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COMPANY LAW December 3, 2009

TERM PAPER : (Term I -2009-2010)


TOPIC: Unfair trade Practices

SUBJECT : Company Law

SUBJECTCODE : MGT 518

SECTION : RR1902

SUBMITTED BY : KRITIKA SRIVASTAVA (B51)

ARCHANA MISHRA (B24)


NEHA BEDI (B55)
Roll no : RRB51, RRB24, RRB55

SUBMITTED TO: SHELLY MAM

Lovely School of Business…. Date: 03/12/2009


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COMPANY LAW December 3, 2009

INDEX
S.NO. TOPIC PAGENO.
1 DEFINITION OF UNFAIR TRADE 6-7
PRACTICE
2 CATEGORIES OF UNFAIR TRADE 7-10
PRACTICES
3 INQUIRY INTO UNFAIR TRADE 10
PRACTICES

4 RELIEF AVAILABLE 10-11


5 LOSS OR DAMAGE 11
6 INQUIORY BY COMMISSION 11-12
7 POWERS OF THE COMMISION 12
8 POWER TO AWARD COMPENSATION 12-13
9 ENFORCEMENT OF ORDERS 13

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COMPANY LAW December 3, 2009

10 CASES RELATED TO UNFAIR 14


TRADE PRACTICES IN INDIA
11 CASE 1 - Vodafone free gift scheme 15
12 ANALYSIS OF CASE 1 16
13 CASE 2 - SIFY Broad Bandnon disclosure of 17
Significant terms and conditions

14 ANALYSIS OF CASE 2 18
15 CASE 3 - Low-cost carrier Spicejet, 19-20

not adopting a fair method

for booking seats at a special

Price of Rs 99 on its first

anniversary.

16 ANALYSIS OF CASE 3 21
17 CASE 4 - ABN Amro Bank to pay up for 22
unfair trade practice

18 ANALYSIS OF CASE 4 23

18 CASE 5 - Advertisement War of Horlicks Vs. Complan 24

19 ANALYSIS OF CASE 5 25

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COMPANY LAW December 3, 2009

20 CASE 6 - Advertisement War of 26


Munch Vs. Dairy Milk

21 ANALYSIS OF CASE 6

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COMPANY LAW December 3, 2009

ACKNOWDLEGEMENT
I am highly obliged and thankful to my teacher
Mrs. Shelly to give me a topic to research, which has
helped me comprehend the application of the
Corporate Business Law being practiced and its
impact on day to day operations of the in respect of
the real corporate world, in relation to Unfair Trade
Practices carried on in different Indian Companies.

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COMPANY LAW December 3, 2009

 Definition of Unfair Trade Practice


[Sec 36-A of the Monopolies and Restrictive Trade Practices
Act, 1969 and act 2 (1)(r)(i) of consumer protection Act, 1986]-

The original MRTP Act dealing with restrictive trade practices was
supplemented by the amendment of 1984 by adding Part B to it. This
part is designed to deal with Unfair Trade Practices. The same set of
provisions has also been included in Section 2(1)(r) of the Consumer
Protection Act, 1986.
Section 36-A explains that “Unfair Trade Practice” means for
the purposes of the Act. The main purpose of the provisions is to afford
some measure of protection to the ultimate consumers of goods or uses
of services. The consumer must get what he is told he is getting. Where,
by any method whatsoever, a belief is created in the minds of consumers
as to some quality or utility of goods or services, and the goods actually
fall short of those standards, this will be unfair to consumers. As the part
of the statutory framework of the consumer protection programme,
such a method has been regarded by the Act as an Unfair Trade Practice.
Such methods are listed in the section. The section says that where the
methods stated in the section are adopted for the purpose of promoting
the sale, use or supply of any goods or for the provision of any services
and thereby some loss or injury is cause to the consumer is achieved by
eliminating or restricting competition or otherwise.
This is so because the primary theme of the provision is to
protect the consumer from the business community. The provision
become necessary because the provision of the contract act 1872
relating to fraud and misrepresentation and those of the Sale of Good
Act, 1930 relating to conditions and warranties have not been able to
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COMPANY LAW December 3, 2009

give adequate protection to consumer against deceptive trade practices.


This is to primarily because of the high cost and long delays of litigation.
An unfair trade practice means a trade practice, which, for the purpose of
promoting any sale, use or supply of any goods or services, adopts unfair
method, or unfair or deceptive practice.

 Categories of Unfair Trade Practices-


According to the Section, Unfair practices may be categorised in
following categories:

1. FALSE REPRESENTATION
The practice of making any oral or written statement or verbal representation
which:

 Falsely suggests that the goods are of a particular standard quality,


quantity, grade, composition, style or model;

 Falsely suggests that the services are of a particular standard, quantity


or grade;

 Falsely suggests any re-built, second-hand renovated, reconditioned or


old goods as new goods;

 Represents that the goods or services have sponsorship, approval,


performance, characteristics, accessories, uses or benefits which such
goods or services do not have;

 Represents that the seller or the supplier has a sponsorship or approval or


affiliation which such seller or supplier do not have;

 Makes a false or misleading representation concerning the need for, or the


usefulness of, any goods or services;

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 Gives a warranty or guarantee as to the durability, performance, efficacy


or length of life of the goods, that is not based on an adequate or
proper test; the burden of proof will lie upon him to show that the goods
were adequately and properly tested

 Makes to the public a representation in the form that look like a


warranty or guarantee of the goods or services,

a promise to replace, maintain or repair the goods until it has achieved


a specified result, if such representation is materially misleading or
there is no reasonable prospect that such warranty, guarantee or
promise will be fulfilled

 Materially misleads about the prices at which such goods or services are
available in the market; or

 Gives false or misleading facts disparaging the goods, services or trade of


another person.

2. FALSE OFFER OF BARGAIN PRICE-


Where an advertisement is published in a newspaper or otherwise, whereby
goods or services are offered at a bargain price when in fact there is no
intention that the same may be offered at that price, for a reasonable period or
reasonable quantity, it shall amount to an unfair trade practice.

The 'bargain price', for this purpose means-

-The price stated in the advertisement in such manner as suggests that it is


lesser than the ordinary price, or

-The price which any person coming across the advertisement would
believe to be better than the price at which such goods are ordinarily sold.

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3. FREE GIFTS OFFER AND PRIZE SCHEMES -


The unfair trade practices under this category are:

 Offering any gifts, prizes or other items along with the goods when the
real intention is different, or

 Creating impression that something is being offered free alongwith the


goods, when in fact the price is wholly or partly covered by the price of
the article sold, or

 Offering some prizes to the buyers by the conduct of any contest, lottery
or game of chance or skill, with real intention to promote sales or
business.

4. NON-COMPLIANCE OF PRESCRIBED STANDARDS


Any sale or supply of goods, for use by consumers, knowing or having reason
to believe that the goods do not comply with the standards prescribed by some
competent authority, in relation to their performance, composition, contents,
design, construction, finishing or packing, as are necessary to prevent or reduce
the risk of injury to the person using such goods, shall amount to an unfair trade
practice.

5. HOARDING, DESTRUCTION, ETC. -


Any practice that permits the hoarding or destruction of goods, or refusal to sell
the goods or provide any services, with an intention to raise the cost of those or
other similar goods or services, shall be an unfair trade practice.

6. DISPARAGING PRODUCTS OF COMPETITORS-


The provision on comparative advertising is as follows-

Section 36 A (1), The practice of making any statement whether orally or in


writing or by visible representation which , gives false or misleading facts
disparaging the goods ,services or trade of another person.
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For the purpose of disparaging something or some product, some


comparison with what is inferior is necessary. Disparagement or an act of
disparaging would occur only by comparison with some identifiable product.

The words “goods of another person” have a definite connotation. It implies


disparagement of the product of an identifiable manufacturer.

The word “ordinary” has to be understood in contradistinction with the


word special, uncommon, unusual, extraordinary and the like synonyms. The
word ordinary is defined to mean customary, usual or normal, of the usual kind,
not distinguished in any important way from others.

 INQUIRY INTO UNFAIR TRADE PRACTICES-


The Commission may inquire into

Any unfair trade practice

 Upon receiving a complaint from any trade association, consumer or a


registered consumer association, or

 Upon reference made to it by the Central Government or State


Government
 Upon an application to it by the Director General or
 Upon its own knowledge or information.

 RELIEF AVAILABLE
After making an inquiry into the unfair trade practice if the Commission is of
the opinion that the practice is prejudicial to the pubic interest, or to the
interest of any consumer it may direct that -

 The practice shall be discontinued or shall not be repeated;


 The agreement relating thereto shall be void in respect of such unfair
trade practice or shall stand modified.

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 Any information, statement or advertisement relating to such unfair trade


practice shall be disclosed, issued or published as may be specified
 The Commission may permit the party to carry on any trade practice to
take steps to ensure that it is no longer prejudicial to the public interest or
to the interest of the consumer.

However no order shall be made in respect a trade practice which is expressly


authorised by any law in force.

The Commission is empowered to direct publication of corrective


advertisement and disclosure of additional information while passing orders
relating to unfair trade practices.

 LOSS OR DAMAGE-
It is not necessary for restraining an unfair trade practice that the
complainant should have suffered some loss, damage or prejudice.
Such consequences can be compensated in addition to the cease and
desist order.

 INQUIORY BY COMMISSION-
The commission can start an inquiry into an alleged unfair trade practice
in the following cases-
1. On receiving a complaint by any trade or consumers association
having a membership of atleast 25 persons or from 25 or more
consumers, the complaint should state the facts.
2. On receiving a reference from the central or any state government.
3. On receiving an application from the director general.
4. upon its own knowledge or information
Where a complaint is made by consumers or a consumers organisation,
the commission is required by Section 36 C, before proceeding against
anybody to ask director general to conduct a preliminary investigation

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about the complaint so as to satisfy itself that the complaint is genuine


and really deserves to be inquired into.

 POWERS OF THE COMMISION-


Where upon an inquiry the commission finds that the practice in
question is prejudicial to public interest or to the interest of any
consumer or consumers generally, the commission can pass orders of
the following kinds-

1. That the practice shall be discontinued or shall not be


repeated.
2. That the agreements connected with an unfair trade practice
shall be void or shall stand nullified, the order may also take
care of the consequential matters
The commission has the alternative power to ask the person concerned
that he should so moderate his dealings as no longer to cause prejudice
to public or consumer interest. The commission may set a time limit for
compliance of its orders. If the orders are not carried out, the
commission may exercise its other powers under the section.
The order of the commission cannot deal with any trade practice which
has been authorised by any law for the time being in force. Subject to
this exception, however the commission and director general will have
the same powers in reference to an unfair trade practice as they have in
respect of restrictive trade practices.
The commission does not have the power to ask a party whose
advertisement was stayed to seek approval in advance before any
further advertisement was launched.

 POWER TO AWARD COMPENSATION-


The power to award compensation has also been conferred by the
amendment 1984. Before this amendment, where any violation of the

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act caused damage, such as damage caused by a restrictive trade


practice, a separate suit had to be filed to recover compensation for the
same. Now the commission itself can award compensation in such
cases though the right to file a separate suit for the purpose is not taken
away.
The section says that where any monopolistic, restrictive or unfair
trade practice has caused damage to any government or trader or
consumer, an application may be made asking for compensation and
the commission may award such compensation as it may think
appropriate. Where any such loss or damage is caused to a number of
persons having the same interest, compensation can be claimed, with
the permission of the commission, by any of them on behalf of all of
them. For this purpose the provisions of rule 8 of order 1 of the first
schedule of the civil procedure court, 1908 will become applicable. The
commission inquires into the allegations in the application and may then
pass a decree for compensation. Where the applicant has already same
civil court for the obtained a decree from a civil court for the same laws
or damage, the amount of that decree shall be set of against the decree
pass by the commission and the decree shall be executable for the
balance.

 ENFORCEMENT OF ORDERS-
Temporary injunctions issued by the commission under Section 12 A
and a decree for compensation under Section 12B are enforceable in
the same manner as if it were a decree passed by a civil court. If the
commission finds that it is not able to execute its orders it may refer
them to the civil court having jurisdiction over the undertaking or the
persons against whom the order is passed.

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COMPANY LAW December 3, 2009

 CASES RELATED TO UNFAIR TRADE PRACTICES IN


INDIA –

 Vodafone free gift scheme


 SIFY BroadBandnon disclosure of significant terms
and conditions
 Low-cost carrier Spicejet, not adopting a fair method
for booking seats at a special price of Rs 99 on its first
anniversary.
 ABN Amro Bank to pay up for unfair trade practice
 Advertisement War of Horlicks Vs. Complan
 Adertisement War of Munch Vs. Dairy Milk

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COMPANY LAW December 3, 2009

 CASE 1 - Vodafone free gift scheme


Vodafone offered subscribers 10 gold coins a day and one SX4 as a
bumper prize, but the chance of winning was restricted only to those
customers who used their phone to make calls for at least 20 minutes a
day.
A consumer organisation filed a case against the company, arguing that
Vodafone was luring subscribers into making unnecessary calls so that
they could qualify for the list of customers from whom a lucky one would
be chosen.
The commission has held that this qualified as an unfair trade practice
under the Consumer Protection Act, 1986 for two reasons. One, it gave
the impression the customer was not paying anything for participating
whereas s/he actually was paying by making more calls every day. Two,
the contest/lottery was meant to promote Vodafone's business interests.
calculations showed that Vodafone had earned around Rs 2 crore (Rs
20 million) extra during the period the scheme was in operation and was
offering gifts worth about Rs 10 lakh (Rs 1 million), so the fine was fixed
at Rs 50 lakh.
Essentially, the law appears to be outlawing any promotional schemes
which seek to increase the company's business -- so, if Vodafone had
offered the chance to win a gold coin and an SX4 to all its customers,
the commission would not have had a problem; but since they offered it
only to those who used their services for more than a certain period of
time a day, and this induced others to try and get into this category, the
commission said the scheme was unfair.

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 ANALYSIS OF CASE 1 –

 JUDGEMENT PASSED- Fine mobile phone firm Vodafone Rs


50 lakh (Rs 5 million)

 EFFECT ON PUBLIC- To be in the competition the consumers


not using the phone for 20 minutes earlier started using it for 20
minutes, to win attractive prices.

 EFFECT ON ORGANISATION-

- Before judgement -Company earned huge profits of


around Rs. 2 crore
-After judgement – It may affect the goodwill of the
company among consumers.

 PRINCIPLE APPLIED- It falls under the third category of


Section Unfair Trade Practices i.e.-
“FREE GIFTS OFFER AND PRIZE SCHEMES “

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COMPANY LAW December 3, 2009

 CASE 2 - SIFY Broad Bandnon disclosure of


significant terms and conditions

The case related to non disclosure of significant terms and


conditions, which included hidden conditions that after
downloading of 750 MB data in a month the speed would be
reduced to 14 Kbps and also a new condition that if a customer
downloaded more than 150 MB data in a day, then he was
penalized in the form of reduction of package validity by one
day, but still packages were advertised as unlimited.

It has been regarded as a landmark judgement as for the first


time technical deficiency has been proved in the court of law in
India against an Internet Company. And further Court
interpreted the matter from the point of view of definition of
Broadband as laid down by TRAI, which lays down criterion of
minimum speed of 256 Kbps to be regarded as BroadBand.
Accordingly, Court has held providing of 14 Kbps speed instead
of 256 Kbps is in itself a 'deficiency in service'.
The case was supported in the Cyber World by
hundreds of SIFY customers from all over India, who all
experienced similar problems and supported the case
throughout, whose testimonials were also included in the
original complaint as Annexure and therefore amounts to
unfair trade practices.

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COMPANY LAW December 3, 2009

 ANALYSIS OF CASE 2 –

 JUDGEMENT PASSED- To pay compensation of Rs


8,200/- including refund of Rs 1,200 paid for two months
internet connection.

 EFFECT ON PUBLIC- Laid false impression on public to


purchase the service.

 EFFECT ON ORGANISATION-

- Before judgement - Increase in sales


-After judgement - Loss in goodwill and decrease in sales
volume.

 PRINCIPLE APPLIED - It falls under the following category of


Section Unfair Trade Practices i.e.-
“The case related to non disclosure of significant terms and
conditions, which included hidden conditions”

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COMPANY LAW December 3, 2009

 CASE 3 - Low-cost carrier Spicejet, not adopting


a fair method for booking seats at a special
price of Rs 99 on its first anniversary.

NEW DELHI: The Monopolies and Restrictive Trade Practices


Commission (MRTPC) has initiated a case of unfair trade
practice against low-cost carrier Spicejet.

For not adopting a fair method for booking seats at a special


price of Rs 99 on its first anniversary.

The notices of enquiry have been issued on the basis of


preliminary investigation reports submitted by MRTPC's
investigative arm Director General of Investigation and
Registration.

In the case, Spicejet did not adopt fair method for booking
tickets while providing its anniversary offer of Rs 99 a seat
through internet.

In its investigation on the case relating to Spicejet's special


anniversary offer, court noticed that there was an
overwhelming response and traffic for ticket booking increased
manifold on its website, which made it very slow. This resulted
in failure to complete booking by Internet users.
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Though the users were calling the reservation centre for


booking through telephone also, the airline did not give correct
information to the complainant that the booking tickets had
started over telephone also.

It also said Spicejet failed to display the information on its


website that prospective customers could book tickets over
telephone because of disruption of Internet booking.

The services of the respondent company have been found to


be deficient in this respect.

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COMPANY LAW December 3, 2009

 ANALYSIS OF CASE 3 –

 JUDGEMENT PASSED- The Commission instituted an


enquiry in the case and issued notices to Spicejet.The
airline has been given time till January to respond to the
notices of enquiry

 EFFECT ON PUBLIC- Over crowded to avail the opportunity of


low cost ticket.

 EFFECT ON ORGANISATION-

- Before judgement - Increase in demand of tickets.


-After judgement – Falsify companies image.

 PRINCIPLE APPLIED- It falls under the second category of


Section Unfair Trade Practices i.e.-
“FALSE OFFER OF BARGAIN PRICE”

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COMPANY LAW December 3, 2009

 CASE 4 - ABN Amro Bank to pay up for unfair trade


practice
.
Shashi Goswami said in his complaint that in 2002 he availed of a
credit card from the bank. After some time, a dispute arose
regarding payment of the outstanding dues of the credit card and a
settlement was arrived at between the parties in July 2004. As per
the terms and conditions of the settlement, the complainant was
required to pay Rs 30,000 in six monthly instalments, which
Goswami said he paid regularly. In November 2007, however, he
received a call saying that one case is pending against him and a
non-bailable warrant has been issued against him regarding non-
payment of the outstanding dues. The caller asked him deposit Rs
20,000 or face arrest.
Goswami deposited Rs 16,000 on the same day with the bank along
with the settlement letter. Since the sum was contrary to the terms
and conditions of the settlement, he moved the consumer forum.

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 ANALYSIS OF CASE 4 –

 JUDGEMENT PASSED- ABN Amro Bank has been charged to


pay Rs 20,000 as compensation for unfair trade practices and Rs
3,000 as costs of litigation

 EFFECT ON PUBLIC- Untrust towards ABN Amro Bank

 EFFECT ON ORGANISATION- Bad image among public

 PRINCIPLE APPLIED- It falls under the following category of


Section Unfair Trade Practices i.e.-
”HOARDING, DESTRUCTION, ETC.”

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COMPANY LAW December 3, 2009

 CASE 5 - Advertisement War of Horlicks Vs. Complan


This case is about the advertising
war between two popular health
drink brands Horlicks and Complan
in India.Over the years, the brands
were involved in aggressive
comparative advertising in print and
television over attributes such as
ingredients, protein content, growth,
and flavors. However, in late 2008,
the makers of Horlicks,
GlaxoSmithKline Consumer
Healthcare (GSK), and the makers
of Complan, Heinz India (Heinz),
came out with advertisements that
directly compared the brands using
the competitor brand's trademarks.
Industry observers felt that in their
bid to outdo each other, the two
companies had ended up denigrating
the competitor brand.

The two companies decided to solve the issue in courts. In September


2008, Complan moved the Bombay High Court objecting to the
Horlicks ad.

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 ANALYSIS OF CASE 5 –

 JUDGEMENT PASSED- Pending in Mumbai High Court.

 EFFECT ON PUBLIC- Misleading facts.

 EFFECT ON ORGANISATION- Competitors Strategy and its


consequences. And may loose its costomers to competitors

 PRINCIPLE APPLIED- It falls under the following category of


Section Unfair Trade Practices i.e.-.
“DISPARAGING PRODUCTS OF COMPETITORS”

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COMPANY LAW December 3, 2009

 CASE 6 - Advertisement War of Munch Vs. Dairy


Milk

First the Dairy Milk came with their campaign – “Celebrate Month's 1st
day with Dariy Milk.” Then as an competitors dilemma-

Nestle Munch have come up with this reply punch – “One can eat
Munch even on 2nd, 3rd and everyday of a month”

Nestlé, the country’s largest food products company, has come out with
a new campaign for Munch, its price warrior in the market. That it takes
off from the clutter-breaking Cadbury Dairy Milk ad which builds on
celebrations around payday in small town India is very clear. “Aaj pehli
tarikh hai,” (Today is the first day of the month) goes the jingle in the
Cadbury advertisement.

To which munch reply “Khao bina tareekh dekhe,” (Eat without looking
at the date) intones the voiceover. “That’s why mera crunch mahan (my
crunch of Munch is so great).” In the last shot, the cuckoo reappears
from the recess in the clock to say the 12th day of the month will fall
next week. That its tongue hangs out and eyes are laden with boredom
are hard to miss.

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COMPANY LAW December 3, 2009

 ANALYSIS OF CASE 6 –

 JUDGEMENT PASSED- Pending in Mumbai High Court

 EFFECT ON PUBLIC- Started comparing both the brands

 EFFECT ON ORGANISATION- Competitors Strategy and its


consequences.And may loose its costomers to competitors

 PRINCIPLE APPLIED- It falls under the following category of


Section Unfair Trade Practices i.e.-.
“DISPARAGING PRODUCTS OF COMPETITORS”

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COMPANY LAW December 3, 2009

BIBLIOGRAPHY
1. WWW.indiabroadband.net)....)sify broadband
2. WWW.iprindia .net/faq/faq/.htm
3. www.sebi.gov.in/acts/futpfinal.html
4. www.expressindia.com
5. www.helpline.com
6. www.flipkart.com
7. WWW.mouthshut.com
8. WWW.vakilno1.com
9. WWW.infibeam.com
10. www.business-standard.com
11. BOOK,Legal Aspects of Business-by
AKHILESHWAR PATHAK

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COMPANY LAW December 3, 2009

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COMPANY LAW December 3, 2009

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