Thursday, July 13, 2006


Organisation Effectiveness & Change – Prof Satyajyoti De

Organisation’s Effectiveness & Change (OEC)

VIRTUAL ORGANISATION – in knowledge based industries like IT industry.

It is the ability to maximize the results in the competitive external environment.

The ability to sustain superior results over the time.

Process & Systems
Environment & Culture
Organizational Culture (discuss in details later)
Organisation Structure (we have read – book : Stroler or Freeman)

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

Management Style & Behaviour
Core Values & Behaviour
Workplace Dynamics
Teamwork Co-operation
Sense of purpose, confidence & ability

STRATEGIC INTENT (what the organisation want to do)
Organisation Purpose & Intent
Strategy Formulation
Business Plans & Objectives
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.

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


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.


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.


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

1) Leadership Process
2) Motivational Process
3) Decision Making Process
4) Communication Process
5) Goal Setting Process
6) Controlling
7) Interaction & Influence Process


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)


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.


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.




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


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)

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.




Empowerment is a process that increases the task motivation.

What 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.


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.


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


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

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.
S. R. Khan
date: 2/11/2006


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.



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


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


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.


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.


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

NOTE: - Learn appointment of Directors


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”.


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.


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.
(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.


(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 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.


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.

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.

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

Section 227(2)
provides the following statutory duties of an auditor
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.

The auditor must sign the auditors report.


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



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.

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.

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.

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.

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.

It means computer system, computer network, and computer database software.

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.

It means authentication of any electronic records by a subscriber by means of an electronic method or procedure in accordance with provisions Section 3.

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.


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.


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


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.


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.


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

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.

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.


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 ********

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

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.

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.


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.

Kalyan Kumar Sen
of Jeliapara Lane
Kolkata –12

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.


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.


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.


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


To Debasish Ghoshal
2, Jadunath Dey Road,

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

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.

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 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
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.

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 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
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.

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 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.


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.


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 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.

1) Existing Goods
2) Future Goods
3) Contingent 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.

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.

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 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.


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.


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.


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.


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.


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.


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.


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”.


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.


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)


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.


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.

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.


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.

3 remedies against goods.
6 remedies against 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.


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.

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.


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.

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 of district forum, state commission & national commission.

Section 10
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.


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.

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.

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
(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

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

Shall have jurisdiction to entertain
(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.

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.
6) Discontinue unfair trade practice or destructive trade practice.
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.
c) Issue corrective advertisement.

General Knowledge
Who is Ralph Nader?
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


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.

(Adjudication means bichar)

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.

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 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.


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).


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.


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.


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)


(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.

This page is powered by Blogger. Isn't yours?