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AUCTION SALES ( SEC 64)

A SALE WHERE GOODS ARE OFFERED TO BE TAKEN BY BIDDERS.

AS PER THE ACT SALE IS COMPLETE WHEN THE AUCTIONEER ANOUNCES THE COMPLETION BY FALL OF THE HAMMER.

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Rights of an unpaid seller Unpaid seller (section 45)

y Whole price not paid y B/E has been received as a conditional payment or has

been dishonoured

RIGHTS CAN BE ENFORCED y Against the goods y And against the buyer personally
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RIGHTS AGAINST THE GOODS: 1.RIGHT OF LIEN (SEC 47 to 49): RIGHT TO RETAIN POSSESSION AND REFUSE TO DELIVER TILL PRICE IS PAID. 2. RIGHT OF STOPPAGE OF GOODS (SEC50 to 52): RIGHT TO STOP WHEN THEY ARE IN TRANSMISSION WHICH CAN BE DONE Either by taking actual possession // giving notice of his claim to the carrier. 3.RIGHT OF RESALE( SEC 54)
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1. 2.

RIGHTS AGAINST THE BUYER SUIT FOR PRICE (SEC 55) SUIT FOR DAMAGES FOR NON ACCEPTANCE (SEC 56) SUIT FOR INTEREST ( SEC 61)

3.

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Remedies to the Buyer against the Seller 1. SUIT FOR DAMAGES FOR NON-DELIVERY ( SEC 57) 2. SUIT FOR SPECIFIC PERFORMANCE ( SEC 58) 3. SUIT FOR BREACH OF WARRANTY ( SEC 59) 4. SUIT FOR RESCINDING THE CONTRACT ( SECTION 60) 5. SUIT FOR RECOVERY OF PRICE AND INTEREST ( SEC61)

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CONDITIONS AND WARRANTIES: Stipulation means a requirement or specified item in an agreement. It can be of two types:
yCondition yWarranty

A stipulation is a condition if it is essential to main purpose of contract. A stipulation is a warranty if it is collateral to the main purpose of the contract.
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y T YPES OF CONDITIONS AND WARRANTIES y Both may be either y Expressed y Implied y Expressed are in the Contract and defined in

terms of sale.

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IMPLIED CONDITIONS: 1. Condition as to title eg : a stolen car cannot have a good title. 2.Sale by description eg : selling a new LG machine as in invoice , but on delivery found to be second hand. 3. Sale by sample: eg sample of cloth supplied and given differs. Contract can be avoided by buyer.
y

101

y 4. Sale by sample as well as description

y 5. Condition as to quality or fitness. y Eg : buying a tweed coat and catching disease. The

seller cannot be guilty.

y 6. Condition as to merchantibility. y 7. Condition as to wholesomeness

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y IMPLIED WARRANTIES

1. Warranty of quiet possession 2. Warranty of freedom from encumbrances 3. Warranty as to quality or fitness by usage of trade 4. Warranty to disclose dangerous nature of goods

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y 1. 2. 3.

FAQ Conditions and warranties are indispensable to formation of contract. Doctorine of Caveat emptor and its exceptions. What are the various types of goods.

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Module 5 NEGOTIABLE INSTRUMENTS ACT OF 1881

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y Definition y Section 13 states negotiable instrument means: y promissory note or bill of exchange or cheque payable

to order or the bearer whether the words order or bearer appear on the instrument or not. y Negotiable Instrument means any document transferable from one person to another.

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Essential features of negotiable instrument:

1. 2. 3. 4. 5.

Free transferability Offer better title to the transferee. Holder in due course is the owner. Holder in due course can file recovery on suits The instrument is transferable till maturity.

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y TYPES OF NEGOTIABLE INSTRUMENT y *PROMISSORY NOTES y Instrument in writing containing unconditional

undertaking signed by the maker to pay a certain sum of money to or to the order of a certain person or to only the bearer of the instrument
y Parties : Maker,

payee, holder,

endorser,

endorsee.
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y 1. 2. 3. 4. 5. 6. 7.

Essentials of Promissory note: Instrument in writing Undertaking to pay The undertaking to pay is unconditional. It must be signed by the maker. Amount payable must be certain andinmoney form. The payee must be certain. Must be duly stamped as per the Stamp Act.

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BILLS OF EXCHANGE
y

IS AN INSTRUMENT IN WRITING UNCONDITIONAL ORDER SIGNED BY THE MAKER DIRECTING A CERTAIN PERSON TO PAY A CERTAIN SUM OF MONEY ONLY TO OR THE ORDER OF CERTAIN SUM OR TO THE BEARER OF THE INSTRUMENT. Parties: Drawer, Drawee, Acceptor, payee, holder, endorser, endorsee, drawee, acceptor

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y 1. 2. 3. 4. 5. 6. 7.

Essentials of Bills of Exchange It must be in writing It must be an order to pay The order to pay must be unconditional It must be signed by the drawer. The parties to the bill must be certain. The oder to pay must be in money. The formalities like date , stamp and others should be there.

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FORMS OF BILL OF EXCHANGE

Inland Bill Foreign Bill Trade Bill Accomodation Bill Bank Draft

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y Negotiation and Endorsement y Negotiation is a process of transferring from one

person to another ( first hand transfer). Thus also confirms the right of the owner to bring a legal suit if necessary. y Endorsement ( endorsement) means writing of the persons name on the back of the instrument for the purpose of negotiation.The person who signs is endorser, who receives is called endorsee.

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NEGOTIATION BY ENDORSEMENT AND DELIVERY Types: -BLANK OR GENERAL: SIGNS OR WRITES AT THE BACK PAYABLE TO BEARER. -SPECIAL OR FULL: ORDERED TO SPECIFIC PERSON -RESTRICTIVE : PROHIBITS OR RESTRICTS FURTHER NEGOTIATION OF INSTRUMENTS. -PARTIAL : ENDORSEMENT OF HALF OF THE AMOUNT -CONDITIONAL OR QUALIFIED : CONDITIONS STIPULATED
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CHEQUE A cheque is a bill of exchange drawn on a specified banker and not expressed to be paid otherwise than on demand. -It is a B/E with two additional features: -Always drawn on a banker. -Always payable on demand. A cheque could be open cheque( payable across counter ) or closed cheque ( named with two parallel lines.)

115

TYPES OF CROSSINGS General Crossingshown by two parallel lines

Special Crossingsy mentions name of the banker on the face of cheque y Not negotiable may or may not be written.

Restrictive Crossingsy Adopted for commercial or banking usage.

116

HUNDIS
ARE NEGOTIABLE INSTRUMENTS NOT COVERED UNDER THE ACT. THEY MAY AT TIMES BE B/E OR P/N

TYPES:
SHAH JOG: PAYABLE TO A RESPECTABLE HOLDER. JOKHMI : DRAWN ON GOODS TO BE SAILED ON SHIP. JAWABEE HUNDI: USED FOR REMITTING MONEY FROM ONE PLACE TO ANOTHER. NAM JOG : PAYABLE TO THE PARTY NAMED IN THE BILL DARSHANI HUNDI : PAYABLE AT DEMAND AND PRESENTED AT DEMAND. MIADI HUNDI : PAYABLE AFTER A SPECIFIC PERIOD OF 117 TIME

y FAQ y 1. What are the reasons for dishonour of cheques. y 2. Discuss the criminal lability arising on dishonour

of a cheque.

118

Module 6 COMPANY LAW

119

y MAIN FEATURES : y -INDEPENDENT CORPORATE EXISTENCE y -PERPETUAL SUCCESSION y -LIMITED LIABILIT Y y -TRANSFERABLE SHARES y -POWER TO SUE AND SUED.

120

KINDS OF REGISTERED COMPANIES -PRIVATE LTD. -PUBLIC LTD. Which could be: *LIMITED BY SHARES: LIABILTY OF

MEMBERS LIMITED BY

ITS MEMORANDUM. *LIMITED BY GUARANTEE: MEMBERS UNDERTAKE TO PAY DURING ITS WINDING UP. *UNLIMITED COMPANIES: PERSONAL ASSETS ARE ALSO SEIZED OFF.
121

DISTINCTION BETWEEN PRIVATE LTD. COMPANY AND PUBLIC LTD. COMPANY 1. Minimum Paid-up Capital : A company to be Incorporated as a Private Company must have a minimum paid-up capital of Rs. 1,00,000, whereas a Public Company must have a minimum paid-up capital of Rs. 5,00,000. 2. Minimum number of members : Minimum number of members required to form a private company is 2, whereas a Public Company requires atleast 7 members.
y

3. Maximum number of members : Maximum number of members in a Private Company is restricted to 50, there is no restriction of maximum number of members in a Public Company.

122

y 4. Transferability of shares : There is complete restriction

on the transferability of the shares of a Private Company through its Articles of Association , whereas there is no restriction on the transferability of the shares of a Public company . y 5. No. Of shareholders Private Ltd. have minimum 2 Shareholders.Public Ltd. have minimum 7 Shareholders, Liability of Company & Its properties.
y 6. Public ltd co. has board of directors.

Whereas a Pvt. ltd has partners.

123

y FAQ y Q1. Should common seal be affixed to all the

documents of the Company. y Ans. No . Common seal may be affixed only POA, Documents requiring Official seal, Share warrant and Share Certificates. y Thus it has to be specified by AOA .

124

y Q2. Stuart ltd wants to change from Public ltd. Co.

change to pvt. Ltd. Can it do so? y Ans. Yes it can . It has to take permission of Central Govt.(ROC) y - Pass a special Resolution. y File a printed copy of changed articles with ROC.

125

y MEMORANDUM OF ASSOCIATION
y IS THE CHARTER OF THE COMPANY y DEFINES THE RELATIONSHIP OF THE COMPANY WITH

THE OUTSIDE WORLD.

y BASED ON TABLES B,C,D AND E OF SCHEDULE I OF THE

COMPANIES ACT , 1956

y BASED ON THE DOCTORINE OF ULTRA VIRES

IT IMPLIES BEYOND THE POWERS . THEREFORE IF ANYTHING IS DONE BEYOND THE OBJECTS OF MEMORANDUM IT IS ULTRA VIRES.
126

Has Six Clauses: y -NAME CLAUSE y -REGISTERED OFFICE CLAUSE y -OBJECTS CLAUSE y -LIABILITY CLAUSE y -SHARE CAPITAL CLAUSE y ASSOCIATION CLAUSE y All the clauses are subject to alteration in the AGM
127

ARTICLES OF ASSOCIATION y Are the bye laws of the company. y Defines the internal rules and regulations of the company. y Mandatory for a public ltd. Company to register articles else TABLE A of Schedule I comes into existence. y TABLE A could be adopted in full Or in part Or wholly exclude TABLE A through a clause and adopt its own byelaws.
128

CONTAINS DETAILS RELATING TO : -SHARES

-MEETINGS -DIRECTORS -CAPITAL -PROXIES AND ANY OTHER RELEVANT TO THE FUNCTIONING. A COMPANY MAY ALTER ITS ARTICLES WHEN NEEDED
129

COMPANY FORMATION PROMOTION

y REGISTRATION

FLOTATION

130

INCORPORATION
-AVAILABILTY OF NAME IN FORM IA -PREPARATION OF MEMORANDUM AND ARTICLES OF -ASSOCIATION: MOA CONTAINS CLAUSES AND AOA DETAILS ABOUT DIRECTORS, MEETINGS ETC. -VETTING OF MOA AND AOA -POWER OF ATTORNEY 131

y OTHER DOCUMENTS TO BE FILED WITH ROC: y FORM 18, y FORM 29, y FORM 32. y -STATUTORY

DECLARATION IN FORM 1

y -PAYMENT OF REGISTRATION FEES AND FILING

FEES.

y -CERTIFICATE OF INCORPORATION
132

FLOATATION y After the certificate of incorporation company can float. y A pvt. Ltd. Company can float after Certificate of incorporation. y A public ltd company must obtain the certificate of commencement of business after floatation.

133

yMCA 21:
y DSN y DIN y ONLINE REGISTRATION OF COMPANIES

134

y Types of Meetings: y y y y

ANNUAL GENERAL MEETING BOARD MEETING STATUTORY MEETING EXTRA ORDINARY GENERAL MEETING

135

y FAQ y Q1.Define Doctorine of Ultra Vires. y Q2. Difference between Motion and resolution.

136

Shares and Share Capital SHARE Section 2(46) : It is a share in the share capital of a Company and includes stock except where the distinction between a share and stock is expressed or implied.

137

Difference Share and Stock

1. Nominal Value: Share present . In stock absent. 2. Distintintive No.: Share present . In stock absent 3. Fully Paid up: Share can be partly or fully paid up. Stock is fully paid up. 4.Transfer : A share cannot be transferred in fractions whereas stock can be t/ferred in parts.

138

Classes of shares : y Preference y Equity y Deferred or Founders 1. PREFERENCE SHARES ( section 85) They carry a preferential right over payment of dividend and repayment of capital on winding up

139

Types: y Participating or non participating y Cumulative or non-cumulative y Redeemable or irredeemable 2. EQUITY SHARES ( section 85) Shares which are not preference are equity shares. As per Companies ( Amendment Act ) 2000 y Equity share capital has y Voting rights, OR y Is with differential rights regarding dividends , voting or in accordance with the specific guidelines provided. SHARE CAPITAL =EQUITY SHARE K +PREFERENTIAL SHARE K y 3. DEFERRED SHARES ISSUED BY A PVT CO AND HELD BY A PROMOTER
140

y Sweat equity shares

y Implies issue of equity shares to employees or directors at a

discount or for consideration other than cash for providing know-how or making available rights by way of IPR or Value additions. y Issued after consent of members by a special resolution in AGM/EGM. y Such shares have a lock in period of three years from the date of allotment.

141

-SHARE CAPITAL
It is total capital or figures of rupees divided into shares of fixed amount. Since:

Share K=Equity share K + Prefr.Share K. It can be used in the following terms:

y AUTHORISED / REGISTERED OR NOMINAL CAPITAL y ISSUED CAPITAL y SUBSCRIBED CAPITAL y CALLED UP CAPITAL y PAID UP CAPITAL AND y RESERVE CAPITAL
142

y Reserve Capital and Capital Reserve y Reserve Capital is the uncalled part of Capital ehich

Company in event of liquidation would be called. y Capital Reserve are created out of profits not fro distribution to shareholders like revenue reserve. Stautory Capital reserve are CRRAccount, Securities Premium account

143

BUY BACK OF SHARES SEC 77A, 77AA OR 77B A company can buy its own shares or securities out of : y Its free reserves y Securities premium account y Proceeds of any shares or other specified securities.

144

The buy back may be in any one of the following modes : - Purchase from open market - Purchase from odd lot holders - Purchase from Sweat Equity. - Purchase of existing equity shareholders. Conditions -Must be authorized by articles of association -Special resolution in AGM/EGM must be passed -The buy back cannot must be completed within 12 months of announcement
145

SHARE CERTIFICATE AND SHARE WARRANT Share Certificate is issued within three months of allotment on fully or partly paid up shares. Share warrant is issued only on following condition: y Fully paid up shares y If the AOA permit y On approval of the Central Government. y Must have common seal of the Company.

146

MEMBERSHIP A member is a :
y Subscriber to the MOA y Agreeing to become a member by getting name

registered y Holder of the equity share Capital of the Company. y FOR A COMPANY LIMITED BY SHARES , MEMBERS WHOSE NAMES APPEARS IN REGISTER OF MEMBERS ARE ALSO CALLED SHAREHOLDERS.

147

y Minors Status y A minor though not competent to contract under the

Indian Contract Act, cannot become a member since the contract is void. y However if the minor s wanting to become a member gets the registration of shares through a lawful guardian then it cannot be refused.

148

PROSPECTUS
Section 2(36) defines:
y Any document described or issued as a prospectus and

includes y any notice circular , advertisement or other document inviting deposits from the public y Or for purchase of any shares or debentures in a body corporte.

149

CONTENTS OF PROSPECTUS SECTION 56 Schedule II prescribes prospectus into three parts: PART I y General Information y Capital structure of the Co. y Terms and particulars of the present issue y Company management and project. y Prescribed litigations y Any other risk factor or disclosure
150

PART II y General Information y Financial Information y Statutory and other Information

PART III y Explanations to the terms provided in part I and part II

y y
151

STATEMENT IN LIEU OF PROSPECTUS ( SEC TION 70) Issued when a public ltd. wants to raise capital from pvt. Sources. Schedule III contains a model

y A ROC may not register prospectus if y - it is not dated y -Does not comply with section 56 or 70 y - it does not contain consent of auditors , brokers etc. y -it does not contain statement of experts.

152

LIABILITY FOR MIS-STATEMENTS y Golden rule states that full and honest disclosure of material facts must be made else any untrue statement attracts civil or criminal liability. y 1. Civil Liability y - against Company- remedy is recession of contract or claim for damages. y - against doer- damages and Compensation

153

2. Criminal Liability -against Company- fine upto Rs.50,000/y - against doer - Fine upto Rs. 50000/-

or imprisonment upto 2 years or both.

154

DIRECTORS
Section 197 A provides appointment of y Managing director y Manager But does not exclude appointment of directors( which do not fall in the above category).They could be: y Executive or Whole time y Part time directors y Independent directors y Nominee directors
155

y Additional directors y The Board of directors may appoint additional directors y Articles of Association of the company must permit . y Such additional directors shall hold office only up to the date of

the next annual general meeting of the company.

y Alternate director y The Board of directors of a company may, if so authorised by

156

its articles or by a resolution passed by the company in general meeting, appoint an alternate director to act for a director during his absence for a period of not less than three months from the State in which meetings of the Board are ordinarily held.

y QUALIFICATION y Qualification shares are the minimum number of

shares a person must own, as provided in the articles of the company, in order to qualify to become a director of the company. y Qualification shares must be acquired by a director within 2 months of his appointment. y The face value of the qualification shares cannot exceed five thousand rupees,.

157

y y y y y y y

DISQUALIFICATION OF DIRECTORS he has been found to be of unsound mind he is an undischarged insolvent he has applied to be adjudicated as an insolvent and his application is pending he has been convicted by a Court he has not paid any call in respect of shares of the company held by him, an order disqualifying him for appointment as director has been passed by a court

158

y POWERS OF THE BOARD

y SECTION 291 PROVIDES GENERAL POWERS AND STATES; y THE BOD ARE AUTHORISED TO EXERCISE ALL SUCH POWERS

AS ARE AUTHORISED BY ACT.

y CANNOT EXERCISE POWERS WHICH THE MOA OR AOA OR ACT

HAS SPECIFIED TO BE CARRIED IN AN AGM

y SECTION 292 PROVIDES POWERS AND 293 PROVIDES

RESTRICTIONS

159

y SECTION 292 enables powers at Board meeting: y Call on unpaid money on shares y Buy back as per section 77A y Power to issue debentures. y Power to issue funds of the Company. y Power to make Loan. y Other Powers at Board ( other sections) y Fill Casual vacancy/ additional director / alternate

director y Sanctioning of contract having directors interest y Decide on dividend rate prior to AGM. 160

DUTIES OF DIRECTORS y STATUTORY y GENERAL General

y Perform in good faith y Attend Meetings y Duty of Care and diligence y Duty not to delegate

161

y Statutory

y File

162

return of allotment y To disclose interest y To disclose receipt from transfer of property. y To disclose receipt from Share transfer y Not to issue irredeemable or redeemable preference shares after 10 years. y To attend Board Meetings y To convene and hold AGM y To place financial accounts in AGM y To make declaration of Solvency

LIABILITIES Can be clubbed under five heads: 1. Liability to the Company y Can arise for breach of duty. y For ultra vires acts y For negligence y For breach of trust and misfeasence

163

2. Liability to third parties y For non-complaince of provisions of Companies Act (like prospectus sec 56,64,70 ) y For breach of warranty. 3. Liability for breach of Statutory duties ( like filing of return on allotment) 4. Liability for acts of Co-directors 5. Criminal Liability.

164

y CASE

SALOMAN VS SALOMAN LTD.

165

WINDING UP Modes y Compulsory winding up under an order of the court y Voluntary winding up y Voluntary winding up under the supervision of the court

166

I. Compulsory winding up by Court Reasons

y Default in holding a Stautory meeting y Failure to commence business business after

incorporation y Reduction in the no. of members ( 2 for pvt ltd. 7 for public ltd.) y Inability to pay its debts y Just and equitable reasons.

167

Procedure :

The winding up petition must be presented to HC. Petitioner may be Company itself, Creditor, contributory, Registrar, Central Govt, Official Liquidator. 2. Application must also be made for appointing provisional liquidator. 3. The Court may dismiss / adjourn the hearing/ pass interim order or as it deems fit maty pass an order for winding up.
1.
168

Voluntary winding up : Members Voluntary Winding Up.

II.

1. Is possible only when Company is solvent and able to pay its liabilities in full. 2 . Directors prepare a DECLARATION OF SOLVENCY . Along with - an affidavit - Copy of the Auditors Report. File an application with the ROC . 3. Appointment and fixing remuneration to the liquidators

169

y Creditors Voluntary Winding Up

y This unlike Members Winding up , is resorted by y y y y y y y

insolvent Companies Procedure Meeting of Creditors Appointment of Liquidators and remuneration Committee of inspection Board Powers Cease. Liquidator to call meeting of creditors and Company Final Meeting and dissolution.

170

III. VOLUNTARY WINDING UP UNDER SUPERVISION OF COURT y Once voluntary winding up has been done the court may under following circumstances, winding up to be done under the supervision of court.: y If resolution for winding up was obtained by fraud y Rules not followed y Liquidator is negligent or prejudicial.
171

Module 7 Consumer Protection Act (1986) Intellectual Property Rights (IPR) Taxes

Intellectual Property Rights Copyright Patent Trademarks

y Copyright Act 1957 y Amendments in 1983, 84, 92, 94,99

(On the pattern of British Copyright Act 1956) y Previous Lawy Copyright Act 1914 (on the pattern of British Copyright Act 1911)

y Berne Convention 1886(as modified in Paris in

1971) y Universal Copyright Convention 1951 y TRIPS Agreement 1994 y Phonograms Convention Geneva 1971 y Rome Convention 1961- India not a signatory, but Indian law complies with it y Internet Treaties 1996 (WIPO) y WIPO Copyrights Treaty y WIPO Performance and Phonograms treaty (WPPT)

y y y

y y

Berne Convention for the Protection of Literary and Artistic works (1886, 1971). Universal Copyright Convention 1971. Convention for the Protection of Producers of Phonograms against Unauthorised Duplication of their Phonograms (1971). Multilateral Convention for the Avoidance of Double Taxation of Copyright Royalties. Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement 1994.

y Key Questions: 1. What is Copyright? 2. What Types of Intellectual Properties are Protected? 3. What is the nature of Protection? 4. Is Registration Necessary For Claiming Copyright Protection? 5. What is the procedure for Registration? 6. Registration of Copyright in respect of computer software 7. Registration of Copyright of Website 8. Remedies available against infringement

y Copyright is the exclusive right of the author of a literary,

dramatic, musical or artistic work or a computer program, cinematograph f ilm or sound recording or a broadcaster or a performer to issue copies of the work or communicate the work to the public. The right is for a limited period. y In the case of a computer program, cinematograph f ilm and sound recording, copyright includes the right to give a copy on commercial rental or hire y Copyright includes the right to translate or adapt the work

Copyright means the exclusive right: 1. In the case of a literary, dramatic or musical work, not being a computer program: y To reproduce the work or to store by electronic means y To issue copies of the work to the public, not being copies already in circulation y To perform the work in public y To communicate the work to the public. y To make cinematograph film or sound recording in respect of the work y To make any translation of the work y To make any adaptation of the work. 2. In the case of a computer program, cinematograph film or sound recording, to make a copy or communicate or to give a copy on commercial rental 3. In the case of an artistic work to reproduce the work in any material form including depiction in three dimensions of a two dimensional work

y A work means any of the following , namely, a literary,

dramatic, musical or artistic work, a cinematograph film, broadcast, performance, a Phonogram (sound recording) or a work of architecture located in India.

y Author is the first owner of the copyright y However, In the case of a work made in the course of

the authors employment under a contract of service or apprenticeship, the employer shall, in the absence of any agreement to the contrary, be the first owner of the copyright therein

Author means: y In the case of a literary or dramatic work the author, i.e., the person who creates the work. y In the case of a musical work, the composer. y In the case of a cinematograph f ilm, the producer. y In the case of a sound recording, the producer. y In the case of a photograph, the photographer. y In the case of a broadcast, the broadcasting organization y In the case of a performance, the performer y In the case of a computer generated work, the person who causes the work to be created.

y Where the assignee does not exercise the rights

assigned to him within a period of one year from the date of assignment, the assignment in respect of such rights shall be deemed to have lapsed after the expiry of the said period unless otherwise specified in the assignment. y If the period of assignment is not stated, it shall be deemed to be five years from the date of assignment.

y Copyright in published literary, dramatic, musical

and artistic works: 60 years from the beginning of the calendar year next following the year in which the author dies, and in the case of photographs, films and sound recordings 60 years from the year of publication. y Broadcast Reproduction Right-25years from the beginning of the calendar year next following the year in which the broadcast is made y Performers Right- 50 years from the beginning of the calendar year next following the year in which the performance is made

1. 2. 3. 4. 5. 6. 7.

for the purpose of research or private study, for criticism or review, for reporting current events, in connection with judicial proceedings, performance by an amateur club or society if the performance is given to a non-paying audience, Making back-up copies as a temporary protection against loss the making of sound recordings of literary, dramatic or musical works under certain conditions

y Computer Software or program can be registered as a

literary work. As per Section 2 (o) of the Copyright Act, 1957 literary work includes computer programs, tables and compilations, including computer databases. y Source Code has also to be supplied along with the application for registration of copyright for software products.

y A web-site contains several works such as literary

works, artistic works (photographs etc.), sound recordings, video clips, cinematograph films and broadcastings and computer software too. Therefore, a separate application has to be filed for registration of all these works.

"Indian work" means a literary, dramatic or musical work,

y the author of which is a citizen of India; or y which is f irst published in India; or y the author of which, in the case of an unpublished work

is, at the time of the making of the work, is or was a citizen of India.

y Copyright of nationals of countries who are members

of the Berne Convention (1971)for the Protection of Literary and Artistic Works, Universal Copyright Convention 1971, Phonogram Convention 1971, and the TRIPS Agreement 1994 are protected in India under the International Copyright Order 1999 on a reciprocal basis

Publication means making a work available to the public by: 1. Issue of copies, and 2. By communicating the work to the public Example: Import and issue of copies in India of books published in other countries amounts to publication, and requires a licence from the copyright owner (AIR 1985 Del 29)
y

1. Broadcast" means communication to the public in the form of signs, sounds or visual images : (i). by any means of wireless diffusion, or (ii). by wire. 2. A licence under the Telegraph act 1885 and the Wireless Telegraphy Act 1933 is necessary for broadcasting

The rights of a broadcasting organization with reference to a broadcast are : y right to re-broadcast; y right to cause the broadcast to be heard or seen by the public on payment of any charges; y right to make any sound recording or visual recording of the broadcast; y right to sell or hire to the public (commercial rental) any sound recording or visual recording of the broadcast.

y The term of protection for broadcasters rights is 25

years from the beginning of the year next following the year in which the broadcast is made. (S.37)

y Performer includes an actor, singer, musician, dancer,

acrobat, juggler, conjurer (magician), snake charmer, a person delivering a lecture or any other person who makes a performance [S.2 (qq)] y Performance means any visual or acoustic presentation made live by one or more performers [S. 2 (q)]

y Right to make a sound recording or visual recording of

the performance; y Right to reproduce the sound recording or visual recording of the performance; y Right to broadcast the performance; y Right to communicate the performance to the public otherwise than by broadcast.

y Performers right subsists for 50 years from the

beginning of the calendar year next following the year in which the performance is made

y A copyright society is a registered collective

administration society. Such a society is formed by copyright owners. The minimum membership required for registration of a society is seven. Ordinarily, only one society is registered to do business in respect of the same class of work. A copyright society can grant licences in respect of any work in which copyright subsists.

- Issue licences in respect of the rights administered by the society.

Collect fees in pursuance of such licences. y Distribute such fees among owners of copyright after making deductions for the administrative expenses.
y

Society for Copyright Regulation of Indian Producers for Film and Television (SCRIPT) 135 Continental Building, Dr. A.B. Road, Worli, Mumbai 400 018, (for cinematograph and television f ilms). The Indian Performing Right Society Limited (IPRS), 208, Golden Chambers, 2nd Floor, New Andheri Link Road, Andheri (W), Mumbai- 400 058 (for musical works). Phonographic Performance Limited (PPL) Flame Proof Equipment Building, B.39, Off New Link Road, Andheri (West), Mumbai 400 053 (for sound recordings).

y y

y y

Making infringing copies for sale or hire or selling or letting them for hire; Permitting any place for the performance of works in public where such performance constitutes infringement of copyright; Distribution or Public exhibition of infringing copies for the purpose of trade; and Import of infringing copies into India.

y Any police officer, not below the rank of a sub

inspector, may, if he is satisfied that an offence in respect of the infringement of copyright in any work has been, is being, or is likely to be committed, seize without warrant, all copies of the work and all plates used for the purpose of making infringing copies of the work, wherever found, and all copies and plates so seized shall, as soon as practicable be produced before a Metropolitan Magistrate or a Judicial Magistrate of the First Class

y Injunctions, y Damages and y Accounts. y District Court has the jurisdiction

y Any person who knowingly infringes or abets the

infringement of copyright in a work shall be punishable with imprisonment of 6 months to 3 years and fine of Rs 50,000 to Rs 2 lakh. y Where infringement has not been made for gain in the course of trade or business, court may give lesser punishment for reasons to be recorded. y Construction of a building which infringes copyright in some other work is not an offence under this section

REGISTRATION OF COPYRIGHT
y It is not necessary to register a work to claim copyright.

However, certif icate of registration of copyright and the entries made therein serve as prima facie evidence in a court of law with reference to dispute relating to ownership of copyright. y Copyright comes into existence as soon as a work is created. y Both published and unpublished work can be registered. y The Copyright Off ice has been set up to provide registration facilities to all types of works and is headed by a Registrar of Copyrights and is located at B.2/W.3, C.R. Barracks, Kasturba Gandhi Marg, New Delhi- 3

y Names, address and nationalities of the owners of various rights comprising

y y

the copyright in the work and the extent of rights held by each, together with the particulars of assignments and licence, if any Names, addresses and nationalities of other persons if any, authorised to assign or licence the rights comprising the copyrights If the work is Artistic the location of the original work, including name and address and nationality of the person in possession of the work, (in case of an architectural work, the year of completion of the work should also be shown). If the work is an Artistic work which is used or is capable of being used in relation to any goods, the application should include a certification from the Registrar of Trade Marks that no identical or deceptively similar trade mark has been registered in the name of any other person [S 45 (i)] In the case of a computer program source code should also be mentioned

y y

y y y y y y

Nature of the Applicants interest in the Copyright of the work - as author, publisher, owner assignee or licencee Class and description of the work- literary, dramatic, musical work, computer software, artistic work, cinematograph film or sound recording, performance, architecture, etc. (i.e. Drama, Novel, Biography, Poems, Lecturers Opera, Painting, Engraving, Photograph, Disco tapes, etc.) Title of the work Language of the work Name, address & Nationality of the Author and if the author is deceased, the date of death Whether the work is published or unpublished Year and Country of first publication (Name, address and nationality of the publisher) Years and countries of subsequent publications if any, and name, addresses and nationalities of the publishers

1. Is the work to be registered y an original work? y a translation of a work in the public domain? y A translation of a work in which Copyright subsists? y an adaptation of a work in the public domain? y an adaptation of a work in which Copyright subsists? 2. If the work is a translation or adaptation of a work in which Copyright subsists: y Title of the original work y Language of the original work y Name, address and nationality of the author of the original work and if the author is deceased, the date of decease y Name, address and nationality of the publisher, if any, of the original work y Particulars of the authorization for a translation or adaptation including the name, address and nationality of the party authorizing:

If a work is published simultaneously in more than one country, state particulars of countries in which it is published and the exact date of publication (and not merely the year of publication) in each country. (simultaneous publication- publication within 30 days- S.5). y If the rights are owned separately by different persons the rights of each person should be stated separately, including the extent of rights held by each person. In the case of a Cinematograph Film or Sound Recording also state in full particulars (viz. full names, addresses and nationalities) of the owners of Copyright of the work recorded in the Sound Recording like the composers, lyricists, story writers, etc.[rights comprising the copyright(S.14)].
y

If a work is published simultaneously in more than one country, state particulars of countries in which it is published and the exact date of publication (and not merely the year of publication) in each country. (simultaneous publication- publication within 30 days- S.5). y If the rights are owned separately by different persons the rights of each person should be stated separately, including the extent of rights held by each person. In the case of a Cinematograph Film or Sound Recording also state in full particulars (viz. full names, addresses and nationalities) of the owners of Copyright of the work recorded in the Sound Recording like the composers, lyricists, story writers, etc.[rights comprising the copyright(S.14)].
y

y y y y y y y y

Ledger sheets and blank forms Rules and recipes White pages listings of telephone directories Facts and theories (although particular expressions of facts or theories are copyrightable) Ideas and principles (R.G Anand v. Delux Films-Hum Hindustani film, Delhi High Court- UKs Copyright Act 1911) Methods of operation/processes News (However, there is copyright over the way in which a news item is reported) Copyright does not ordinarily protect titles by themselves or names, short word combinations, slogans, short phrases, methods, plots or factual information.

y Authors Guild of India, New Delhi. y Federation of Publishers and Booksellers

Associations in India, New Delhi. y Film Federation of India, Mumbai y National Association of Software Service Companies, New Delhi y Phonographic Performance Limited, Mumbai. y Indian Performing Right Society Ltd., Mumbai y Cine Artistes Association, Mumbai

Intellectual Intellectual Property Rights (IPRs):

Intellectual property rights are the rights given to persons over the creations of their minds. They usually give the creator an exclusive right over the use of his/her creation for a certain period of time. a) legal or statutory right b) Of exclusive or monopolistic nature c) Over their creations i.e. products of human intellect

IPRs in general Copyright Industrial Property

IPRs in the Indian Context| Patent Copyright Trademark Industrial Design Geographical Indication Layout design of industrial circuits

y Patents and designs Act 1911 y The Patents Act, 1970 y Three amendments 1999, 2002 & 2005 y The 3rd amendment in 2005 has major implications on: y Introduction of product patent for food, pharmaceuticals,

chemicals and embedded software (software in combination with hardware, like mobile telephone, Computer, television) inventions. y Examination of the mail box applications, from January 01, 2005

When the TRIPS agreement came into force on January 1, 1995, developing countries like India were given a grace period of ten years to introduce product patents. During this interim period of ten years, all patent applications were put in a mailbox and were only to be examined after January 1, 2005. However, Pharmaceutical companies were allowed to apply for exclusive marketing rights (EMR) for their products for f ive years if their product was registered for a patent and had received marketing rights in any of the WTO member countries. Practice of EMRs stopped after January 1, 2005.

Object: To encourage
 Scientific research;  new technology;  industrial progress

Methodology: Opportunity of acquiring exclusive rights stimulates technical progress in the following ways:1. 2. 3. 4.

Encourages research & invention Inducement to disclose invention Offers a reward Inducement to invest capital

y Intellectual property rights are customarily divided

into two main areas: (i) Copyright (ii) Industrial property.

Copyright is the exclusive right to copy a creative work or allow someone else to do so. It includes the sole right to publish, produce or reproduce, to perform in public, to communicate a work to the public by telecommunication, to translate a work, and in some cases, to rent the work.

Copyright applies to all original literary, dramatic, musical and artistic works. These include books, other writings, music, sculptures, paintings, photographs, films, plays, television and radio programs, computer programs (software), sound recordings (such as records, cassettes, and tapes), performances, etc..

Themes, ideas, titles, names, catch-phrases and other short-word combinations.

Industrial property can be divided into two main areas: y Distinctive signs, like trademarks (which distinguish the goods or services of one undertaking from those of others)and geographical indications (which identify a good as originating in a place where a given characteristic of the good is essentially attributable to its geographical origin). Innovation through research and design, creation of technology. This includes inventions (protected by patents), industrial designs and trade secrets. y Industrial Property thus includes Patents, Trade Marks and Geographical Indications, Industrial Designs and Trade Secrets
y

Exclusive right for being the true and first inventor of a product or process, granted by the govt for a limited period. to exclude others from making, using, selling or importing the patented product or process without his consent, in exchange of full disclosure of his invention . y Term- 20 years from FILING Date (S.45)

y Patent" originates from patere: to lay open (to public

inspection) y Letters patent originally denoted royal decrees granting exclusive rights to certain individuals or businesses y Term not defined in the Patent Act, 1970

y Characteristic Features of Patent y 1. Set of exclusive rights y 2. Right granted

to the true and first inventor y 3. Of a product or process y 4. Right to exclude others from making, using, selling or
importing the patented product or process without his consent
y 5.. Right Granted by the state (Sort of agreement

between inventor and the state) y 6. Right In exchange for Public disclosure of complete
specifications of the invention.
y 7. Right Granted For a fixed period of time (20 years

from the date of filing)

y Characteristic Features of Copyright  1. Right over original works of authorship  2. Protects the form of expression, not the subject matter or

idea  3. The right is for a longer duration (life of author+60 years)  4. Copyright is automatically granted  5. Registration of Copyright helps in proving the copyright. The burden of proof shifts to the party who denies copyright
y Examples of Copyright: y Book, Film, Music, Sound Recording, Casette, Tape, Play/Drama,

Performance, Television and Radio Programs, Art, Photograph,

Painting; Computer Program (Software)

ORGANIZATION STRUCTURESTRUCTURE- IP OFFICES

MINISTRY OF INDUSTRY & COMMERCE Office of the Controller General of Patents, Designs & Trademarks Patent office Kolkatta, Delhi, Mumbai, chennai GI Registry Chennai

TM Registry Kolkatta, Delhi, Chennai, Mumbai, Ahmedabad, Designs wing Kolkatta

y 1. 2.

Exclusive right to prevent third parties, who do not have his consent, from making, using, selling or importing the product or using the process (S. 48) Exceptions (S. 47): Use by govt. for its own use Use for experiment, research or instructions to pupils

Sec. 2(1)(j): Invention means a new product or process involving an inventive step & capable of industrial application 1. Process, method or manner of manufacture, 2. Machine, apparatus or other article, 3. Substance produced by manufacture, And includes any new & useful improvement of any of them.

y NEW: that no other inventor

has obtained a patent for the same

invention.

y NON-OBVIOUS that the subject matter of an invention was not

obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains. in industry or commerce.

y USEFUL :that the machine, product, or process is one that can be used

 Novelty  Non-Obviousness (an inventive step)  Utility (Capable of industrial application)

:
1. 2. 3. 4. 5. 6. 7.

An invention which is frivolous, or claims anything contrary to existing natural laws. An invention whose use would be contrary to public order or morality, or which will be prejudicial to health or environment Discovery of a scientific principle or the formulation of an abstract theory. Discovery of any living thing or non living substance occurring in nature Discovery of a new property or use of a known substance, unless it results in a new product A substance obtained by mere admixture Arrangement or rearrangement or duplication of known devices .

8.
9. 10. 11. 12. 13. 14. 15. 16.

A method of agriculture or horticulture, seeds, etc. . Any process of medicinal, surgical application on human beings or animals to render them free of disease. Plants, seeds, animals and biological processes for production or propagation of plants and animals Computer program, per se, other than its application to industry or combination with hardware (embedded software) A mathematical method or a business method Literary, dramatic, musical, artistic, aesthetic creation including cinematic work or television production A method of playing game, presentation of information Integrated circuits Traditional knowledge, or aggregation of traditionally known components

y y y y y y y y

Atomic energy 1962(S.4) Traditional knowledge Scientific principle Abstract theory Discovery of natural substances New form of a known substance Mixture of known compounds Methods of agriculture

For an invention to become patentable subject matter must meet the following criteria y i) It should be new or novel. y ii) It should have inventive step or it must be nonobvious y iii) It should be capable of Industrial application. y iv) It should not fall within the provisions of section 3 and 4 of the Patents Act 1970.

1. Application (s 10) 2. Publication (S.11-A), 3. Examination (S.11-B, 12). 4. Pre-Grant Opposition (after publication and before grant) 5. Grant of patent (Notification) 6. Post-Grant opposition (within an year of grant) 7. Maintenance of patent (renewal after three years-renewal fee) 8. Working of patent (Satisfactory availability of the patented product at reasonable prices-Compulsory licensing by the Controller , if required) 9. Revocation of patent (s 64- wrongfully obtained) 10. Remedies against abuse of patent (S . 66, revocation in public interest by central govt.-mischievous) 11. Penalties ( S. 120- falsely representing Patented, Patent applied for-fine up to Rs 1 lakh) 12 Infringement (S.108, injunction, either damages or an account for profits)

1. Application with complete specifications has to be submitted to Controller of Patents. 2. The application along with an abstract is published after 18 months of filing, unless the applicant requests early publication 3. Applicant may apply for examination of his application within 48 months of filing (31 months incase of applications under Patent Cooperation treaty) 4. The application is then referred to an Examiner. 5. Examiner checks its legality and authenticity and reports to the Controller. 6. If there are discrepancies in the application , objections are raised which must be answered within an year from the date of report. 7. Any one interested can object after the publication and before grant of the patent

8. Grant of the patent is notified in the Official Gazette, Patent Office journal published every week 9. Post grant objections can be made within an year of grant of the patent 10. Maintenance (renewal)fee has to be paid after the third year 11. Lapse of the Patent on failure to renew, restoration within 18 months from the date of lapse on payment of fee 11. Controller may grant compulsory licence if the patent is not working (product is not available in sufficient quantity at reasonable prices). 12. PATENTEE CAN SELL OR ASSIGN HIS PATENT TO OTHER PERSONS

y Patent application- specifications

1. Name of the inventor 2. Address 3. Name of the assignee, if any 4. Title of the invention, sufficiently indicating the subject matter 5. Subject matter, object & purpose: to enable a reasonably well informed artisan to make the patented thing at the end of protected period. 6. Prior art, full description of the invention, its operation and use 7. model or sample (if the Controller requires), etc. 8. Best method of performing the invention

9. Claims: defining scope of invention 10. Abstract, providing technical information 11. If the applicant mentions a biological material in the specifications, he should deposit the material with an international depository authority under the Budapest Treaty, give name and address of the depository institution, date and number of the deposit of the material in that institution. He should disclose the source and origin of the biological material( There are 34 authorised international depository authorities notified under S 10 of the Patents Act, including one in India (Chandigarh)-Microbial Type Culture Collection and Gene Bank (MTCC)

A patent specif ication can be prepared by the applicant himself or his registered and authorized agent. The patent specif ication generally comprises of the title of the invention indicating its technical f ield, prior art, draw backs in the prior art, the solution provided by the inventor to obviate the drawbacks of the prior art, a concise but suff icient description of the invention and its usefulness, drawings (if any) and details of best method of its working. The complete specif ication must contain at least one claim or statement of claims def ining the scope of the invention for which protection is sought

Indian Patent Law follows f irst to f ile system. Provisional specif ication describes the nature of the invention to have the priority date of f iling of the application in which the inventive idea has been disclosed. It must be followed by a complete specif ication describing the details of the invention along with a statement of claims within 12 months after f iling of the provisional application. If the complete specif ication is not f iled within the prescribed period, the application is treated as abandoned

y Prior art ( state of the art) is all information that

has been disclosed to the public in any form about an invention before a given date. Prior art includes things like any patents related to your invention, any published articles about your invention, and any public demonstrations. y If an invention has been described in prior art, a patent on that invention is not valid.

How can one find out that an invention is already patented? y The person concerned can perform a preliminary search on: 1. Patent Office website in the Indian patent data base of granted patents, or 2. Patent Office journal published every week, or 3. Search in the documents kept in the Patent Office Search and Reference Room, which contains Indian patents arranged according to international patent classification system. 4. One can also make a request for information regarding any patent under section 153 of the Act

y Priority date of the claim is the date of filing of

specifications-provisional or complete, wherein the matter on which the claim is fairly based was first disclosed. Controller can order post-dating or antedating of a claim under section 9, 17 and 16 depending upon when he thinks the matter was actually first disclosed.

y Every application for patent is published after 18

months from the date of its filing or priority date whichever is earlier, except where there is a secrecy direction. y Applicant can make a request for early publication with the prescribed fee. After receiving such request the Patent Office publishes such application within a period of one month provided the invention does not relate to atomic energy or defence purpose.

y The patent application is examined only on request. y The request for examination can be f iled within a period of

48 months from the date of priority or date of f iling of the application whichever is earlier. y Request for examination before expiry of 31 months can be made in respect of the applications f iled under Patent Cooperation Treaty known as National Phase applications by payment of the prescribed fee.

After examination, the Patent off ice issues an examination report to the applicant which is generally known as First Examination Report (FER). Thereafter the applicant is required to comply with the requirements within a period of twelve months from the date of FER. In case, the application is found to be in order for grant, the patent is granted, provided there is no pre-grant opposition is f iled or pending. A letter patent is issued to the applicant. However, in case a pre-grant opposition is pending, further action is taken after disposal of the pregrant opposition.

Grounds For Pre-Grant Opposition:

1. 2. 3.

Lack of Patentability including novelty, inventive step and industrial use Non disclosure or wrongful mentioning in complete specif ication Anticipation of invention by knowledge oral or otherwise The patentee wrongfully obtained the invention or any part of it from him Anticipation by previous publication or prior claim

Grounds for Post-Grant Opposition:

1. 2.

y Pre-grant Opposition
y Patent applications are published y Non-compliance y Non/wrong-disclosure

y Post-grant Opposition
y Within 12 months of grant of a patent y Misconduct, public display, non-patentable

Patent opposition (contd)

y A representation for pre-grant opposition can be filed

after publication of the application u/s 11A and before the grant of patent. y The grounds on which the representation can be filed are provided u/s 25(1) of the Patents Act 1970.

Grounds (Sec. 25):

1. 2. 3. 4. 5. 6. 7. 8. 9.

Obtaining the Patent wrongfully Prior publication Prior claim in a concurrent application Prior public use or knowledge in India Obviousness or lack of inventive step Non-patentable invention Insufficient description of the invention Failure to disclose information relating to foreign application If convention application, not made within prescribed time

After filing the application for the grant of patent: 1. Applicant may make a request for early publication of his application and an abstract of application ( Publication before 18 months from the date of filing or date of priority, whichever is earlier) (S.11-A), 2. A request for examination is required to be made by the applicant or by any other interested person and thereafter it is referred by the Controller to an Examiner for report (S.11-B, 12). 3. Prior Art Search for Anticipation by Previous Publication and Prior Claim( Prior Art search) (S.13) 4. First Examination Report is issued and the applicant is given an opportunity to correct deficiencies within the prescribed time.

5. Power of Controller to direct revision of application if specification relate to more than one invention or as respects post-dating or ante-dating of application (S.16,17) 6. Power of controller to direct the applicant to insert a reference to the other specification by way of notice to the public in the applicants complete specification in case of anticipation by prior claim or potential infringement (S.18, 19) 7. When all the requirements are met, the patent is granted and notified in the Patent office Journal. 8. However before the grant of patent and after the publication of application, any person can make a representation for pregrant opposition. 9. Post- grant opposition, within one year from the date of publication of grant [S. 25 (3)]

y A patent is not infringed until proven otherwise y onus or burden of proving infringement is on the

patent owner

y Jurisdiction-District Court (S.104) y If the defendant makes a counter claim for

revocation of the patent-High Court y Burden of Proof (104-A): If the patentee first proves that the product is identical then if the subject matter is a process, the court may direct the defendant to prove that the process used by him to obtain the product was different.

y A suit for declaration as to non infringement may be

instituted if the patentee neglects or refuses to acknowledge a declaration that the use of the process by the plaintiff does not amount to an infringement

y If any person threatens any one by circulars,

advertisements or by communications-oral or in writing, with proceedings for infringement of a patent, the threatened person can bring a suit for declaration that the threats are unjustifiable. He may also seek an injunction and damages.

y Damages or an account of profits shall not be

granted against a defendant who proves that he was not aware of the patent. y Mere mention of Patented on the article is not deemed to make everyone aware of the existence of patent, unless the number of the patent is also mentioned on the article

Defences: Every ground on which the patent may be revoked is available as a defence in a suit for infringement. Relief: y Injunction y Damages or account of profits

Contravention of secrecy directions relevant for defense purposes (S.35) or applying for patents outside India without prior permission of the Controller (S. 39) is punishable with imprisonment up to 2 years or with fine or with both. (S 118) y Unauthorized claim of patent rights: If any person falsely represents that any article sold by him is patented in India by using words such as patented, patent applied for ; he shall be punishable with fine up to Rs 1 lakh ( S.120) y Failure or refusal to furnish information to: (1) central govt. to use invention for purposes of govt. [S.100(5)] (2) Controller regarding the extent of commercial use of the invention in India as required us 146 Punishable with fine up to Rs 10 lakh (S. 122): y Practice by non-registered patent agents punishable with fine up to Rs 1 lakh(S. 123)
y

y After 3 years of patent, anyone can request a license from

the govt. on these grounds

y That the reasonable requirements of the

public with respect to the patented invention have not been satisfied
y That the patented invention is not available

to the public at reasonably affordable price

y Export of pharmaceuticals to poor countries

1. Any time after three years of the sealing of a patent any interested person may apply to the Controller for grant of compulsory licence on the ground that reasonable requirements of the public with respect to the patented invention are not being satisfied at reasonably affordable price or that the invention is not being worked in India 2. The Controller has to take into account the efforts made by the applicant for obtaining a licence from the patentee on reasonable terms and the fact that such efforts were not successful within a reasonable period. 3. Controller will secure reasonable royalty and other remuneration to the patentee 4. After the expiration of two years from the date of granting the first compulsory licence, any person may apply to the Controller to revoke the patent on the same grounds as mentioned in the first para.

y Administered by

 Office of the Controller General of

Patents, Designs & Trade Marks (CGPDTM)  ~300 examiners Patents now granted in 2-3 years

y Balancing of public and private rights y Structure of the patents legislation

y Scope of patentability y Exclusion from patentability y Procedure for grant of patents y Remedies against abuse of patents y Exceptions to patents rights y Remedies against infringement

y More than 90% of patent rights are held in developed

countries
y 95% of patents are not working y Not all industries are bothered about patents (E.g. Auto

industry)
y Industries keen on Patent-Chemical, Biotech, IT Sector etc

y y y y y y y y y y y

When an application for a patent complies with the Act and Rules it is in order for grant and the applicant is notif ied of the date on which the complete specif ication of the application will be published. For a patent to be granted the applicant must request sealing on the appropriate form and pay the required fee. This form must be f iled within 4 months of the date on which the complete specif ication is published, subject the there not being any pending action on the application in any court or before the Comptroller. Following such an action the request for sealing must be f iled within 2 months after the action is completed. In all cases an extension of up to 3 months are allowed for making the request for sealing on payment of an additional fee. The patent is prepared on one of the forms set out in a schedule to the Rules and sealed with the Patent Office seal, the date of sealing being entered in the Register of Patents.

Trademarks Act 1999

TRADE MARKS ACT 1999

BACKGROUND
y y

It replaced the Trade & Merchandise Marks Act, 1958 The Trade Mark Act, 1999 was enacted to bring our law in conformity with the TRIPs Agreement 1994, to which India is a signatory The Trade Marks Act, 1999, came into force on September 15, 2003.

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y Trade Mark is a mark which is capable of being

represented graphically (visually), and is capable of distinguishing goods or services of one person from those of others. y It may include shape of goods, their packaging and combination of colours

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y Mark includes brand (name used to identify goods or

services or business), label, name, letter, word, numeral,

signature, shape of goods, packaging, combination of colours, or any combination of these

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y 1. 2.

Trade Mark is a visual symbol, word, letter, numeral, name, signature, label, identifying or distinguishing the goods or services of one person from those of others, and capable of graphic representation Trade mark shows the connection between: Goods and services on the one hand, and The business dealing with them, or the business from where they originate on the other

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5/9/2010

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Some More Definitions

y Well-known Trade Mark: means a mark well known to a substantial segment

of the public using such goods or services, if the use of such mark in relation to other goods or services would be taken as indicating a connection with that well-known trade mark.[ S. 2(zg)], eg. Wal-Mart, Marks and Spencer, Xerox
y Collective Mark: a Trade Mark distinguishing the goods and services of

members of an association of persons. Collective Mark is owned by an association of persons (not being a partnership within the meaning of Indian Partnership Act, 1932) [S. 2(g)] ; eg. ASSOCHAM, FICCI
y Certification Mark: means a mark capable of distinguishing goods or services

which the proprietor of the mark certifies in respect of origin, material, quality, accuracy, ingredients or other characteristics, etc. e.g. Agmark, ISI mark [S. 2(e)]

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y Any name, surname of the applicant or predecessor in

y y y

business or the signature of the person, which is not unusual for trade to adopt as a mark. An invented word or any arbitrary dictionary word or words, not being directly descriptive of the character or quality of the goods/service. Letters or numerals or any combination thereof. Monograms Marks constituting a 3-dimensional sign

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y Combination of colors or even a single color in combination y y y y y

y y

with a word or device Shape of goods or their packaging Sound marks Symbols If it is a word it should be easy to speak, spell and remember. Best TMs are invented or coined words. Avoid selection of a geographical name, names of chemical elements (S.13). No one can have monopoly rights on such things. Avoid adopting laudatory word or words that describe the quality of goods (such as best, perfect, super etc) Conduct a market survey to ascertain if same/similar mark is used in market.
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1. 2. 3. 4.

Identification of goods / or services and their origin Used on goods, containers & wrappers Marketing, Advertisement, and display on windows, etc. Trade mark is a guarantee for unchanged nature, quality & characteristics of goods and services; The brand operates as a seal of authenticity. Creates an image for the goods/ services; a badge of loyalty and affiliation Trade Mark is a property (goodwill) which can be transferred, sold or bought
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5.

6.

LEGAL REQUIREMENTS FOR REGISTERING TM: y The selected mark, brand, label, name, signature or abbreviation, etc should be :
Capable of being represented graphically (in the paper form). 2. Capable of being used in relation to goods or services 3. Capable of distinguishing the goods or services of one undertaking from those of others 4. Capable of indicating the connection, in the course of trade, between the goods or services on the one hand and their proprietor or permitted user on the other
1.

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REGISTRATION OF TM
 Controller General of Patents, Designs and Trademarks is

also Registrar of Trademarks  Registry H.O.: Mumbai  Branch offices (4): Kolkata, Chennai, New Delhi, Ahmedabad  Registrar publishes the classification of goods and services, as far as possible, in accordance with international classification. (S.7,8)  Register of TM contains: all record of registered TMs, with names, addresses and description of proprietors, users, assignments, transmissions, conditions and limitations (S.6)  A digital library of 1,50,000 TMs and 1250 TM journals 5/9/2010 on CD-ROM

A trade mark shall not be registered if : 1. It is devoid of distinctive character 2. It deceives the public or causes confusion 3. Its use is prohibited under any law, like the Emblems and Names (Prevention of Improper Use) Act 1950 4. It is scandalous or obscene matter 4. It is likely to hurt religious susceptibilities 5. It consists exclusively of marks and indications to designate kind, quality, quantity, intended purpose, values, geographical origin etc.; or a mark which has become customary.
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y If there is likelihood of confusion on the part of

the public because of identity with or similarity to an earlier trade mark and identity or similarity of goods and services covered by the trade mark y Identity with or similarity to a well known trade mark in India which would take unfair advantage or be detrimental to the repute of that well known trade mark y Good faith of parties will be seen while taking a view
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a) Filing b) Examination c) Acceptance and advertisement of application d) Opposition, if any, within three months of advertisement e) Registration

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Any person claiming to be the proprietor of a TM used or proposed to be used by him may apply in writing in prescribed manner for registration. The application should contain:
1. The TM, 2. Goods/services to which the Trade Mark relates, 3. Name and address of applicant and agent (if any) with power of attorney 4. Period for which the Trade mark has been in use, and signature, etc.

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Registrar may withdraw the acceptance if he is satisfied that the application has been accepted in error or that circumstances are such that such registration should not be granted Registrar has to hear the applicant before withdrawing the acceptance.

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y Registrar shall get the application advertised in the journal

within six months after acceptance. (However, the application shall be advertised before acceptance if the application is related to a TM in respect of which there are grounds of refusal under sections 9 & 11. y Purpose of advertisement is to give information to public at large in respect of the TM advertised and afford an opportunity to oppose the registration of the mark on given grounds.

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y Any person: a customer, purchaser or a member of the

public who is likely to use the goods may oppose the registration of TM (Sec. 21) y The period of filing opposition: 3 months from advertisement date (extendable by Registrar up to 1 month on payment of prescribed fee). y On receiving the notice of opposition, the Registrar sends a copy to the applicant. The applicant is given 2 months time to file counter statement to the registrar. This copy of counter statement shall be sent to the person who has filed opposition (sec.21 (3)) y If the opposition is decided in favour of applicant for the trade mark, the trade mark is registered.
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y The registration shall be made as of the application date

and the applicant shall be issued a certificate of registration.(S.23) y Registration is valid for 10 years and may be renewed indefinitely, for 10 years at a time. (S.25) y Failure to renew registration leads to removal of TM from the Register; it could be restored by an application filed within 1 year. (S.25) y The mark can be registered jointly for two or more persons (sec. 24) & none of them is entitled to use the mark independently
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1. Renewal of Trade Mark 2. Acquiescence 3. Cancellation for non use 4. Infringement

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y An application for renewal (for ten years) should be made

six months before the expiry of the registration with the prescribed renewal fee y Registrar may remove the trade mark from the register, after giving notice, if the trade mark is not renewed. y Registrar may restore the trade mark on application and payment of fee within one year from the expiration y Where a trade mark is removed from the register for non payment of renewal fee, that trade mark will be freezed for one year ( Will not be allocated to another applicant for one year).

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y A registered Trade Mark may be taken off the register

(removed from the register) if there is no bonafide use of the trade mark for a continuous period of five years (S.47)

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y Where the proprietor of an earlier trade mark has

acquiesced for five years in the use of a registered trade mark, being aware of that use, he shall no longer be entitled to oppose the use of the later trade mark, unless he can prove that the registration of the subsequent trade mark was not obtained in good faith (S.33)

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A registered TM is infringed by a person who, without the permission of the proprietor,

 

uses in the course of trade an identical or a deceptively similar TM in relation to goods or services for which the TM is registered; or Uses a mark which because of its identity or similarity with the regd. TM and the identity or similarity of the goods/services covered by it

is likely to cause confusion on the part of the public. (S.29)

y

No action for infringement can be taken in respect of unregistered Trade Mark . However, action can be taken for passing off goods/services as those of another person (S. 27)

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y y 1. 2. 3.

Suit for infringement can be filed in the District Court (s.134) Relief available in Suits for Infringement (S. 135): Injunction, and Either damages or an account of profits, at the option of the plaintiff, Destruction or erasure of infringing labels and marks

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y Where a person, by circulars, advertisement or

otherwise groundlessly threatens a person with action for infringement of a trade mark which is registered or alleged to be registered, the person aggrieved may obtain a declaration that the threats are unjustified, an injunction against the treats and damages (S.142)

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y Falsifying and Falsely applying a trade mark: Applying a

y y

trade mark without the assent of the proprietor, or making a deceptively similar trade mark, or altering a genuine trade mark ( S. 102) Penalty for applying false trade mark- Imprisonment for 6 months to 3 years and with f ine of Rs 50,000 to Rs 2 lakh (S.103).The offence is cognizable ( S.115) Penalty for selling goods or services to which false trade mark is applied- same penalty (S.104). The offence is cognizable (S. 115) Penalty for falsely representing a trade mark as registeredimprisonment up to 3 years, or f ine, or both (s.107) Court may order forfeiture of goods to government in case of conviction (S.111)
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Note: cognizable: Police can arrest without warrant

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y Where a person has made an application in a

convention country, within 6 months of that date he may get registered under this Act in India; and the registration will be deemed to be as of date on which the application was made in the convention country. (S.154)

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y Trade mark has legal validity. Its infringement can be

challenged in a court and is punishable according to Trade Marks Act y Registration of domain name is on a f irst come f irst registered basis. It is self regulated by the network and the technology used. [Internet Protocols,www, TCP/IP, DNS (Domain Name System)]. y Internet Network Information Centre (Inter NIC) in the US is responsible for handling the DNS. Netwok Solutions Inc. (NSI) assigns domain names on behalf of Inter NIC. Preemptive, and at times fraudulent, registrations (reservation) of well known trade marks and company names are often being made by persons who have no genuine interest for later on selling and traff icking on a premium. This is known as cyber squatting
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y They are all Intellectual Properties- legal rights, which

result from intellectual activity in the industrial, scientif ic, literary and artistic f ields. y The all are time-limited rights to control the use of their intellectual creations. y Patents and Trade Marks relate to industrial property. Patents relate to creations of technology, inventions, products and processes. Trade marks are used on goods and services of businesses. y Copyright does not relate to industrial property but to literary, artistic, musical, dramatic, cinematographic, phonographic work, broadcasts or performances.

y Patents can only be acquired through registration y Trade marks can be acquired through use or

registration y Copyright is acquired as soon as the literary/ artistic/ musical/ dramatic work is created. Registration of copyright only shifts the burden of proof on the person who is accused of infringement

y y y

1.

2. 3.

Patents- 20 years from the date of filing Trade Mark- 10 years from the date of registration Copyright: Copyright in published literary, dramatic, musical and artistic works: 60 years from the beginning of the calendar year next following the year in which the author dies, and in the case of photographs, films and sound recordings 60 years from the year of publication. Broadcast Reproduction Right-25years from the beginning of the calendar year next following the year in which the broadcast is made Performers Right- 50 years from the beginning of the calendar year next following the year in which the performance is made

y Patents1. Only civil remedies of injunction, damages or accounts of

prof its are available. Seizure, forfeiture or destruction of infringing goods, as the Court deems f it (S. 108) 2. Infringement of patent is not an offence. No criminal action is possible. 3. Damages or an account of prof its shall not be granted against a defendant who proves that he was not aware of the patent. y Mere mention of Patented on the article is not deemed to make everyone aware of the existence of patent, unless the number of the patent is also mentioned on the article (S.111) 4. Burden of proving infringement is on the patent owner.

Trade Mark: Civil as well as criminal remedies are available against infringement or passing of . 1. Civil Remedies of Injunction, damages or account of profits, seizure and destruction of infringing material are available (S.135). 2. Criminal Offences : Offences of applying false trade marks or selling them are cognizable. Police can arrest without warrant (S.115) y Penalty for applying false trade mark- Imprisonment for 6 months to 3 years and fine of Rs 50,000 to Rs 2 lakh (S.103).The offence is cognizable ( S.115) y Penalty for selling goods or services to which false trade mark is applied- same penalty (S.104). The offence is cognizable (S. 115) y Penalty for falsely representing a trade mark as registeredimprisonment up to 3 years, or fine, or both (s.107)

Copyright: 1. Civil remedies include: y Injunctions, y Damages and y Accounts. y District Court has the jurisdiction 2. Criminal Offences include (S. 63): y Any person who knowingly infringes copyright in a work shall be punishable with imprisonment of 6 months to 3 years and fine of Rs 50,000 to Rs 2 lakh. y Where infringement has not been made for gain in the course of trade or business, court may give lesser punishment for reasons to be recorded. y Construction of a building which infringes copyright in some other work is not an offence under this section y However, none of the offences is cognizable 3. Police can seize infringing material (S.64) 4. Rights are available to even unregistered work. Registration only shifts the burden of proof on the person accused of infringing

y Patents lapse unless renewed periodically during their

life of 20 years by payment of renewal fee (S.53). Lapsed patents can be restored on payment of renewal fee (S. 60). Patents can not be renewed after the expiry of their 20 year term. y Trade Marks can be renewed, indefinitely, for ten years at a time (S. 25 ).

y Patents can be revoked for non working, any time after

two years from grant of compulsory licence. (S. 85). Patents can also be revoked in public interest (S 66). y A registered trade mark may be taken off the register on the ground of non-use for 5 years.(S.47)

y Any time after three years from the date of grant of patent,

Controller of Patents can grant compulsory licence to an applicant who could not succeed in his efforts for obtaining a licence from the patentee, if he f inds that the reasonable requirements of the public with respect to the patent are not being met at reasonable prices. Controller shall secure reasonable royalty for the patentee (S.84, 90) y Copyright Board may authorize grant of compulsory licence to publish a work which has been published or performed in public but is subsequently being withheld from public by refusal of the owner of the copyright to republish the work. (S 31). Licences may also be granted to publish translations after a specif ied period from f irst publication.

INCOME TAX ACT, 1961

It is a tax imposed by the Government of India on any body who earns income in India. Who is supposed to pay Income Tax? Any Individual or group of Individual or artificial bodies who/which have earned income during the previous years are required to pay Income tax on it. The Act recognizes the earners of income under seven categories. Each category is called a Status. These are Individuals, Hindu Undivided Family [HUF], Association of Persons [AOP], Body of individuals [BOI], Firms, Companies, Local authority, Artificial juridical person.

Previous Year: Income earned in the twelve months contained in the period from 1st April to 31st March (commonly called Financial Year) is taken into account for purposes of calculating Income Tax. Under the income tax Act this period is called a Previous year. Assessment Year: It is the twelve-month period 1st April to 31st March immediately following the previous year. In the Assessment year a person files his return for the income earned in the previous year.

Applicability of Income Tax: The Income tax Act applies to all persons who earn income in India. Whether they are resident or nonresident. Resident: If an individual stays in India for 182 days or more in a year, he is treated as resident in that year regardless of his citizenship. If the stay is less than 182 days he is a nonresident.

Taxable Income: Under the Act, all incomes earned by persons are classified into 5 different heads, such as: y Income from Salary y Income from House property y Income from Business or Profession y Income from Capital gains y Income from other sources

Exempt Income (Section 10):

Section 10 grants certain exemptions on incomes earned by the assessees. Some of which arAgricultural income 1) Leave Travel Concession received from employer. 2) Gratuity (As per conditions mentioned in the Act) 3) Commuted pension (As per conditions) 4) Leave Encashment (As per conditions) 5) Compensation received for voluntary retirement- upto maximum of Rs.5 lacs. 6) House Rent Allowance (As per conditions) 7) Payments received from recognized provident fund. 8) Prescribed allowances.

Meaning of salary:
Salary under the Act is defined U/s 17(1), which includes the following:y Wages y Annuity or Pension y Gratuity y Fees, commission, perquisites, profit in lieu of salary y Any advance of salary y Leave Travel Concession y Transferred balance in a recognized Provident Fund, to the extent it is taxable.

Allowances: i. Entertainment Allowance - Exempt only for Govt. employees. ii. Conveyance Allowance - Exempt to the extent of expenditure incurred. iii. Children Education allowance - Exempt upto Rs.100 p.m. per child to a maximum of 2 children. iv. Transport Allowance- Exempt upto Rs.800 p.m.

v. House Rent Allowance (HRA)- exempt upto minimum of the following: y 50% of salary, if residential house is situated at Mumbai, Kolkata, Delhi or Chennai and 40% in other cases. y HRA received y Rent paid minus 10% of salary. (Salary here means basic salary+DA+Commission)

Deduction under Section 80C: Section 80 C provides deduction in respect of specified qualifying amounts (investments/ contributions/ deposits/ payments) made by the tax payer during the previous year. For exampley Life insurance premium y Subscription to National Saving Certificates y Subscription towards notified units of Mutual Funds The maximum amount deductible is Rs.1,00,000.

Rates of Income Tax (Assessment Year 2010-11):

(For individuals) NET INCOME RANGE Upto Rs.1,60,000 Next Rs.1,60,000-Rs.3,00,000 Next Rs.3,00,000-Rs.5,00,000 Next Above Rs.5,00,000 Education cess: 3% of income tax * Women - Net Income upto Rs.1,90,000 is exempt from tax. *Senior citizens (65yrs or more) - Net Income upto Rs.2,40,000 is exempt from tax. RATES Nil* 10% 20% 30%

For Domestic Companies: y Income-tax: 30% of total income. y Surcharge: 10% of such income tax, provided that the total income exceeds Rs. 1 crore. y Education Cess: 3% of the total of Income-tax and Surcharge.

Return Of Income: It is a prescribed form through which the particulars of income earned by a person in a f inancial year and taxes paid on such income is communicated to the Income tax department after the end of the Financial year. Different forms are prescribed for f iling of returns for different Status and Nature of income. Last dates for filing of return: STATUS LAST DATE

Companies 30th September Other Entities that require audit 30th September of their accounts Other cases 31st July

Calculation of tax: Basic salary Commission Allowances (minus exemptions) Gross salary Other income Gross Total income Less: Deduction u/s 80C Net Income Income tax on net income Add: Surcharge Add: Education Cess Add: Secondary and higher edu. Cess Tax payable

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INCOME TAX ACT, 1961

It is a tax imposed by the Government of India on any body who earns income in India. Who is supposed to pay Income Tax? Any Individual or group of Individual or artificial bodies who/which have earned income during the previous years are required to pay Income tax on it. The Act recognizes the earners of income under seven categories. Each category is called a Status. These are Individuals, Hindu Undivided Family [HUF], Association of Persons [AOP], Body of individuals [BOI], Firms, Companies, Local authority, Artificial juridical person.

Previous Year: Income earned in the twelve months contained in the period from 1st April to 31st March (commonly called Financial Year) is taken into account for purposes of calculating Income Tax. Under the income tax Act this period is called a Previous year. Assessment Year: It is the twelve-month period 1st April to 31st March immediately following the previous year. In the Assessment year a person files his return for the income earned in the previous year.

Applicability of Income Tax: The Income tax Act applies to all persons who earn income in India. Whether they are resident or nonresident. Resident: If an individual stays in India for 182 days or more in a year, he is treated as resident in that year regardless of his citizenship. If the stay is less than 182 days he is a nonresident.

Taxable Income: Under the Act, all incomes earned by persons are classified into 5 different heads, such as: y Income from Salary y Income from House property y Income from Business or Profession y Income from Capital gains y Income from other sources

Exempt Income (Section 10):

Section 10 grants certain exemptions on incomes earned by the assessees. Some of which arAgricultural income 1) Leave Travel Concession received from employer. 2) Gratuity (As per conditions mentioned in the Act) 3) Commuted pension (As per conditions) 4) Leave Encashment (As per conditions) 5) Compensation received for voluntary retirement- upto maximum of Rs.5 lacs. 6) House Rent Allowance (As per conditions) 7) Payments received from recognized provident fund. 8) Prescribed allowances.

Meaning of salary:
Salary under the Act is defined U/s 17(1), which includes the following:y Wages y Annuity or Pension y Gratuity y Fees, commission, perquisites, profit in lieu of salary y Any advance of salary y Leave Travel Concession y Transferred balance in a recognized Provident Fund, to the extent it is taxable.

Allowances: i. Entertainment Allowance - Exempt only for Govt. employees. ii. Conveyance Allowance - Exempt to the extent of expenditure incurred. iii. Children Education allowance - Exempt upto Rs.100 p.m. per child to a maximum of 2 children. iv. Transport Allowance- Exempt upto Rs.800 p.m.

v. House Rent Allowance (HRA)- exempt upto minimum of the following: y 50% of salary, if residential house is situated at Mumbai, Kolkata, Delhi or Chennai and 40% in other cases. y HRA received y Rent paid minus 10% of salary. (Salary here means basic salary+DA+Commission)

Deduction under Section 80C: Section 80 C provides deduction in respect of specified qualifying amounts (investments/ contributions/ deposits/ payments) made by the tax payer during the previous year. For exampley Life insurance premium y Subscription to National Saving Certificates y Subscription towards notified units of Mutual Funds The maximum amount deductible is Rs.1,00,000.

Rates of Income Tax (Assessment Year 2010-11):

(For individuals) NET INCOME RANGE Upto Rs.1,60,000 Next Rs.1,60,000-Rs.3,00,000 Next Rs.3,00,000-Rs.5,00,000 Next Above Rs.5,00,000 Education cess: 3% of income tax * Women - Net Income upto Rs.1,90,000 is exempt from tax. *Senior citizens (65yrs or more) - Net Income upto Rs.2,40,000 is exempt from tax. RATES Nil* 10% 20% 30%

For Domestic Companies: y Income-tax: 30% of total income. y Surcharge: 10% of such income tax, provided that the total income exceeds Rs. 1 crore. y Education Cess: 3% of the total of Income-tax and Surcharge.

Return Of Income: It is a prescribed form through which the particulars of income earned by a person in a f inancial year and taxes paid on such income is communicated to the Income tax department after the end of the Financial year. Different forms are prescribed for f iling of returns for different Status and Nature of income. Last dates for filing of return: STATUS LAST DATE

Companies 30th September Other Entities that require audit 30th September of their accounts Other cases 31st July

Calculation of tax: Basic salary Commission Allowances (minus exemptions) Gross salary Other income Gross Total income Less: Deduction u/s 80C Net Income Income tax on net income Add: Surcharge Add: Education Cess Add: Secondary and higher edu. Cess Tax payable

xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx

DIRECT AND INDIRECT TAXES: Direct Tax is the tax, which is paid directly by people to the government, while indirect tax is paid indirectly by people to the government through registered government representatives. Income Tax is paid directly to the government therefore it is a direct tax while excise duty is paid by people to the manufacturer who pays it to the government, therefore it is an indirect tax.

CENTRAL EXCISE : Central Excise is an indirect tax; which is levied and collected on the goods/commodities manufactured in India. This indirect taxation is administered through an enactment of the Central Government viz., the Central Excise Act, 1944 and other connected rules. The rates at which the excise duty is to be collected are stipulated in the Central Excise Tariff Act, 1985.

Dutiability: As per section 3 of Central Excise Act (CEA) excise duty is levied only if the following all conditions are satisf ied: y There should be goods. y Goods must be moveable y Goods are marketable y Goods are mentioned in the Central Excise Tariff Act y Goods are manufactured in India.

Chargeability of Excise Duty:

Excise duty is levied on production of goods but

the liability of excise duty arises only on removal of goods from the place of storage, i.e., factory or warehouse.

As Excise duty is levied at the time of removal of

goods. Hence the date of its actual production is not relevant. The date of removal is relevant and the rate of excise duty applicable on the date of removal shall be actual rate of excise duty to be paid.

VAT (Value Added Tax):

Value Added Tax means tax on value addition. Value addition means the value of output as reduced by value of inputs. Under value added tax all taxes borne in respect of inputs is allowed to be set off against the taxes paid on f inal product in order to subject only value addition, at each stage to taxation.

CENVAT under Central Excise:

CENVAT stands for "Central Value Added Tax". This scheme was introduced with a view to remove the effect of the double taxation. Under this scheme, a manufacturer can take credit of excise duty paid on raw materials and components used by him in his manufacture. Since it amounts to excise duty only on additions in value by each manufacturer at each stage, it is called value-added-tax (VAT). The CENVAT credit can be utilized towards payment of excise duty on the f inal product.

Duty payment:
Excise Duty is payable on monthly basis by 5th of the next month in which duty payment becomes due, i.e., the month in which goods are cleared from the factory. Small Scale Industry (SSI) is required to pay the duty by 15th of the next month. However, the duty for the month of March is paid by 31st March itself.

CENTRAL SALES TAX:

Central Sales Tax Act,1956 (CST Act) provides for levy, collection and distribution of taxes on sales of goods in the course of inter-state trade or commerce.

Inter State Sale (Section 3) Sale is Inter-State when: (a) sale occasions movement of goods from one State to another or (b) is effected by a transfer of documents of title to the goods during their movement from one State to another.

Goods under CST Act [Sec 2(d)]:

Sales tax liability is on goods. The CST Act def ines that goods includes all materials, articles, commodities and all kinds of movable property, but does not include newspapers, actionable claims, stocks, shares and securities.

Transactions which are not sales:

i. ii. iii. iv. v.

Charge/ mortgage/ hypothecation/ pledge Job work/ processing Consignment/ branch transfer/ depot transfer Barter or exchange Free Gift

Person liable to pay CST: The Act specif ies that every dealer who in the course of inter State trade or commerce sells the goods shall be liable to pay tax under the Act. Thus, liability is on the dealer who 'sells' the goods [Section 8(1)]. Registered Dealer: A 'register dealer' means a dealer who is registered under CST Act. [section 2(f )]. Section 9A specif ies that only a registered dealer can collect taxes in respect of sales made by him in Inter State Trade.

State relevant to a dealer: Normally, State from which movement of goods commences is entitled to collect CST [Section 9(1)]. Form C: The purchasing dealer can issue C form to the seller and purchase goods at concessional rate. Submission of C form is mandatory and unless C form is submitted, concessional rate of sales tax will not apply. The blank C form has to be obtained by purchasing dealer from Sales Tax authority in the State where purchasing dealer is registered.

Rate of CST: The current rate of CST is 2% w.e.f. 1st June , 2008.

Customs Act, 1962:

This Act provides for levy and collection of duty, import/export procedures, prohibitions on importation and exportation of goods, penalties, offences etc. Import duty is levied on almost all items, while export duty is levied only on a few limited products, where Indian goods are in commanding position. Customs Act is used to : (a) regulate imports and exports (b) protect Indian industry from dumping (c) collect revenue of customs duty.

Dutiable goods: Goods become liable to import duty or export duty when there is import into, or export from India'. Taxable Event: In case of Imports: The import of the goods commences when they enter into territorial waters but taxable event occurs when goods cross customs barrier.
In case of Exports:

Export is complete only when goods cross territorial waters of India. * Territorial waters of India extend upto 12 nautical miles from the baseline on the coast of India.

Methods of Valuation: The methods of valuation for customs are as follows  Transaction Value of Imported goods  Transaction Value of Identical Goods  Transaction Value of Similar Goods  Deductive Value which is based on identical or similar imported goods sold in India  Computed value which is based on cost of manufacture of goods plus profits  Residual method based on reasonable means and data available.

Types of Custom Duties: i. Basic Custom Duty ii. Additional Duty or Countervailing Duty iii. Anti-dumping Duty iv. Safeguard Duty v. National Calamity Contingent Duty (NCCD of customs) vi. Export Duty _________x________x_________