Legal Environment of Business

The word Legal connotes

pertaining to law or
relating to law
Those parts of laws - which have a direct
bearing on trade, commerce or industry or
any other similar activities - are known as
Business Laws or Mercantile Laws.
Laws that confer benefits or impose
burdens or regulate transactions of a
business setting or industrial scenario and
surroundings - may be understood and studied
as the subject matter of
- Legal Environment of Law.

 Laws regulating organizational aspects of

a business establishment may be studied by
referring to Company Law Partnership
Act Societies Acts etc
Law regulating business transactions may
be known by referring to general
principles of contract law and the rules
governing special contracts such as
bailment, pledge, guarantee.
Laws pertaining to contracts of sale of
goods, Transfer of property, Negotiable
Instruments, Banking, Insurance, Imports &
Exports, Transport, Shipping. etc have a
lot of impact on business environment.

 Laws pertaining to- Intellectual

Properties, Information Technology do
protect and also confer certain rights
and benefits on business units.
Laws of Direct or Indirect Taxation - are
often looked down as imposing
burdens on business without
conferring any benefits in return.
Environmental Protection and Pollution
Control Laws are an increasing source
of itch in the minds of industrial
entrepreneurs & business adventurists.

The Consumer Protection while aimed at protecting

consumers interests , imposes responsibilities as to supply of safe and quality goods without defects and to render services without deficiency - on trade and
manufacture.
There are other set of laws which either regulate market
conditions, including capital markets and stock exchanges
or have control over sale price of certain essential
commodities.
Social responsibility of industry, Transparency in
business dealings and Good governance - are the
popular slogan of the day.
Thus, it is seen that the legal rules are all pervading
and encompassing business scenario - calling for more
efficient management of Legal Environment of Business
with proper and timely compliance.

Meaning and Scope of Law in Society:

Law is the command of the Sovereign.
In a democratic state, the rule of
law prevails. Adherence to rule of law is a sine
quo non.
Failure to comply with law will
result in sanctions
i.e. compensation or damages;
punishment and Fine.
There is no discrimination before law. All are
equal and are treated equally before law.
The purpose or object of Law is to maintain,
- order, peace and tranquility in the
society so that every one will live happily,
without fear or threat.

The three (3) most important functions of Law:

1.
To regulate the relations between individuals and institutions
and inter-se individuals or institutions.
Law attempts to regulate the
relations by striking
a balance between conflicting
interests in society.
2.
To bring social change, law is an instrument. Abolition of
practice of sati or dowry prohibition
or untouchability,
could not have been possible,
but for the force of
law, apart from pursueation
and education of people
on these evil practices.
3. To control crime rate: Harm or any injury or death
caused to body of any person or damage to property is a crime
punishable with fine or imprisonment or even death. Crime is
treated as an offence against the State. Therefore, state takes
action to prosecute the criminal. Law attempts to save society
from crime and protect people from offenders.
- More stringent is the law Lesser the crime rate.

Working Definition of Law.

For the purpose of study of the subject matter of Legal Environment
of Business in India, the most opt working definition is found in
Article 13(3)(a) of the Constitution of India.
Law includes any

Ordinance,
order,
bye-law,
rule,
regulation,
notification,

custom or usage
having in the territory of India, the force of law.

The word includes in the definition - is indicative

of the fact that - it is not exhaustive definition.
The definition is open to include
Principles of equity
Common Law i.e. precedents set by
higher judiciary in India while
interpreting the terms of statute law
Principles of Natural Justice so on.
Principles of equity have been evolved over
ages in England to over come the Statutory
and Common Law procedures which are
technical and
dilatory
causing much hardship to common man.

 The primary source of equity law was

- neither unwritten law like custom
- nor written law like statute.
Grant of relief on equity is always
a matter of discretion of
courts.
It is governed by certain maxims.
Whenever the general preposition of legal
law is found to work hardship to a particular
case, equity must be applied to mitigate it
and rectify the harshness.


There are many maxims of equity but five (5)
Principles are of interest to us because - they are often
referred to in deciding business/mercantile disputes.

They are
One who seeks equity must come with clean
hands
One who seeks equity should do equity
One who seeks equity should be vigilant - not
indolent.
Delay defeats equity.
Where there are equal equities,
- the first in time will prevail.

Relief is always confined to

- Compensation or
- Damages - in money.
Equitable remedies are:
- Injunction
- Specific performance
- Restoration
- Rectification
- Cancellation of documents or contracts
where Money alone can not do justice and give
satisfactory relief to complainant.
Provisions relating to the above said reliefs have been
laid down in Indian Specific Relief Act 1963.

Common law
Common law in the context of Indian
Business/ Mercantile Law is the name
give to those
- Principles of law
- evolved by judges
- in making decisions
- on cases brought
before them.
These principles have been built up
over many
years, so as to form

Natural Justice
Justice may be classified into two types
- Legal Justice and
- Natural Justice.
Legal justice refers to justice governed by the law of the
state and
Natural Justice refers to moral justice and is governed by the
Laws of Equity.
Justice done to one seems
- not injustice to another.
So
the goodness of a law is in
- maximizing the pleasure of the beneficiaries
- with minimized pain to the others.
Natural Justice must ensure Procedural Fairness.

 The word Natural Justice is derived from

the Roman word Jus naturale, which
means Principles of natural law are - justice,
equity, and good conscience.
Natural Justice is not something derived
from Laws of nature. Laws of nature promote
the survival rather than justice.
Therefore, natural justice
is not justice found in nature;
it is a compendium of concepts which
must be naturally associated with
justice, whether these concepts are
incorporated in law or not.

Principles of Natural Justice

Its the natural law - that provides the frame

work of Principles and
It is left to the
statute law
- to supply flesh and blood
to the legal system.

Its

- a great humanizing principle

- intended to invest law with fairness,

- to secure justice
and - prevent miscarriage of justice.

Principles of Natural Justice operate in areas not

covered by any rule or law; they do not supplant
the law but only supplement it.

The following are the two (2) important basic

principles of natural justice:
(i) Nemo debet essa judex in propria cause,
means:
No one can be a judge in his own cause.
(ii) Audi Alteram Partem, means:
Hear the other side.
The first principle, No one can be a judge in his own
cause implies that the accuser must not sit in
judgment on the accused. The judge can under no
circumstances combine in himself the roles of judge and
jury, of judge and witness or judge and prosecutor.
He must be totally free from any bias.

Bias can be of three (3) types: A Judge may have

(a) a pecuniary interest,
(b) a personal interest, and /or
(c) a general interest,
- in the subject matter brought before
him for decision.
In employee relations , bias is relevant
- not only in the disciplinary authority but
also - in the inquiry officer,
even where the inquiry officer is a different person
from the disciplinary authority.

The second principle, Hear the other side means:

That a judge
- must hear both sides;
and - must not hear one side in the absence
of the other.
(a) In Administrative matters (HR), it means
that the delinquent employee has
- a notice of the charges he is called upon
to explain;
and - the allegations on which those charges
are based.

(b) that he has access to all relevant evidence

that he wishes to adduce;
(c) that he is given the opportunity
- to cross-examine the prosecution witnesses;
- to produce witnesses in defence; and
- offer himself for examination;
(d) that no evidence should be recorded behind
his back but all of it should be taken in his
presence; and
(e) that no materials should be relied on against
him without giving him an opportunity of
explaining them.

 The following further principles emerge from

a consideration of what is stated above:
(i) that the decision must be made in good
faith and
(ii) an order must be a speaking order.
(I) The principle that the decision must be made
in good faith implies that
- the judge has bestowed due consideration to
the facts and evidence adduced during the
inquiry and
- he has not taken into account any extraneous
matter not adduced during the inquiry
- and that he has arrived at the decision
without favour to any of the parties.

(ii) The principle that the order must be a speaking

order is based on the premise that whether the
judge has considered all the aspects of a
matter before him can be ascertained only if
the order which he makes is a speaking order.
The requirement of making a speaking order
will minimise the possibility of arbitrary
exercise of power as the necessary search for
reasons will ensure fair-play and reasonableness.

*Reasons are the links between the materials on which

certain conclusions are based and the actual conclusions.
They disclose how the mind is applied to the subject
matter while arriving at a decision.

 In simple terms, a speaking order is

an order that speaks for itself.
The order should stand the test of
legality, fairness, and reason at all
the higher appellate forums.
That is, the Speaking orders should
contain all the details the facts, reason, - finding of the case and also reasons on basis of which such final
order is passed.
Mostly, Court orders are speaking
orders

In conclusion, it may be summarized and said:

1. Rules of natural justice are
the minimum
standards
of fair decision-making
imposed on persons or bodies
acting in a judicial capacity.
2. Natural Justice is also known as - substantial
justice, - fundamental justice, - universal justice
or - fair play in action.

Administration of justice

Broadly, the Administration of Justice in India is a

two fold (2) system:
1. Civil Law Administration
2. Criminal Law Administration.
. Civil law administration is guided by the well
established principle of probability of
preponderance of evidence.
For example, in a suit between
A and B on a question whether the contract is
voidable at the option of B or is it a
contract enforceable against B, the case will
be decided on the basis of the strength of
evidence produced by A and B in support of
their respective claims in the case.

If the evidence adduced before the court by B

prevails over the evidence produced by A,
then B will succeed in the suit and A will
fail. After proper application and evaluation
of the evidence produced by both the parties
before it, if the court comes to the conclusion
that the quality of evidence produced by B
before it and brought on record weigh 51% or
above and that of A is 49% or below, then B
will succeed and A will fail, even though A
has adduced evidence something nearing to that
of B.
This is - what the Principle of probability of
preponderance of evidence means in civil law
administration in India.

 Criminal Law Administration is guided by the

principle that Let ten thousand criminals

scot-free or let-off
but not even a single innocent be punished.
It means that the
prosecution must establish that it is the
accused and the accused only and none
else than the accused - has committed the
offence. Thus, there is a burden of proof on
the part of prosecution to adduce 100%
evidence and establish its case beyond any
reasonable doubt, before the trial court.

Even if there is an iota of doubt - say 0.01%

appears in favour of the accused, the court shall
acquit but not convict him. He will be released
on the ground of benefit of doubt and thus the
accused would succeed against the prosecution.
This is because the Constitution of India
guarantees freedom of movement and liberty of
life to every person.
The presumption is that the accused is
innocent, unless proved guilty - without an iota of
doubt.
The standard of proof required in Criminal law
administration is evidence beyond reasonable
doubt. i.e. cent percent (100%) proof against the
accused.

INDIA and LAW

The Preamble of the Constitution of India

declares:
India is a - Sovereign,
- Socialist,
- Secular,
- Democratic
- Republic.
1. Sovereign means: The State is Independent
and it is all powerful in its domain national
territory. It is not subordinate to any
political power or state in the world. No one
can interfere with its internal affairs.

2. Socialist:
1. The Principle aim of socialist state is
- to eliminate inequality in (i) income and
(ii) status and (iii) standard of life.
2. The basic framework of socialism is
- to provide a decent standard of life to
the
working people and
- especially to provide security from
cradle to
grave.
3. This, amongst others, on economic side
- envisaged economic equality and
equitable
distribution of income.

4. The state shall in particular direct its policy towards

securing
that the ownership and control
of material
resources of the community are so
distributed as best to subserve the common
good; and
that the operation of the economic
system
does not result in the concentration of
wealth and means of production to the
common detriment.

3. Secular: The state does not

profess, practice or propagate any
particular Religion. It treats all
religions equally. It will not
discriminate one religious group
against the other.
4. Democratic: The power and
ultimate authority in governance
of the state is vested in the hands of
the people. It envisages a
representative form of

5. Republic: means the Head of the

State is not a titular and ancestral
monarch, but an elected
representative from among the
people.
The three (3) main organs of the
Government are:
Legislature [Supreme Law
making body]
Executive
[Administrative and law
enforcing

 India is a union of states. [Not

federation of states].
The Union of India
is organized into 29 states for the purpose
of - administrative convenience and on
- linguistic basis.
There are also seven (7) areas declared as
Union Territories (UTs). The UTs are
administered by the President of India
through a designated person appointed
- subject to any law made by
Parliament in this regard; hence the name
Union territory'. [Art -239]
India is - unitary in spirit and - federal
in structure.

The Governments at both levels have separate

- Legislative wing and
- Executive wing.
But there is only one unitary form of Judiciary with
- Supreme Court of India at its apex. It is the
Court
of last appeal. Law declared by Supreme Court is
binding on all courts within the territory of India.
The Legislative, Executive and Financial Relations
between Union and State Governments and inter se
State Governments - are regulated by a schematic
and systematic Constitutional framework.
Parliament, however, enjoys the status of supreme
law making organ of India.

 Schedule VII : Distribution of Legislative powers:

There are three (3) lists under the Schedule

List - I Union List

List - II State List
List - III Concurrent List.
On subject matters listed under List-I Union List

the Union has exclusive legislative power.

On subject matters listed under List-II State List

the State has exclusive legislative power.

On subject matters listed under List-III Concurrent
List both Union and States can exercise parallel
legislative power

subject to the Principle of Federal Supremacy.

 The

Legislative wing of the Union is known as

- the Parliament.
The Legislative wing of a state is known as
- the Assembly.
The Indian Parliament is bicameral having two
chambers called as (1) Lok Sabha (House of people) and
(2) Rajya Sabha (House of elders). They are also known
as Lower House and Upper House, -respectively.
It is left to the option of the Indian states to have a
bicameral legislature or not. The two chambers are
called as (i) Legislative Assembly and (ii) Legislative
Council, similar to Parliament. Some States in India did
not opt for or after having opted for some period
dispensed with or discontinued having Councils
- to reduce financial burden on state exchequer.

 The Law made by Parliament extends

to whole of
the territory of India, subject to
exemption of
certain areas or parts of an area, if any.
The Law made by a state Assembly
extends to
whole of the territory of that state
only, subject
to certain exemption as to some area or
part of an
area, if any.
Thus, if we want to see Legal

 In other words, we have to keep in mind

the
- Principle of Legislative
Competency.
check for example: Whether your
business
establishment is situated within the
state limits
of Karnataka, or Punjab or Maharashtra
so on.
check again, whether you have to look

 One need not to look for

a State law, where the compliance required in
connection with any subject matter listed
under Union List; for example a company law
compliance matter; or computation and
payment of income tax or corporate tax; or
Central Excise or Customs Duty, or Service tax .
an Union law when the compliance required is
in connection with any subject matter listed
under State List; for example payment of stamp
duty and registration fee for any kind of
transfer of land, or computation of General
Sales Tax, Property tax, Land Revenue etc.

THANK YOU.
Prof. Dr. KSN Sarma
B. Sc, M.A, LL.D

Advocate
High Court of Judicature
Andhra Pradesh

Visiting Professor - IBS

Hyderabad.
Mobile: 88864 22446

Pro se
Litigants or parties
representing themselves in court without the
assistance of an attorney are known as pro se
litigants.
Pro se is Latin for in ones own behalf.
The right to appear pro se in a civil case is
recognised in India
Thus, with some limitations, anyone can appear
pro se, and anyone who appears before the
Court without an attorney is considered pro se.