## Decision Support System - Part II – Prof. Chandan Bhattacharya

Decision Support System – Prof. Chandan Bhattacharya – 17th July, 2006.

GENETIC ALGORITHM

Genetic Algorithm is a way of solving problems by mimicking the same process or processes that the Mother Nature uses.

It is basically a searching process with approach to optimization of the problem based on same sample data. They use the same combination of selection, recombination & mutation to evolve a solution to a given problem.

At the beginning of a run of a genetic algorithm, a large population of random chromosomes (a string of real numbers / a binary string) is created. Each one, when decoded with represents a different solution to the problem. Let there are ‘M’ no of Chromosomes in the initial composition. The following steps are repeated until a solution is found.

1) Test each chromosome to see how good it is at solving the problem & assign a fitness score accordingly. The fitness score is a measure of how good that chromosome is to solve the given problem.

2) Select 2 members from the current population. The chance of being selected is proportional to the chromosome fitness.

3) Dependent on the crossover rate, crossover the bits from each chosen chromosome at a randomly chosen point.

4) State through the chosen chromosomes bits & flip dependent on the mutation rate.

5) Repeat step 2,3 & 4 until a new population of n number has been created.

CROSSOVER RATE

This is simply the chance that 2 chromosomes will swap their bits. Crossover is performed by selecting the random gene along the length of the chromosomes & swapping all the genes after that point.

X 10111001 011101
Y 11001011 101000
Becomes: -
X 10111001 101000 (final output)
Y 11001011 011101

Informative part is called MOTIF & the rest is called CROSSOVER.

Diagram

MUTATION

This is the chance that a bit within a chromosome will be fit (0 changes to 1 & 1 becomes 0). This is usually a very low chance. Whenever chromosomes are chosen from the chains the algorithm first checks to see if crossover should be applied & then the algorithm iterates down the length to each chromosome mutating the bits if applicable.

Given the digits 0 through 9 & operators +, -, X, / find a sequence that will represent a given target number. The operators will be applied sequentially from left to right as you read.

Eg: 4 – 3 * 6 = 1 * 6 = 6

23 => 6 + 5 * 4 / 2 + 1 (9 genes)
= 0110 1010 0101 1100 0100 1101 0010 1010 0001
= 011010100101110001001101001010100001 (Chromosome)

This has been obtained from the chart below: -

0 - 0000
1 - 0001
2 - 0010
3 - 0011
4 - 0100
5 - 0101
6 - 0110
7 - 0111
8 - 1000
9 - 1001
+ - 1010
- - 1011
* - 1100
/ - 1101
blank - 1110
blank - 1111

Steps: -

1) First we need to encode a possible solution as a string of bits to represent all the different characters available to the solution. This will represent a gene.

Each chromosome will be made up of several genes. The above, show all the different genes required to encode the problem.

The possible genes 1100 1111 will remain unused & will be ignored by the algorithm if encountered. Hence the target no 23 would represent 9 genes as follows. These genes all together form the chromosome.

FITNESS FUNCTION

This can be the most difficult part of the algorithm to figure out. It really depends on the problem to solve. The general idea is to give a higher fitness score; the closer a chromosome comes to solving the problem.

A fitness score can be assigned that is universally proportional to the difference between the solution & the value, a decoded chromosome represents.

Assuming solution target no is 42, the fitness score of the chromosome mentioned above
1 / (42 – 23) = 1 / 19

If a solution is found, a divide by zero, error would occur, as the fitness would be 1/ 42 – 42. This is not a problem, as we are looking for a solution and not a mathematical data.

Decision Support System – Prof. Chandan Bhattacharya – 25th July, 2006.

NEURAL NETWORK

A Neural Network is a massively parallel-distributed processor made up of simple processing unit, which has a natural characteristic for storing experimental knowledge and making it available for use. It resembles the brain in 2 respects: -

1) Knowledge is acquired by the network from its environment through a learning process.
2) Inter-neuron connection strengths, known as synaptic weight, are used to store the acquired knowledge.

BENEFITS OF NEURAL NETWORKS

1) Non-linearity – An artificial neuron can be linear or non linear. A neural network made up of an interconnection of nonlinear neurons is itself a non linear.

2) Input / Output Mapping – A popular technique of learning, called supervised learning involves modification of the synaptic weights of a neural network by applying a set of labelled training samples or task examples.

3) Adaptability – Neural Networks have a built in capability to adopt their synaptic weights, to changes in the surrounding environment.

A neural network trained to operate in a specific environment can easily be retrained to deal with minor changes in the operating environmental conditions.

4) Evidential Response – In the context of pattern classification, a neural network can be designed to provide information not only about which particular pattern to select but also about the confidence of the decision made.

5) Contextual Information – Knowledge is represented by the very structure 7 activation state of a neural network. Every neuron in a network is potentially affected by the global activity of all other neurons in the network.

6) Neurobiological analogy – The design of a neural network is motivated by analogy of the brain, which is a living proof of fault tolerant parallel processing.

Diagram 1

Diagram 2

(Mapping how should work if we make analogy to a human brain)
Nonlinear Model of Neuron

A neuron is an information-processing unit that is fundamental to the operation of a neural network.

The diagram above shows the model of a neuron, which forms the basis of designing artificial neural network. The model comprises of the following key elements.

1) A set of synapse or connecting links, each of which is characterised by a weight or strength of its own. A signal ‘xj’ (1 <= j <= n) Specially ‘xj‘ at the input of synapse j connected to neuron k is multiplied by the synaptic weight ‘wkj’. Unlike a synapse in the brain, the synaptic weight of an artificial neuron may be negative as well as positive values.

2) An adder for summing the input signals, weighted by the respective synapse of the neuron forms a linear combiner.

3) An activation function for limiting the amplitude of the output of a neuron is called squashing function.

The neural model includes an externally applied bias denoted by ‘bk’ which has the effect of increasing or lowering the net input of the activation function.

In mathematical terms we now may describe a neuron k by the following equation: -
m
Uk = Σ Wkj xj
j=1
Yk = Φ (uk + bk )

Where,
x1, x2 …….xn are the input signals,
wk1, wk2 ………xkn are the synaptic weights of neuron k
uk is the linear combiner output
bk is the bias
Φ() is the activation function &
yk is the output signal of neuron ‘k’.

Inparticular depending on whether the bias bk is +ve or –ve the relationship between the induced local field for activation potential vk of the neuron k and the linear combined output uk is modified by induced local field.

DIFFERNECE BETWEEN NEURAL NETWORK AND EXPERT SYSTEM

Expert system like post-traditional systems seek to emulate or model, human experts way of solving a set of problems. The Knowledge Engineers observe humans, builds a model of their expertise and writes a computer programs or algorithm that implements the model. The program incorporates specific rules, which are derived from human experts & their experience in a limited problem domain. Neural Networks do not model human intelligence nor to use knowledge engineers to solve a specific problem. Instead of putting intelligence into program neural network designers.

Others:-

FUZZY LOGIC

Professor Zadeh reasoned that people do not require precise numerical information input & yet they are capable of highly adoptive control. If feedback controllers could be programmed to accept noisy, imprecise input they could be much more effective and perhaps easier to implement.

Fuzzy Logic is a problem solving Control System methodology that lend itself to implement in systems ranging from simple, small embedded micro-controllers to large, networked, multi-channel PC or Work-Stations based data acquisition and Control Systems. It can be implemented in Hardware, Software or a combination of both. If fuzzy logic provides a simple way to arrive at a definite conclusion based upon vague, ambiguous, imprecise, noisy or even missing input information.

Fuzzy Logic incorporates a simple, rule based IF X AND Y THEN Z approach to a solving control problem rather than attending to model a system mathematically. The fuzzy logic model is empirically based and relies on operator’s experience rather than technical understanding of the system.

Fuzzy Logic requires some numerical parameters in order to operate such as what is considered to be significant error and significant rate of change of error, but exact values of these numbers are usually not critical unless very responsive performance is required.

WHY USE FUZZY LOGIC

1) It is inherently robust since it does not require precise, noise free inputs. The output control is a smooth control function despite a wide range of input variations.

2) Since the Fuzzy logic Controllers processes user defined rules, it can be modified easily to improve or alter system performances.

3) Fuzzy Logic is not limited to a few feedback inputs nor is it necessary to measure or compute rate of change parameters.

4) Because of the rule based operation any reasonable number of inputs can be processed and numerous output can be generated with more limited responsibilities.

5) Fuzzy Logic can control non-linear system that would be difficult or impossible to model mathematically.

Suppose we want to design a simple proportional temperature controller with an electric healing element and a variable speed cooling fan. A positive element output calls for 0 – 100 % heat while a negative signal output calls for 0 – 100 % cooling. Control is achieved through proper balance and control of these two active devices.

Diag DSS 4

Cmd: Target Temperature
Temp: Feedback sensor in Controlled environment.
Error: Cmd – Temp ( + = too cold ; - = too hot )
Cmd-dot : Time derivative or Error ( + = getting hotter ; - = getting cooler )
Output: HEAT or NO CHANGE or COOL

A simple block diagram of the Control System

Notations:
N – Negative error or error dot in input level
Z – Zero(0) error or error dot in input level
P – Positive error or error dot in input level
H – Heat output response
- - No change
C – Cool

Rule Structure & Rule Matrix: (assuming 3 X 3 matrix)

Diag DSS 5

Rule Structure:
1) If Cmd - Temp – N and d/dt [Cmd – Temp)] = N then output = C
2) If Cmd - Temp – Z and d/dt [Cmd – Temp)] = N then output = H
3) If Cmd - Temp – P and d/dt [Cmd – Temp)] = N then output = H
4) If Cmd - Temp – N and d/dt [Cmd – Temp)] = Z then output = C
5) If Cmd - Temp – Z and d/dt [Cmd – Temp)] = Z then output = NC
6) If Cmd - Temp – P and d/dt [Cmd – Temp)] = Z then output = H
7) If Cmd - Temp – N and d/dt [Cmd – Temp)] = P then output = C
8) If Cmd - Temp – Z and d/dt [Cmd – Temp)] = P then output = C
9) If Cmd - Temp – P and d/dt [Cmd – Temp)] = P then output = H

Definition:

System Status Input:

[Error] – P – Too Cold
Z – Just Right
N – Too Hot

[Error dot] – P – Getting Hotter
Z – Not Changing
N – Getting Colder

System Status Output:

H – Call for heating
C – Call for Cooling
NC – No Change

GENETIC ALGORITHMS

Genetic Algorithms are a way of solving problems by mimicking the same process that the nature uses. They use the same combination of selection recombination and mutation to evolve a solution to a problem. Every organism has a set of rules. These rules are encoded in the genes of an organism, which in turn are connected together into long strings called chromosomes. A typical chromosome may look like follows when it is coded in binary sequences: -

10010010110010………………..

At the beginning of run of genetic algorithm, a large population of random chromosomes is created. Each one, when decoded will represent a different solution to the problem. Let us assume that there are N chromosomes in the initial population. The following steps are repeated until a solution is found: -

1) Test each chromosome to see how good it is at solving the problems and assign a fitness score accordingly. The fitness score is a measure of how good that chromosome is at solving the problem.
2) Select two members from the current population. The chance of being selected is proportional to the chromosome fitness.
3) Dependent on the crossover rate, crossover the bits from each chosen chromosomes at a randomly chosen point.
4) Step through the chosen chromosome bits and flip dependent on the mutation rate.
5) Repeat step II, III, IV until a new population of N members has been created.

Soln: - max[min[(A,B),(B,D)],min{A,C),(C,D)]]
So, max[min[0.8,.05],min[9,6]]
= max[0.5,0.6]
= 0.6

## Decision Support System – Prof. Chandan Bhattacharya

Decision Support System – Prof. Chandan Bhattacharya – 29th Jan, 2006.

MANAGEMENT INFORMATION SYSTEM

The study of Management Information System started in 1960 to focus on computer based information system aimed at managers. MIS combines theoretical work of computer science, management science and operations research. It is a practical orientation towards building systems and applications. This is shown in the following figure.

Diag DSS 1

TECHNICAL APPROACH

The technical approach of information system emphasizes mathematically based models as well as the physical technologies to study information systems. The discipline that contributes the technical approach are computer science, management science and operation research computer science is concerned with establishing theories of compatibility, methods of computations and methods of efficient data storage and accesses Management Science emphasizes the development of models for decision-making and management practices. Operation Research focuses on mathematical techniques for optimizing selected parameters of organizations such as transportations inventory control.

BEHAVIOURAL APPROACH

The growing part of the information system is concerned with behavioral problems and issues. Sociologists focused on the impact of the information system on organizations and society.

Political Science investigates the political impact and uses of information system and technology psychology concern with individual responses and information systems and cognitive model of human reasons.

DIFFERENT KINDS OF INFORMATION SYSTEMS

There are 4 main kinds of information system serving different organisation levels: -

1. Operations Level
2. Knowledge Level
3. Management Level
4. Strategic Level

This is shown in following diagram: -

Diag DSS 2

Organisations and information systems can be divided into strategic management, knowledge and operational levels. They can be divided further into five functional areas: -

1. Sales & Marketing
2. Manufacturing
3. Finance
4. Accounting
5. Human Resources

1) STRATEGIC LEVEL SYSTEM help senior managers for long term planning.
2) MANAGEMENT LEVEL SYSTEM helps middle managers monitor and control.
3) KNOWLEDGE LEVEL SYSTEM help knowledge and data workers design product distribute information and cope with papers work.
4) OPERATIONAL LEVEL SYSTEM help operational managers to keep track of organisations day to day activities.

DIFFERENT TYPES OF INFORMATIONS SYSTEM

6 major types of information system needed for the 4 levels of an organisation as shown in the following table. Information systems are built from each of the four levels of an organization.

A Table Chart

TRANSACTION PROCESSING SYSTEM
Computerised systems that perform and record the daily routine transaction to necessary conduct the business. It serves the operational level of an organisation.

KNOWLEDGE WORK SYSTEMS
Information Systems that aid knowledge workers in the creation and investigation of new knowledge of the organisation. It serves the knowledge level of an organisation.

OFFICE AUTOMATION SYSTEM
Computer Systems, such as word processing, electronic mail etc. are designed to increase the productivity of data workers in the office. It serves the knowledge level of an organisation.

DECISION SUPPORT SYSTEM
Information Systems at the management level of an organisation that combine data and sophisticated analytical model to support semi-structured or un-structured decision-making. It serves the management level of an organisation.

MANAGEMENT INFORMATION SYSTEM
Information System at the management level of an organisation that serves the function of planning, controlling and decision making by providing routine summary and exception reports. It serves management level of organisation.

EXECUTIVE SUPPORT SYSTEM
Information Systems at the strategic level of an organisation designed to address unstructured decision making to advanced graphic and communication.

CHARACTERTISICS OF MANAGEMENT INFORMATION SYSTEM

1. MIS support structured and semi-structured decision at the operational and management control useful for planning purpose of senior management stuff.
2. MIS are generally reporting and control oriented. They are designed to report on existing operations and therefore to help to provide day-to-day control of operations.
3. MIS relay on existing corporate date and data flow.
4. MIS have little analytical capabilities.
5. MIS generally aid in decision making using past and present data.
6. MIS are relatively flexible.
7. MIS have an internal rather than external orientation.
8. Information requires are known and stable.
9. MIS requires a lengthy analysis and design process.

CHARACTERISTICS of DECISION SUPPORT SYSTEM

1. DSS offer users flexibility and adoptability and a quick response.
2. DSS allow users to initiate and control the input and output.
3. DSS operate with little or no assistance from professional programmers.
4. DSS provide support for decisions and problems whose solutions cannot be specified in advance.
5. DSS use sophisticated analysis and no modeling.

Diag DSS 3

The figure above illustrates how various types of system in the organisation are related to each other – TPS are the major producer of information that is required by the other systems which in turn produces information for other systems. These different types of systems are loosely coupled in most organisations.

Decision Support System – Prof. Chandan Bhattacharya – 20th June, 2006.

DATA MINING

The non-trivial extraction of implicit, previously unknown & potentially useful information from network.

TECHNIQUES USED

1) Clustering
2) Data summarisation
3) Learning classification rules
4) Analyzing changes
5) Detecting anomalies

DEFINITION

1) Data Mining is the analysis of data & the use of software techniques for finding patterns & regularities, in sets of data.

2) It is responsible for finding the patterns by identifying & underlying rules & features in the data.

COMPARISON BETWEEN DATA MINING & DBMS

DATA: Queries (SQL) based on the data held.
DATA MINING: Infer (knowledge required) from the data held to answer queries.

CHARACTERISTICS OF DATA MINING

1) Large quantities of data.
2) Noisy, incomplete data.
3) Complex data structure.
4) Heterogeneous data stored in legacy systems.

Decision Support System – Prof. Chandan Bhattacharya – 27th June, 2006.

DIFFERENCE BETWEEN DATA MINING AND MACHINE LEARNING

Data Mining or Knowledge Discovery in database is about finding understandable knowledge where as Machine Learning is concerned with improving performance of an agent like training a Neural Network.

Data Mining is concerned with very large & real world databases whereas Machine Learning typically looks at smaller data sets.

DATA WAREHOUSING

A data warehouse can be defined as any centralized data repository, which can be required for business benefit.

Warehousing makes it possible to: -
(i) Extract achieved operational data.
(ii) Overcome inconsistencies between different legacy data format.
(iii) Integrate data through put throughout an enterprise regardless of location, format or communication requirements.
(iv) Incorporate additional or expert information.

CHARACTERISTICS OF DATA WAREHOUSE SUBJECT ORIENTED

Data organized by subject instead of application. It contains only the information necessary for decision support process.

1) Integrated – Encoding of data is often inconsistent.
2) Mass user scalability – Access to warehouse to support concurrent users while maintaining acceptable query performance.
3) Network data-warehouse – Data warehouse rarely exist in isolation. Users must be able to look at and work with multiple warehouses from a single client workstation.
4) Warehouse administration – Large scale and time cyclic nature of the data warehouse demands administrative flexibility
5) The RDBMS must integrate dimentioned analysis.
7) End users require advanced analysis calculations sequential comparative analysis to detailed and summarized date.

DATAWAREHOUSING & ONLINE TRANSACTION PROCESSING (OLTP)

Table Chart

Decision Support System – Prof. Chandan Bhattacharya – 4th July, 2006.

DATA WAREHOUSING SYSTEMS

Data Warehouses are interested in query processing as opposed to transaction processing. It contains a place for storing data that are 5-10 years old. These data is used for consequences, trends & forecasting.

PROCESS

INSULATE DATA

1) Preserves the security 7 integrity of mission critical OLTP applications.

RETRIEVE DATA

1) Data is transformed 7 delivered to the data warehouse on a selected model (of mapping definition)

META DATA

1) Information describing the model & definition of the source data element.

Removal of certain aspect of operational data such as low level transaction information, which slow down the query time.

TRANSFER

Processed data transferred to the data warehouse, a large database on a high performance box.

USE OF DATA WAREHOUSE

A central store against which the queries are own, it uses very simple data structures with very little assumptions about the relationships between data.

A data mart is a small warehouse, which provides subsets of the main store, depending on the requirement of a specific group or department. Data marts often use multidimensional databases, which can speed up query processing as they can have data structures, which reflects the most likely queries.

CRITERION FOR A DATA WAREHOUSE

2) Load processing – data conversion, filtering, reformatting, integrity checks, physical storage, indexing, metadata update.
3) Data quality management – Ensure consistency & referential integrity in massive database size.
4) Query performance – must not be slow b the query of data warehouse RDBMS. It must support modular parallel management.

4 diagrams

ARTIFICIAL INTELLIGENCE FAMILY

Artificial Intelligence is commonly defined as the effort to develop computer based systems that behave as human. Such systems would be able to learn natural languages, accomplish coordinated physical task (robotics) & emulate human expertise & decision making (expert system) such systems will also exhibit logic, reasoning, intuition & common sense that is associated with human being.

The figure above illustrates the major branches of artificial intelligence family.

The birth of AI is based on to different approaches
1) Top down
2) Bottom up

Bottom up approach is an effort to build a physical analogy to the human brain while top down approach is the effort to develop analogy to how brain works.

Decision Support System – Prof. Chandan Bhattacharya – 11th July, 2006.

DIAGRAM

EVOLUTION OF ARTIFICIAL INTELLIGENCE

TOP DOWN APPROACH

One of the first top down efforts was Logic Theory in 1950 applying which a software was developed named Logic Theories that mimicked deductive logic:

Selecting the correct rules and postulates so as to create a coherent logical chain. From these developments emerged expert system, which consist of a limited number of rules for a very specific and limited domain of human expertise.

BOTTOM UP APPROACH

The beginning of contemporary AI started with the concept of feedback to develop a theory of how brain works. According to this theory a brain is composed of millions of neuron cells which processed binary numbers those were connected into a network that took feedback or information from the environment. Learning was simply a matter of teaching the neuron in a brain how to response to the environment.

SYMBOLIC ARTIFICIAL INTELLIGENCE

Symbolic AI (classical AI) is the branch of AI that concerns itself with attempting to explicitly represent human knowledge in a declarative form (i.e. with facts and rules). If such an approach is to be successful in producing human life intelligent, then it is necessary to translate procedure knowledge possessed by human into an explicit form. Game playing programs are the best human experts. One difficult problem encountered by symbolic AI, is Common Sense Knowledge Problem.

STRONG AI AND WEAK AI

Strong AI is the view that a sufficiently programmed computer would actually be intelligent and would think in the same way that a human does where as weak AI is the use of methods modeled on intelligent behaviour to make computers more efficient at solving problems.

HUMAN v/s ARTIFICIAL INTELLIGENCE

1) Human intelligence is a way of reasoning
2) One part of human intelligence can be described as the applications of rules, based on human experience and genetics.
3) Human intelligence is the way of behaving. Even if human do not actually invoke rules, they are obligated to act as if they did by a culture and a society that values reasonable and intelligent behaviour.
4) Human intelligence includes the development and use of metaphors and analogies. Using metaphors and analogy human creates new rules, apply old rules to an unknown/new situation and at times instinctively apply without rules.
5) Human intelligence includes the creation and use of concept. Humans have a unique ability to improve a conceptual apparatus on world around them.
6) ***************************************************************************** Artificial intelligence refers to an effort to develop machines that can reason, behave compare and conceptualise like human being.

Questions
How brain works?
(Find out from google.com + howstuffworks.com + wikipedia.org + techtutorials.com )

EXPERT SYSTEMS

An expert system is knowledge intensive program that solves a program by capturing the expertise of a human in limited domains of knowledge and experience . An expert system can assist decision making by asking relevant questions and explaining the reasons for adopting certain actions. Some of the common characteristics of expert systems are the following:
1) Perform some of the problem solving work of humans.
2) Represent knowledge informs such as rules or frames.
3) Interact with human.
4) Can consider multiple hypotheses simultaneously.

DIAGRAM

How expert systems work?

COMPONENT OF EXPERT SYSTEM

4 BASIC ELEMTS OF EXPERT SYSTEM
1) Knowledge base
2) Development Team
3) At Cell
4) The User

KNOWLEDGE BASE

This is the modeling of human knowledge that a computer can deal. This model of human knowledge used by expert system is called knowledge base. A standard structured programming construct is the If Then construct in which a condition is evaluated. The difference between a traditional program and a rule base expert system program is the degree and magnitude.

Symantec Nets can be used to represent Knowledge when the knowledge base is composed of easily identified objects of interrelated characteristic. Symmetric net can be much more efficient than rules.

Frames also recognised knowledge into chunks but the relationship is based on shared characteristic rather than hierarchy. This approach is grounded as human use frames a concept to make rapid sense out of perception.

DEVELOPMENT TEAM

An AI development team is composed of one or several experts who have command over knowledge base and one or more knowledge engineers who can translate the knowledge as described by the expert with a set of rules, frames of Symantec Nets.

A knowledge engineer is similar to a traditional system analyst but has special expertise in collecting information and expertise from other professionals.

AI SHELL

The AI shell is the programming environment of an expert system. They are user friendly development environment that can quickly generate user interface screen to capture the knowledge base and manage the strategies of searching the rule base.

THE USER

The role of the user is both to pose questions of the system and to enter relevant date to guide a system alone. The user may employ the expert system as a source of advice or to perform tedious and routine analysis tasks.

PROBLEMS WITH EXPERT SYSTEMS

1) Expert systems are not applicable for complex managerial problems.
2) Many experts cannot express their knowledge using an IF THEN format.
3) Expertise is collective
4) It may be distributed throughout an organisation
5) Expert systems are extensive to maintain.
6) A more limited role of an expert system.

## Organisation Effectiveness & Change - Part II – Prof Satyajyoti De

7th July, 2006 – Organisation Effectiveness & Change – Prof Satyajyoti De

STRATEGIES FOR MERGING DIFFERENT ORGANISATIONAL CULTURE

TABLE

DIAGRAM

CONFLICT: Conflict in any situation in which two or more parties feel themselves in opposition. It is an interpersonal process that arises from disagreements over the goal to attain or methods to be used to accomplish.
-KEITH DAVIS

CONFLICT: It is a process that begins with one party perceives that another party has negatively affected or is about to negatively affect something that the first party cares about.
-STEPHEN. P. ROBBINS

TRANSITION IN CONFLICT THOUGHTS

A) TRADITIONAL VIEW- Believes that all conflicts are harmful and must be avoided.

B) HUMAN RELATIONS- Believes that conflicts are a natural and inevitable outcome in any group.

C) INTERACTIONIST VIEW- Believes that conflict is not a positive in a group but that it is absolutely necessary for a group to perform effectively.

D) FUNCTIONAL v/s DYSFUNCTIONAL VIEW- The criterion that differentiates a functional view from a dysfunctional conflict is a group performance. Functional conflict supports the goal of the group and improves its performance. Dysfunctional conflict hinders group performances.

STAGES OF CONFLICT PROCESS

Stage 1 – May arise because of personal variables.
Stage 2 – Cognition or personalization.
Stage 3 – Decision to act in a given way.
Stage 4 – Behavioral pattern
Stage 5 – Outcome

CONFLICT RESOLUTION PROCESS, CAUSE OF CONFLICT

a) Organisational change
b) Personality clash
c) Different sets of values
d) Threat to status
e) Contrasting perception
f) Lack of trust

CONFLICT PERCEPTION
(perception of other parties, how they will behave)

Functional or Dysfunctional

PARTICIPANT INTENTION
(2 parties who are in conflict)
Winning v/s Loosing – Every party wants to win. Boss is the sufferer as he is deprived of certain situation.)

RESOLUTION STRATEGIES

Avoiding
Smoothing
Forcing
Compromising
Confronting (There is no organisation that do not have a conflict. Even RK Mission has conflicts.)

12th July, 2006 – Organisation Effectiveness & Change – Prof Satyajyoti De

Stakeholder = shareholder + customer + others

Stakeholders help in effective running of the organisation. All the stakeholders have different interest, claim from the company.

STAKEHOLDERS
(In what way they are connected to the organisation)

SHAREHOLDERS – Profit + ROI
CUSTOMER – Price + Quality + Service + Market Share
SUPPLIERS – Terms of Contract + Payment
CREDITORS – Credit worthiness
EMPLOYEES – Job satisfaction + Remuneration + Work Environment + Quality of Work Life
GOVERNMENT – Law Abiding + Tax + Welfare to employees the family members
SOCIETY – Social Responsibility + Awareness towards Ecology & Pollution.

O C T A PA C E

These are 8 different activities on which the organisation works & success of the organisation depends on the OCTAPACE.

O = OPENNESS & RISK TAKING

Openness – Works with open mind. Eg: Connection to Internet & information accessibility for all.

C = CONFRONTATION

Confrontation – Whenever there is a problem – don’t shy way from it – simply try to resolve it – this is not a clash between two persons.

Trust – When somebody tells you something in the organisation you need not necessarily suspect that man. Trust that man. So we repose trust on the other person’s behaviour.

A = AUTHENTICITY

Authenticity – While communicating, don’t think whether it has some authenticity or not. When you give information to other, say something factual.

P = PROACTIVE

Proactive – React to a situation in response to a stimulus is being Reactive. Doing something out of initiative is being Proactive.

A = AUTONOMY

Autonomy - You ask the people in your organisation to perform som
e task without too much supervision, freedom, independence, giving them job satisfaction.

C = COLLABORATION

Collaboration – Every one of us are dependent on someone or other.
People have 2 notions
1) Omnipotence – I can do everything. Independence. It is a wrong concept. No one can be fully independent.
2) Impotence – I cannot do anything.

Between the above 2 there is a concept called MUTUAL INTERDEPENDENCE. Say small children are dependent on parents. Similarly mother is also dependent on the child for love & affection.

So collaboration comes from concept of mutual interdependence. Say you are a HR Manager. But you cannot function in organisation unless you now technical functioning, and so on. So in certain cases technical manager can collaborate with financial manager & vice versa. Thus collaboration occurs.

E = EXPERIMENTATION

Experimentation – Autonomy & Proactive & Experimentation are connected, make experiment about new aspects of functioning of organisation & carry the organisation forward. We may not be aware but everyday something is happening in the organisation that carries the organisation forward.

These are the 8 pillars of Organisation Culture.

Questions
1) Write short notes on OCTAPACE.
2) How organisation effectiveness & culture can develop through this OCTAPACE?

DIAGRAM

DIMENSION OF CONFLICT HANDLING INTENTIONS

2 persons in conflict – perception of situation. I may not know what has been perceived by the Manager. So this is perception of conflict. I have been perceived as an assertive person but I see opponent is more collaborative.

14th July, 2006 – Organisation Effectiveness & Change – Prof Satyajyoti De

ORGANISATION CHANGE

Any organisation + it is dynamic + objective of the organisation goal does not change + process of achieving the objective may change

2 REASONS FOR ORGANISATION CHANGE

1) REACTIVE CHANGE – because ofMacro Environmental condition (changes taking place outside borders of organisation) like merger, takeover, but organisation prepares to cope the change.

2) PROACTIVE CHANGE - Management Initiative – Changes the company wants to make within an organisation eg: procedure for Financial Management, Material Management, Human Resource Management.

So changes are made either in reactive or proactive way.
Some changes
1) psychological
2) system
3) one way

1) PSYCHOLOGICAL – Changes a) Macro level b) Micro level
In Micro level changes people are affected because of
a) Insecurity
b) Opportunity

2) SYSTEMS – Indications in the Management
Eg: Study by scientists that evening birds flock together & fly together in a certain direction. They change their direction and move in another direction. They have noticed that the sense of direction of individual bird is much faster than a group of birds.

3) ONE WAY – As a whole, like quantum theory of physics, concept of change of the whole thing. When change takes place, all people try to accommodate each other in this situation.
Eg: Say a balloon is filled with air means it has air particles inside it. They are all arrested inside the boundary of the balloon, like the boundary of the organisation. If a pressure is applied on the surface of the balloon, the particles inside the balloon want to adjust themselves quickly. Thus all try to accommodate each other. This is the process of pressure change. It is the case of an organisation.

Macro Environmental Condition – Employees start adjusting them to the change in condition. Management tries to cope up with the pressure. It is called Macro Level Pressure.

FACTORS OF CHANGE
Organisation is dynamic. In an organisation whether we are putting a pressure from inside – organisation is established – goes through a life cycle- certain changes are seen – those changes are used in a 1) positive manner – they can be handled carefully.

Changes are of organisation: -
1) Technological
2) Structural
3) Workforce

Change Management - approach to change

Change Agent – When change takes place in an organisation, a person or group of persons who implement in a manner that makes the change effective.
Change agent does not mean outsourcing.
It may be
1) External
2) Internal

21st July, 2006 – Organisation Effectiveness & Change – Prof Satyajyoti De

OPERATIONAL DEVELOPMENT

1) Richmond Beckhand
managed from top
1) Top Management – To increase organisational effectiveness through intervention.

2) Wendell French & Cecil Bell – tells everything about OD

Culture Intervention through change Agent (like catalyst)
Action Research – is a process by which when any change is made in an organisation certain exercises are followed like a research type of work.

3) Increasing organisation performance change attitude values, organisation structure, practices to improve organisation performance.

4) OD intervention is a scientific process through which we try to identify & diagnose the problem, find a solution to that. It is done by: -
1) Internal Change Agent –
2) External Change Agent –

DIAGRAM 1

DIAGRAM 2

FOUNDATION OF ORGANISATION DEVELOPMENT PROCESS

ORGANISATIONAL DEVELOPMENT INTERVENTION PROCESS
Eg: Family business with father & 2 sons. Disputes between the 2 brothers due to family influence.

VALUES & ASSUMPTIONS
Mechanical – Operational Pattern
Organic – Behavioral Pattern

28th July, 2006 – Organisation Effectiveness & Change – Prof Satyajyoti De

ORGANISATON LEARNING (learn from OB book) (VVVV Imp)
Definition
Interaction with people – continuous learning organisation has some goals & objectives – we come into close contact with them & judge whether they are correct or not –

We learn certain values & systems – double loop (Imp) + we change the values & system

Values, ethics – governing variable (these govern us)
1) I may follow the governing variables whatever may be the consequence. (single loop learning)
2) I may challenge them. (double loop learning)

Because of learning we can react to a situation in a different manner.
We act according to the Brain Map (Brain Theory) but we normally act according to our decisions.

Espoused Theory - If I do something other than my normal doings then it is a deliberate acting to make others know that I am acting in a different manner.
Eg: of Creativity (eg given in Luthans book)

Qs) How many different things you can do with a newspaper?

Thinking
Cognitive – what is within me.
Divergent – thinking on different plains.

Question
Individual Behaviour in organisational learning context.

Transference of knowledge which generates by creative thinking started from F.W.Taylor.

DIVERSIFICATION WORKFORCE

Change in workforce – by age, culture
Influx of people from different countries due to increase in investments.
Techno specific diversity – 7 specific diversity eg: agro product – fruits, (particular fruits in particular place)
Organisation is from some definite culture & they make certain diversity in workforce.
Gender Discrimination
Colour Discrimination
Age Discrimination

These may increase in future. So how can there be cultural convergence.

CASE OF DISCRIMINATION BY A MANAGER
Discrimination against the women – It is called the glass ceiling effect. It was coined in USA.

1) She cannot be placed to a place where there are only 5/6 employees.
2) She cannot be placed in a factory
3) She cannot be made to work at night
4) She cannot be raised after certain position.

DIAGRAM

## Organisation Effectiveness & Change – Prof Satyajyoti De

Organisation’s Effectiveness & Change (OEC)

VIRTUAL ORGANISATION – in knowledge based industries like IT industry.

ORGANISATION CLIMATE & CULTURE
It is the ability to maximize the results in the competitive external environment.

The ability to sustain superior results over the time.

ALIGNMENT OF FACTORS FOR ORGANISATION EFFECTIVENESS
People
Process & Systems
Environment & Culture
Organizational Culture (discuss in details later)
Organisation Structure (we have read – book : Stroler or Freeman)

SPAN OF CONTROL
High Span of Control – A person does his work + he does others work.
Low Span of Control – A person does only his own work.

INTERCONNECTED FACTORS FOR ORGANISATIONAL EFFECTIVENESS PROFILING CULTURE / BEHAVIOUR
Management Style & Behaviour
Core Values & Behaviour
Workplace Dynamics
Teamwork Co-operation
Sense of purpose, confidence & ability
Attitude

STRATEGIC INTENT (what the organisation want to do)
Organisation Purpose & Intent
Strategy Formulation
Strategic Resource Allocation – allocation of resources property as resources are limited.

Reporting Performance Management – measuring your performance with standard.
Information & communication Equipment – communication methodology and chain.
System Software Document
International Information Transfer
Coordinating Mechanism – it is from point of view of organisation, technical systems, organisational systems.

ORGANISATIONAL CLIMATE
It is a nature of employee’s perception of those aspects of their environment (both external and internal), which directly impact how well they do their job.

(this word has a hollow effect – it means how you feel about something based on your own experience. All have some interest with the organisation – perception is important word here)

16th June, 2006 – Organisation Effectiveness & Change – Prof Satyajyoti De

6 DIMENSIONS OF ORGANISATION CLIMATE

FLEXIBILITY – Bureaucracy minimized and motivation encouraged.

RESPONSIBILITY – Sufficient Autonomy & reasonable risk taking encouraged.

STANDARDS – Excellence is the standard & continual improvement is encouraged.

REWARDS – Good performance is recognized & rewards recognitions are only performance based

CLARITY – The work unit mission is clear and now roles relate.

There is pride (commitment), dedication and cooperation among unit members.

MANAGEMENT, STYLE, SYSTEM, CHARACTERISTICS

ORGANISATION – Nature of organisation & rigidity to rules regulations & procedure.

VALUES – Personal beliefs & values as to show to treat people (eg: Douglas Mc Gregor Theory X & Theory Y)

PERSONAL HISTROY – Preference to particular approach on experiential learning of past experiences.

CHANCE – Providing of lack of chances for applying particular style of functioning.

RENESIS LIVERT’S 4 FOLD MANAGEMENT SYSTEM

1) Exploitative Authoritative
2) Benevolent Authoritative
3) Consultative
4) Participative

ORGANISATION CHARACTERISTICS VARIABLE LINKING TO 4 SYSTEMS
2) Motivational Process
3) Decision Making Process
4) Communication Process
5) Goal Setting Process
6) Controlling
7) Interaction & Influence Process

ORGANISATION CULTURE

Culture consists of learned mode of behaviour that is socially transmitted from one generation to the next and from one society or individual to another – J.W.STEWARD.

1) Culture is a shared system of meaning which functions as a process leading to automatic solutions to frequently meaning problems. – FONS TOMPENAARS (this definition is respected in the world)

2) Culture is a common perception held by the organizations members a system of shared meaning. – STEPHEN. P. ROBBINS.

A pattern of basic assumption inented, discovered or developed by a given group as it learns to cope with its problem of external adaptations and internal integration – that has worked well enough to be considered valuable and therefore to be taught to the new members as the correct way to perceive ; think & fell in relation to that problem. – EDGER SCHEN (Beautiful definition)

IMPORTANCE OF STUDE OF ORGANISATION CULTURE.

1) It gives organisational identity to its employers – a defining vision of what organisation represents.
2) Important source of stability & continuity to the organisation.
3) Provide sense of security to its members.
4) Help new employees to interpret what goes on inside the organisation.
5) Culture help stimulate employee enthusiasm for their task.

19th June, 2006 – Organisation Effectiveness & Change – Prof Satyajyoti De

ATTRIBUTION THEORY – As our perceptions are different the same action gives rise to different repercussions. (Douglas Mc Gregor – Theory X and Theory Y)

CULTURE is something that he people has found out at some point of time to solve a problem & these are percolated down the line.

Eg: Superstitions – wearing a chain at some point of time made a batsman success in a particular day & that made him feel that it its because of the chain the problem was solved (he batted well). It becomes a culture for the player to wear the chain in every match.

CULTURAL FOUNDATIONS

Main foundation on which the culture is based on the organisation

DISTINCTIVE – What makes it different from another organisation.

STABLE – Changing or forced to stay culture base too often.

IMPLICIT – Culture is internationalized. Culture of an organisation is a matter both of perception by employees & sincere practices by the organisation of its values, ethics & procedures.

SYMBOLIC – Representation of underlying values belief.

NO-ONE-BEST – Culture of an organisation being distinctive it is erroneous to sit on judgment, which is better than the other as the culture is of an organisation is inverted, discovered or developed based on its specific problems, situations and circumstances and the mode of evolving solutions.

STRATEGIES FOR STRENTHENING ORGANISATION CULTURE.

Diagram

CULTURAL BASE

Distinctive – What makes it distinctive form another organisation.
Stable – Not changing or forced to change too often.
Implicit – Culture is internalized
Symbolic – Representation of underlying belief, values.
No one best (don’t make comparison)– Cultural base varies with organizations mission goal, business environment.
Integrated – Elements are generally not in divergence.
Accepted – Culture base is valued and accepted by employees.
Top Management - Culture is evolved and flows down from top management.
Subculture – Not many subcultures evolve.
Strength – Now is viewed, strong or weak by people in general.

23rd June, 2006 – Organisation Effectiveness & Change – Prof Satyajyoti De

CHARACTERISTICS OF ORGANISATION CULTURE

MEMBER IDENTITY – Identification with organisation as a whole or with job specialization.

GROUP EMPHASIS – Activities central around group or individual.

PEOPLE FOCES – Concern of the management the effects of its decision on people or tasks.

UNIT INTEGRATION – Concepts on the principle of mutual interdependence amongst the units in multi unit organisation.

CONTROL – High or Low adherence to rules regulation procedures i.e. how bureaucratic. (Managing a situation)

RISK TOLERANE – Degree of Risk taking is encouraged. (Allow people to take risk)

REWARD CRITERIA – Degree of awarding rewards based on performance or other factors. (Unless given rewards, workers wont work properly)

CONFLICT TOLERANCE – How much employee are encouraged to discuss conflicts & criticisms openly. (Conflict is wrong, that is a traditional idea, but sometimes it is helpful)

MEANS-END ORIENTATION – What is important for management - final result or the means whatever be the process or method. (These 2 words are used in a personality trait factor in OB) (If end justifies the job then people are free to do whatever they like.)

OPEN SYSTEM FOCUS – Receptibility or external internal environmental change. (You are not traditionally tied up with your way of work)

NOTE:
These factors given above are not that constitute the culture of organisation. It shows the type of organisation)
What I am doing to achieve my goal is my characteristic and not my culture.

IMPACT OF ORGANISATION ON INDIVIDUAL

DIAGRAM

EMPLOYEE EMPOWERMENT

Definition:
Empowerment is a process that increases the task motivation.

1) IMPACT - When employees realize the task performed make a difference in terms of accomplishing the task purpose.

2) COMPETENCE - A skilful performance of task has effects of competence.

3) MEANINGFULNESS – When employees care for what they do it provides meaningfulness.

4) CHOICE – Tasks provide choices if it allow the employees self determination in performing task objectives.

IMPLICATION AND MANAGEMENT ACTIONS

1) DELEGATE AUTHORITY – Use Participative Decision Making

2) ENCOURAGE SELF MANAGEMENT – Job enrichment create self managed work teams, create tasks that provide intrinsic feedback.

3) INSTALL UPWARD PERFORMANCE APPRAISAL - Lessen formalities, create supportive culture.

4) ENCOURAGE GOAL SETTING – Educate & train employees.

BARRIERS TO EMPOWERMENT

1) EMPLOYMENT GOAL INCONGRUENT TO ORGANISATION CULTURE -
a) Lack of employee commitment,
b) fail to share organisation goal,
c) fear of retribution

2) RELUCTANCE OF MANAGERS – Managers having fear of being held responsible for mistake of others and loss of position or power.

3) Hiring people having low need for autonomy.

4) EXISTANCE OF BUREAUCRATIC AND AUTOCRATIC TYPE OF MANAGEMENT – Style with high belief in traditional pyramidal & hierarchical organisation.

## Business Legislation Notes - Prof. Bijoy Kumar Dutta - Part 5

17th July, 2006 – Bijoy Kumar Dutta – Business Legislation

INCOHED INSTRUMENT

An Incohed instrument is an instrument in some respects. When a person signs and delivers to another a blank or incomplete stamp papers & he authorizes the other person to make or complete the NI for an amount covered by the stand, the person so singing 7 delivering is liable upon such an amount to any holder on due course for such an amount.
Eg: A bill in due course may write his own name as payee in the bill of exchange and sue upon the instrument.

Section 91 (VVV Imp)
Dishonoured by non acceptance
A deed of exchange is dishonoured by non-acceptance in any of the following ways: -
(a) If the drawee does not accept the bill within 48 hours from the time of presentment though it is duly presented for acceptance.
(b) If there are several drawees ( who are not partners) and all of them do not accept
(c) When the drawee is incompetent to contract
(d) When the drawee gives a qualified acceptance
(e) When the drawee is a fictitious person.

Section 92
Dishonoured by non payment
A promissory note, bill of exchange or a cheque is said to be dishonoured if the maker of the promissory note, acceptor of the bill of exchange, or the drawee of a check, makes a default in payment upon being duly required to pay, the same.

Section 93
Notice of dishonour
A deed of exchange may be dishonoured by non-acceptance since only being is required acceptance since only being is required acceptance on non-payment.

A promissory note of a check are dishonoured by nonpayment only. When a negotiable instrument is dishonoured by non-acceptance or non-payment, the holder must give notice of dishonour to all the prior parties to make them liable on the instrument.

Negotiation
Negotiation of an instrument is a process by which the ownership of the instrument is transformed from one person to another.

Acceptance
Under the Negotiable Instrument Act only deed of exchange must be accepted. A deed of exchange is said to be accepted when the drawee puts his signature on it, thereby acknowledging his liability under the deed of exchange.

The usual mode of acceptance is writing the word “accepted” across the deed & signing under it.
Eg:
Accepted
S. R. Khan
[signature]
date: 2/11/2006

BOUNCING OF CHECK

Chapter XVII (Roman 17) of Negotiable Instrument Act was inserted by Act 66 of 1988, effective from 1st April 1989 prescribing penalties in case of dishonour of certain cheques for insufficiency of funds.

Section 138 of Negotiable Instrument Act states that any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for discharge in whole or in part of any legally enforceable debt or other liability, is returned by the bank, unpaid, either because of the amount of money standing within credit of that account, is insufficient to honour the cheque or that it exceeds the mount arranged to be paid from that account by an agreement made with the bank, such person shall be deemed and have committed an offence and should be punishable with imprisonment for a term which extend to twice the amount of the cheque or both. But the above provision will not apply unless,

(a) the cheque has been presented to the bank within a period of 6 months from the date on which it was drawn or within the period of its validity whichever is earlier.

(b) the payee or the holder in due course of cheque as the case may be, makes a demand for the payment of the said money by giving within 30 days of the receipt of the information by him from the bank regarding the return of the cheques as unpaid, and

(c) drawer of such cheque fails to make payment of the said amount to the payee or as the case may be to the holder in due course within 15 days of the receipt of the said notice.

COMPANY LAW

DIRECTOR (VVVV Imp)

A company being an artificial person cannot act by itself, it has neither a mind nor a body of its own. It must Act through some human agency. The persons by whom or through whom, the business of the company is carried on are termed as directors.

They are in charge of the management of the affairs of the company. The directors are called The board of directors.

Section 13(2)
States that the director includes any person occupying position of a director by whatever name called an important factor to determine, whether a person is or is not a director, is to refer to the nature of the office & its duties.

Thus function is everything. Name matters nothing. The director is in fact a director or controller of the affairs of the company. He is not a servant of the company.

Nobody corporate, association or firm shall be appointed director of a company. Only an individual shall be appointed. (Section 253)

Number of Directors

The number of directors to be appointed to the board of director of a company is determined by the Articles of Association. The Company’s Act provides that there must be at least 3 directors in the case of a Public Limited Company & at least 2 directors in other companies by an amendment of the section. It has been provided that a public company having a paid up share capital of Rs 5 crore or more thus 1000 or more shareholders, should have a director elected by small shareholders. A small shareholder means having shares of the nominal value of Rs 25,000 or less is a Public Ltd Company.

Who can be a Director?

A director must be capable of entering into a contract i.e. be
(a) He must have attained the age of majority
(b) Must be of sound mind
(c) Must not be disqualified from contract by any law for which he is subject.
(d) Director must be a natural person
(e) Director must have the requisite qualification

POSITION OF DIRECTORS (VVVV Imp)

They have been described sometimes, as trustees of the company & sometimes as agents but of neither view are wholly correct.

DIRECTOR AS A TRUSTEE (VVVV Imp)

A trustee is a person who is the owner of a property & deals with it as principle but the director is not the owner of the company. Director’s position is similar to that of a trustee because the directors are bound to exercise their powers in the interest of the company & are liable misuse of power if any.

DIRECTOR AS AN AGENT

It is more accurate to describe the directors as agents of the company. They are agents as the company acts through them.

Directors are in the eyes of the law agents of the company for which they act & the general principle of the law of principle & agent regulate in most respects, the relationship between the company and the directors.

MANAGING DIRECTOR

He is a director who is entrusted with substantial powers of management. He is the whole time director. He is the chief executive of the company.

WHOLE TIME DIRECTORS

Whole time Directors who is entrusted with certain duties & responsibilities. The ambit of jurisdiction is defined to its contract of employment.

NOTE: - Learn appointment of Directors

PREVENTION OD OPPRESSION & MISMANAGEMENT

The basic principle relating to the administration of the affairs of a company is that court will not in general intervene at the instance of shareholders in matters of internal administration 7 will not interfere with the management of the company by its directors, so long as they are acting within the powers conferred on them under AOA (Articles of Association)

The principle that the will of the majority should prevail & bind the minority is known as principle of majority rule. It was established in the case of Foss v/s Harbattle in 1843.

The case: -

2 minority shareholders in a company alleged that the directors were guilty buying their own land for the company’s use & paying a price greater than its value which resulted in a loss to the company.

The minority shareholders decided to take an action against the direction. The shareholders in a general meeting by majority resolved not to take any action. The court dismissed the suite on the ground that the acts of the directors were capable of conformation by the majority.

The majority should be basic but not prevail under all circumstances. There are certain acts which no majority shareholders can approve or affirm.

Exception: -

1) Where the act, done is illegal of ultravires (beyond power)
2) Where the majorities are perpetrating a fraud on the minority.
3) Where a company is doing an act, which is in consistent with AOA.
4) Where an act can only be done a special resolution but in fact has been done by a simple majority.
5) Where there is a breach of duty.

18th July, 2006 – Bijoy Kumar Dutta – Business Legislation

OPPRESSION (definition) (VVVV Imp)

Lord Cooper in Elder v/s Elder observed, “The essence of the matter seems to be that the conduct concurred of should at the low and involve a visible departure from the standards of fair dealing and violation of the condition of fair play on which every shareholder who entrusts his money to the company is entitled to rely”.

PREVENTION OF OPPRESSION (concept) (VVVV Imp)

Whenever the affairs of a company are being conducted in a manner oppressive to any member or members or prejudicial to public interest, an application can be made under section 397 of the Act.

The Requisite number of members who must sign the application is given in section 399, (100 or 1/10th of the total no of members) must sign the application.

PREVENTION OF MISMANAGEMENT (concept) (VVVV Imp)

Section 398 provides that a requisite no of members has lain down in section 399 of a company may apply to the tribunal for appropriate relief on grounds of mismanagement.

The tribunal may give relief if it is of the opinion
(a) the affairs of the company are being conducted in a manner prejudicial to the public interest or in a manner prejudicial to the interest of the company.
or
(b) by the affairs of material change in the management or control of the company. The affairs of the company is likely to be conducted in a manner prejudicial to the public interest or in a manner prejudicial to the interest of the company.

Under section 397 & 398 the tribunal has all the necessary powers to end oppression as well as prevent mismanagement.

POWERS OF THE TRIBUNAL (VV Imp)

(a) A regulation of the conduct of the company’s affairs in future.

(b) The purchase of the shares of any member of a company by other members or by the company

(c) In case of purchase of shares by the company, the consequent reduction of the share capital of the company

(d) Termination, setting aside or modification of any agreement of the company & its management

(e) The termination setting aside or modification of any agreement between company & third party

COMPROMISE & ARRANGEMENT

Compromise means an amicable settlement of differences by mutual concessions by the parties to dispute or differences by agreeing not to try it out.

Arrangement is of wider import than compromise & includes a reorganization of the share capital of the company by the consolidation of share of different classes or by the division of shares into shares of different classes by both these methods.

An arrangement may also involve the preference shareholders giving up the right to arrears of dividends further agreeing to accept a reduced rate of dividend in future.

RECONSTRUCTION & AMALGAMATION

Reconstruction
The term indicates the process, which involves: -
1) Transfer of undertakings of an existing company to another company, usually a company incorporated for the purpose.
2) The ld company ceases to exist
3) The carrying on of substantially the same business by the same person.
4) The rights of the shareholders in the old company being satisfied by their being allotted shares in the new company. A reconstruction is made to extend the operation of the company also if the company wants to do business, which is totally unrelated to its objects, it may resolve to reconstruction, in fact it is like putting old wine in a new bottle.

Amalgamation
It is a blending of two or more undertakings into one undertaking. The shareholders of each blending company becoming substantially the shareholders of the other companies which hold blended undertakings.
The differences between amalgamation & reconstruction are that amalgamation involves the blending of two or more concerns and nearly the constituents of one concern.

Reconstruction implies the carrying of an existing business in same altered forms.

Questions
1) Differences between Compromise and Arrangement
2) Distinction between the above 4 concepts. (VVVV Imp)

STATUTORY DUTIES OF AUDITOR
Section 227(2)
provides the following statutory duties of an auditor
Duties
The auditor shall make a report to the members of the company on the account examined by him and / or every balance sheet & profit or loss account and every other document declared by the Company’s Act to be a part of or annexed to the balance sheet or profit & loss account which are laid before the company in general meeting during the tenure of the office & report shall also state whether in his opinion to the best of his information & according to the explanation given to him, said accounts keep the information required by the Company’s Act in the manner so required & give a true & fair view.

1) In the case of balance sheet of the state of the company’s affairs as at the end of the financial year & in the case of profit & loss account of the profit & loss for its financial year.

The auditors report shall also state: -

a) Whether he has obtained all the information and explanation, which to the best of his knowledge & belief were necessary for the purpose of his audit.

b) Whether in his opinion proper books of accounts as required by law have been kept by the company & bb (added later) whether the report of the accounts or any branch office audited under section 228 by a person other than a company’s auditor has been forwarded to him when required.

c) Whether the company’s balance sheet & profit or loss account tell to it by the report are any agreement with the books of account & returns.

Conclusion
The auditor must sign the auditors report.

DUTIES & RESPONSIBILITES OF THE AUDITOR

1) Must have knowledge of MOA and AOA.
2) Should know the terms of the agreement.
3) Should be cautious and careful
4) Must examine the affairs of the company.
5) The auditor holds a position of trust & it is his duty to tell the shareholders frankly & fully everything with regard the affairs of the company.
6) Must satisfy himself about the valuation of the assets. The audit of a company is inherited for the protection of shareholders.
7) The auditor is liable to pay damages if on account of breach of statutory duties the company suffers loss.
8) The auditor has no criminal liability.

24th July, 2006 – Bijoy Kumar Dutta – Business Legislation

CYBER LAWS

INFORMATION TECHNOLOGY ACT 2000

An act to provide legal recognition for transactions carried out by electronic data interchange and other means of electronic communication commonly referred to as electronic commerce, which involve the rules or alternatives to paper based methods of communication & storage of information to facilitate electronic piling of documents with government agencies.

The act does not apply
a) Negotiable instruments
b) Power of Attorney as defined in the Power of Attorney 1882
c) Trust Act 1882
d) A will under Indian Succession Act 1925
e) Conveyance of immovable property.

1. ACCESS - 2(1)(a)
It means gaining entry into instructing or communicating with the logical arithmetical or memory function resources of a computer, computer systems or computer network.

It means a person who is intended by the originator to receive the electronic record but does not include any intermediary.

3. AFFIXING DIGITAL SIGNATURE SECTION - 2(1)(d)
Affixing digital signature with its grammatical variation & cognate expressions means the adaptation of any methodology or procedure by a person for the purpose of authenticating an electronic record by means of digital signature.

4. ASSYMETRIC CRYPTO SYSTEM - 2(1)(f)
It means a system of a secure key pair consisting of a private key or creating a digital signature & a public key to verify the digital signature.

5. CERTIFYING AUTHORITY - 2(1)(g)
Certifying Authority means a person who has been granted a license to issue digital signature certificate under Section 24.

6. COMPUTER - 2(1)(i)
It means any electronic, magnetic, optical or high-speed data processing device or system, which perform logical, arithmetic & memory function by manipulation of electronic, magnetic or optical impulses. It includes all input, output processing storage computer software or communication facilities, which are connected or related to the computer in a computer system or computer network.

7. COMPUTER NETWORK - 2(1)(j)
It means the interconnection of one or more computers through the
(i) Use of satellite microwave terrestrial line or other communication media.
(ii) Terminals or a complex consisting of 2 or more interconnected computers whether or not the interconnection is continuously maintained.

8. COMPUTER RESOURCE - 2(1)(k)
It means computer system, computer network, and computer database software.

9. COMPUTTER SYSTEM - 2(1)(l)
It means a device or collection of devices including input and output support devices and excluding calculations, which are not programmed.

10. DATA - 2(1)(o)
It means a representation of information, knowledge factor concepts or instruction which are being prepared or have been prepared in a formalized manner & is intended to be processed, is being processed or has been processed in a computer system or a computer network.

11. DIGITAL SIGNATURE - 2(1)(p)
It means authentication of any electronic records by a subscriber by means of an electronic method or procedure in accordance with provisions Section 3.

12. ELECTRONIC RECORD - 2(1)(a)
Data, Record, Data Generated, image or sound stored, received or sent in an electronic form or microfilm.

13. FUNCTION - 2(1)(u)
In relation to a computer includes logic control, arithmetical process deletion, storage & retrieval and communication from or within a computer.

14. ORIGINATOR - 2(1)(ZA)
Originator means a person who sends, generates, stores or transmits any electronic message or causes any electronic messages to be sent, generated, stored or transmitted to any other person but does not include an intermediary.

WINDING UP

1) According to Professor Gower winding up of a company is a process where by its life is ended & its property administered for the benefits of its creditors & members.

2) An administrator called the liquidator is appointed & he takes control of the company, collects his assets pays his debts & finally distributes any surplus among the members in accordance with their rights.

3) In short it means a proceeding by which a company is dissolved.

TYPES OF WINDING UP (Section 425)

The act provides for two types of winding up: -
(i) Compulsory winding up under order of the tribunal.
(ii) Voluntary Winding Up – It is of 2 types: -
(a) Members Voluntary Winding Up
(b) Creditors Voluntary Winding Up

WINDING UP BY TRIBUNAL (VVVV Imp)

The grounds of compulsory winding up have been stated in Section 4(b)

A company may be ruled up in any of the following circumstances by the tribunal: -

(i) If the company has, by special resolution resolved that the company be wound up by the tribunal.

(ii) If default is made in delivering the statutory report to the registrar or in holding or statutory meeting - default is made.

(iii) If the company does not commence its business within a year of its incorporation or suspends business for a whole year.

(iv) If the number of members is reduced in the case of a public company below 7 & in the case of a private company below 2.

(v) If the company is unable to pay its debts.

(vi) If the tribunal is of the opinion that it is just on equitable the company should be wound up.

CIRCUMSTANCES OF WINDING UP OF A COMPANY

The tribunal may order winding up of a company under the just or an equitable clause under the following circumstances: -

The tribunal has a wise discretionary power to order winding up whenever it appears to be desirable.

(a) DEADLOCK – When there is a deadlock in the management of a company it is just & equitable to order winding up.

(b) LOSS OF SUBSTRATUM – The substratum of a company can be said to have disappeared only when the object for which it was incorporated has substantially failed or when it is impossible to carry on the business of the company except at a loss or the existing & possible assets are inefficient to meet the existing liability.

(c) It is unjust and equitable to wind up a company where principal shareholders have adopted an aggressive or oppressive or squeezing policy towards the minority shareholders.

(d) It is just an equitable to wind up a company if it has been conceived and brought for in fraud or for illegal matters.

(e) If the company has made default in filing with the registrar of companies its balance sheet & profit & loss account or annual return for any 5 consecutive financial years.

(f) It is just & equitable to wind up where the company has acted against the interest of the sovereignty & integrity of Indian, the security of the state, friendly relation with foreign states public order decency or morality.

(g) A company may be wound up if it is of the opinion that the company should be wound up under the circumstances specified in section 424(g) as a sick industrial company.

VOLUNTARY WINDING UP

A company may be wound up voluntarily in the following 2 ways: -

1. BY ORDINARY RESOLUTION – A company may be wound up by passing an ordinary resolution when the period if any fixed for the duration of the company by the Articles of Association has expired. Similarly when the event if any occurs on the occurrence of which the AOA provide that the company is to be dissolved.

2. BY SPECIAL RESOLUTION – Winding up commences at the time when the resolution was passed within 14 days of the resolution, the company shall give notice of the resolution by advertisement in official gazette & also in same newspaper.

Voluntary Winding Up is of 2 kinds namely: -
a. Members Voluntarily Winding Up
b. Creditors Voluntarily Winding Up

(1) MEMBERS VOLUNTARILY WINDING UP
A liquidator is appointed & his remuneration is fixed by the company in general meeting of the shareholders, the liquidator is not to take charge unless his remuneration is fixed within 10 days of the appointment, the company should give a notice to the registrar on the appointment of the liquidator all the powers of the Board of Directors shall come to an end except when the company of the liquidators sanctions them to continue.

(2) CREDITORS VOLUNTARILY WINDING UP
The company calls a meeting of the creditors the Board of Directors has to lay before the meeting, the full statement of the position of the company’s affairs & the estimated amount of their claims, a copy of any resolution passes must be filed with the registrar.

## Business Legislation Notes - Prof. Bijoy Kumar Dutta - Part 4

10th July, 2006 – Bijoy Kumar Dutta – Business Legislation

A NEGOTIABLE INSTRUMENT means a promissory note, bid of exchange or check, payable either through order or through bearer. These 3 kinds of instruments are recognised as negotiable instrument.

CHARACTERISTICS OF NEGOTIABLE INSTRUMENT

1) FREELY TRANSFERBLE – The property in a Negotiable Instrument passes from one person to another by delivery, if the instrument is payable to bearer by endorsed & delivery if the instrument is payable by order.

2) TITLE or HOLDER – Free from all defects a person taking an instrument bonafidely & for value is known as HOLDER in due course, gets the instrument free from all defects, in the title of the transfer.

3) RECOVERER – Holder in due course can sue upon a Negotiable Instrument in his hwn way for the recovery of their ********

4) PRESUMPTIONS –
a) CONSIDERATION – Every Negotiable Instrument is presumed to have been made, drawn, accepted, endorsed, negotiated or transferred for considerations.

b) DEBT – Every Negotiable Instrument bearing a debt is presumed to have been made or drawn on some date.

c) TIME OF ACCEPTANCE - When a minimum exchange is accepted, it is presumed that it was accepted within a presumary time of its debt & before it was accepted.

d) TIME OF TRANSFER – Every transfer of Negotiable Instrument is presumed to have been made before its maturity.

e) When an instrument is lost it is presumed that it was newly stamped.

f) Endorsement appearing upon an Negotiable Instrument are product to have been made in the order in which they appear thereon.

Section 4
PROMISSORY NOTE (Imp)

A promissory note is an instrument in writing (not being a bank note or a currency note) containing an unconditional undertaking signed by the mega to pay a certain sum of money only through order of a certain person or through the bearer of an instrument.

The person who makes the promise to pay is called the MAKER. The person who gets money is called the PAYEE.

Question
What are the ESSENTIAL ELEMENTS of a promissory note?

The Essential Elements are: -
1) The instrument must be in writing.
2) The instrument must be signed by the maker.
3) The instrument must contain a promise to pay – must be expressed & not implied.
4) The instrument must be unconditional.
5) The instrument must be stamped.
6) The sum of money to be paid must be certain.
7) The sum of money must be legal tender money of India & not a foreign currency.
8) Sum of money is payable to a definite person or to his order.
9) Sum of money is payable on demand or after a certain definite time.

AN EXAMPLE OF A PROMISSORY NOTE: -

On demand, I promise to pay Vaijayanta Chattoraj of 29A, RKA Lane, Kol-10. or order a sum of Rs 500/- (five hundred only) with interest @ 18% per annum, for value received in cash.

STAMP
Kalyan Kumar Sen
of Jeliapara Lane
Kolkata –12
10-7-2006

Problem
1) I promise to pay 7 days after D’s marriage.
A- A condition appears here, so not a Promissory Note.
2) I owe you Rs 100. Is it a promissory note?
A- It is an acknowledgement of indebtedness. It does not have the phrase that “I promise to pay”, so not a promissory note.

BILL OF EXCHANGE (VVV Imp)

A Bill of Exchange is or instrument in writing containing an unconditional order signed by the maker directly a certain person to pay certain sum of many only to or to the order of a certain person, or to the bearer of the instrument.

Section 5
The maker of the Bill of Exchange is called the DRAWER.
The person who is directed to pay is called the DRAWEE.
The person who will receive the money is called the PAYEE.
It is the holder’s duty to present the Bill of Exchange. The drawee signifies his acceptance by signing.

ESSENTIAL ELEMENTS OF BILL OF EXCHANGE (VVV Imp)

1) The instrument must be in writing.
2) The instrument must be signed by the drawer.
3) The instrument must contain an order to pay.
4) The drawer, drawee & payee must be certain.
5) The payment must be in legal tender money of India.
6) The payment must be payable to a definite person or according to his order.
7) The instrument must be stamped.
8) The payment must be payable on demand to the drawer after a definite period of time.

AN EXAMPLE OF A BILL OF EXCHANGE

Pay Vaijayanta Chattoraj of RKA Lane Kol-10 or order, the sum of Rs 10,000 (Rupees Ten Thousand only) for value received in cash.
Kalyan Kumar Sen
of Jeliapara Lane
Kol-12.

STAMP
10-7-2006

To Debasish Ghoshal
Kol-6

Accepted
D. Ghoshal.
(it is not possible if it isnot accepted here)

Problem
1) English Case
Please let the bearer have 7 pounds and oblige.
A- It is not a bill of exchange as it is a request & not an order.

Section 6
A check is a bill of exchange drawn upon a specified banker (drawee) on single document.

ESSENTIAL ELEMENTS
a) A check must fulfill all the essential requirements of a Bill of Exchange.
b) A check may be payable to bearer or order but in either case it must be payable on demand.
c) The banker named there must pay it when it is presented for payment to it during office hours provided the check is validly drawn and the drawer has sufficient funds to his credit.
d) The signature must tally with the specified signature kept in the bank.
e) The check must be dated.
f) Check becomes due of payment on the date specified on it.
g) The check drawn for a future date is quite valid.
h) A check must be presented as valid but after due date but the usual validity is 6 months.

Section 8
HOLDER (VVV Imp)
Holder of a Negotiable Instrument means any person entitled in his own name to the possession thereof & to receive or recover the amount due there from the parties there to, thus clerks or servants having the instrument in their custody are not holders as they are not entitled in their own name to rescue or recover the amount.

Section 9
HOLDER IN DUE COURSE
The holder of an Negotiable Instrument is called the holder in due course, till he satisfies the following criteria.
1) He obtained the instrument for valuable consideration.
2) He becomes holder before its maturity.
3) He had no cause to believe that any defect existed in the title of the person from whom he derived the instrument.

Question
What are the PRIVILEGES for a holder in due course?
A – The holder in due course enjoys the following privileges under the Negotiable Instrument Act.
1) He gets better title than that of transferor.
2) Privilege in case of incohed stamp instruments – A person who delivers the said instrument is precluded from asserting as against the holder in due course that the instrument has not been filled in accordance with his authority. The stamp being sufficient to cover the amount.
3) Liability of prior parties – Every prior party is liable to a holder in due course till the instrument is satisfied.
4) The acceptor of a bill of exchange cannot say as against the holder in due course, that the other parties to the bill of exchange were fictitious.

Section 8
HOLDER (VVV Imp)
Holder of a Negotiable Instrument means any person entitled in his own name to the possession thereof & to receive or recover the amount due there from the parties there to, thus clerks or servants having the instrument in their custody are not holders as they are not entitled in their own name to rescue or recover the amount.

Section 9
HOLDER IN DUE COURSE
The holder of an Negotiable Instrument is called the holder in due course, till he satisfies the following criteria.
1) He obtained the instrument for valuable consideration.
2) He becomes holder before its maturity.
3) He had no cause to believe that any defect existed in the title of the person from whom he derived the instrument.

Question
What are the PRIVILEGES for a holder in due course?
A – The holder in due course enjoys the following privileges under the Negotiable Instrument Act.
1) He gets better title than that of transferor.
2) Privilege in case of incohed stamp instruments – A person who delivers the said instrument is precluded from asserting as against the holder in due course that the instrument has not been filled in accordance with his authority. The stamp being sufficient to cover the amount.
3) Liability of prior parties – Every prior party is liable to a holder in due course till the instrument is satisfied.
4) The acceptor of a bill of exchange cannot say as against the holder in due course, that the other parties to the bill of exchange were fictitious.

## Business Legislation Notes - Prof. Bijoy Kumar Dutta - Part 3

26st June, 2006 – Bijoy Kumar Dutta – Business Legislation

SALE OF GOODS ACT 1930

Sale of goods act defines a contract of sale of goods as a contract whereby the seller comes first or agrees to transfer the property of the goods to the buyer for a price.

Section A Sub Section 3 states that where in a contract of sell the property in the goods is transfer from the seller to the buyer the contract is called a sale, where the transfer of property in the goods is to take place at a future day or subject to same conditions here in after to be fulfilled the contract is called an agreement sale.

Imp

An agreement to sell is an executed contract where as sell is an executed contract. So contract of sell includes both sell & agreement to sell.

ESSENTIAL ELEMENTS OF CONTRACT OF SELL

1. TWO PARTIES: A buyer & a seller.

2. GOODS: There must be same goods the property in which is or is to be transferred from the seller to the buyer. Property means the general property in the goods or in other words it means the right of ownership.

3. PRICE: The consideration for the contract of sale called price must be legal, tender, money of India. (Rupee)

4. TRANSFER OF PROPERTY: There must be transfer of general property distinguished from special property.

GOODS – (VVV Imp)
Goods means any kind of movable property except actionable claims & money & includes stocks & shares growing crops, grains & things attached to and forming part of the land which are agreed to be several before sale or under a contract of sale.

ACTIONABLE CLAIM – is a claim, which is actionable. It means a claim to a debt other than a debt secured by mortgage of immovable property or hypothecation or pledge of moveable property, which a civil court recognises, an affordable ground for relief.

Hipothecation – Money borrowed from tender but possession with owner.
Pledge – Property of goods is lying with tender.

CLASSIFICATION OF GOODS
1) Existing Goods
2) Future Goods
3) Contingent Goods

1) EXISTING GOODS –
Existing goods are those goods which are already in existence & which are physically present in some persons ownership & possession. Existing goods are classified into
a) Specific Goods
b) Certain Goods

a) a) SPECIFIC GOODS - Specific Goods are those goods, which are clearly identified & recognised as separate things. Eg: a motorcar, a briefcase, a watch.
b) GENERIC GOODS – Generic Goods are those goods, which are indicated by description & are not separately identifiable. Eg: a seller agrees to sell one bag of rice to a buyer for 100 bags of rice available in his go down.

2) FUTURE GOODS –
Future goods are those goods, which will be manufactures by the seller after the control of sell.
Eg: furniture, wood or raw material is converted into furniture.

3) CONTINGENT GOODS –
There may be contract for sell of goods. The acquisition of which depends upon a contingency, which may or may not happen.
Eg: ‘A’ agrees to sell to ‘B’ a certain ring provided he is able to purchase it from its present owner.

DOCTORINE OF CAVET EMPTOR (let the buyer beware)

There means ordinarily a buyer must buy goods after satisfying himself of quality & fitness. If a buyer makes a bad choice, he cannot blame the seller & recover damages from him.

HIGHER PURCHASE v/s INSTALMENT

Higher Purchase Agreement is one in which a person takes delivery of goods, promising to pay the price by a certain no of installments & until full payment is made to pay higher charges for using the goods.The ownership in the goods is not transferred until the last payment is made.

In Installment Sale, the purchaser becomes the owner of specific goods immediately although the total price is to be paid in a no of installments or in other words, ownership is transferred at the payment of installments.

DIFFERENCE BETWEEN SALE ND BARTER

SALE: Where the property in the goods is transferred from seller to the buyer for a price.

BARTER: The transaction where goods are exchanged for goods.

CONDITION & WARRANTY

Before a contract of sale is entered into, a seller often makes statements with reference to the goods, which influence the buyer to clinch the bargain.

Whether any statement made by the seller with reference to the good is a stipulation forming part of the contract or is a mere representation namely expression of opinion forming no part of the contract depends upon the construction of the contract.

Section 12 of the sale of goods act states that a stipulation or a term in a contract of sale w.r.t. goods may be a condition or a warranty.

CONDITION

Section 12 Sub Section 2

Condition is a stipulation essential to the main purpose of the contract in breach of which gives rise to a right to treat the contract as repudiated.
Eg: I have a saree shop. During Puja/Deewali, I know women will come to buy sarees. I make a condition with the saree manufacturer in Bangalore to send 2000 metres before 31stSeptember. If they send after the time (breach of contract), then I can ask for or sue for damages and contract termed as repudiated.

WARRANTY (VVV Imp)

Section 12 Sub Section 3

It is also a stipulation, collateral to the main purpose of the contract. The breach of which gives rise to claim for damages but not a right to reject the goods & treat the contract as repudiated.

Section 13

Condition can be treated as a warranty by the buyer.

WAIVER

1) The buyer may waiver the condition or may elect to treat the breach of condition is a breach of warranty and accept performance ******** & sue for damages if he has suffered any loss.

COMPULSORY WAIVER

Where a contract of sale is not sever able & the buyer has accepted the goods on part thereof, he cannot repudiate the contract but can only sue for damages. It is called Compulsory Waiver.

IMPLIED CONDITION (V Imp)

1) Condition as to the title of goods.
In a contract of sale, unless the circumstances are such as to show different intentions, there is an implied condition on the part of the seller that:
a) In the case of sale he has a right to sell the goods &
b) In the case of an agreement to sale he will have the right to sell the goods at the time when the property of the goods is to pass.

Rowland v/s Divar Case
The plaintiff bought a motorcar from the defendant & used it for several months. After sometime, it appeared that the defendant had no title to it & the plaintiff was compelled to surrender it to the owner.

2) Sale by Description
Where there is a contract of goods by description, there is an implied condition that the goods shall correspond to the description. This rule of law is summarized in a maxim “If you contract to sell peas, you cannot oblige a party to take beans”.

CONDITION AS TO FITNESS / QUALITY

When the buyer expressly or by implication makes known to the seller, the particular purpose for which he needs the goods & depends upon the skill & judgement of the seller whose business is to supply goods of that description, then there is an implied condition that the goods shall be reasonably fit for the purpose.

Eg: Manchester Lines Limited v/s Rea Limited
Plaintiff who were ship when ordered from the defendants 500 tons of southwest coal for bunkering their steel ship. Defendants failed to supply the coal of the quality promised but delivered coal which was unsuitable for the plaintiff’s ship or steamer. Here the plaintiff had relied upon the sellers judgement & accordingly entitled to sue for damages.

SALE BY SAMPLE (VVV Imp)

1) In the case of sale by sample there is an implied condition that the bulk shall correspond to the sample in quality.
2) The buyer shall have the opportunity of company the goods with the sample.
3) The goods shall be free from any defect.
4) These implied conditions apply only to latent defects, which are not discoverable on an examination of the sample, but the seller is not responsible for patent defects. (ja chokhe dekha jay)

WARRANTY

1) The buyer must get quiet possession.
2) The goods must be free from encumbrances.

28st June, 2006 – Bijoy Kumar Dutta – Business Legislation

Section 5
How is Contract of Sale made?
The contract of sale may be made in any of the following modes:-
1) Immediate delivery of goods
2) There may be immediate payment of price and the delivery is to be made at a future date.
3) There may be immediate delivery of goods & immediate payment
4) It may be agreed that the delivery / Payment or both due to be made even no of installments
5) Or may be agreed the delivery / payment or both to be made in future.

SALE & BAILMENT

In sale, the property in the goods is transferred from the seller to the buyer for a price but in bailment there is only transfer of possession from the bailer to the bailey for a purpose.

DIFFERENCE BETWEEN EARNEST MONEY & ADVANCE (Imp)
Section 74 of the Sale of Goods Act defines earnest money as a security for fulfillment of agreement. Usually an understanding is made or a team in the agreement is incorporated to the effect that if a contract is broken by the buyer, the seller is to retain the earnest money as compensation, where as if the contract is fulfilled, the amount is credited to the purchase price pay but in the case of advance, the amount is not forfeited.

UNPAID SELLER (VVV Imp)

Qs) Who is an unpaid seller?
A - Seller of goods is deemed to be an unpaid seller when
a) Whole of the price of goods has not been paid or tendered.
b) When a bead of exchange or other negotiable instalments, which has a condition on the basis of which it was received, has not been fulfilled on by a reason of dishonour of instruments.

REMEDY OF UNPAID SELLER
3 remedies against goods.
6 remedies against goods.

(i) AGAINST THE GOODS
1) Seller’s lien – An unpaid seller of goods who is in possession of them is entitled to retain them until tender of payment has been made, when the goods have been sold.
a) Without any stipulation as to credit or
b) On credit, but time has expired or
c) When the buyer becomes insolvent.

2) Right of stoppage in transit – When the goods are in the course of transit but the buyer of goods become insolvent, then the seller can resume possession from the carrier.

3) Right of resale of the goods – The unpaid seller who has retained possession of the goods in exercise of his right of lien or who has resumed possession from the carrier upon the solvency of the buyer has the right of resale of the same goods.

1) Rights of unpaid seller against the buyer – When under a contract of sale the property in the goods has already passed to the buyer & the buyer refuses / neglects to pay the price of the goods according to the terms of the contract, the seller may file a suit for recovery of price of goods sold & delivered.

2) Sue for damages – When the buyer wrongfully refuses or neglects to accept & pay for the goods, the seller may sue for damages for the loss he had suffered.

3) Claim for special damages & interest – Seller may recover special damages / interest where by law special damages & interest may be recovered.

I NEED TO WRITE THIS PART (2nd HALF OF THE ABOVE CLASS)

3rd July, 2006 – Bijoy Kumar Dutta – Business Legislation

Section 2
A definition of service e under section 2 means service of any description which us made available to potential users & includes what not the limited the provision of facilities in connection with banking, financing, insurance, transport, processing, entertainment,, amusement, or the purity of user other information but does not include the rendering of any service free of charge or under a contract of personal service.

Now medical service is included in deficiency of service as per decision of non Supreme Court.

Question
What are the rights given to a consumer under CP Act 1986?
The consumer has been given the rights under the CP Act, which are as follows: -

1) RIGHT TO SAFETY - Right to be protected against the marketing, the goods & services that are hazardous to life & properties.

2) RIGHT TO BE INFORMAL – About the quality, quantity, policy, purity, standard/price of goods & services so as to protect the consumer against unfair trade practice.

3) RIGHT TO CHOOSE – To be assure wherever possible access to a variety of goods & services at competitive prices.

4) RIGHT TO BE HEARD – To be assured that the consumers interests will receive due considerations at appropriate forums for a **********.

5) RIGHT TO SEEK REDRESSAL against unfair trade practice or restriction trade practice of unscrupulous exploitation of consumers.

6) RIGHT TO CONSUMER EDUCATION

UNFAIR TRADE PRACTICE – Means a trade practice which is in purpose of providing a sale of new supply of any goods or for the provision of nay sale service, adopts any unfair record or unfair or deceptive practice including any of the following practices, namely: -

(i) False fully represents that the goods are of a particular standard, quantity grade composition style or model.
(ii) False fully represents any *******second hand , relocated, reconditioned or old goods as new gods.

It means a trade practice, which tends to bring about manipulation of price or its conditions of delivery or to affect flow of supplies in the market relating to goods or services. It is in such a manner so as to impose, all the consumers unjustified costs, all restrictions & shall include any trade practice, which requires a consumer to buy or hire or avail of any goods or services. As a condition precedent, to buy, hiring all availing of other goods or services.

RIGHT TO SEEK REDRESSAL
Section 9

(a) Establishment of consumer disputes, redressal agencies consumer disputes redressal forum to be known as district forum in each district of the state.

(b) Consumer disputes redressal commission to be known or state commission in the state established by state government.

(c) National consumer disputes redressal commission known as national commission established by central government.

COMPOSITION & JURISDICTION (VVVV Imp)

Composition & Jurisdiction of district forum, state commission & national commission.

Section 10
COMPOSITION OF DISTRICT FORUM
Each district forum shall consist of
a) A person who is or has been or is qualified to be a district judge, who shall be its President.
b) Two other members, one of who shall be a woman, who shall have the following qualifications namely: -
(i) Be not less than 35 years of age,
(ii) Possess a bachelors degree
(iii) The persons of ability, integrity & standing & hand adequate knowledge & experience of at least 10 years in dealing with problems relating to economics law, commence, accountancy, industry, public affairs or administration.

DISQUALIFICATION

The convicted & sentenced to imprisonment for an offence, which involves moral terminology, insolvent, unsound mind, removal or discretion of service from the government.

Every appointment should be made by state government on the recommendation of selection consists of committee consisting of president of State Commission & Departmental Secretary. Every member shall hold office for a term of 5 years / 65 years.

JURIUSDICTION OF DISTRICT FORUM
Section 11

District Forum shall have jurisdiction to entertain complains where the value of the goods or services and the compensation if any, claim does not exceed 20 lacs.

COMPOSITION OF STATE COMMISSION
Section 16

Each commission shall consist of
a) A person who is or have been a judge of a high court court, who shall be its president.
b) Not less than 2, one of who shall be a woman, who shall have the following qualification, same as District Forum.

Section 17
Section 17 have jurisdiction
a)
(i) To entertain complains where the value of the goods or services & compensation if any
claim exceeds 20 lakhs but does not exceed 1 crore.
(ii)Appeals against the order of any District Forum.

b) Revisional Jurisdiction

Section 20
COMPOSITION OF NATIONAL COMMISSION (VVVV Imp)

a) A person who is or has been a judge of Supreme Court, he shall be its President.
b) Not less than 4 of whom are must be a woman, who shall have the following qualification same as District Forum. (Sir’s favourite)

Section 21
JURISDICTION OF NATIONAL COMMISSION

Shall have jurisdiction to entertain
a)
(i) To entertain complains, where the value of goods& or services & composition if any claim exceeds 1 crore.
(ii) Appeals against the order of any state commissions.

Question
What are the RELIEFS a claimant can get?

1) Removal of direct pointed out by laboratory from the goods.
2) Replacement of the goods with new goods of similar description.
3) Return of price or charges paid.
4) Payment of compensation awarded.
5) Removal of defects of goods or deficiencies in service.
7) Not to offer hazardous goods for sell.
8) Withdraw hazardous goods.
a) Cease manufacturer of hazardous goods.
b) To pay some sum, if it is an opinion that loss or injury has been suffered by large no of consumers.

General Knowledge
He is an American Activist who proposed this above relief.

Who is Malubhai Shah?
He is an Indian Activist.

5th July, 2006 – Bijoy Kumar Dutta – Business Legislation

Question
What is ARBITRATION?

In simple words it is adjudication over disputes between parties by a judge who has been agreed upon by the parties to be the judge & decide upon the matter. Arbitration therefore means submission by two or more parties of their disputes to the judgement of a third person, called the arbitrator & who is to decide the controversy or dispute in a judicial manner.

Thus the usual feature of arbitration is the existence of a dispute between the parties and their agreement to refer it to the decision of a 3rd person with the intention that he shall act judiciously.

MINIMUM DISPUTE
Dispute means the matter in dispute & not the contention over it. The exp***** dispute shall include dispute of law as well as fact. It may relate to an act of commission or omission.
Eg: You are holding a certificate to which a person is entitled to or refusing to raise the transfer of shares.

DISPUTES MUST BE OF CIVIL NATUREMatters of criminal nature cannot be referred to arbitration. Matters of moral and spiritual nature are not fir subjects of arbitration.

DIFFERENT TYPES OF ARBITRATION
DOMESTIC ARBITRATION – Domestic Arbitration takes place in India when arbitation proceedings are subject matter of the contract & the merits of the disputes are governed by Indian Law or when the cause of action of the dispute arises wholly in India or where the party otherwise is subject to Indian Jurisdiction.

INTERNATIONAL ARBITRATION – It can take place either within India or outside in cases where there are the ingredients of foreign origin relating to the parties or the subject matter of the dispute.

In law, applicable the conduct of arbitration & merits of disputes may be Indian Law or foreign Law depending on the contract in this regard & the rules of the conflict of laws.

3. AD-HOC ARBITRATION – It is an arbitration agreed to and arranged by the parties themselves without reports to any institution. The proceedings are conducted & procedures are adopted by the arbitrator as per the agreement or with the concurrence of the parties.

4. INSTITUTIONAL ARBITRATION – Institutional Arbitration are conducted under the rules established by the arbitration organisation. Such rules are made to supplement in provision of the arbitration act in the matter of procedure.

5. STATUTORY ARBITRATION – Statutory Arbitration is conducted in accordance to tin provision of certain special acts, which specifically provide for arbitration in respect of disputes arising from matters covered by those acts.

Eg: - Electricity Act of 1910, Railways Act of 1889

ARBITRATION AGREEMENT

Arbitration Agreement means an agreement by the parties to submit or all certain disputes which have arisen or which may arise in respect of a defined legal relationship, whether contractual or not.

Whether contractual or not means that the relation ship between the parties could be created by express contract or might exist dehors (means without) the contract.

DEFINED LEGAL RELATIONSHIP means no categories of a legal relationship.

ESSENTIAL CONTRACTS OF ARBITRATION AGREEMENT

1) It must be writing though it need not be contained in a formal document. An arbitration agreement is in writing if it is contained in a: -
a) The document signed by the parties.
b) An exchange of letters, telex, telegrams or other means of telecommunication, which provide a record of agreement.
c) An exchange or statement of claims and defense in which the existence of the agreement is arranged by one party and denied by the other.

2) It must have all the essentials of a valid contact.
3) It may in the fall of an arbitration clause in a contract or in the fall of a separate entity.
4) There must be present or future difference in connection with some contemplated affair.
5) There must be the intention of the parties to settle such differences by some private tribunal.
6) The parties must agree in writing to be bound by the decision s of such tribunal.
7) The parties must be ad – item (both such have the same opinion).

APPONTMENT OF ARBITRATORS

The parties are free to agree to a procedure about the appointment of Arbitrator, in case of disagreement on the appointment of an arbitrator, in ad-hoc arbitration cases. Section 11 of the 1996 Act empowers the Chief Justice of High Court to appoint the Arbitrator or Arbitrator.

The Chief Justice is also empowered to designate any person or institution to take necessary steps for appointment of an Arbitrator.

AWARD

Question
What is an Arbitral Award?
An Award in an adjudication and its decision by the arbitrator upon the matter submitted to him. Section 30 of the Act recognises the liberty of the parties to come to a settlement.

The Arbitrator if satisfied about the genuineness and validity, of the settlement has to give an award in terms of settlement.

FORM AND CONTENT OF THE AWARD

An Award shall be made in writing and shall be signed by the member/s of the Arbitral Tribunal. The award shall state the reasons upon which it is based unless the party is dispersed it with it, or unless the award is an arbitral award on agreed terms.

The award shall state its date and place of arbitration and after it is made and published, a signed copy of it shall be delivered to each party.

(solenama means compromise)

REQUIREMENTS OF A VALID AWARD

(i) Must conform to submission.
(ii) Arbitrator should conform to terms of agreement under which he is appointed.
(iii) Must be certain in operative particulars
Eg: There must be certainty as to the party who has to perform, who has to receive payments, the time and mode of payment, the amount payable.
(iv) Must be complete and final.

Exam 2006 Question

Under Section 34 of the 1996 Act an aggrieved party may apply to court within three months of the receipt of the award for settling aside of the award.

The grounds for settling aside of the award are as follows: -
a) Incapacity of the parties
b) Invalidity of the agreement
c) Want of proper notice about the appointment of an arbitrator or arbitral proceedings.
d) Award deal with a dispute not referred to arbitration.
e) Arbitrary tribunal was defective in composition.
f) Subject matter of dispute not being capable of settlement by arbitration under the law for a time being enforced.
g) Arbitral Award is in conflict with public policy of India.