PRACTICAL PROBLEMS
Problem-1. A and B were only two members of a private limited company. Both of them have been killed in a bomb blast. Does this company cease to exist? Explain. [B.COM. (H), D.U., 1993, 1996]
Ans. A company is an artificial person. It exists only in contemplation of law and is distinct from the members constituting it. Being distinct from the members, the death, insolvency or retirement of its members leaves the company unaffected. Members may come and go but the company can go forever. It continues even if all its human members are dead. Even where during the war all the members of a private company, while in general meeting were killed by a bomb, the company survived. Not even a hydrogen bomb could have destroyed it. [K/9 Meat Suppliers (Guildford) Ltd., Re (1996) 1 W.L.R. 1112]. The shares will be registered in the name of the nominees or legal successors.
Thus, the company does not cease to exist.
Common Seal- A company being an artificial person is not bestowed with a body of natural being. Therefore, it has to work through its directors, officers and other employees. But, it can be held bound by only those documents which bear its signatures. Common seal is the official signature of a company.
Problem-2 . A public limited company has only seven shareholders, all the shares being paid up in full. All the shares of one such shareholder are sold by the Court in an auction and purchased by another shareholder. The company continues to carry on its business, thereafter. Discuss the liabilities of the shareholders of the company.
Ans. The Problem in question relates to reduction of membership below the statutory minimum. Section 12 of the Companies Act requires a public company to have a minimum of seven members. If at any time the membership of a public company falls below seven and it continues its business for more than six months, then according to Section 45 of the Companies Act, 1956 every such member who was aware of this fact, would be individually (personally) liable for all debts contracted after six months.
Thus, in the above Problem, the remaining six members shall incur personal liability for the debts contracted by the company :
(i) If they continued to carry on the business of the company with that reduced membership (ie., 6) beyond six month period;
(ii) Only those members who knew of this fact of reduced membership shall be liable, for instance, one of the members who was abroad and thus not aware of those developments, shall not be liable;
(iii) The liability shall extend only to the debts contracted after six months from the date of auction of that member's shares.
Problem-3. The number of members in a public company got reduced to six on 10th Sept., 2006. The company incurs trade debts on 11th Sept., 2006, 2nd February, 2007 and 17th March, 2007. How far are the remaining six members liable for the debts?
Ans. Six members shall be personally liable only for the debt incurred on 17th March, 2007. In respect of the earlier two debts company alone shall be liable.
** For law on the subject, please see Answer to above Problem.
Problem-4. Directors of a public limited company accepted a bill of exchange on behalf o the company. But the word 'limited' was omitted from the name of the company at the time of acceptance. Who can be held liable for the payment of the bill?
Ans. According to Section 147 of the Companies Act, 1956, where an officer of a company signs on behalf of the company any contract, bill of exchange, hundi, promissory note cheque or order for money, such person shall be personally liable to the holder if the name of the company is either not mentioned, or is not properly mentioned. Thus, where on a cheque, the name of a company was stated as 'LR agencies limited' whereas the real name of the company was 'L&R Agencies Ltd.' the signatory directors were held personally liable (Hendon v. Adelman 1973, New Delhi LR 637).
However, personal liability, as aforesaid, will not be attracted where there is an accidental omission of the word 'limited' - Dermatine Co. v. Ashworth [1905] 21 T.L.R. 510. In this case a bill of exchange was accepted on behalf of a limited company but the size of the paper was shorter than the company's seal. As a result, the word 'limited' did not appear on the instrument. Held, the directors who accepted the bill of exchange were not personally liable because the omission was neither deliberate nor of negligent origin. It was an obvious error of most trifling kind and the mischief aimed at by the Act, did not exist here. Thus, if the omission is not deliberate or the result of negligence on the part of the Directors, they shall not be held liable.
Problem-5 . Two joint Hindu families carry on together a business as joint owners. The first family consists of 3 brothers and their respective sons, being 12 in number. The second family consists of the father, 4 major sons and 2 minor sons. Is the business illegal?
Ans. Where two joint families combine to carry on business as joint owners or in partnership, all major persons shall be counted as members. Minors are, however, to be excluded. An association comprising of more than 20 members is an illegal association if engaged in business other than banking. Since in the given Problem, it is not indicated that they are engaged in banking business, it may be assumed that they are not and thus since the total persons in the two joint families come to 22 including 2 minors, Le., only 20 major persons, business is not illegal.
Problem-6 . In a private limited company, it is discovered that there are, in fact, 54 members. C an enquiry, it is ascertained that 6 of such members have been employees of the company in a recent past and that they acquired their shares while they were still employees of the con Is it necessary to convert the company into a public limited company?
Ans. As per Section 3(l)(j), a company to be registered as a private company must restrict its membership to 50 only. However, in counting this number of 50 members, employee members and ex-employee members (ie., those who become members while in the employment of the company but now having ceased to be in the employment still continue to retain membership) are to be excluded. Thus, in the given case, the company shall continue to be a private company. There is no need for conversion.
Problem-7. The paid-up share capital of XYZ (Private) Company Ltd. is Rs. 20 lakhs consisting of 2,00,000 equity shares of Rs. 10 each fully paid-up. ABC (Private) Ltd. and its subsidiary DBF (Private) Ltd. are holding 60,000 and 50,000 shares respectively in XYZ (Private) Co. Ltd.
Examine with reference to the provisions of the Companies Act, 1956, whether XYZ (Pvt.) Co. Ltd. is a subsidiary of ABC (Pvt.) Ltd. Would your answer be different if DBF (P.) Ltd. is holding 1,10,000 shares in XYZ (Pvt.) Co. Ltd. and no shares are held by ABC (Pvt.) Ltd. in XYZ (Pvt.) Co. Ltd. ?
Ans. Section - 4 of the Companies Act, 1956, inter alia, provides that a company shall be deemed to be the holding of another where it holds more than half in nominal value of the equity share capital of the other. But, in this regard, shares held or power exercisable by a subsidiary shall be treated as held or exercisable by the said company. Thus, the shares held or power exercisable by a subsidiary shall be treated as 'held' or 'exercisable' by the holding company. Thus, in the given case XYZ (Pvt.) Ltd. shall be deemed to be the subsidiary of ABC (Pvt.) Ltd.
The second situation is rather simpler inasmuch as under Section 4(l)(c), a company which is a subsidiary of a subsidiary shall also be deemed to be the subsidiary of the holding company. Accordingly, XYZ (Pvt.) Ltd. shall be, or the basis of majority shareholding criterion, the subsidiary of DEF (Pvt.) Ltd. and DBF (Pvt.) Ltd. being subsidiary of ABC (Pvt.) Ltd.; XYZ (Pvt.) Ltd. shall also be subsidiary of ABC (Pvt.) Ltd.
Problem-8. Few friends purchased a property. Later on they promoted a company and sold this property to the company at huge profit. Can the company recover this profit from the promoters? [B. COM. (H) D.U. 1999]
Ans. Promoters are allowed to make profits and accordingly remunerate themselves provided they make a due disclosure of the same. Thus, the only prohibition is to make secret profits [See Gluckstein v. Barnes]. Thus, in the given case, company shall be entitled to recover the profit made by the promoters if they failed to disclose the same to an independent Board of Directors or alternatively to whole body of shareholders including future shareholders, Le., through prospec¬tus.
Problem.-9 All the seven signatures on a Memorandum of Association were forged by a person and a certificate of incorporation was duly obtained. Is the certificate of incorporation valid ? Explain. [BCOM. (H) D,U. 1992, 1995].
Ans. Yes; [See Section 35.]
Problem-10. A company was formed on the basis of a Certificate of Incorporation obtained by threatening the Registrar of Companies. Is the company legally formed?
Ans. Yes; [See Section 35.] [B. COM. (H)D.U. 1997].
Problem-11. A, a furniture dealer, entered into a contract with the company for the furnishing the offices of the company. The company went into liquidation before it could obtain certificate of commencement of business. Can A prove in the winding-up for the price of the furnishing supplied to the company?
Ans. No. All contracts after incorporation but before certificate to commence business is reed' are Provisional. In other words, they shall, on certificate to commence business being recei\ become enforceable against/by the company and shall become void if the same is not recei* Since the company has gone into liquidation, the question of certificate to commence busin being issued does not arise.
Problem-12. Advise 'Asiatic Government Security Life Insurance Co. Ltd.' whether it can seek, injunction against 'The New Asiatic Insurance Co. Ltd.' which was subsequently formed restarting it from having in its name the word 'Asiatic' on the ground that it has caused confusions can deceive the public.
Ans. The Act permits the promoters of a company to choose any suitable name for the company provided the name chosen is not undesirable. A name may be considered undesirable where it is too similar to the name of an already exist by company. In the present, problem since the two companies are in insurance business, it may Is to a natural inference on the part of the public that the two are inler-related because of thewu 'Asiatic'which is quite an imaginary word and does not mean anything. Mere addition of the wo? 'New' is not likely to give an impression that the two companies are different. Therefore, on asJ by Asiatic Government Security Life Insurance Co. Ltd. Court is likely to advise the New Asian Insurance Co. Ltd., to change its name and remove the word 'Asialic' therefrom.
Problem-13. M/s India Computers Ltd. was registered as a Public Company on 1st July, 2005 info State of Maharashtra. Another company by name M/s All India Computers Ltd, was registered! Delhi on 15th July, 2005. The promoters of ‘India Computers Ltd.’ have failed to persuade the Management of All India Computers Ltd. to change the company's name, as it closely resembles with the name of the first registered company.
Advise the Management of India Computers Ltd. about the remedies available to them under! provisions of the Companies Act, 1956.
Ans. If through inadvertence or otherwise, a company on its first registration or on its registration by a new name has been registered with a name which, in the opinion of the Central GovernmeiH is identical with or too closely resembles the name of an existing company, the company ma] change its name by passing an ordinary resolution and by obtaining the approval of the Centra Government in writing [Sec. 22]. Again, the company may change its name by following the aforesaid procedure, where an application has been made by a registered proprietor of a trade mark and, in the opinion of the Central Government, the name is identical with or too nearl resembles a registered trade mark of such proprietor under the Trade Marks Act, 1999. Thus, in the given case M/s India Computers Ltd- should approach the Central Government, am seek directions to be given to M/s All India Computers Ltd. to change its name by following the procedure as aforesaid. The application for the purpose must be made within 1 year ol the date of registration of M/s Al! India Computers Ltd. Period of 12 months is a statutory limitation to the right of a company to .seek change of name of the other company registered with a too similar name [Sidhvi Constructions (India) (P.) Ltd. v. Registrar of Companies (1997)].
Problem-14. ABC (Pvt.) Ltd. was incorporated on 10th June, 2003. A similar company with identical name and same objects was also incorporated on 10th June, 2004. ABC (Pvt.) Ltd. came to know about this and filed a petition on 10th January 2005. Explain the remedies available to the first company.
Ans. If a company is inadvertently registered with a name which, in the opinion of the Central Government, is identical with or too nearly resembles, the name by which a company in existence has been previously registered, the company registered later;
[See under name clause.]
(a) may, by ordinary resolution and with previous approval of the Central Government, signified in writing, change its name,.
(b) shall, if the Central Government so directs within twelve months of its registration, change its name by ordinary resolution within a period of three months from the date of such direction or such longer period as the Central Government may allow.
In the given case, ABC (Pvt.) Ltd. can complain to the Central Government or can make a representation (o the Regional Director under section 22 of the Companies Act, 1956 to issue suitable directions to the company incorporated on 10th June, 1997 for change of its name by passing an ordinary resolution.
In the instant ease, the company filed a petition on 10-1-2005 within 12 months of date of registration of second company and so cognizance shall be taken of the complaint. ABC Ltd. may also file a suit for injunction or other appropriate relief. The facts of the given case arc similar to KGK Compressors Ltd. v. K.E.Ltd. AIR 1986 Del. 181
Problem-15:. XY Ltd. has its registered office in Bihar. For better administrative control, the company plans to shift its registered office from Bihar to Delhi. The Bihar Government opposes such shifting on the ground that such transfer will cause revenue loss to the Slate. Discuss the validity of such opposition with reference to the case law on the subject.
Ans. LOSS OF REVENUE OR EMPLOYMENT OF STATE, WHETHER RELEVANT CONSIDERATION - In Orient Paper Mills Ltd. v. State (1957), it was observed that a State whose interests are affected by the change of the registered office to a different Stale has a locus standi to oppose shift of the registered office of a company. Accordingly, the Orissa High Court declined to confirm change of registered office from Orissa to West Bengal, in teralia, on the ground that in a Federal constitution every State has the right to protect its revenue and, therefore, the interest of the State must be taken into account.
But, Minerva Mills Ltd..Govt, of Maha.rashlra[1915], Justice Ray of the Bombay High Court held that the Company Law Board (now Central Government)* cannot refuse confirmation of the shifting of the registered office on the ground that the change would cause loss of revenue to a State or would have adverse effects on the general economy of the State. The question of loss of revenue to one State would have to be considered in the prospects of total revenues for the Republic of India and no parochial consider¬ations should be allowed to turn the scale in regard to change of registered office from one State to another within India.
Similar view was expressed in Rank Film Distributors of India Ltd. \. Registrar of Companies, West Bengal (1969), A Division Bench of the Calcutta High Court observed that State has no statutory right under section 17 to oppose the shifting of the registered office from one State to another.
It was further held that the argument that employment or sales tax or income-tax revenue of the State will be affected by transfer of registered office, is not tenable.
Articles contain a restrictive clause on shifting of registered office from one State to another.
Company Law Board has held mJindal Vijaynagar Steel Ltd., In re [2005] 63 SCL 7 that existence of restrictive clause in respect of inter-State change of registered office in the Articles is against the spirit of section 17 of the Act. This clause was included in the Articles as a result of a joint venture agreement of the company with KS1IDC, a Karnataka Government Industrial Development Corporation and it was held that this clause in the Articles cannot be forced by the company.
A printed or a typewritten copy of the special resolution both under section 146 and section 17, should be sent to the Registrar of Companies within 30 days of its passing.
A certified copy of the Company Law Board (now Central Government's)* order should be filed within three months thereof with the Registrar of Companies of each State la., old and the new. If it is not filed within the prescribed time, then the alteration shall, at the expiry of such period, become void and inoperative.
A notice of the new location of the registered office must be given to the Registrar of the State to which the of ficehas been shifted, within thirty days after the change of the office (section 146).
A company is in a position to shift its registered office from one State to another for certain purposes only. These are discussed in the following paragraphs (under 'Alter¬ation of objects'- the grounds being common).
Problem-16. The Management of Ambitious Properties Ltd. has decided to take up the business of food processing activity because of the downward trend in real estate, business. There is no provision in the object clause of the Memorandum of Association to enable the company to carry on such business. State with reasons whether its object clause can be amended. State briefly the procedure to be adopted for change in the object clause.
Ans. The given case falls under Section n(i)(d), viz, to carry on some business which under existing circumstances may be conveniently or advantageously be combined with the business of the company. Thus, the company can amend its object clause to take up the business of food • processing.
Problem-17. The object clause of the Memorandum of a company empowers it to'carry on distillery business and any other business that is allied to it. The company wants to alter its Memorandum so as to include the cinema business in its objects clause. Advise the company.
Ans. Section 17(1) of the Act permits alteration of memorandum to carry on some business which under existing circumstances may conveniently or advantageously be combined with the business of the company. Thus, Section 17(1) does not prohibit a company to diversify in areas other than those specified in the Memorandum. But, the business sought to be added must be such which can conveniently or advantageously be combined with the business of the Company. The High Court in Distilling Industries Ltd. v. Registrar of Companies [1963J 83 Comp. Cas. 811 (Punj.). [The facts of the given problem are based on this case] held that the cinema business could not be either conveniently or advantageously combined with the distillery business and, therefore, disallowed change of objects. Accordingly, alteration shall not be allowed.
5.4-3e. TO RESTRICT OR ABANDON ANY OF THE OBJECTS SPECIFIED IN THE MEMORAN¬DUM [SECTION 17(1 )(e)] - Even for deleting any portion of the object clause, the procedure laid down in Section 17 has to be followed.
Can shift of objects from 'other objects' to 'main objects' be permitted under section 17?
The Company Law Board which was faced with the aforesaid issue in the case of Mafatlal Consultancy Services (India) Ltd., In re [1995] answered it in the negative. Since the Amendment Act of 1996 though no approval of Company Law Board (now Central Government**) is necessary, the aforesaid case being the precedent, the same shall not be allowed,
TO SELL OR DISPOSE OF THE WHOLE OR ANY PART OF THE UNDERTAKING [SEC. - Where a company wishes to adopt a cut-back or retrenchment strategy, i.e.,
1. A company, in which the directors hold majority of the shares, altered its Articles so ve power to directors to require any shareholder, who competed with the company's to transfer his shares, at their full value, to any nominee of the directors. S had some the company, and he was in competition with the company. Is S bound by the alteration? ..power of the members to effect alteration in the Articles by passing special resolution is inasmuch as the alteration must be bona fide and in the interest of the company. In the «e, alteration requires taking over the shares of only those who competed with company's (i Therefore, empowering the directors to takeover shares of such members seems to be peral interest of the company as a whole and hence shall be valid. S shall be held bound toration. [see Side Bottom v. Kershaw Lease & Co. (1920)]
Problem-18 Thc Articles of a company provided that the shares of a member who became bankrupt would be offered for sale to other shareholders at a certain price. Is the provision binding on the shareholders?
Ans: The facts of the given Problem are based on the decided case oiBordand Trustee \. Steel Bros. |4Co. Ltd., in which case, the provisions in the Articles were held to be binding on the members. |The learned judge observed that "Shares having been purchased on these terms and conditions, lit is impossible to say that those terms and conditions are not to be observed". Thus, since Articles '""stitute a binding contract between the company and its members, the shareholders shall be \ bound by the stated provisions in the Articles.
Problem-19. A limited Company is formed with its Articles stating that one Mr, Srivastava sh the solicitor for the company, and that he shall not be removed except on the groui misconduct. Can the company remove Mr. Srivastava from the position even though he guilty of misconduct?
Ans. As between outsiders and the company, Articles do not give any right to outsiders again company, even though their names might have been mentioned in the Articles. An outsider c take advantage of the Articles to found a claim thereon against the company. Thus, in the case, the company shall succeed in removing Mr. Srivastava as the solicitor of the con without incurring any obligations. The facts given arc based on the decided case of Eleyv.Pt Government Security Life Assurance Co. in which similar decision was pronounced.
Problem-20 -Company 'A' lends money to Company 'B' on a mortgage of its assets and the procedure laid down in the articles was not complied with and the directors of the two companies were the same. Is the mortgage binding upon Company B?
Ans. Protection under the rule of Indoor Management is not available to anyone who is aware of the irregularity. In the given case, directors of the two companies being the same, they shall be deemed to have knowledge of the non-compliance of the prescribed procedure. Thus, mortgage shall not be binding on Company B.
**. NO KNOWLEDGE OF ARTICLES - Again, the rule cannot be invoked in favour of a person who did not consult the memorandum and articles and thus did not rely on them.
In Rama Corpartition v. Proved Tin & General Investment Co. [1952], Twas a director in the investment company. He, purporting to act on behalf of the company, entered into a contract with the Rama Corporation and took a cheque from the latter. The articles of the company did provide that the directors could delegate their powers to one of them. But Rama Corporation people had never read the articles. Later, it was found that the directors of the company did not delegate their powers to T. plaintiff relied on the rule of indoor management. Held, they could not, because they even did not know that power could be delegated.
Problem-21. The plaintiffs contracted with a director of the defendant company and gave him a cheque under the contract. The director could have been authorised under the company's articles, but was not in fact so authorised. The plaintiffs had not seen the Articles. The director misappropriated the cheque and the plaintiffs sued the company, Is the company liable?
Ans. The Problem relates to the protection that the outsider may claim against lack of authority on the part of the officers of the company. The rule commonly known as the Doctrine of Indoor Management, was first laid down in the case of The Royal British Bank v. Turquand However, it has been held that the rule of indoor management cannot be invoked in favour of a person who had no knowledge of the Articles of the company. It is because, in such a case the person cannot assume that the power (of which he has no knowledge) has been rightly exercised. In Rama Corporation v. Proved Tin and General Investment Co., on which the Problem in question is based, it was held that the plaintiffs could not rely on the rule of indoor management because they did not know the existence of the power to authorise the director.
Thus, in the present case, company shall not be held liable by the act of the director who has transacted beyond the scope of his authority. A principal can be held liable for the frauds of his agent only to the extent they are committed within the scope of the authority conferred upon him.
Problem-22. The authorized signatory of a company issued a share certificate in favour of X, which apparently complied with the company's articles as it was purported to be signed by two directors and the secretary and it had the company's common seal affixed to it. In fact, the secretary had forged the signatures of the directors and affixed the seal without any authority. Will the) certificate be binding upon the company?
Ans. In the case of Ruben v. Great Fingall Consolidated Ltd. (1906), the secretary of the company! issued a share certificate in favour of Ruben, which apparently complied with the company's | articles, as it was purported to be signed by two directors and the secretary and it had company's common seal affixed to it. In fact, the secretary had forged the signatures of the] directors and affixed the seal without any authority.
It was held that the certificate was not binding upon the company. Lord Lorcburn held: "It is quite] true that persons dealing with limited liability companies are not bound to inquire into their indoor] management but this doctrine which is well established, applied to irregularities which otherwise] might affect genuine transactions. It cannot apply to a forgery."
NEGLIGENCE- The 'doctrine of indoor management
Problem-23. X Co. Ltd., intended to buy a rubber estate in Peru. Its prospectus contained extracts from an experts report giving the number of rubber trees in the estate. The report was inaccurate. Will any shareholder buying the shares of the company on the basis of the above representation have any remedy against the company? Can the persons authorising the issue of the prospectus] escape from their liability?
Ans. In the event of any mis-statement in a prospectus, the allottees have certain remedies against I the company as well as those responsible for the issue of the prospectus. Thus, in the present case, the allottee shall have the right to claim compensation from the company for any loss that he might have sustained in terms of the value of shares. But, his claim against those responsible for issue of prospectus shall not succeed since they made the statement on the basis of the report of an expert whom they believed to be competent. Section 62(2) provides that in such circumstances, | one shall not incur liability. However, expert can be proceeded against.
Problem-24. A prospectus issued by a company contained a promise of subscription of a substantial amount by some persons so as to induce the public to subscribe. The plaintiff who was allotted 10 shares alleged material misrepresentation. Decide?
Ans. The Companies Act charges the company as well as every officer who may be guilty of '• inducing the members of the public to subscribe for its shares or debentures by including material misrepresentations as to a matter of fact. In such cases not only the party defrauded shall have a right to return the shares and claim his money back but damages can also be claimed. Besides these civil remedies, Section 63 imposes criminal liability on every person who authorises the issue' of such a prospectus. Liability under this Section may be imprisonment up to 2 years or fine up to Rs. 5,000 or both. Further, Section 68 imposes a penalty on every person responsible for inducing public to subscribe for the shares or debentures of a company by making false statements. Under Section 68, the liability may be punishment with imprisonment for a term up to 5 years or willi fine up to Rs. 10,000 or with both. In the present case, representation that substantial amounts were promised to be subscribed by some persons may be taken to induce the public if this happens to be untrue. Thus, those responsible for making such a statement shall be held liable for the above listed consequences,
Problem-25. A purchased from B 1000 shares of a company on the basis of a prospectus containing wrong statement. What remedies are available to A against the company?
[B.COM (II) D.U. 2000].
Ans. A shall have no remedy against the company; there being no privity of contract between A I and the company. The reliefs in terms of right of rescission and claim for damages are available i only to the parties to the contract. The concept of 'stranger to the contract' is not recognized. 'A1 in this case having purchased shares from 'B' and not from the company cannot have any remedies against the company; company not being a party to the contract.
Problem-26 Amar subscribed shares issued by FasUrak Ltd. The prospectus of Fasttrak Lid. included a statement which was misleading in the form and content. On the faith of the prospectus believing it to be a true. Amar subscribed for shares and sustained loss. Can Amar sue for compensation of loss? If so, who will be sued for such loss?
Ans. Yes; Amar can sue for compensation of luss: Section 62 of the Companies Act provides that an allottee is entitled to claim compensation from directors, promoters and any other persons who authorised the issue of a prospectus, for damages sustained by reason of any untrue statement in it.
However, he will have to prove that (i) misrepresentation was of material fact; (ii) he acted on misrepresentation; and (t'i'0 has suffered damages in consequences.
The following persons are liable to pay compensation for loss or damage sustained by reason of untrue statement included in a prospectus:
(i) every person who is a director of a company at the time of issue of prospectus;
(ii) every person who has authorised himself to be named in the prospectus and is so named cither as a director, or as having agreed to become a director either immediately or after an interval of time;
(iii) every person who is a promoter of the company; and (iv) every person who has authorised the issue of the prospectus.
However, where a person named in the prospectus has given a consent in the manner required for the issue of prospectus, shall not, by reason of having given such consent, be liable as a person who has authorised the issue of prospectus except in respect of untrue statement, if any, purporting to be made by him as an expert.
Mr. Amar having sustained loss because of having believed the facts given in the prospectus issued by Fasttrak Ltd. to be true, can sue for four categories of persons mentioned above lor compensation of his loss. Apart from above, he may sue the company for damages for deceit.
Problem 27. All statements in a prospectus issued by a public limited company were literally true, but it failed to disclose that the dividends stated in it as paid were not paid out of the realized profits. The statement that the company had paid dividend for a number of years was true. But the fact that company had incurred losses for all these years was not disclosed in tbe prospectus. An allottee of shares wanted to avoid the contract on the ground that the prospectus did not disclose this fact, which in his opinion, was very material. Will he succeed? Give reasons.
[B.Com (H) D.U. 2007]. [HINTS: REX V. KYLSANT, SEE PARA 7.9.1
Problem-28 The capital of 'X' Ltd. is Rs. 50 lakhs, consisting of Equity Share Capital of Rs. 40 lakhs anil Redeemable Preference Share Capital of Rs. 10 lakhs. The preference share capital is to be redeemed before 31st August 2007. The company is running in losses and its accumulated losses aggregated to Rs. 15 lakhs. The company wants to borrow Rs. 20 lakhs from financial institutions lo improve its working and also to redeem the preference share capital. Advise.
Ans. According to Section 80, redemption of preference share capital is permitted unly out of (i) profits of company, or (it) out of a fresh issue of shares made for the purposes of redemption. Thus, borrowing from financial institutions for redemption of preference shares shall not be permis¬sible. The amount may, however, be raised for improving its working. The limits to deposits do not apply to borrowing from financial institutions since the same is excluded from the expression 'deposit' as per Rule 2(b)(ii) of the Companies Acceptance of Deposits Rules, 1975.
Problem-29. ABC Company Limited at a general meeting of members of the company pass an ordinary resolution to buy-back 30% of its Equity Share Capital. The Articles of the Company empower the company for buy-back of shares. The company further decides that the payment for buy-back be made out of the proceeds of the company's earlier issue of equity shares. Explaining the provisions of the Companies Act, 1956, and stating the sources through which the buy-back of the companies own shares be executed. Examine. (i) Whether company's proposal is in order?
(») Would your answer be still the same in case the company instead of 30% decide to buy-back only 20% of its Equity Share Capital?
Ans. The Companies (Amendment) Act, 1999 has permitted companies to buy-back their own shares but subject to certain limitations and compliances. Sections 77A, 77AA and 77B contain the necessary provisions in this regard. Besides other requirements, in case of buy-back of equity shares, buy-back beyond 25% of the paid-up equity capital in a financial year is not allowed. Again, buy-back cannot be effected out of the proceeds of an earlier issue of the same kind of shares/ security. Moreover, special resolution of shareholders is required to be passed. Thus, the buy-back effected by the company is not valid on the following counts:
(i) Instead of special resolution, ordinary resolution has been passed.
(ii) Buy-back of 30% of equity share capital exceeds the maximum permissible buy-back, viz. 25%.
(iii) Buy-back could not have been effected from the proceeds of an earlier issue of equity shares.
Sources of Buy-back
Please see discussion in the aforesaid para.
'Substituted for 24 months by the Companies (Amendment) Act, 2001
Problem-30 A, the secretary of a company issues a certificate in favour of B by forging the signatures of two directors. He also affixes the seal of the company on the certificate without authority. Can B hold the company liable for the shares covered by the share certificate? Give reasons [B. COM. (H) D.U. 1998J
Ans. No - see Rubben v. Great Fingall Consolidated Co. [1906] under para 8.17-
Problem-31 DJA Company Ltd. is holding 40% of total equity shares in MR Company Ltd. The Board of Directors of MR Company Ltd. (incorporated on 1.1.1998) decided to raise the paid-up equity share capital by issuing further shares and also decided not to offer any shares to DJA Company Ltd. on the ground that it was already holding a high percentage of shares in MR Company Ltd. Articles of Association of MR Company Ltd. provides that the new shares be offered to the existing shareholders of the company. On 1.3.2001 new shares were offered to all the shareholders excepting DJA Company Ltd. Referring to the provisions of the Companies Act, 1956, examine the validity of decisions of Board of Directors of MR Company Ltd. of not offering any further shares to DJA Company Ltd.
Ans, In view of Section 81, decision of the Board of Directors of MR Company Ltd. is not valid. (For details see aforesaid discussion on Rights Issue)
Problem-32 "Sunrise Ltd." is authorised by its articles to accept the whole or any part of the amoun of remaining unpaid calls from any member although no part of that amount has been called 1 'X', a shareholder of the Sunrise Ltd., deposits in advance the remaining amount due on his shara without any calls made by "Sunrise Ltd."
Referring to the provisions of the Companies Act, 1956, decide the rights and liabilities of Mr.) which will arise on the payment of calls made in advance.
Ans. Section 92 of the Act provides that the directors may, if authorised by the Articles, alia shareholders to pay the whole or a part of the amount remaining unpaid on any shares held! them, although no part of that amount has been called up. On the amount so received the compa may pay interest at such a rate as may be agreed upon between the Board and the members payaj this sum in advance. In this regard, Regulation 18 of Table A provides as follows:
"18. The Board may. if it thinks fit, receive from any member willing to advance the sum, all or in] of the money, uncalled and unpaid upon any shares held by him; and (b) upon all or in part of the moneys so advanced, may (until the sum would, but for such advance, become presently payable) pay interest at such rate exceeding, unless the company in general meeting shall otherwise direct; 6% per annum, as may be agreed upon between the Board and the member paying the sum in advance."
According to Section 92(2) a member of a limited liability company having share capital shall not be entitled to any voting rights in respect of the moneys so paid in advance by him until the same becomes payable.
However, Section 93 provides that dividends may be paid on advance calls, if so authorised by the Articles.
1. Discuss the law relating to forfeiture of shares.
2. Explain the requirements of valid forfeiture of shares.
3. State the circumstances under which shares can be forfeited. Discuss the procedures in forfeiture of shares by a company which has adopted Table A of Schedule I to Companies Act, 1956 as its Articles of Association.
4. When and how shares may be forfeited? What is the legal effect of forfeiture?
5. State the conditions to be satisfied before a company may forfeit the shares. Whatisl effect of such forfeiture? [B. COM. (H) D.U. 1994,20
Surrender of shares
Surrender of shares means voluntary return of shares by the shareholder to the company for cancellation. There is no provision for surrender of shares either in I Companies Act or in Table A. In Bellerby v. Rowland & Marwood Steamship Co. [1902], it was observed that a company cannot accept a surrender of its shares, "asev^ surrender of shares, whether fully paid-up or not involves a reduction of capital wh is unlawful... forfeiture is a statutory exception and is the only exception". However,! articles of some companies may allow surrender of shares as a short cut to thelfl procedure of forfeiture, where their forfeiture is otherwise justified - Trevor
Problem-33 .Ram Lalis a shareholder of a company holding 100 shares. Ram Lal dies leaving Mohail as his legal representative. Mohan is not a member of the company. Till then, the shares do nut vestj in him and, therefore, he has no right to transfer the same. [B. COM. (H) D.U. 20(
Ans. No; Transfer is not valid. Mohan can effect a valid transfer only after the succession in I favour is duly registered with the company. Till then, the shares do not vest in him and, therefore,! he has no right to transfer the same.
Problem-34 . (a) State whether the following persons can be counted for the purpose of quo.. a general meeting of a public company: (0 a person representing three member companies; (ijj the joint owners of shares arc present at the meeting.
(&) State also whether it is possible for a single member to constitute a meeting of a comp
Ans. («}((). To be counted as three members personally present. (n) To be counted as one member personally present.
(/>) yes. (z) under Section 167 [AGM convened or directed to be convened by Central Govern (ii) under Section 186 [EGM at the direction of Tribunal]; (Hi) in case of class meetings
Problem-35: Prosperity Limited Issued a notice for holding of its Annual General Me on November 7, 2006. The notice was posted to the members on October 16, 2006. Some me of the company allege that the company had not complied with the provisions of the Co Act with regard to the period of notice and as such the meeting was not validly called. (i) Whether the meeting has been validly called? (ii) If there is a shortfall in the number of days by which the notice falls short of the statij requirement, state and explain by how many days docs the notice fall short of the stati requirement?
(ii) Can the shortfall, if any, be condoned? [B.COM (H) D.U.',
Ans. The Companies Act, 1956 charges the company as well as every officer who may be j, inducing the members of the public to subscribe for its shares or debentures by including ma misrepresentations as to a matter of fact. Tn such cases not only the parly defrauded shall I a right to return the shares and claim his money back but damages can also be claimed. Ba these civil remedies, Section 63 imposes criminal liability on every person who authorises thei of such a prospectus. Liability under this Section may be imprisonment up to 2 years or fin to Rs. 5,000 or both. Further, Section 68 imposes a penally on every person responsible for indu, public to subscribe for the shares or debentures of a company by making false statements. Under Section 68, the liability may be punishment with imprisonment for a term up to 5 years or with fine up to Rs. 10,000 or with both.
In the present case, representation that substantial amounts were promised to be subscribed by some persons may be taken to induce the public if this happens to be untrue. Thus, those responsible for making such a statement shall be held liable for the above listed consequences.
Problem-36 : A company served a notice of a general meeting upon its members. The notice stated that a resolution to increase the share capital of the company would be considered at such i meeting. A shareholder complains that the amount of the proposed increase was not specified in the notice. Is the notice valid?
Ans. Section 173 of the Companies Act, 1956 requires a company to annex an explanatory statement to every notice for a meeting of company, at which some 'special business' is to be transacted. This explanatory statement is to bring to the notice of the members all materials facts related to each item of special business. Section 173 further specifies that all business in case of any meeting other than the annual general meeting is regarded as special business. Thus, the objection of the shareholder is valid since the details on the item to be considered arc lacking. The information about the amount is a material fact with reference to the proposed increase of share capital. The notice is, therefore, not a valid notice under Section 173 of the Companies Act, 1956.
Problem-37:. A general meeting was properly convened and was subsequently adjourned by the Chairman for want of quorum. No fresh notice is given for the adjourned meeting which is held subsequently. State whether the adjourned meeting is valid?
Ans. According to the Section 174 of the Companies Act, 1956, if within half an hour from the time appointed for holding a meeting of the company, quorum is not present, the meeting, shall stand adjourned lo the same day in the next week, at the same time and place unless the directors determine otherwise. No fresh notice is, therefore, required to hold the adjourned meeting. Besides, no quorum is necessary in the adjourned meeting. Thus, the adjourned meeting in question is valid.
Problem-38. The secretary of a company while sending out to members of the company notices of a special resolution to be proposed at the Annual General Meeting inadvertently omitted to send notice to one member. The resolution was passed at the meeting. Discuss whether the resolution is valid or not?
Ans. Section 172(3) of the Companies Act requires that proper notice must be served on all the persons entitled to receive such notice. Deliberate omission to give notice even to a single member entitled to notice, shall invalidate the proceedings of the meeting.
But, it provides that an accidental omission to give notice lo a member or if the member does not receive the notice, the meeting cannot be held invalid. Thus, in the present case, the resolution shall be a valid one and binding since the omission is stated to be inadvertent (ie., unintentional).
Problem-39: Mr. M, a member, appointed Mr. P as his proxy for the annual general meeting of a company in the form as set out in Schedule IX to the Companies Act, 1956. The company did not permit Mr. P to attend the meeting on the ground that the special requirements for the instrument in the articles have not been fulfilled.
Ans. As per Section 176(5), the appointment of proxy must be made by a written instrument signed by the appointer or his duly authorised attorney. Further, sub-section of the Section 176 provides that an instrument appointing a proxy, if in any of the forms set out in Schedule IX, shall not be questioned on the ground that it fails lo comply with any special requirement specified for .such instrument by the Articles.
Problem-40: AGM of a public company was scheduled to be held on 15.12.2001. Mr. X, a shareholder, issued two proxies in respect of the shares held by him in favour of Mr. A and Mr. B. The proxy in favour of B was lodged on 12.12.2001 and the one in favour of Mr, A was lodged on 15.12.2001. the company rejected the proxy in favour of Mr. B as the proxy in favour of Mr. B was dated 12.12,001 and that in favour of Mr. A was 'dated 13.12.2001. Is the rejection by the company in order?
Ans. In case more than one proxies have been appointed by a member in respect of the same meeting, one which is later in time shall prevail and the earlier one shall be deemed to have been revoked. Thus, in the normal course, the proxy in favour of Mr. A. being later in time, should he upheld as valid. But as per Section 176, a proxy should be deposited 48 hours before the time of the meeting. In this case, the proxies should have, therefore, been deposited on or before 13.12.2001 (the date of the meeting being 15.12.2001). But Mr. A deposited the proxy on 15.12.2001. Therefore, proxy in favour of Mr. A has become invalid. Thus, rejecting the proxy in favour of Mr. B is unsustainable. Proxy in favour of Mr. B is valid since it is deposited in time.
Problem-41 'A' appoints 'B' as proxy. Just before the meeting 'A' comes to attend the meeting. Explain the position of proxy appointed by 'A'. [B.COM (H) D.U. 2007],
Ans. Subject to articles, proxy may be revoked unless made irrevocable for valuable consider¬ation. If the shareholder, after appointing a proxy himself attends the meeting, he can vote in person, the proxy stands revoked - Cousins v. International Brick Co, Ltd. [1931] 2 Ch. 90. ite at the meeting without revoking, death of the shareholder revokes
Problem-42: A Company has 100members.lt sends notice of the general meeting to all of them.2li members do not attend the meeting. Out of 80 members who are present 20 abstain from voting,] How many members should vote in favour of a resolution if it is to be passed as a Special] Resolution?
Ans. As per Section 189(2), for a valid special resolution, votes cast in favour must at least be 3 times' (he votes cast against the resolution, if any. Those who abstain are not to be counted. Thus, 3/4tli of 60, ie., at least 45 members must vote in favour of the resolution.
Problem-43 : Diyas Limited issued a notice for holding of its Annual General Meeting on 7thj November, 2006. The notice was posted to the members on 16-10-2006. Some members of the! company allege that the company had not complied with the provisions of the Companies Act with I regard to the period of notice and as such the meeting was not validly called. Decide …
(i) Whether the meeting has been validly called?
(ii) If there is a shortfall in the number of days by which the notice falls short of the statutory requirement, state and explain by how many days does the notice fall short of the statutory requirement?
(iii) Can the shortfall, if any, be condoned?
Ans. (j) 21 days' clear notice of an AGM must be given [section 171]. In case of notice by post. Section 53(2) provides that the notice shall be deemed to have been received on expiry of 48 hrs. from the time of its posting. Besides, for working out clear 21 days, the day of the notice and the day of the meeting shall be excluded. Accordingly, 21 clear days' notice has not been served (only 19 clear days' notice is served) and the meeting is, therefore, not validly convened,
Problem-44 . The Annual General Meeting of XYZ Ltd., for the financial year ending 31 -3-2005 was held on 27-9-2005. But since the accounts had not been audited, it was adjourned and finally held on 31-3-2006 at which the audited balance-sheet was adopted. The annual general meeting for the previous year had been held on 29-6-2004.
Decide whether the holding of the annual general meeting on 31-3-2006 for the year ending 31-3-2005 is valid.
Ans. The facts of the Problem have been based on the case of Bejay Kumar Karnaniv. Asstt Registrar of Companies [1985] wherein it was held that even adjourned annual general meeting of a company, inter alia, must be held within 15 months of the previous meeting. The meeting of 31-3-2006 is, therefore, not valid.
Problem-45 One general meeting was called by a company in December, 2005. This meeting was adjourned to March 2006 and then held. Subsequent meeting was held in February, 2007. Is the company liable for any irregularity?
Ans. Section 166 of the Companies Act, 1956 requires a company to hold its annual general meeting every calendar year. So there should be one meeting per year and as many meetings as there are years. Thus, in the above case the meeting held in March 2005 is actually the meeting of December 2006. Since, next meeting is held only in February 2007, the meeting of 2006 has been missed. Under these circumstances, unless permission of the Registrar was obtained for extension of lime which may be granted upto a period of 3 months under certain special circumstances, the company shall be proceeded against.
In fact, the facts of the given Problem are based upon the decided case of Shree Meenukshi Mills Co. Lid. v. Assistant Registrar of Joint Stock Companies in which case similar decision was given.
Problem-46: 40 out of 100 members of a company submitted a requisition for holding of i extraordinary general meeting in order to remove managing director from office. On the failu of the company to call the meeting, the requisitionists themselves called the meeting at I registered office of the company. On the appointed day, they could not hold the meeting at I registered office, as it was kept under lock and key by Ihc managing director himself. The memb held the meeting elsewhere and adopted resolution removing the managing director from offic Is the resolution valid?
Ans. Section 169 of the Companies Act contains provisions regarding holding of extraordin general meetings. It provides that if directors fail to call a properly requisitioned meeting, I requisitionist? or such of the requisitionists as represent not less than l/10th of the total votip rights of all ihe members (or a majority of them) may call a meeting to be held on a date fixed with 3 months of the date of the requisition.
Where a meeting is called by the requisitionists and the registered office is not made available! them, it was decided in R. Chettiarv. M. Chettiar that the meeting may be held anywhere I
Further, resolutions properly passed at such a meeting, arc binding on the company.
Thus, in the given case, since all the ahovemcntioned provisions are duly complied with, resolution removing the managing director shall be valid.
Problem-47: 2-M/s ABC Ltd. is a big sized public company managed by a Board of Directors consistin of 12 Directors including one Managing Director and two Joint Managing Directors. Four direct! «present the financial institutions, which together hold more than 50% of the equity capital of the company. The Board of Directors took certain decisions which are opposed by the directors representing the financial institutions as they felt that the decisions were not in the interests of the company. The financial institutions, therefore, sought to remove the Directors under section 284 of the Companies Act and served a requisition under section 169 of the Companies Act for extraordinary general meeting. The financial institutions refused to give any reasons for the removal of the directors. The company refused to convene the meeting on various grounds including that the requisition is not accompanied by a proper explanatory statement. Discuss. [B.COM (H) D.U. 2000]
Ans. The contention of the company is not valid. The facts of the Problem are based on the case t&UC\.Escorts Ltd. [1986]. In this case, it was held that ever)' shareholder of a company including an institutional shareholder has the right, subject to the provisions of the statute, to call an . extraordinary general meeting in accordance with the provisions of the Act, He cannot be restrained from calling a meeting and he is not bound to disclose the reasons for the resolution proposed to be moved at the meeting.
Regarding explanatory statement, the Court held that it was a duty cast on the management to disclose, in an explanatory note, all material facts relating to the resolution coming up before the general meeting to enable the shareholders to form a judgment on the business before them. Section 173(2) does not require the shareholders calling a meeting to disclose the reasons for the resolution which they propose to move at the meeting.
Class meetings [Sections 106 and 107]
11.13 Section 106 provides that where the share capital of a company is divided into different classes of shares, the rights attached to the shares of any class may be varied with the consent in writing of the holders of not less than three-fourths of the issued shares of that class or with the sanction of a special resolution passed at a separate meeting of the holders of the issued shares of that class—
(a) if provision with respect to such variation is contained in the memorandum or articles of the company; or
(b] in the absence of any such provision in the memorandum or articles, if such variation is not prohibited by the terms of issue of the shares of that class.
Problem-48 State the legal position in the following circumstances :
The articles of association of a company provide for minimum share qualification. Mr X who, appointed as a director of the company failed to obtain qualification shares within the specific time limit,
Ans. Following effects shall follow.
1. He shall be liable to fine upto Rs. 50 for every day until he stops acting as such {Section27}
2. He shall be liable to a further penalty under section 283(2A) upto Rs. 500 for each
day functions as a director. It appears that the penal provisions of sections 272 and 283(2A), cumulatively apply.
3. He automatically vacates the office under section 283(1 }(a).
Problem-49 Mohan, a director of XYZ Ltd., died in an air crash. It has been decided to appoint Murari in his place. Will the company be required to call extraordinary general meeting to approve the latter's appointment as a director? When appointed, how long Murari would remain in office?
Ans. The vacancy being a casual vacancy can be filled by the Board of directors at its meeting under section 262. It may also be filled in a general meeting. Thus, there is no need to call an EGM for the purpose.
Murari's tenure will be the period for which Mohan, if he had not died would have continued.
Problem-50 Mr. X who was appointed as a Director at the last annual general meeting resigned. The Board filled up the casual vacancy by appointing Mr. Y. But within a few days of his becoming Director, Y died. The Board wishes to fill up the casual vacancy by appointing Mr. Z in place of Mr. Y in the next Board meeting. State the legal position.
Ans, Section 262 provides that in the case of a public company or a private company which is a subsidiary of a public company, if the office of any director appointed by the company in general meeting is vacated before the expiry of his term of office in the normal course, the resulting casual vacancy may, subject to any regulations in the Articles of the company, be filled by the Board of Directors at a meeting of the Board.
It would thus be noted that Board of Directors is empowered to fill a casual vacancy only in respect of a director appointed by the company in general meeting. If a casual vacancy arises in the office of a director appointed in the casual vacancy under Section 262, there is no casual vacancy within the meaning of Section 262 and cannot be filled up by the Board of Directors. Consequently, Board should not be empowered to appoint Mr. 2 in place of Mr. Y. However, the Depart merit of Company Affairs has opined that the vacancy may be filled by the Board as a casual vacancy. Certain commentary writers do not subscribe to this view and suggest that vacancy should be filled not as a casual vacancy but by appointing the person as an additional director so that he ceases to hold office by the next AGM.
Problem-51: In Parween Woodcraft Co. Ltd., Mr. James was named in the list of first directors. He, however, died before he could assume office. How can the Problem regarding the appointment of a director be solved in this case?
Ans. The vacancy in question is not a casual vacancy under Section 262 and cannot, therefore, be filled by the Board of Directors. Accordingly, it will be necessary for the subscribers to the Memorandum (who will then be only mem bers) to convene a meeting for the appointment of the director. To the extent to which the Articles do not make any other provision in this behalf subscribers who would be entitled to requisition a meeting may call the meeting. A meeting is not necessary if all the subscribers concur in the appointment.
In the present case, representation that substantial amounts were promised to be subscribed by some persons may be taken to induce the public if this happens to be untrue. Thus, those responsible for making such a statement shall be held liable for the above listed consequences.
Problem-52:. X, an employee of ABC Ltd., was appointed as an alternate director. In the meantime, the original director returned and wanted to attend the Board meeting. Advise.
Ans. In terms of Section 313 of the Act, an Alternate Director can act on behalf of the Original Director during the latter's absence for a period of not less than three months from the State in which the meetings of the company are ordinarily held.
Alternate director has to vacate office when the Original Director returns to the State in which meetings of the Board are ordinarily held. Thus, the original director only can attend the Board meeting. Even if the alternate director so desires, he cannot attend the Board meeting. Assignment of office by a director [Section 312]
13.10 Section 312 prohibits assignment of his office by a director. The Section applies to all companies. Section reads:
"Any assignment of his office made after the commencement of this Act by any director of a company shall be void."
Problem-53: 'X' was appointed as Managing Director for life by the Articles of Association of a private company incorporated on 1st June, 1970. The articles also empowered 'X' to appoint a successor. 'X' appointed, by will, 'G' to succeed him after his death. Answer the following: Can 'G' succeed 'X' as Managing Director after the death of 'X' ?
Ans. 'G' can succeed 'X'. Appointing a successor under a power conferred under the Articles is not considered as 'assignment of office' which is prohibited under section 312 [Oriental Metal Pressing v.Bhasker Kashmath Thakoor[l96\] 31 Comp. Cas. 143 (SC)]
Problem-54 Articles of Association (AoA) of XY7, Ltd. provide for 10 as the maximum strength of the Board of Directors. Present strength of the Board is 8 directors. On 1st January, 2005 company by passing a special resolution alters its AoA raising the maximum permissible strength of the Board from 10 to 15. On 1st February, 2005, company proposes to raise the present strength of the Board from 8 to 13. Company has been advised to only pass an ordinary resolution. Is it in order?
Ans. No; company cannot be allowed to circumvent the provisions of Section 259 by phasing out the increase in the aforesaid manner. Approval of the Central Government shall be necessary. The only case where Central Government's approval is not necessary for raising the strength of tfie Board beyond 12 is where Articles, as originally registered, provide for a number beyond 12 and increase is within the number prescribed.
Problem-55 The maximum number of Directors of each of the following Companies as per their Articles of Association is 11.
"(i) ABS Company Ltd.
(ii) DSP Trading Private Ltd.
(iii) Traders Association (a Company registered under Section 25 of the Co.anies Act, 1956)
(i'v) Hindustan Paper Ltd. (A Government Company registered under Section 617 of the Companies Act, 1956)
The Board of Directors of the Company wants to increase the number of Directors to 15.
State with reference to the provisions of the Companies Act, 1956, whether the Directors can do so?
Ans. The Problem is based on Section 259 of the Companies Act, 1956. As per Section 259, a company can increase the strength of its Board beyond the maximum number prescribed by the Articles by passing special resolution at a general body meeting of its members and if the increase is beyond 12, approval of the Central Government shall also be necessary. However, a private company which is not subsidiary of a public company, a Section 25 company and government companies need not obtain the approval of the Central Government, Thus, in case (r), the company being a public company and not falling under any of the aforesaid exemptions, it shall require special resolution and approval of the Central Government. Cases (w). («0 and (»$ fell under exemption from the Central Government's approval. These companies shall, therefore, be able to increase the strength of the Board to 15 by passing special resolution only.
Problem-56 Mr. PMC is Director in 14 Public Limited Companies as on 30th July, 2006. He continues to be so till Septem ber 24,2006. The following companies appointed Mr. PMC as a Director at their respective Annual General Meetings held on dates mentioned against their names. (i) PQR Ltd. (AGM held on 29th September, 2006)
(ii) BCD Private Ltd. (AGM held on 25th September, 2006)
(iii) City Traders Association (A company registered under Section 25 of the Companies Act, 1956 - AGM held on 26th September, 2006)
(iV) TSP Ltd. (AGM held on 25th September, 2006)
You are required to state with reference to the relevant provisions of the Companies Act, 1956 the options available to Mr. PMC in respect of accepting or not accepting the appointment of Director of the above companies.
Ans. As per Sec. 277(2), where a person already holding the office of director in 14 companies or less is appointed, after the commencement of the Companies (Amendment) Act, 2000 as a director of other companies, making the total number of his directorships more than 15, he shall choose the directorships which he wishes to continue to hold or to accept, so, however, that the total number of the directorships, old and new, held by him shall not exceed 15. None of the new appointments of director shall take effect until suHi choice is made; and all. the new appointments shall become void if the choice is not made within 15 days of the day on which the last of them was made.
However, as per Section 278, directorships in certain companies shall not be included for the purposes of Section 277. These, inter alia, include directorship in private company and Section 25 company. Accordingly, on 25th September, 2006 appointment in TSP Ltd- alone shall be added to the directorship of Mr. PMC thus raising his total directorships to 15. Thus, the case shall be covered under Section 277(1) and not under Section 277(2). As per Section 277(1), he should make a choice of 15 companies within 15 days, in the present case, from 29th September, 2006.
Problem -57. After serious disagreement and difference of opinion among the shareholders of tig company in the last annual general meeting, some of the directors took the steps as noted belt) Discuss the validity and effect of the following:
(z) Mr. John, the managing director sends his notice of resignation. (if) Mr. Paul, an ordinary director verbally resigns and not in writing. (iit) Mr. David, another ordinary director, had sent his resignation, but withdrew it before L.
Board meeting was held for accepting his resignation.
Ans. (/) Mr. John, the managing director cannot resign merely by giving a notice. In his case a formal acceptance of resignation by the company is essential so as to make it complete and effective. Th' is because he occupies two positions or possesses two capacities, viz., one that of a director, an the other that of manager or officer of the company in the sense of a whole- time employee. An employee cannot give up office at his pleasure simply by giving notice. The notice or the letter of resignation is required to be approved or accepted by the company and the officer concerned. has to be relieved of his duties and responsibilities attached to the office which he has resigned from. (Achutha Pal vs. Registrar of Companies (1956) 36 Comp. Cas. 598). (if) A director can resign from his office in the manner laid down in the Articles of the company. Where Articles do not contain any provision in this regard, a director may still resign ai anytime by giving a reasonable notice to the company, In Latchford Premier Cinema vs. Ennion it was held thai a verbal notice accepted at a meeting is sufficient, even if the articles provide for resignation in writing.
Thus, verbal resignation cannot be held valid unless accepted at a meeting of the Board/ Shareholders.
Even written notice of resignation to be valid must be addressed to the company and not to any third party.
(iii) Once a director has given a notice of resignation, he cannot withdraw it except with the consent of the company properly considered by the directors. It makes no difference that the withdrawal is sought before the Board's meeting. However, where articles provide that a director may resign only if the Board consents, the resignation shall not be effective until the Board's consent is given and the resignation may be withdrawn in the meantime.
Problem -58. The Board of Directors of a public company in the private sector having made an average net profit of Rs. 1 crore during the last three financial years propose to donate during the current year the following amounts :
(j) Rs. 1,00,000 to a school run exclusively for the benefit of employees,
(«) Rs. 40,000 to a general charitable fund, and
(ill) Rs. 4,00,000 to a political party.
Advice the Board of Directors about the powers in respect of the above explaining the relevant provisions of the Companies Act.
Ans. (i) Since the donation relates to a purpose connected with the welfare of the employees, Board of directors are empowered to donate any amount under section 293(l)(e).
(ii) The amount of donation being less than Rs. 50,000, the same shall be in order and not require the approval of shareholders.
(iii) Board of Directors is empowered to contribute to a political party upto 5% of its average net profits for the last three financial years. Accordingly, donation to a political party, in the given case being, less than Rs. 5 lakhs (5% of Rs. 1 crore), it shall be in order under section 293A.
Problem-59 A public limited company intends to contribute: (i) to a charitable fund not related to compant's business; and (11) for political purpose.
Ans, See above answer
Problem-60 The Board of Directors of M/s ABC Motors Ltd. made the following appointments at its meeting held on 1st January, 2006 :
(i) Mr. X, a Director of its subsidiary company, namely, M/s ABC Forgings Ltd., was appointed as Purchase Manager on a consolidated salary of Rs. 11,000 per month with effect from 1st January, 2006.
(ii) Mr. Y was appointed as the Sales Manager on a consolidated salary of Rs. 11,000 per month with effect from 1st January, 2006. Answer the following explaining the relevant provisions of the Companies Act:
• (t) Does the appointment of Mr. X require the approval of the members in a general meeting of any company? Will your answer be different if M/s ABC Motors Ltd. is the subsidiary of M/s ABC Forgings Ltd.? (it) Mr. P, a relative of Mr. Y was appointed as a Director of M/s ABC Motors Ltd. on 1st
January, 2007. Does it affect the continuation of Mr. Y as the Sales Manager? Ans. (i) Yes, the appointment of Mr. X is hit by section 314(1) and therefore shall require the approval of general meeting by way of special resolution.
However, it will not require the aforesaid approval if M/s ABC Motors Ltd. is the subsidiary of M/s ABC Forgings Ltd. Section 314(1) does not prohibit a Director of a subsidiary company from holding an office or place of profit in its holding company.
(») Section 314(1) does not apply since at the time of appointment of 'Y' as the sales manager, his relative 'P' was not the director of the company, [Section 314(1A)]
Problem. State whether the restrictions under Section 314 of the Companies Act, 1956 would apply if a relative of the director of a private company is appointed as managing director of the company,
Ans. Section 314 applies to both public as well as private companies. However, the instant case is covered under the exceptions contained in Section 314(1) as regards the position of the managing director is concerned.
In other words the requirement of a special resolution is not applicable in the instant case. Problem 3. Mr. X is a director of a private Co. Mr. A, who is the husband of Mr. X's grand-daughter, is appointed as a Genera! Manager of the Co. on a remuneration of Rs. 8,000 per month, without the approval of the general body of the company.
(0 Is the appointment valid?
(«) Does it make any difference if the remuneration is Rs. 10,000 per month? Ans. Section 314( 1). Limits have been raised under this section by notification dated 5.2.2003. special resolution shall be required only if the remuneration payable is more Rs. 10,000 and special resolution as well as approval of the Central Government shall be C8 if the remuneration exceeds Rs. 50,000,
Problem. XYZ Machineries Ltd. having a paid up share capital of Rs, 80 lakhs proposes! into contract with the following parties for the supply of certain components for a perio years with effect from 1st January, 1995 :
(i) ABC Forgings Private Limited where 'X', a director of XYZ Machineries Lin interested as a director and member.
(it) DBF Casting Limited, where 'Y', a director of XYZ Machineries Limited, is interest member holding 25 per cent of the paid up share capital. I State briefly the legal requirements to be complied with under the Companies Act to give! to the above proposals. Will the agreements continue to be valid after the paid up share cff XYZ Machineries Ltd. is increased to Rs. 4 crores in December 1995 by further issue of!
Ans. ', ,
(i) Under section 297, it will require a resolution of the Board of Directors to be passed] meeting.
In the event of capital of XYZ Ltd. being increased to Rs. 4 crores, previous approvals Central Government shall also be required under section 297. Approval of the Ci Government is required where the paid up share capital of the company is Rs. 1 end more. But, applicability of the section is to be determined at the time of entering infa contract. If no permission under this section is required at the time of entering inlij contract, subsequent permission is not necessary even though there may be a chs circumstances which would require permission to be taken for a fresh contract. Thus, it appears that, where contracts entered into by companies when their paid up< was less than Rs. 1 crore, and raised upwards subsequently [as in the given case], app of the Central Government would not be necessary until the expiry of the contract,
Also under section 299, 'X' must disclose his interest to the Board and not participates said meeting/deliberations.
Section 297 does not cover cases of public limited companies. Tbus, the aforesaid appr shall not be necessary.
Problem 1. A company sold one of its flats to one of the directors and received 50% of the price in cash and agreed to receive the balance in instalments. Wpuld you consider this as a loan granted to director attracting the provisions of Section 295?
OR
M/s. International Carrier Ltd. purchased a flat in Mumbai to give residential accommodation to Shri Ravi Mehta, the Managing Director. At the time of purchase of flat, the Managing Director was given an option to buy the flat during the course of his employment. The Managing Director exercised his option and paid the company half of the purchase price and requested for lime to pay the balance amount in three year half-yearly instalments at 10% interest per annum. Examine whether the arrangement would amount to a loan to the Managing Director and if so, whether the loan was in order.
Ans. The facts of the Problem are based on the case Dr. Fredie Ardeshir Mehta vs. Union of India [1991] 70 Comp. Cas. 210 (Bom.). In this case the Bombay High Court held that when a company gives official accommodation in the matter of payment of debt to one of its directors, it is not, and does not amount to, a loan and company cannot be prosecuted for contravention of provisions of Section 295. The Court held that Section 295(1) prohibits a company from, directly or indirectly, making any loan to its directors without the previous approval of the Central Government in that behalf. However, the Court said that the essential requirement of a loan is the advance of money (or some article) upon the understanding that it shall be returned; it may or may not carry interest. The debt here arose not out of an advance but out of the sale of the flat by the company to the managing director. The company gave time to the managing director to pay a part of the purchase price. The managing director was thus given official accommodation by the company in the matter of payment of the debt. Such official accommodation was not and did not amount to a loan. When Section 295 refers to an indirect loan to a director, what it means is that the company shall not give, a loan to a director through agency of one or more intermediaries. The word 'indirectly' in the I Section cannot be read as converting what is not a loan into a loan. Thus, there was no) contravention of Section 295.
Problem 2. Following transactions are made by a public company. You are required to examine! the same whether these transactions can be termed as Loans to Directors requiring the approval] of the Central Government as required under Section 295 of the Companies Act, 1956:
(i) A salary advance of Rs.5,000 to an employee, who is the wife of the managing director of] the company.
(if) Loan to its 100% (one hundred per cent) subsidiary company. Ans.
(0 According to Section 394 of the Companies Act, 1956, a company cannot give, without! obtaining prior approval of the Central Government any loan (directly or indirectly) to, inter] alia, any relative of a director. 'Wife' is a relative under Section 6 of the Companies Act, 1956, j However, where wife of a director is also an employee of the company then in Electronic Components Ltd v. Asstt. Registrar of Companies (1987) 61 Comp. Cas. 8 (Mad) I the Madras High Court held that in the absence of any evidence that there has been) circumvention of the Section by disguising the loan to the wife of a director, who is also an j employee, as salary advance, the same may not be admitted as contravention of Section 295.;
(a) The restrictions of Section 295 are not applicable to a holding company in respect of any loan given by it to its subsidiary or any security or guarantee provided by it for any 1 given to its subsidiary. Thus, loan to a 100% subsidiary shall not require any approval of the Central Government.
315
Problem 1. The Board of Directors of a public company met on three times in the previous year, the fourth meeting though called could not be held for want of quorum on two occasions successively. Discuss whether any provisions of the Companies Act has been contravened.
Ans, As per Section 285 of the Companies Act, 1956, a company must hold a meeting of its Board of Directors at least once in every 3 calendar months and there should be at least 4 meetings of the Board every year. But, Section 288(2) provides that where a meeting is called but could not be held for want of quorum, there is no contravention of Section 285. Thus, as per the facts in the above case, there has been no contravention of any provisions of the Companies Act, 1956.
330
Problem 1. X, Y and Z, directors of a company were the major shareholders of the company. X was the chairman of the company. At a meeting of the Board of Directors, it was decided to increase the share capital. Y and Z did not have the money to take up additional shares and feared thai in consequence, X would corner all shares and become predominant in the company. So a general meeting was called and it was resolved that the present members alone should not benefit from the prosperity of the company, but others also should share, and a special resolution was passed that the new shares may be offered to about a dozen persons who were not members of the company.
X rushed to the Court, complaining of oppression, saying that Y and Z wanted to throw him out as director and chairman of the company ;ind they had passed a special resolution to bring about a change in the management.
(i) Define what amounts to oppression.'
{«) Discuss fully the chances, if any, of X succeeding in the proceeding. Ana. The person claiming oppression has to prove on the part of majority:
- lack of probity
- unfair conduct
- prejudice to him in the exercise of legal and proprietary rights as a shareholder - rsktmti Prasad Jaw v. Kalinga Tubes Lid. (1965); Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holdings Ltd. [1981]].
The facts in the case do not point to the conduct of majority falling under any of the aforesaid grounds. Seeking change of management does not, prima facie, amount to oppression. Accord¬ingly, X would not succeed.
Problem 1. XYZ Company Limited ceased to operate its business in the field of its activities for 14 months. The company did not do any business as stated in its objects clause of memorandum of association. Instead, it became a holding company by forming two subsidiary companies, viz., ABC Company Limited and KJD Limited. These companies are engaged in the pursuit of objects for which XYZ Company Limited was incorporated. Some members of XYZ Company Limited want to move the Court for winding-up of the company on the ground that the company had suspended its business for a whole year. Advise the members.
Ans. Section 433(c); the company having suspended its business for more than a year. Hence, prima fade, ground for winding-up. However, in Easter Telegraph Co. Ltd., In re [1947], it was held that where a company ceases to do any business but becomes a holding company of subsidiaries engaged in pursuit of the business, which it was previously doing, it cannot be said that the company has suspended its business, for the whole year, so as to justify an order for its winding-up.
The members of XYZ Co. Ltd. should, therefore, not move the Court for winding-up of the company.
Problem 2. Company was incorporated for the purpose of manufacturing machine tools, implements, etc. It spent a substantial part of its subscribed capital on fixed assets. It borrowed a sum of Rs. 30 lakhs from a bank for providing working capital. As the company was unable to pay back this loan otherwise, the stock-in trade, plant and machinery and all the fixed assets of company were sold out in execution of a decree obtained by the bank, leaving no surplus for the
company.
Would it be just and equitable to wind-up the company in the circumstances?
Ans. In a ease where the subject-matter (substratum) of the company has gone or the objects for which the company was incorporated have substantially failed, it was held In re Kaithal General Mills Co, Ltd, [1951] that it shall be just and equitable to wind-up the company. The substratum of the company is deemed to have gone in such a case.
Thus, the company in question may be wound-up on just and equitable grounds since its substratum is gone.
Problem 3. Y Estates Ltd. was incorporated with the object of developing land for residential houses as well as purchase and sale of flats. It had, therefore, purchased 5 acres of land near the airport at Calcutta. But Government acquired the same for defence purposes. The company would not replace the land as the prices of land of other places were prohibitive.
What will be the decision of the court in the following cases: (0 The company suspends its business for a whole year?
(if) The company fails to resume its operations (business) for 5 years and the prospects seemed gloomy?
Ans. (i) The court may refuse to grant winding-up order. Suspension uf business for a whole year is a ground under section 433(c) seeking winding-up by the court but the power of the Court in this regard is discretionary. The Court shall refuse winding-up on this ground if the intention of the company not to resume its business is absent. Thus, in the given case, winding-up order shall not be issued. Similar decision was given under similar circumstances in the case of Murlidhurv. Bengal Steamship Co. Ltd. [192QJ.
(ii) Where the company fails to resume its operations for 5 years and prospects also seem gloomy, the Court may order the winding-up of the company [Kupu Bharati Lid. v. Registrar uf Companies [1969]].
Problem 4, The Official Liquidator of a public company in liquidation instituted misfeasance proceedings against the Managing Director of the Company. During the pendency of the proceedings, the Managing Director passed away.
What is meant by misfeasance? Can the legal representatives of the Managing Director be impleaded and the proceedings continued against him?
Ans, The facts of the case in question are similar to the case of Official Liquidator v. Panhasarthi Sinha[\ 983], wherein it was held that misfeasance proceedings initiated under section 543, against a director of a company in winding-up can be continued on his death against his heirs and legal representatives for the purpose of determining and declaring the loss or damage caused to the company. The expression 'misfeasance' means grave breach of duty or abuse of power usually associated with taking undue benefit or advantage at the cost of the company.
Problem 5. R and W formed a private limited company in which they were the only directors and shareholders having equal voting rights. Differences arose between them. They were not even on speaking terms. One of them shareholders filed a winding-up petition. Will he succeed in getting a winding-up order?
Ans. Facts similar to the case of re Yenidje Tobacco Co, [I916J. The company was ordered to be wound-up because of dead lock in management. Such a ground will fall under just and equitable.
Problem 6, The Balance Sheet of an investment company J Ltd. as on 31st March, 1980, disclosed an accumulated loss of Rs. 3 lakhs against the paid-up capital of Rs. 28,000 and that whereas its tangible assets were worth Rs. 6 lakhs, its liabilities amounted to Rs. 8 lakhs. The Registrar of Companies filed a petition for winding-up of the company on the ground that the company was unable to pay its debts. The Managing Director had stated that the paid-up capital of the company had been increased and the business of the company was also increasing every year, with the result that the company was making profits and all the creditors, whose claims had matured, had been paid-ofl. Decide, giving reasons whether the Registrar's petition for winding-up of the company is tenable.
Ans. Registrar is allowed to make a petition for winding-up of a company, inter alia, where it is felt to be just and equitable that the company be wound-up. Where the business of the company cannot be carried on except at a loss, it has been held to be a just and equitable ground for winding-up the company. However, merely the fact that the company has made losses, and is even likely to make further losses will not fall within the aforesaid ground and the Court shall not be justified in making a winding-up order [Re Shah Steamship Navigation Co, [1901]]. Based on the above and the given facts, the Registrar's petition shall not be tenable.
Problem 7.There are only two members of a company and both of them are not on speaking terms. Can the company be wound-up on this ground?
Ans. Yes, company can be wound-up on just and equitable ground under section 433. In Re Yenidje Tobacco Co. Ltd. [1916], on which the given Problem is based there were only two shareholders who were also the directors of the company and had become so hostile to each other that neither of them would speak to the other except through the Secretary. Held that there was a complete deadlock and consequently the company was ordered to be wound-up.
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Wednesday, May 28, 2008
GCL-Previous QPs
INTERMEDIATE EXAMINATION
DECEMBER 2003
GENERAL AND COMMERCIAL LAWS
Time allowed : 3 hours Maximum marks : 100
NOTE: Answer SIX questions including Question No. 1 which is COMPULSORY.
Question 1
Discuss the following under the Constitution of India :
(i) Fundamental duties.
(ii) Safeguards in a law providing for preventive detention.
(Hi) Writ of habeas corpus.
(iv) Ordinance making powers of the President of India. (5 marks each)
Answer 1(1)
Fundamental duties have been enumerated under Part IVA of the Constitution. Article 51A of the Constitution contains provisions relating to fundamental duties. According to Articles 51A of the Constitution, it shall be the duty of every citizen of India-
(a) To abide by the Constitution and respect its ideals and institutions, the National flag and the National Anthem.
(b) To cherish and follow the noble ideals which inspired our national struggle for freedom;
(c) To uphold and protect the sovereignty, unity and integrity of India;
(d) To defend the country and render national service when called upon to do so;
(e) To promote harmony and the spirit of common brotherhood amongst all the people of India transcending religious, linguistic and regional or sectional diversities;
(f) to renounce practices derogatory to the dignity of women;
(g) To value and preserve the rich heritage of our composite culture;
(h) To protect and improve the natural environment including forests, lakes, rivers and wild life, and to have compassion for living creatures;
(i) To develop the scientific temper, humanism and the spirit of inquiry and reform; (j) To safeguard public property and to abjure violence;
(k) To strive towards excellence in all spheres of individual and collective activity so that the nation constantly rises to higher levels of endeavour and achievement.
As is evident the fundamental duties enumerated in Article 51A of the Constitution are addressed to the citizens. They owe these duties to the State. It may be pointed out that these duties are not enforceable through a Court of law.
Answer 1(ii)
Preventive detention means the detention of a person without trial in such circumstances that the evidence in possession of the authority is not sufficient to make a legal charge or to secure the conviction of the detenu by legal proof but may still be sufficient to justify his detention. The object of preventive detention is to prevent the individual not merely from acting in a way but from achieving a particular object. No offence is proved nor any charge formulated, but the justification is suspicion or reasonable probability and not criminal conviction which only can be warranted by legal evidence.(Gopa/an v. State of Madras, AIR 1950 SCR 88)
Article 22 of the Constitution guarantees the fundamental right relating to protection against arrest and detention in certain cases. Articles 22 contains seven clauses. Clauses (1) and (2) lay down the procedure that has to be followed when a man is arrested. Thereafter, clause (4) to (7) deal with preventive detention.
While providing safeguards against preventive detention, Article 22(4) of the Constitution stipulates a limit of three months of prevention detention unless the Advisory Board recommends, before the three months period that there is sufficient cause for the continuation of the detention. The maximum period of detention has to be fixed by the appropriate law made by Parliament.
Article 22(5) casts a dual obligation on the detaining authority - (a) to communicate to the detenu the grounds on which the detention order has been made; (b) to give him the earliest opportunity to make representation against the order of detention.
Under clause (6) a wide latitude is given to the authority in the matter of disclosure. They are given a special privilege in respect of facts which are considered not desirable to be disclosed in public interest.
Article 22(7) empowers Parliament to prescribe the maximum period of detention. It has been held that no preventive detention law can be made under Article 22(4) unless Parliament prescribes the maximum period of detention under clause 7.
Answer 1(iii)
The writ of habeas corpus is a remedy available to a person who is confined without legal justification. The words "habeas corpus" literally mean "to have a body". This writ is used to secure release of a person who has been detained unlawfully or without legal justification. The great value of this writ is that it enables an immediate determination of a persons' right to freedom. This writ is issued to the authority who has the aggrieved person in his custody.
Under Article 32 of the Constitution, the Supreme Court can issue writ of habeas corpus against a person / authority who has detained a person without legal justification. Likewise the High Court under Article 226 of the Constitution can issue writ of habeas corpus in similar circumstances provided that the person or authority against whom the writ is sought is within the territorial jurisdiction of that High Court on the date of filing the writ petition.
Answer! (iv)
The Ordinance making power is the most important legislative power conferred on the President of India under Article 123 of the Indian Constitution. The President can legislate by Ordinances at any time when a parliamentary enactment is not possible. This power enables the Executive to meet a sudden situation arising in the country when Parliament is not in session and which it cannot deal with under the ordinary law. This power is co-extensive with legislative power of the Parliament.
The power has following peculiarities:
(1) The President has to satisfy himself that circumstances exist which render it necessary for him to take immediate action.
(2) This power has to be exercised by the President on the advice of Council of Ministers.
(3) The Ordinance must be laid before Parliament when it reassembles and shall automatically cease to have effect at the expiration of 6 weeks from the date of reassembly unless disapproved earlier by the Parliament.
(4) This power is available only when the two houses of Parliament (Lok Sabha and Rajya Sabha) have been prorogued or are otherwise not in session. However, Ordinance can be made even if only one house is in session, when law cannot be made by that house in session alone.
The Ordinance is to be laid before each house of the Parliament when it reconvenes after making of the Ordinance. The Ordinance shall cease to operate at the expiry of six weeks from the reassembly of Parliament. An Ordinance has the same force and effect as an Act of Parliament.
Question 2 (4 marks each)
Write notes on any four of the following :
(i) Ut res magis valeat quam pereat
(ii) (ii) Alternate dispute resolution
(iii) (Hi) Documents whose registration is optional
(iv) (iv) Legal recognition to electronic records
(v) (v) Doctrine of pith and substance.
Question 2(i) :: Ut res magis valeat quam pereat
The rule of reasonable construction implies that a statute must be construed reasonably. It is one of the primary rules of interpretation of statutes. A statute or any enacting provision therein must be so construed as to make it effective and operative. A construction should be rejected if it results in hardship, serious inconvenience, injustice, absurdity or anomaly.
As perthis rule, the courts will reject the construction which will defeat the intention of the legislature even though there may be inexactitude in the language used. Preference should be given to such construction which affords consistency and certainty facilitating smooth working of the legal system. Courts may even depart from the dictionary (literal) meaning of a word and give such sensible meaning which will advance remedy and suppress the mischief intended. If the litera legis i.e. letter of law is not clear, interpretation must be ratio legis, i.e. according to the purpose, policy, object or spirit of law.
Answer 2(ii) :: Alternate dispute resolution
There is a growing awareness that courts will not be in a position to bear the entire burden of justice system. A very large number of disputes lend themselves to resolution alternative modes such as arbitration, mediation, conciliation, negotiation, etc. The ADR processes provide procedural flexibility, save valuable time and money and avoid the stress of a conventional trial.
ADR works almost in all disputes including commercial, civil, labour and family disputes in respect of which the parties are entitled to conclude a settlement. ADR techniques have been proven to work in the business environment, especially in respect of disputes involving joint ventures, construction projects, partnership differences, intellectual property, personal injury, product liability, professional liability, real estate, securities, contract interpretation and performance and insurance coverage.
At present ADR services are offered in India in a very rudimentary form. There is, therefore an urgent need to establish and promote ADR services for resolution of both domestic and international disputes in India.These services need to be nourished on sound conceptions, expertise in their implementation and comprehensive and modern facilities.
Answer 2(iii) :: Documents whose registration is optional
Section 18 of the Registration Act, 1908 specifies the documents, of which registration is optional. It provides that any of the following documents may be registered under this Act, namely:
(a) Instruments (other than instruments of gift and wills) which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest whether vested or contingent of value less than one hundred rupees, to or in immovable property.
(b) Instruments acknowledging the receipt or payment of any consideration on account of the creation, declaration, assignment, limitation or extinction of any such right, title or interest;
(c) Leases of immovable property for any term not exceeding one year and leases exempted under Section 17;
(d) Instruments transferring or assigning any decree or order of a court or any award when such decree or order or award purports or operates to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent of a value less than one hundred rupees, to or in immovable property;
(e) Instruments (other than wills) which purport or operate to create declare, assign, limit or extinguish any right, title or interest to or in moveable property;
(f) wills; and
(g) other documents not required by Section 17 to be registered.
Answer 2(iv) :: Legal recognition to electronic records
The Information Technology Act, 2000 under Section 4 grants legal recognition to electronic records by laying down that where any law provides that "information or any other matter is in - writing or in typewritten or printed form then, such requirement is deemed to have been satisfied, if such information or matter is -
(i) rendered or made available in an electronic form; and
(ii) accessible, so as to be usable for a subsequent reference.
It may be pointed out that "information" as defined in Section 2(v) of the said Act, includes data, text, images, sound, voice, codes, computer programs, software and data-bases or micro-film or computer-generated "micro-fiche". Thus, Section 4 of the Information Technology Act practically equates electronic record with a manual or typed or printed record.
Answer 2(v) :: Doctrine of pith and substance
The rule of pith and substance means that where a law in reality and substance falls within an item on which the legislature which enacted that law is competent to legislate, then such law shall not become invalid merely because it incidentally touches a matter outside the competence of legislature. In a federal Constitution, as was observed by Gwyer C.J. "it must inevitably happen from time to time that legislation though purporting to deal with a subject in one list touches also upon a subject in another list, and the different provisions of the enactment may be so closely interwined that blind adherence to a strictly verbal interpretation would result in a large number of statutes being declared invalid because the legislature enacting them may appearto have legislated in a forbidden sphere" (Prafulla Kumarv. Bank ofKhulna, AIR 1947 PC 60), Therefore, where such overlapping occurs, the question must be asked, what is, "pith and substance" of the enactment in question and in which list its true nature and character is to be found. For this purpose, the enactment as a whole with its object and effect must be considered.
Questions
(a) What do you understand by 'conciliation' ? How are the conciliators
appointed? Discuss their role in arriving at a settlement agreement. (8 marks)
(b) Distinguish between 'temporary injunction'and 'perpetual injunction'. (4 M)
(c) "Where once time has begun to run, no subsequent disability or inability to
institute suit or make an application can stop it." Explain. (4 Mks)
Answer 3(a)
Conciliation means the settling of disputes without litigation (Warton's Law Laxicon. Conciliation is an informal process in which the conciliator (the third party) tries to bring the disputants to an agreement. He does this by lowering tensions, improving communications, interpreting issues, providing technical assistance, exploring potential solutions and bringing about a negotiated settlement. The Arbitration and Conciliation Act, 1996 gives a formal recognition to conciliation in India.
Appointment of Conciliator: As per Section 64(1) of the Arbitration and Conciliation Act, 1996
(1) If there is one conciliator in a conciliation proceedings, there should be an agreement on his name,
(2) If there are two conciliators, each party should appoint one each, and
(3) If there are three conciliators in conciliation proceedings, the third conciliator will be an agreed person who will act as a presiding conciliator.
Further, the parties may enlist the assistance of a suitable institution or person to recommend the names of suitable individuals or to appoint one or more persons as conciliators to which the parties should agree. However, in recommending or appointing individuals to act as conciliator, the institution or person should have regard to such considerations as are likely to secure the appointment of independent and impartial conciliators.
Role of Conciliator:
As per Section 67 of the Act, the conciliator's role is to provide assistance in an independent and impartial manner to the parties to reach an amicable settlement of their dispute and to conduct the conciliation proceedings in such a manner as he considers appropriate. He is guided by principles of objectivity, fairness and justice. The conciliator may conduct the conciliation proceedings in an appropriate manner taking into consideration all circumstances and wishes of the parties. The conciliator's role is not confined merely in providing assistance, but also extends to making proposals for settlement of disputes. The conciliator may make proposals for a settlement of dispute at any stage of the proceedings. He may invite the parties to meet him or communicate with them orally or in writing, individually or together[Section 69(1)]. He may not disclose the information to the other party , when a party has given it under specific condition that it be kept confidential. But in other cases, the conciliator discloses substance of the factual information concerning the dispute so that the other party may have the opportunity to present any explanation which he considers appropriate. (Section 70)
Answer 3(b)
Temporary injunctions are granted under Order 39, Rule 1 -2 of the Civil Procedure Code, 1908, while perpetual injunctions are granted under Section 38 of the Specific Relief Act, 1963.
Temporary injunction can be granted at any stage of proceedings and can be dissolved at any stage of proceedings. Temporary injunction is granted before plaintiff establishing his case at the trial and continue upto a specified time.
Perpetual injunction can only be granted after hearing the defendant and upon the merits of the suit.
Temporary injunction is granted for maximum period of suit and automatically terminates with disposal of suit or till further order of the Court whereas in perpetual injunction the defendant is perpetually restrained from the assertion of right or from commission of an act which would be contrary to rights of plaintiff. It is usually granted to prevent breach of an obligation existing in favour of plaintiff when defendant invades or threatens to invade plaintiff's right to enjoyment of property.
Temporary injunction may be replaced by perpetual injunction on merits of the case but not vice-versa.
Answer 3(c) 7
Section 9 of the Limitation Act, 1 963 provides where once time has begun to run no subsequent disability or inability to institute a suit can stop it provided that where letters of administration to the estate of a auditor have been granted to his debtor, the running of period of limitation for a suit to recover debt shall be suspended while the administration continues. This Section is based on the general principle that once a right to sue has accrued and time has started running, it could not stop unless there was some direct obstruction to the remedy itself, or unless the case fell within some of the exceptions provided in the Limitation Act. The statute of Limitation Act is a self-contained statute and no equitable consideration can be imported in it, apart from the provisions made therein.
Section 9 imports the common law rule (time when once it has commenced to run in any case will not cease to be so by reason of any subsequent event. This rule applies only to suits and applications and not to appeals, unless case is covered under any exemptions. For the application of this rule, the right to move the application or cause of action must exist and subsisting on the date on which a particular application is made. If right or cause of action has already extinguished, no question of bar of limitation will arise.
It may be pointed out that Section 9 refers only to subsequent disability or inability to sue or make an application. It has nothing to do with a case where execution has been stayed by an order. The time during which the execution cannot go on because of an order resulting in the stay of execution is expressly excluded by Section 15(1) of the Limitation Act.
Question 4 :: Distinguish between any four of the following :
(i) 'Summons cases' and 'warrant cases'.
(ii) 'Judgment', 'decree' and 'order1.
(Hi) 'Trust' and 'bailment'.
(iv) 'Mortgage 'and 'charge '.
(v) 'Cognizable offence' and 'non-cognizable offence'.
Answer 4(i)
Section 2(w) and 2(x) of the Code of Criminal Procedure, 1973 define the terms "summons case" and "warrant case". Accordingly, "summons case" means a case relating to an offence and not being a warrant case. "Warrant case" means a case relating to an offence punishable with death, imprisonment for life or imprisonment for a term exceeding two years. Thus, it can be seen that the distinction between these two terms is based on the quantum of punishment that can be awarded. In other words, cases which are punishable with imprisonment for two years are summons cases, and the rest are all warrant cases.
Answer 4(ii)
Judgment as defined in Section 2(9) of the Civil Procedure Code, 1908 means the statement given by the judge on the grounds of a decree or order. Thus a judgment sets out the grounds and reasons for the judge to have arrived at the decision. In other words, a "judgment" is the decision of a court of justice upon the respective rights and claims of the parties to an action in a suit submitted to it for determination. (State of Tamil Nadu v. S Thangaval, AIR 1997 SC 2283)
Decree is defined in Section 2(2) of the said Code as
(i) the formal expression of an adjudication which, so far as regards the court expressing it;
(ii) conclusively;
(iii) determines the rights of the parties
(iv) with regard to all or any of the matters in controversy;
(v) in the suit and may be either preliminary or final. But decree does not include
(a) any adjudication from which an appeal lies, as an appeal from an order or;
(b) any order of dismissal for default. According to the explanation appended to the definition, a decree may be partly preliminary or partly final.
A decree comes into existence as soon as a judgment is pronounced and not on the date when it is sealed and signed.
"Order" as set out in Section 2(14) of the Civil Procedure Code means the formal expression of any decision of a civil court, which is not a decree.
Answer 4(iii)
The definition of bailment is given in Section 148 of the Indian Contract Act, 1872.
A "bailment" is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them.
'Trust" according to Indian Trusts Act is
(i) an obligation annexed to the ownership of property and
(ii) arising out of confidence reposed in and
(iii) accepted by the owner or declared and accepted by him,
(iv) for the benefit of another, or of another and the owner. The difference between a trust and a bailment is as under:
(i) A trustee becomes the full owner of the trust property. A bailee acquires special property only.
The obligation of the bailee is legal, whereas that of a trustee is equitable.
A bailment may be created for movable property only. A trust may be created for both movable and immovable properties.
Answer 4(iv)
(a) A mortgage is transfer of an interest in the property made by the mortgagor as a security for the loan, while the charge is not the transfer of any interest in the property though it is security for the payment of an amount.
(b) A charge may be created by act of parties or by operation of law. A mortgage can only be created by act of parties.
(c) A mortgage deed must be registered and attested by two witnesses, while a charge need not be made in writing, and if reduced to writing, it need not be attested or registered.
(d) In certain types of mortgage (viz., mortgage by conditional sale and anomalous mortgage) the mortgagor can foreclose the mortgaged property but in charge, the charge-holder cannot foreclose though he can get the property sold as in a simple mortgage.
(e) A charge as a general rule, cannot be enforced against a transferee for consideration without notice. But in a mortgage, the transferee of mortgaged property from the mortgagor, can only acquire the remaining interest of the mortgagor, and is therefore, only bound by the mortgage.
(f) In a charge created by act of parties, the specification of the particular fund or property negatives a personal liability and the remedy of the charge-holder is against the property only. In a mortgage, there can be security as well as personal liability.
Answer 4(v)
As per Section 2(c) of the Cr.P.C. 1973 "cognizable offence" means an offence for which a police officer may arrest the offender without warrant in accordance with First Schedule of Criminal Procedure Code or under any other law for the time being in force. Murder, culpable homicide, dacoity, abetting mutiny, counterfeiting coins are some instances of cognizable offences. As is evident, the magnitude of cognizable offences is quite grave and the punishment provided is quite heavy.
"Non cognizable offence" as per Section 2(l) of the Code means a case in which a police officer has no authority to arrest without warrant. The instances of non-cognisable offences are undue influence at an election, simple hurt, false claim in a Court of law etc. It needs special authority to arrest the offender i.e., it requires warrant for arrest. Non cognizable offences are less serious in nature as compared to cognizable offences.
Question 5
(a) Discuss the 'doctrine of part-performance' under the Transfer of Property Act, 1882. (5 marks)
(b) Explain the term 'distinct matters'relating to instruments liable for payment of duty under the Indian Stamp Act, 1899. (5 marks)
(c) Mention the circumstances under which suits by and against societies may be filed under the Societies Registration Act, 1860. Explain. (6 marks)
Answer 5(a)
The doctrine of part-performance operates as an exception to the principle that equity will only enforce specific performance of a contract that is valid at law and provable in Courts of Law. The doctrine has been statutorily recognised under the Transfer of Property Act (Section 53A), Specific Relief Act (Section 27A) and Indian Registration Act (Section 49).
Essentials of the doctrine of part-performance
1. There should be a contract to transfer immoveable property.
2. The contract should be -
(a) in writing and signed by the transferor himself, or on his behalf;
(b) for consideration;
(c) to enable the court to ascertain with reasonable certainty the terms of the contract
3. The contract should have been part-performed —
(a) the intended transferee should in part-performance of the agreement take, possession of the property (or any part of it) proposed to be transferred, or
(b) when the intended transferee is already in possession, he should continue possession in part-performance of the contract, and do some act in furtherance of the contract.
4. The intended transferee should perform his part of the contract or must be willing to do so.
5. When the contract has thus been partly performed all rights and liabilities under the contract should arise and be enforceable as between the parties to the contract notwithstanding that the transaction has not been completed.
6. The application of the doctrine shall not affect the rights of a transferee for consideration who has no notice of the contract or of the performance thereof.
Answer 5(b)
The expression distinct matter means distinct transaction (Ram Swarup v. Joti, (1933) Allahabad Law Journal 427, Board of Revenue Madras v. Narasimhan, AIR 1961 Mad 504.
Under Section 5, of the Indian Stamp Act, 1899 an instrument comprising or relating to several distinct matters is chargeable with the aggregate amount of the duties with which each separate instrument, relating to one of such matters, would be chargeable under the Act. The Section deals with multifarious instruments. Section 5 applies even where the two (or more) matters are of the same description.
Illustrations as to distinct matters :
(i) A document containing both an agreement for the dissolution of a partnership and a bond, is chargeable with the aggregate of the duties with which two such separate instruments would be chargeable. The two are distinct matters. (Chinmoyee Basuv. Sankare Prasad Singh, AIR 1955 Cal. 561, cf AIR 1936 Lah. 449)
(ii) A grant of annuity by several persons requires only one stamp (because there is only one transaction).
(iii) A lease to joint tenants requires only one stamp.
(iv) A conveyance by several persons jointly relating to their separate interest in certain shares in an incorporated company requires only one stamp.
(v) A power of attorney executed by several persons authorizing the agent to do similar acts for them in relation to different subject matter is chargeable under Section 5, where they have no common interest.
Answer 5(c)
A society registered under the Societies Registration Act, 1860 is a legal entity. It can sue and can be sued in the name of the President, Chairman or Principal Secretary or Trustees as determined by the rules of the society. If there is no law, then authorized person by the governing council or the general body may sue on behalf of the society (Section 6).
Section 7 of the Act provides that no suit or proceeding in any civil court shall abate or discontinue if the person in whose name the suit has been brought is dying or ceasing to fill the character, such suit shall be continued in the name of or against the successor of such person.
The provisions of Section 6 and 7 are not mandatory. Even the general authority to sue or to be sued can be given to the Chairman or Secretary or Trustees on behalf of the society. But an authority given by the governing body has to be limited to the occasion concerned. The object is that the registered societies should not embark upon needless and endless litigations.
Question 6
(a) Arun bequeaths certain property to Barun, requesting him to distribute it among such members of Chaman's family, as Barun should think most deserving. Can Chaman enforce this trust ? (5 marks)
(b) Ram executed a gift deed of certain immovable properties in favour of his brother Shyam. By another deed, Shyam made provision for the living expenses of Ram and created a charge in his favour on some properties included in the above mentioned gift deed in order to secure the payment of these living expenses. The government authority insists that deed executed by Shyam is liable to full duty. Decide with reasons. (5 marks)
(c) Explain the terms 'investigation', 'inquiry'and 'trial'in a criminal case under the
Code of Criminal Procedure, 1973. (6 marks)
Answer 6(a)
As per Section 6 of the Indian Trust Act, 1882 for the creation of a trust, the author of the trust should indicate with reasonable certainty by any words or acts
(a) an intention on his part to create a trust
(b) the property in respect of which trust is created
(c) the purpose of the trust for which it is created and the beneficiaries of
the trust.
The words used to create a trust must be clear and certain so as to explain a clear intention to create a trust.
In the present problem, the trust is not created as the beneficiaries are not indicated with reasonable certainty.
Answer 6(b)
According to Section 4 of the Indian Stamp Act, 1899 where in the case of any sale, mortgage or settlement, several instruments are employed for completing the transaction
(a) the only principal instrument shall be chargeable with the duty prescribed for the conveyance, mortgage or settlement, and
(b) each of the other instruments shall be chargeable with a duty of one rupee.
, In the present problem, the two documents i.e. deeds, one executed by Ram and another executed by Shyam are part of the same transaction. They amount to a settlement and the provisions of Section 4 of the Stamp Act are attracted (Maharaj Someshar Dutta, ILR 37 ALL 264). Therefore, the concerned Government authority should not insist for full duty. The deed executed by Shyam is chargeable with a duty of one rupee and not with full duty.
Answer 6(c)
The three terms - investigation, inquiry and trial denote three different stages of a criminal case. Investigation includes all the proceedings under the Cr.P.C., 1973 for the collection of evidence conducted by a police officer or by any person (other than a Magistrate) who is authorized by a Magistrate in this behalf. [Section 2(h), Cr.P.C, 1973]
Inquiry means every inquiry other than a trial, conducted under this Code by a Magistrate or Court [Section 2(g) Cr.P.C, 1973].
Trial is the final stage in a criminal case and starts when inquiry is concluded.
Question 7
(a) Bab/oo borrowed Rs.5,000 from Shambhu, which was recorded on a printed paper and stored in computer as the computer output. After some time, Shambhu demanded money from Babloo, which the latter refused to pay. Shambhu filed a suit for recovery of money from Babloo on the basis of computer records. Whether the court can treat it as sufficient proof for granting relief to Shambhu against Babloo under the Indian Evidence Act, 1872 ? (5 marks)
(b) Sunil gives property worth Rs.2,000 only to Anil and adds a condition that Anil should sell the property for Rs.50,000 and not below this amount. Is this condition valid? Give reasons. (5 marks)
(c) Amrish was found guilty of damaging the data stored in a computer. The adjudicating officer fined him Rs. 1,00,000 and directed the amount to be paid to the aggrieved person. Advise Amrish about the course of action against this decision under the Information Technology Act, 2000. (6 marks)
Answer 7(a)
Section 65A of the Indian Evidence Act, 1872 provides that the contents of electronic records may be proved in accordance with the provisions of Section 65B. Shambhu can file a suit for recovery of money from Babloo on the basis of computer record which is admissible under the Indian Evidence Act as an evidence. The Court will treat it as sufficient proof for granting relief to Shambhu against Babloo.
Answer 7(b)
The condition is not valid because it places absolute restriction on the transfer of property. Section 10 of the Transfer of Property Act, 1882 says that when property is transferred, the transferee should not be restrained absolutely from alienating the property. One may give property to another subject to a condition but the condition should not be such which absolutely prevents the transferee from alienating the property.
In the given problem, Sunil gives to Anil property worth only Rs. 2000 and adds a condition that Anil should sell the property for Rs. 50,000 and not below that amount. The condition becomes at once invalid because no one will buy the property which is only worth Rs. 2,000 for Rs. 50,000.
Answer 7(c)
The course of action available to Amrish in this case, is that he can file an appeal under Section 57 of the Information Technology Act against the decision of the Adjudication Officer before the Cyber Appellate Tribunal. The appeal is to be filed within a period of 45 days.
Question 8
(a) On 31st Decr, 1995, Govind took loan from Ghanshyam. On 16th June, 1999, Govind made only part payment. After that no payment was made. Ghanshyam subsequently filed a suit against Govind for recovery of the debt after the expiry of two years from the date of part payment. Is the suit maintainable? (5 M)
(b) A magistrate of the first class passes a sentence of imprisonment for a term of three years with a fine of Rs.5,000, and in case of failure to pay the fine an additional imprisonment for another one year. The convict feels aggrieved by the sentence. Can he prefer an appeal against the judgment ? (5 marks)
(c) An illegitimate son of a deceased owner of a property gets possession of the property to which he is not legally entitled but his name is entered in the papers as owner. He mortgages the property. On the date of mortgage, the rightful owner's suit against him for recovery and possession was pending and it was decreed subsequently. When the rightful owner sought to avoid the mortgage, the mortgagee resisted the claim by pleading that mortgager was the ostensible owner of the property when he mortgaged it. Decide. (6 marks)
Answer 8(a)
Part payment is acknowledgement by conduct, but under Section 19 of the Limitation Act it should be made before the expiry of the period of limitation. A fresh period of limitation is available only when part payment is made within the period of limitation.
In the present problem, part payment by Govind is made after the expiry of limitation period.Therefore, fresh period of limitation will not be available to Ghanshyam. The suit filed by Ghanshyam is not maintainable.
Answer 8(b)
The convict may appeal against the judgment of the Magistrate. Under Section 30 of the Cr.P.C 1973, the Court of a Magistrate may award such term of imprisonment in default of payment of fine as is authorized by law provided the term is not in excess of the powers of the Magistrate under Section 29 of the Code (a Magistrate under Section 29 can impose imprisonment for a term of three years or a fine of Rs. 5000 or of both) and shall not where the imprisonment has been awarded as a part of the substantive sentence exceed one-fourth of the term of imprisonment which the Magistrate is competent to inflict as punishment for the offence otherwise than as imprisonment in default of payment of the fine.
Answer 8(c)
As oer Section 41 of the Transfer of Property Act,1882 where a person with the ""1 express or implied of the persons interested in immovable property is the tc--—J*B owner of such property and transfers the same for consideration, the transfer Pgil'not be voidable on the ground that the transferor was not authorized to make it.
In the given problem, the illegitimate son of a deceased owner gets possession illegally, without the consent of rightful owner. Therefore illegitimate son cannot be treated as ostensible owner of the property. The mortgagee's claim is not valid. The property will vest in rightful owner.
INTERMEDIATE EXAMINATION
DECEMBER 2004
GENERAL AND COMMERCIAL LAWS
Time allowed : 3 hours Maximum marks : 100
NOTE: Answer SIX questions including Question No. 1 which is COMPULSORY.
Question 1
(a) Discuss the legislative powers of the Parliament and State Assemblies with respect to different subjects of legislation as provided under the Constitution of India. (8 marks)
(b) Discuss the position of fundamental rights vis-a-vis directive principles of State policy. (6 marks)
(c) What is 'delegated legislation' ? What are the limits under which powers of delegated legislation may be exercised ? (6 marks)
Answer 1 (a)
A federal Constitution establishes a dual polity as it comprises two levels of Government. At one level there exists a Central Government having jurisdiction over the whole country and reaching down to the person and property of every individual therein. At the other level, there exists the States into which the country is divided under the Constitution. The two levels of Government divide and share the totality of governmental functions and powers between themselves. A federal Constitution thus envisages a division of governmental functions and powers between the Certre and the regions by the sanction of the Constitution.
The Constitution of India substantially follows the pattern of the Government of India Act, 1935 for the purpose of distribution of legislative powers'between Union and States subject to the modification that the residuary subjects have been left for the Union as in Canada. The Constitution draws three long lists—the Union List, the State List and the Concurrent List. These lists are contained in the Vllth Schedule to the Constitution.
Union List on which Parliament is empowered to legislate contains 97 entries and includes subjects of national interest or importance. For example, defence of India, foreign affairs, atomic energy, war and peace, railways, posts and telegraphs, banking, currency, coinage and legal tender, trade and commerce with foreign countries, foreign loans and soon.
The State List consists of 66 entries. Entries 19, 20, 29, 36 have been deleted by Constitutional amendments. The subjects which are of local or regional interest and on which local control is more expedient have been assigned to the State List. These include police, prisons, public order, public health and sanitation, trade and commerce within the State, agriculture, education, forest, state taxes and duties and so on. State has the exclusive power to legislate over these matters.
Concurrent List consists of 47 entries. Those subjects which ordinarily are of local interest yet need uniformity on national level or at least with respect to some parts of the country, i.e., with respect to more than one State have been allotted to the Concurrent List. Criminal law, marriage and divorce, transfer of property, contracts, economic and social planning, commercial and industrial insurance, monopolies, social security and social insurance, legal, medical and other professions, price control are some of the illustrative matters included in the Concurrent List. New entries 11 A, 17A, 178,20Aand 33A have been added by Constitutional amendments.
As stated above, residuary powers under Article 248 vest with the Parliament. On the subject enumerated in Concurrent List, both Parliament and State Legislatures can make laws. In case of conflict between Centre and State laws on a subject, the Central law will prevail. Entry 97 of the Union List provides that Parliament has exclusive powers to make laws with respect to any matter not mentioned in the State List or in the Concurrent List. Parliament also has power to legislate on State subject under Articles 249, 250, 252, 253 and 356(b), while a State can never make a law on any Union List matter. Thus, from the scheme of distribution of legislative powers between State and Union, it is evident that the framers of the Constitution have given more powers to the Union as against States.
Answer 1(b)
The Constitution of India seeks to secure to the people "Liberty of thought, expression, belief, faith and worship: Equality of status and of opportunity: and Fraternity assuring the dignity of the individual". With this object, the fundamental rights are envisaged in Part III of the Constitution. These are:
(i) Right to Equality - Articles 14 to 18;
(ii) Right to Freedom -Articles 19 to 22;
(iii) Right against exploitation - Articles 23 and 24;
(iv) Right to Freedom of Religion -Articles 25 to 28;
(v) Cultural and Educational Rights -Article 29 and 30.
(vi) Right to Constitutional Remedies - Article 32.
Fundamental rights are deemed essential to protect the rights and liberties of people of India against the encroachment of the State power. In Maneka Gandhi v. Union of India, AIR 1978 SC 597, the Supreme Court laid down that these rights represent the values cherished by the people of this country to protect the dignity of the individual, to create conditions for the dignity of the individual and to create conditions for the fullest development of human personality. Fundamental rights can be enforced in the courts of law.
On the other hand the Directive Principles of State Policy contained in Part IV of the Constitution set out the aims and objects to be taken up by the State in the Governance of the country. The idea of Welfare State can be achieved if the State endeavours to implement them with high sense of moral duty. Articles 36 to 51 provide different kinds of social, economic and community welfare character of Directive Principles. The Directive Principles cannot be enforced in the courts of law.
The Directive Principles have the following features:
(i) The Directives are not enforceable in the courts and do not create any justiciable rights in favour of individuals.
(ii) he legislature must itself lay down the legislative policy and principles and must afford guidance to rule making body;
(iii) Act delegating law-making powers shall be invalid if it lays down no principles and standards for guidance.
(iv) If the legislature has performed its essential function of laying down the policy of the law providing guidance there is no constitutional bar against delegation of subsidiary or ancillary powers in that behalf to an outside authority.
Question 2
(a) Discuss the ejusdem generis rule of interpretation. (6 marks)
(b) If one person fraudulently uses the 'domain name'of another, what legal remedy is available to the aggrieved party ? (5 marks)
(c) What are the documents of which registration is not compulsory under the
Registration Act, 1908? (5 marks)
Answer 2(a):: Rule of ejusdem generis
The expression, 'ejusdem generis' means 'of the same kind'. Normally, general words should be given their natural meaning like all other words unless the context requires otherwise. But when a general word follows specific words of a distinct category, the general word may be given a restricted meaning of the same category. The general expression takes its meaning from the preceding particular expressions because the legislature by using the particular words of a distinct genus has shown its intention to that effect. If the preceding specific words do not belong to a distinct genus, this rule is not applicable.
It is merely a rule of construction to aid the courts to find out the true intention of the legislature (Jage Ram v. State ofHaryana, AIR 1971 SC1033). To apply the rule, the following conditions must exist:
(1) The statute contains an enumeration by specific words,
(2) The members of the enumeration constitute a class,
(3) The class is not exhausted by the enumeration,
(4) A general term follows the enumeration,
(5) There is a distinct genus which comprises more than one species, and
(6) There is no clearly manifested intent that the general term be given a broader meaning that the doctrine requires. (Thakura Singh. v. Revenue Minister, AIR 1965J&K102)
The rule of ejusdem generis must be applied with great caution because it implies a departure from the natural meaning of words, in order to give them a meaning or supposed intention of.the legislature. The rule must be controlled by the fundamental rule that statutes must be construed so as to carry out the object sought to be accomplished. The rule requires that specific words are all of one genus, in which case, the general words may be presumed to be restricted to that genus.
Whether the rule of ejusdem generis should be applied or not to a particular provision depends upon the purpose and object of the provision, which is intended to be achieved.
Answer 2(b)
The Information Technology Act, 2000 does not make any specific remedial provision if any person legally or fraudulently uses other person's domain name, However, such conduct is actionable under the law of torts. Judicial decisions in India and in other countries suggest that the tort of 'passing off is wide enough to afford legal redress (the damages) to a person who is the holder of a particular domain name and who suffers harm as a result of the fraudulent use of his domain name by other person. Such conduct has been regarded as falling under the tort of 'passing off.
The principles relating to 'passing off were held to be applicable to domain names in RediffCommunication Ltd. v. Cyberbooth (2000) 1 Recent Arbitration Judgements, 562 (Bombay High Court). In this case the domain name 'Rediff (of Plaintiff) and domain name Rediff (of defendant) were held to be deceptively similar and capable of causing deception as business activities of both the parties were similar. The grant of a temporary injunction restraining the, defendant from using the name was held to be proper. The similar view was taken by the High Court of Delhi in Yahoo Inc. v. Akash Arora (1999) 2 Recent Arbitration Judgements, 176 (Delhi).
Answer 2(c)
Section 18 of the Registration Act, 1908 specifies the documents, of which registration is not compulsory but optional. They are as follows:
(1) Instruments, (other than instruments of gift and will) which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, vested or contingent, of value less than Rs.100/- to or in immovable property;
(2) Instrument acknowledging the receipt or payment of any consideration on account of the creation, declaration, assignment, limitation or extinction of any such right, title or interest;
(3) Leases of immovable property for any term not exceeding one year.
(4) Instruments transferring or assigning any decree or order of a court or award when they purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest of a value less than one hundred rupees, to or in immovable property;
(5) Instruments (other than will) which create, declare, assign, limit or extinguish any right, title or interest to or in movable property.
(6) Wills; and
(7) Other documents not required to be registered u/s 17.
Question 3
(c) What purposes are prohibited for creation of a valid trust ? What are the effects of a void trust ? (5 marks)
Answer 3(a)
It is one of the principles of the English Criminal Law that a crime is not committed if the mind of the person doing the act in question be innocent. It is said that 'actus non facitream nisimens sit rea', i.e. the intention and act must both concur to constitute the crime and that is why it is said that guilty mind is generally necessary for liability in criminal law. The general rule to be stated is "there must be a mind at fault before there can be a crime".
In modern times this principle or maxim does not have so wide application. It has undergone a modification owing to the greater precision of modern statutes. It is impossible to apply it generally to all statutes. Crimes are, in the present day, much more accurately defined by statute than they formally were. However, mens rea is considered as essential element in every act of offence. But three exceptions to this rule have been pointed out in Sherras v. De Rutzen:
(a) cases not criminal in real sense but which in public interest are prohibited under a penalty e.g Revenue Acts;
(b) public nuisances;
(c) cases criminal in form but which are .really only a summary mode of enforcing civil rights.
The doctrine of mens rea has no application to the offences under IPC as all offences under IPC are defined mentioning the state of mind of the accused.
Answer 3(b)
Section 10 of the Code of Civil Procedure, 1908 provides the rule with regard to stay of suits where things are under consideration by a court. This section reads —"no court shall proceed with the trial of any suit in which the matter in issue is also directly and substantially in issue in a previously instituted suit between the same parties or between parties under whom they or any of them claim litigating under the same title where such suit is pending in the same or any other court in India having jurisdiction to grant the relief claimed, or in any court beyond the limits of India established or continued by the Central Government and having like jurisdiction, or before the Supreme Court."
However, the pendency of a suit in a foreign court does not bar the courts in India from trying a suit founded on the same cause of action. For the application of doctrine of res subjudice the following conditions must be fulfilled:
(1) A previously instituted suit is pending in a court.
(2) The matter in issue in second suit is also directly and substantially in issue in the previously instituted suit.
(3) The previously instituted suit is still pending in the same court or in any other court in India.
(4) The court in which previous suit is pending has jurisdiction to grant relief.
(5) Parties in two suits are same.
(6) Parties are litigating under same title in both the suits Madras High Court in Kunthe Sankara Eaman v. Vankapa Bhatia AIR 1954 Mad. 820 has laid down that for application of res sub judice what is essential is that there must be substantial identity between matters in dispute and parties.
Answer 3(c)
The Indian Trusts Act, 1882 allows creation of.a trust for any lawful purpose. What is lawful purpose can be gathered from Section 4 of the said Act which provides that the purpose of a trust is lawful unless:
1. it is forbidden by law;
2. it is of such nature that if permitted, would defeat the provisions of any law;
3. it is fraudulent;
4. it implies injury to any person or property of another;
5. the court regards it as immoral and against public policy.
Thus, a trust which does not fall in any of the above prohibitions is deemed to be for lawful purpose. If the purpose of the trust is unlawful the trust is void and the trust is extinguished. It is a nullity and cannot be enforced.
Question 4
(a) If a person is dispossessed of immovable property without his consent and
otherwise than in due course of law, what legal remedy is available to him if he
does not establish his title ? (6 marks)
(b) Define 'arbitration agreement'. What are the essentials for a valid arbitration
agreement ? (5 marks)
(c) Which party is responsible for payment of duty on different kinds of instruments under the Indian Stamp Act, 1899 ? (5 marks)
Answer 4(a)
Section 5 and 6 of the Specific Relief Act, 1963 provides for the remedy for a person for recovering possession of property i.e. immovable property. Section 5 lays down that 'person entitled to the possession of specific immovable property may recover it in the manner provided by the Code of Civil Procedure 1908. It means a suit for ejectment on the basis of title could be brought.
Section 6(1) deals with situations where a person has been dispossessed from immovable property without his consent and due course of law and provides that in case any person is dispossessed without his consent of immovable property otherwise than in due course of law, he or any person claiming through him may by suit recover possession thereof notwithstanding any title that may be set-up in such suit.
Sub-section (2) further provides that, no suit shall be brought:
(a) after the expiry of six months from the date of dispossession;
(b) against the Government;
(c) no appeal shall lie from any orders or decree passed in any suit instituted under this Section.
Therefore ,'to attract Section 6 following conditons must exist;
(a) Plaintiff has been dispossessed.
(b) Plaintiff has been dispossessed without his consent and without due process of law.
(c) Plaintiff has been dispossessed during last six months from the date of institution of suit.
If the above conditions are fulfilled then no quesiton of title of the plaintiff or of the defendant can be raised or gone into. Plaintiff's previous possession is sufficient to give relief under this Section. The plaintiff must be in legal possession of the property under some right. In M/s Chandra & Co. v. Stefe ofRajasthan (AIR 1976 SC 1628) the court held that State Government cannot forcibly evict a person who was in peaceful possession and the High Court upon a petition under Article 226 may provide appropriate relief to the aggrieved. In NairSer 'je Society v. K.C. Alexander (MR 1968 SC 1165) the Supreme Court held that suit .jn be brought after six months under this Section. In Somnathv. SPRajMR 1970 SC 846 the Supreme Court laid down that 'Section 9 (now Section 6) of the Specific Relief Act is in no way inconsistent with the position that as against a wrong doer, prior possession of plaintiff in an action of ejectment is sufficient title even if suit is brought more than six months after the act of dispossession. The wrong doer cannot take plea that the title and right to possession are in a Third person'. •
Answer 4(b)
Under Section 7 of the Arbitration and Conciliation Act, 1996, 'arbitration agreement" has been defined to mean an agreement by parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.
Section 7(2) provides that an arbitration agreement may be in the form of an arbitration clause in a contract or in the form of separate agreement. The agreement shall be in writing. Section 7(4) provides that an agreement is in writing if it is contained in a document signed by the parties, an exchange of letters, telex, telegrams or other means of telecommunication, which provide a record of the agreement or an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. Under Section 7(5), it is further provided that the reference in a contract or a document containing an arbitration clause constitutes an arbitration agreement, if the contract is in writing and the reference is such as to make that arbitration clause part of the contract. Whatever be the form or contents of the agreement, if it is necessary for the Act to apply then there should be a mandatory requirement for settlement of dispute by means of arbitration. In RukmanibaiGuptav. Collector, Vaba/pur(1980) 4 SCC 556, the Supreme Court laid down that no particular form of agreement is necessary.
Thus, arbitration agreement stands on the same footing as any other agreement. It is binding upon the parties unless it is influenced by fraud or coercion or undue influence, etc. As per Section 7, one of the essential ingredients of an arbitration agreement is that it should be in writing. An oral arbitration agreement is not recognized as an arbitration agreement according to this Section.
Section 7(3) only requires that an agreement by the parties should be in writing. It is not necessary that the words arbitration, arbitrator or arbitration agreement should appear in the arbitration clause so long as the parties have valid agreement to allow the matter of dJspute to be decided by persons of their own choice.
Under the present law, certain disputes such as matrimonial disputes, criminal prosecutions, questions relating to guardianship about the validity of a will, etc. are treated as not suitable for arbitration. Subject to this qualification Section 7(1) of the Act. makes it permissible to enter into an arbitration agreement "in respect of a defined legal relationship, whether contractual or not".
Answer 4(c)
Section 29 of the Indian Stamp Act, 1899, specifies the persons liable to pay the stamp duty in different instruments although the said section is not exhaustive. In the absence of an agreement, the expense of the stamp duty shall be borne:
(i) By the person drawing, making, executing any instrument of the following kinds:
Administration bond, Agreement relating to deposit of title deeds, power or pledge, Bill of Exchange, Bond-Bottomry Bond, the customs Bond, debenture, indemnity bond, mortgage deed, prornissory note, release deed, transfer of share, Respondentia Bond, security Bond, or Mortgage deed;
(ii) In the case of policy of insurance other than fire insurance by the person effecting the insurance;
(iii) In the case of a policy of fire insurance—by the person issuing the policy;
(iv) In the case of a conveyance including reconveyance of mortgaged property- by the grantee, in case of a lease or agreement to lease by the lessee or intended lessee;
(v) In the case of counterpart of a lease-by the lessor;
(vi) In the case of instrument of exchange-by the parties in equal shares;
(vii) In the case of certificate of sale-by the purchaser of the property to which such certificate relates; and
(viii) In the cases of partition—by the parties thereto in proportion to their respective shares in the whole property partitioned or when the partition is made in execution of an order passed by a Revenue Authority or Civil Court or Arbitrator, in such proportion as such authority, court or arbitrator directs.
Question 5
(a) Ajoy, after learning that Chancier had been murdered by Bijoy, went to the spot and found that the body of Chander was being taken to the house of Chander by four persons who told him that Bijoy had murdered Chander and he had run away. Is the statement of Ajoy that he was told by four persons that Bijoy had murdered Chander and run away admissible as an evidence ? (6 marks)
(b) Anand bequeaths his house to trustees, declaring that they may sell it with the consent ofBhanu. Bhanu gives a general prospective assent in writing to any sale which the trustees may make. The trustees then enter into a contract with Chetan to sell him the house. Chetan refuses to carry out the contract. Can trustees specifically enforce the contract ? (5 marks)
(c) Ramesh owed Rs.50,000 to Brijesh on a bond which fell due on 1st January, 2002. Brijesh died in an accident on 30th June, 2003 without having brought any suit, and was succeeded by his son Mohan of 12 years of age. Is Mohan entitled to any extension of time because of his minority ? (5 marks)
Answer 5(a)
The statement of Ajoy that he was told by four persons that Bijoy had murdered Chanderand had run away does not form part ofresgesfaeand is therefore, inadmissible under Section 6 of the Evidence Act.
As per Section 6 of the Indian Evidence Act, 1872 "facts which though not in issue, are so connected with a fact in issue as to form part of the same transaction, are relevant, whether they occurred at the same time and place or at different times and places."
The evidence of a statement of a by-stander as to an occurrence will be admissible in evidence as part of res gestae. The word 'by-standers' means the persons who are present at the time of the incident and not the persons who gather on the spot after the incident (46 P.L.R. 353); (1945) Lah. 146).
Answer 5(b)
The trustees cannot specifically enforce this contract, as in the absence of Bhanu's consent to the sale to Chetan, the title which they can give to Chetan is, as the law stands, not free from reasonable doubt. The reason is that Section 17(1 )(b) of the Specific Relief Act, provides that a contract to sell or hire property cannot be specifically enforced in favour of a seller or lessor if he had no title to the property or he entered into contract believing that he had title to property but cannot give a title free from reasonable doubt when it should be given as per contract or as per court order. The provisions of this Act can be applied only if specific permission has been given for sale of the particular or specific property. It is the duty of the vendor to make a reasonable, clear and marketable title about which there must not be any reasonable doubt.
Answer 5(c)
Section 9 of the Limitation Act, 1963 clearly says that once the time has begun to run, no subsequent disability or inability to institute a suit or make an application stops it. However, where, letters of administration to the estate of a creditor has been granted to his debtor, the running of the period of limitation for a suit to recover the debt shall be suspended while the administration continues.
In the present problem, Mohan is not entitled to any extension of time on account of his minority because when the cause of action arose in this case Brijesh was alive and the period of limitation started during his lifetime i.e. 1st January 2002.
Question 6
(a) A requisition was received by the sub-inspector of a police station from another police-station to arrest one Sameerin connection with the commission of a non-cognizable offence. Can the sub-inspector arrest Sameer ? (6 marks)
(b) While a suit relating to a bunglow is pending between Ram and Shyam, Gita transferred the bunglow in favour of Sita. The court passes a decree in favour of Ram. Ram starts proceedings for execution of the decree against Sita. Will Ram succeed ? (5 marks)
(c) Aman filed a suft'against Bhuvan for obtaining a house and land property of Chaman on the ground that Chaman had bequeathed those properties to him by a will. But, Aman failed to prove the will and his suit was dismissed. Now, Aman files a fresh suit to get the properties of Chaman on the ground that he is the only and nearest heir to Chaman. Will Aman succeed ? (5 marks)
Answer 6(a)
In the present problem, arrest is required to be made in connection with a non-cognizable offence for which warrant is necessary. Therefore, Sameer cannot be legally arrested without warrant. The sub-inspector cannot arrest Sameer on the basis of requisition alone.
Section 41(1)(i) of the Code of Criminal Procedure, 1973 provides that police can arrest a person without warrant for whose arres't a requisition is received from other police station only when the offence, in connection of which requisition is made, is such for which arrest warrant is not required.
Answer 6(b)
In this problem transfer of Bungalow in relation to which suit is pending, is made by Gita who is not a party to the suit. Therefore, the doctrine of Us pendens is not applicable and thus decree is not enforceable against Sita, the transferee. The doctrine of Us pendens requires that during the pendency of suit transfer of immovable property which is subject matter of dispute in the suit should be made by any party to the suit and not by a stranger. (Section 52 of Transfer of Property Act, 1882)
Answer 6(c)
Explanation IV to Section 11 of C. PC 1908 provides that any matter which might and ought to have been made ground of defence or attack in a former suit, shall be deemed to have been a matter directly and substantially in issue in such suit. In simple terms it means that all the grounds of attack or defence must be given at the earliest stage in any proceeding, if it could have been known reasonably befoehand. Parties cannot bring the grounds of attack or defence stage by stage. Therefore, the ground that Aman is entitled to get the properties as the only and nearest heir of Chaman shall be deemed to be a matter directly and substantially in issue in former suit and it ought to have been taken up by Aman in that suit itself since it was a ground known already to Aman. Thus, fresh suit is barred by the application of doctrine of resjudicata and Aman will not succeed.
Question 7
(a) A special meeting of the governing body of a society registered under the Societies Registration Act, 1860 was convened to consider the proposal for altering its purposes. The proposal was submitted to the members in a written report. The proposal was agreed to by the votes of three-fourths of members present and voting in person.
A second special meeting was convened after ten days of the first meeting. In
the said meeting, the agreed proposal was confirmed by three-fifths of the total
members. Is the alteration valid ? (6 marks)
(b) Rajesh mortgages a building of the value of Rs. 70,000 to Suresh for Rs. 50,000. Rajesh, subsequently, sells the building to Suresh. An unpaid amount of Rs. 5,000 against interest is also outstanding at the time of sale. Determine the value on which the stamp duty is payable in this transfer of property.
(5 marks)
(c) Ajit sells a house to Baljit by a written document in 1997 and delivers possession thereof to Baljit. But the document is not registered. After one year, Ajit sues Baljit to take back possession of the house on the ground that because of non¬registration, the document has no validity. Will Ajit succeed ? (5 marks)
Answer 7(a)
According to Section 12 of the Societies Registration Act, 1860 whenever the governing body of the Society considers it advisable to alter, extend or abridge its purpose or to amalgamate the Society with any other Society either wholly or partially, it shall convene a special meeting to consider the proposal and shall submit the proposition to the members in a written or printed report, sent or delivered 10 days prior to the special meeting convened. The propositions must be agreed by the votes of three-fifths of the members present in person or by proxy. Then a second special meeting will be convened, at an interval of one month after the first meeting. In the second meeting the agreed proposition must be confirmed by three-fifths of the members present there. Only after that the proposition if confirmed shall be carried into effect. In Shridhar Mishra v. Jai Chandra, (AIR 1959, All 598) the court held that provisions of this Section are mandatory .
In the present problem the procedure provided under Section 12 has not been complied with. Therefore as the second meeting was convened after 10 days while it should have been conveyed at an interval of one month after first meeting the alteration of purpose is not valid and cannot be carried into effect.
Answer 7(b)
Explanation to Section 24 of the Indian Stamp Act, 1999, provides that in the case of sale of property subject to mortgage or other encumbrances any unpaid mortgage money or money charged together with interest, if any due on the same shall be deemed to be part of the consideration for the sale, provided that where property subject to a mortgage is transferred to the mortgagee he shall be entitled to deduct from the duty payable on the transfer the amount of any duty already paid in respect of the mortgage.
In the present problem, in the light of above rule, a stamp duty is payable on Rs.70,000 + 5 000 i.e. Rs. 75,000 less the amount of stamp duty already paid for the mortgage. Hence stamp duty is payable on Rs. 25,000 now, if the duty on mortgaged amount of Rs. 50,000 has already been paid.
Answer 7(c)
As per Section 49 of the Registration Act, 1908 if a document is to be registered but has not been registered, it cannot affect any immovable property or cannot be admitted in evidence of any transaction affecting such property unless it has been registered.
However, the proviso to Section 49 of the Registration Act, 1908 provides that an unregistered document affecting immovable property and required by this Act or by the Transfer of Property Act, 1882 to be registered, may be received as evidence of a contract in a suit for specific performance or as evidence of any collateral transaction not required to be effected by registered instrument.
In the present problem, Ajit will not succeed because of the effect of Section 53Aof the Transfer of Property Act, 1882 and Section 49 of the Registration Act, 1908. The Instrument of transfer is admissible even without registration.
Question 8
(a) Under the terms of an arbitration agreement, the court appointed Anurag, chairman
of the arbitral tribunal, as the arbitrator. During the pendency of the arbitration,
Anurag was demoted and ceased to be the chairman of arbitral tribunal. The
parties to the dispute objected to his continuance as arbitrator on the ground
that he had now become disqualified. Is he entitled to continue as the arbitrator?
Decide: (6 marks)
(b) Amar bequeaths certain property to Akbar, having the fullest confidence that he
will dispose it of for the benefit of Anthony. Explain whether a valid trust is
constituted by this instrument ? (5 marks)
(c) Arjun owed money to Bheem. Bheem transferred the debt by deed of gift to
Chander. Subsequently, Bheem transferred it for value to Deepak. Who is
entitled to the amount ? (5 marks)
Answer 8(a)
Facts of this problem are based on the case Construction India Ltd. v. Secretary, Works Department, Government ofOrissa, 1998 2, SCC 89. The Supreme Court in this case held that if an arbitrator was demoted from the office of chairman of the Tribunal during pendency of the arbitration proceedings, he would not cease to have jurisdiction. He would be entitled to continue with the matter. The court observed that parties may rely on his experience or special skill, when arbitrator is designated by name. Unless clear intention is spelt out in the agreement that he would continue to be an arbitrator only so long as he holds a particular office, a mere reference to the office held by arbitrator will not disqualify him from being an arbitrator after he ceases to hold that office. In this problem Mr. Anurag will continue as arbitrator and his demotion will have no effect.
Answer 8(b)
Section 6 of the Trust Act, 1882 provides the conditions for creation of valid trust. The Section provides that a trust is created when the author of the trust indicates with reasonable certainty by any words or act (a) an intention on his part to create thereby a trust; (b) the purpose of the trust (c) the beneficiary and (d) the trust property, and transfers the trust property to the trustee.
In the present problem, Amar creates a valid trust for Anthony, as there is reasonable certainty regarding purpose of trust in the instrument of trust. Problem is based on illustration (a) appended ta Section 6 of the Indian Trusts Act, 1882.
Answer 8(c)
In the given problem, the first transfer is in favour of Chander. An actionable claim may be transferred even without consideration, hence this transfer is valid. The Second transfer of same actionable claim to Deepak for consideration cannot deprive Chander of the rights, which he had already acquired. Chander is therefore entitled to the money.
INTERMEDIATE EXAMINATION
DECEMBER 2005 GENERAL AND COMMERCIAL LAWS
Time allowed: 3 hours , Maximum marks: 100
Note: Answer SIX questions including Question No. 1 which is COMPULSORY.
Question 1
(a) "None of the fundamental rights to freedom is absolute." Comment and explain
the reasonable restrictions which can be imposed on the freedom of speech
and expression. .- (8 marks)
(b) On what grounds and against whom can the writ of certiorari be issued?
(6 marks)
(c) Discuss in brief the rule of colourable legislation. (6 marks)
Answer 1(a)
Article 19 of the Constitution guarantees to the citizens of India six fundamental freedoms which are exercisable by them throughout and in all parts of India. As per Article 19(1), all citizens shall have the right -
(a) to freedom of speech and expression;
(b) to assemble peaceably and without arms;
(c) to form associations or unions
(d) to move freely, throughout the territory of India;
(e) to reside and settle in any part of the territory of India;
(f) (omitted)
(g) to practise any profession, or to carry on any occupation, trade or business.
The freedoms enumerated in Article 19(1) are those great and basic rights which are recognized as the natural rights inherent in the status of a citizen. But at the same time, these freedoms are not absolute but subject to reasonable restrictions. Accordingly, clauses (2) to (6) of Article19 recognize the right of the State to make laws imposing 'reasonable restrictions' on these freedoms in the interests of the general public, security of the State, public order, decency and morality, and for other reasons set out in these sub-clauses. The principle on which the power of the State to impose restriction is based is that all individual rights of a person are held subject to such reasonable limitations and regulations as may be necessary for the protection of the general welfare.
Right to freedom of speech and expression
A democratic Government attaches great importance to this freedom because without freedom of speech and expression the appeal to reason which is the basis of democracy cannot be made. The freedom of speech and expression under Article 19(1)(a) means the right to express one's convictions and opinions freely by word of mouth, writing, printing, pictures or any other mode.
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One may express oneself even by signs. This freedom includes the freedom of press as it partakes of the same basic nature and characteristic (Maneka Gandhi v. Union of India, AIR 1978 S.C. 597). The Courts have held that this right includes right to publish one's opinion, right to circulation and propagation of one's ideas, freedom of peaceful demonstration, dramatic performance and cinematography. It may also include any other mode of expression of one's ideas. The Supreme Court in Cricket Association of Bengal v. Ministry of Information & Broadcasting (Govt. of India), AIR 1995 SC 1236, has held that this freedom includes the right to communicate through any media - print, electronic and audio visual.
The freedom of speech and of the press does not confer an absolute right to speak or publish without responsibility whatever one may choose. This freedom as mentioned above, is subject to reasonable restrictions and clause (2) of Article 19 specifies the limits upto which the freedom of speech and expression may be restricted. It enables the legislature to impose by law reasonable restrictions on the freedom of speech and expression in the interests of:
(1) The sovereignty and integrity of India;
(2) The security of the State;
(3) Friendly relations with foreign States;
(4) Public Order;
(5) Decency or morality; or
(6) In relation to contempt of court;
(7) Defamation or incitement to an offence.
Reasonableness of the restriction is an ingredient common to all the clauses of Article 19. The Constitution no where defines the expression 'reasonable restrictions'. The determination by the Legislature of what constitutes a reasonable restriction is not final or conclusive; it is subject to supervision by the court. No abstract standard reasonableness can be laid down as applicable to all cases. The nature of the right alleged to have been infringed, the underlying purpose of the restrictions imposed, the extent and urgency of the evil sought to be remedied thereby, the disproportion of the imposition and prevailing conditions at the time should all enter into the judicial verdict.
The Supreme Court has considered the question of reasonableness on several occasions and has laid down several tests and guidelines to indicate what in particular circumstances can be regarded as a reasonable restriction. One of the tests is to bear in mind the Directive Principles of State Policy. Other tests include that the restrictions must not be arbitrary or of an excessive nature so as to go beyond the requirement of the interests of the general public; Restrictions must examine the nature and extent, the purport and the content of the right, the nature of the evil sought to be remedied by the statute; there must be a direct and proximate nexus or a reasonable connection between the restriction imposed and the object which is sought to be achieved; Another important test is that so far as the nature of reasonableness is concerned, it has to be viewed not only from the point of view of citizens but the problem before the legislature and the object which is sought to be achieved by the statute.
In order to judge the quality of reasonableness no abstract or general pattern or fixed principle can be laid down so as to be of universal application and the same will have to vary from case to case.
Answer 1(b)
The writ of certiorari is a judicial order directed by the Supreme Court or High Court to any constitutional, statutory or non statutory body or person requiring the records of any action to be certified by the court and dealt with according to law. Under the Constitution of India, such power of writ jurisdiction is vested with the Supreme Court under Article 32 and with the High Courts under Article 226.
A writ of certiorari can be issued to a judicial or quasi judicial body on the following grounds:
(i) Lack or excess of jurisdiction
(ii) Abuse of jurisdiction
(iii) Violation of the principles of natural justice
(iv) Error of law apparent on the face of record.
Lack or excess of jurisdiction: Lack of jurisdiction refers to such situations where the authority has no jurisdiction at all to take action. Excess of jurisdiction refers to cases where authority has jurisdiction but it exceeds its permitted limits.
Abuse of jurisdiction: An authority shall be deemed to have abused the jurisdiction when it exercises its power for an improper purpose or on extraneous considerations or in bad faith or leaves out a relevant consideration or does not exercise the power by itself but at the instance and discretion of some one else.
Violation of the principles of natural justice: Law recognizes two principles of natural justice:
(a) Bias; (b) Rule of audi alteram partem which means right to fair hearing. The requirement of reasoned decisions is also added to these two as the third principle of natural justice. The writ of certiorari will lie to set aside the decisions in violation of the principles of natural justice.
Error of law apparent on the face of record: Error apparent on the face of record shall include not a mere error but a manifest error based on clear ignorance or disregard of the law or on a wrong proposition of the law or on clear inconsistency between facts and the law and the decision.
Answer 1(c)
Colourable Legislation .
Where legislative powers are divided into two bodies which have to act within their respective specific legislative spheres, there questions do arise as to whether the legislation in a particular case has or has not in respect of subject matter of the statute, or in the method of enacting it, transgressed the limits of its constitutional powers. Such transgression may be patent or direct, but it may be disguised, covert and indirect. In the later class of legislation the expression 'colourable legislation has been applied in certain judicial decisions.
Rule of colourable legislation conveys that although a legislature in passing a statute purports to act within the limits of its powers, yet in substance and in reality it transgresses those powers, the transgression being veiled by what appears on
IGCL-Dec. 2005 4
proper examination to be a mere practice or disguise. In other words, it is the substance of the Act that is material and not merely the form and if the subject matter in substance is something, which is beyond the powers of the legislature to legislate upon, the form in which the law is clothed would not save from declaring it as ultravires.
In Shakammerayana v. State of Mysore AIR 1966 SC 1571, the Supreme Court observed that the doctrine of colourable legislation is relevant only in connection with the question of legislative competence. Objections based on colourable legislation have relevance only in situations when the power is restricted to particular topics and an attempt is made to escape legal fetters imposed on its powers by resorting to forms of legislation calculated to mask the real subject matter.
Question 2
(a) Explain the golden rule of interpretation of statutes. (5 marks)
(b) When does the payment of interest or part-payment of principal amount by the
debtor extend the period of limitation ? Discuss. (5 marks)
(c) Discuss the law embodied in the doctrine of feeding the grant by estoppel under
the Transfer of Property Act, 1882. (6 marks)
Answer 2(a)
Golden Rule of Interpretation
Golden Rule of interpretation is a modification of the principle of grammatical rule of interpretation. The golden rule is that the words of a statute must prima facie be given their ordinary meaning. Natural and ordinary meaning should not be departed from unless it can be shown that the legal context in which the words are used requires a different meaning. On the face of it, this rule solves all problems and is, therefore known as the golden rule. Since the literal meaning is modified to some extent, this approach is called the modifying method of interpretation. This rule suggests that consequences or effects of an interpretation deserve a lot more importance because these are clues to the true meaning of legislation.
There may be cases where even though literal interpretation may include certain consequences not intended by the legislature, the court shall not so interpret because some lawful justification is available for doing so. Whenever, more than one construction is possible that which appears most reasonable shall be given effect to. The court will try to avoid unreasonable and anomalous results.
Answer 2(b)
Section 19 of the Limitation Act, 1963 stipulates the law for extension of the period of limitation when part payment of the principal amount or payment of interest is made. As per Section 19 of the Act, where payment on account of a debt or of interest on a legacy is made before the expiration of the prescribed period by the person liable to pay the debt or legacy or by his agent duly authorized in this behalf, a fresh period of limitation shall be computed from the time when the payment was made.
The proviso to the Section says that, save in the case of payment of interest made before the 1st day of January, 1928 an acknowledgement of the payment must
appear in the handwriting of, or in a writing signed by the person making the payment.
The explanation appended to the Section further provides that:
(a) where mortgaged land is in the possession of the mortgagee, the receipt of the rent or.produce of such land shall be deemed to be a payment;
(b) 'debt' dogs^not include money payable under a decree or order of a court for the purpose, of this Section.
Thus, according to this section a fresh period of limitation becomes available to the creditor when part-payment of debt is made by the debtor before the expiration of the period of limitation.
Answer 2(c)
Doctrine of feeding the grant by Estoppel has been embodied in" Section 43 of the Transfer of property Act, 1882. As per Section 43, where a person fraudulently or erroneously represents that he is authorized to transfer certain immoveable property and professes to transfer such property for consideration, such transfer shall, at the option of the transferee, operate on any interest which the transferor may acquire in such property at any time during which the contract of transfer subsists. Nothing in this Section shall impair the right of transferees in good faith for consideration without notice of the existence of the said option.
In order to invoke this section, the transferee must prove that: (i) there was a representation, fraudulent or erroneous;
it was to the effect that the transferor is entitled to transfer the immoveable property;
the transferor is found to have subsequently acquired the interest which he professed to transfer;
(iv) the transfer of property was for consideration; (v) the transferee has not rescinded the contract;
(vi) the transferee acted in good-faith for consideration and without notice of the rights under the prior transfer.
Question 3 .
(a) State the contracts which can be specifically enforced under the Specific Relief
Act, 1963. (5 marks)
(b) How and when a trust can be revoked and extinguished? (5 marks)
(c) Write short notes on the following, (i) Doctrine of sufficient cause
(ii) Actionable claims. (3 marks each)
Answer 3(a)
Contracts which can be specifically enforced have been dealt with under Section 10 of the Specific Relief Act, 1963. It says that except as otherwise provided in this Chapter, the specific performance of any contract may, in the discretion of the Court, be enforced (a) when there exists no standard for ascertaining the actual damage caused by the non-performance of the act agreed to be done, or (b) when the act
agreed to be done is such that compensation in money for its non-performance would not'afford adequate relief. The explanation provides that unless and until the contrary is proved, the Court shall presume:
(i) that the breach of a contract to transfer immovable property cannot be
adequately relieved by compensation in money, and
(ii) that the breach of a contract to transfer movable property can be so relieved except in the two cases: (a) where the property is not an ordinary article of commerce or is of special value or interest to the plaintiff, or consists of goods which are not easily obtainable in the market, (b) where the property is held by the defendant as the agent or trustee of the plaintiff. So, under this Section, contracts for sale of patent right, copy right, shares of a company which are not easily available, future property, chattels of special value, etc., are specifically enforceable.
Further, specific performance of contracts connected with trusts may in the discretion of the court be specifically enforced. Section 11 lays down that except as otherwise provided in this Act, specific performance of a contract may, in the discretion of the Court, be enforced when the act agreed to be done is in the performance wholly or partly of a trust. But if a trustee enters into a contract in excess of his powers then such a contract cannot be specifically enforced. Furthermore, under Section 12 of the Act, the court may grant the specific performance of a part of a contract in certain cases mentioned therein. Answer 3(b)
Section 77 and 78 of the Indian Trusts Act, 1882 deal with extinction and revocation of a trust.
As per Section 77, a trust is extinguished:
(a) When its purpose is completely fulfilled; or
(b) When its purpose becomes unlawful; or
(c) When the fulfillment of its purpose becomes impossible by destruction of the trust-property or otherwise; or
(d) When the trust being revocable, is expressly revoked. Revocation of a Trust: If a trust is created by a will, it may be revoked by the revocation of the will. A trust which has been created otherwise, can be revoked only:
(a) With the consent of all the beneficiaries competent to contract;
(b) By the exercise of a power of revocation expressly reserved by the author of the trust (in cases of trusts declared orally or by non-testamentary instruments); or
(c) Where the trust is created for the payment of debts of the author of the trust and has not been communicated to the creditors - at the pleasure of the author of the trust. (Section 78) Answer 3(c)(i)
Section 5 of the Limitation Act, 1963 allows the extension of prescribed period of limitation in certain cases on sufficient cause being shown for the delay. Section 5
provides that any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908, may be admitted after the prescribed period if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period.
It is clarified by the explanation appended to Section 5 that the fact that the appellant or applicant was misled by any order, practice or judgement of the High Court in ascertaining or computing the prescribed period may be a sufficient cause within the meaning of this Section.
Thus, the Court may admit an application or appeal even after the expiry of the specified period of limitation if it is satisfied with the applicant or the appellant, as the case may be as to sufficient cause for not making it within time.
The Section is not applicable to applications made under any of the provisions of Order XXI of the Code of Civil Procedure, 190ff and also to suits. It applies only to appeals or applications as specified therein. The reason for non-applicability of the Section to suits is that, the period of limitation allowed in most of the suits extends from 31o 12 years whereas in appeals and application it does not exceed 6 months.
The party applying for condonation of delay should satisfy the Court for not making an appeal or application within the prescribed period for sufficient cause. The term sufficient cause has not been defined in the Limitation Act. It depends on the circumstances of each case.
Answer 3(c)(ii)
Section 3 of the Transfer of Property Act defines "actionable claim" as a claim to any debt, other than a debt secured by mortgage of immoveable property or by hypothecation or pledge of moveable property, or to any beneficial interest in moveable property not in the possession, either actual or constructive, of the claimant, which the Civil courts recognize as affording grounds for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent.
Actionable claims are claims, to unsecured debts. If a debt is secured by the mortgage of immoveable property it is not an actionable claim, because the Section clearly excludes such a debt. A debt is a liquidated money obligation which is usually recoverable by a suit. To create a debt, first of all, there must be a liquidated or definite sum which is actually due. For example, arrears of rent due. The term debt may also include a sum of money which is due in the sense that it exists, but is not actually payable until a later date. Another essential of an actionable claim is that it is not in possession of a person and the person can claim such a debt by bringing an action in a Court of law. As for instance, arrears of rent due; money due under the Insurance Policy; a partner's right to sue for accounts of dissolved partnership.
The Section also says that it must be a claim to any debt which the Civil Courts recognize as affording grounds for relief to the person who claims it.
Question 4 .
(a) Discuss the essential ingredients of an arbitral award. On what grounds may an
award be challenged before the court under the provisions of the Arbitration and
Conciliation Act, 1996? (8 marks)
(b) Differentiate between the following in the context of the Code of Civil Procedure, 1908:
(i) 'Set off, 'counter claim' and 'equitable set off.
(ii) 'Reference', 'review' and 'revision'. (4 marks each)
Answer 4(a)
The definition of arbitral award under Section 2(1 )(c) of the Arbitration and Conciliation Act,1996 does not give much details of an arbitral award. It says "arbitral award" includes an interim award. In fact, an award is a document incorporating the adjudication or determination of a matter in dispute by the person competent to adjudicate and determine the dispute. An arbitral award is such adjudication by the arbitral Tribunal to whom dispute is referred.
Essential Ingredients: As per Section 31 of the Arbitration and Conciliation Act, 1996 an arbitral award shall be made in writing and shall be signed by the members of he arbitral Tribunal. If the arbitral Tribunal consists of more than one arbitrator it will be sufficient if the majority of the members of the Tribunal sign it provided reasons are given for the omitted signatures.
An arbitral Tribunal must state reasons for its award except when the parties have agreed that no reasons be given, or when the award is on agreed terms under Section 30 of the Act. The arbitral award shall state its date and the place of arbitration determined according to Section 20 of the Act. After the award is made, a signed copy shall be given to each party.
The arbitral Tribunal may grant interest if the arbitral award is for the payment of money for the period between the date on which the cause of action arose and the date on which the award is made. This is subject to the agreement of the parties to the contrary. The Tribunal may grant interest at a rate as it deems reasonable, on the whole or part of the money found due, for the whole or any part of the period. Award may include directions of the arbitral Tribunal regarding costs of the arbitration.
An award may be challenged before a Court. The 'Court' means the Principal Civil Court of original jurisdiction in a district including High Court exercising its original civil jurisdiction but does not include any Civil Court below the rank of Principal Civil Court. An arbitral award may be challenged on the following grounds under Section 34(2) of the Arbitration and Conciliation Act 1996.
(i) Incapacity of a party.
(ii) Invalidity of the arbitration agreement.
(iii) Party applying was not given proper notice of the appointment of arbitrator or of the arbitral proceedings.
(iv) Award dealing with a dispute not contemplated by or not falling within the terms of the submission to arbitration.
(v) Arbitral Tribunal not properly constituted or the procedure adopted not in accordance with the agreement.
(vi) The subject matter of dispute is not capable of settlement by arbitration under the law.
(vii) Award is in conflict with the public policy.
Sub-section (3) of Section 34 of the Act prescribes the time limit for making an application for setting aside the arbitral award. As per this sub-section, an application cannot be made after three months have elapsed from the date on which the party making that application had received the arbitral award or if a request had been made under Section 33 from the date on which that request had been disposed of by the arbitral Tribunal. The period of three months could be extended to a maximum of 30 days by the Court if it is satisfied that the applicant was prevented by "sufficient cause" from making the application within the said period.
Answer 4(b)(i)
Set-off
Order 8, Rule 6 deals with set-off which is a reciprocal acquittal of debts between the plaintiff and defendant. It has the effect of extinguishing the plaintiff's claim to the extent of the amount claimed by the defendant as a counter claim.
Under Order VIII Rule 6 where in a suit for the recovery of money the defendant claims to sef off against the plaintiff's demand any ascertained sum of money legally recoverable by him from the plaintiff not exceeding the pecuniary jurisdiction of the Court and where both parties fill the same character as in the plaintiff's suit, the defendant may, at the first hearing of the suit, but not afterwards unless permitted by the Court, present a written statement containing the particulars of the debt sought to be set-off.
Counter-claim
A defendant in a suit may, in addition to his right of pleading a set-off under Rule 6, set up by way of counter-claim against the claim of the plaintiff, any right or claim in respect of a cause of action accruing to the defendant against the plaintiff either before or after the filling of the suit but before the defendant has delivered his defence or before the time limited for delivering his defence has expired, whether such counter-claim is in the nature of claim for damages or not. Such counter-claim must be within the pecuniary jurisdiction of the Court. (Order 8, Rule 6A)
Equitable set-off
Sometimes, the defendant is permitted to claim set-off in respect of an unascertained sum of money where the claim arises out of the same transaction, or transactions which can be considered as one transaction, or where there is knowledge on both sides of an existing debt due to one party and a credit by the other party found on and trusting to such debt as a means of discharging it. Generally the suits emerge from cross-demands in the same transaction and this doctrine is intended to save the defendant from having to take recourse to a separate cross-suit. In India distinction between legal and equitable set-off is recognised. Order 8, Rule 6 contains provisions as to legal set-off. Order 8, Rule 6A recognises the counter-claim by the defendant. An equitable set-off can be claimed independently of the Code. The Common Law Courts in England do not recognise equitable claims.
Answer 4(b)(ii)
Section 113, 114, 115 and Orders 46, 47 of Part VIII of Code of Civil Procedure deal with the reference, review and revision.
IGCL-Dec. 2005 10
Reference
The only Court to which a reference can be made is the High Court. Any other Court has the following powers to make a reference under Section 113.
Where the Court is satisfied that a case pending before it involves a question as to the validity of any Act, Ordinance or Regulation or of any provision contained therein, the determination of which is necessary for the disposal of the case, and is of opinion that such Act, Ordinance, Regulation or provision is invalid or inoperative but has not been declared by the High Court to which that Court is subordinate or by the Supreme Court, the Court shall state a case setting out its opinion and the reason therefor and refer the same for the opinion of the High Court. Order 46 Rule 1 provides following conditions for reference:
(i) there must be a pending suit or appeal or execution and there arises a question of law in such suit etc.
(ii) (iii) (iv)
(v)
from decision of such suit there is no appeal. , .: ;,
there is reasonable doubt on such questions. -
the Court draws up a statement of the facts of the case and the point on which doubt is entertained, the Court express its own opinion on the point.
The purpose of Section 113 is to enable the subordinate Court, to obtain in non-appealable cases the opinion of High Court on question of law for doing justice to the parties.
Review
Section 114 and Order 47 Rule 1 of the Code confer the right of review. These provisions provide that any person aggrieved by a decree or order may apply for review of the judgement of the Court which passed the decree on the .following grounds:
(i) discovery by the applicant of new and important matter or evidence which after the exercise of due diligence, was not within his knowledge or could not be produced by him at the time when the decree was passed or order made; or
on account of some mistake or error apparent on the face of the record; or for any other sufficient reason, and the Court may make such orders thereon as Jt thinks fit.
Revision
Section 115 of the Code provides that the High Court may call for the record of any case which has been decided by the Court subordinate to such High Court and in which no appeal lies thereto, and if such subordinate Court appears -(i) to have exercised a jurisdiction not vested in it by law; or (ii) to have failed to exercise a jurisdiction so vested; or (iii) to have acted in the exercise of its jurisdiction illegally or with material
irregularity. The High Court may make such orders as it thinks fit. Question 5
(a) Discuss in brief the procedure for formation and registration of a society under
the Societies Registration Act, 1860. (5 marks)
(b) Briefly explain the law relating to the place for registering documents pertaining
to land and other documents. (5 marks)
(c) Explain the following terms under the Information Technology Act, 2000: (i) Digital signatures, (ii) Originator.
(Hi) Asymmetric crypto system. (2 marks each)
Answer 5(a)
Under the Societies Registration Act, 1860, a society may be formed by any seven or more persons associated for any literary, scientific or charitable purposes or for any other purpose as specified in Section 20 of the Act by subscribing their names to a memorandum of association containing the :
(a) name of the society;
(b) objects of the society;
(c) names and addresses and occupations of the governors, council directors, committee, or other governing body to whom by the rules of the society, the management of its affairs is entrusted.
A fee of Rs.50/- is to be paid to the Registrar for every such registration. A society may get itself registered with the Registrar of Joint Stock companies by filing:
(i) a copy of the memorandum of association;
(ii) a copy of the rules and regulations of the society certified as correct by not less than three members of the governing body; and
(iii) by paying the prescribed fee (Section 1 & 2).
Before registering a society, the Registrar must satisfy that the memorandum as required by the law has been field i.e., the memorandum has been signed by at least seven persons and the copy of the rules and regulations of the society must on the face of it bear the signature of not less than three of the members of the governing body. Thereupon the society is registered under this Act. (Section 3)
Answer 5(b)
Section 28 of the Registration Act, 1908 provides that documents affecting immovable property mentioned in Section 17(1)(a)(b)(c)(d) and (e), and Section 17(2), etc. shall be presented for registration in the office of a Sub-Registrar within whose sub-district the whole or some portion of the relevant property is situated.
Regarding other documents, it has been stipulated under Section 29 of the Act that every document not being a document referred to in Section 28 or a copy of the decree or order, may be presented for registration either in the office of the Sub-Registrar in whose sub-district the document was executed, or in the office of any other Sub-Registrar under the State Government at which all the persons executing and claiming under the document desire the same to be registered.
Answer 5(c)(i)
"Digital Signature" under Section 2(1 )(p) of the Information Technology Act, 2000 means authentication of any electronic record by a subscriber by means of an electronic method or procedure in accordance with the provisions of Section 3.
Section 3 deals with authentication of electronic records. This section provides the conditions subject to which an electronic record may be authenticated by means of affixing digital signature. The digital signature is treated in two distinct steps. First the electronic record is converted into a message digest by using a mathematical function known as "hash function" which digitally freezes the electronic record thus ensuring the integrity of the content of the intended communication contained in the electronic record. Any tempering with the contents of the electronic record will immediately invalidate the digital signature. Secondly, the identity of the person affixing the digital signature is authenticated through the use of private key which is attached to the message digest and which can be verified by any person who has the public key corresponding to such private key. This will enable any person to verify whether the electronic record is retained intact or has been tampered with. It will also enable a person who has a public key to identify the originator of the electronic message.
Answer 5(c)(ii)
"Originator" under the Information Technology Act, 2000 means a person who sends, generates, stores or transmits any electronic message or causes any electronic message to be sent, generated, stored or transmitted to any other person, but does not include an intermediary. [Section 2(1)(za)J Answer 5(c)(iii)
Under Section 2(1 )(f) of the Information Technology Act, 2000, "asymmetric crypto system" means a system of a secure key pair, consisting of a private key for creating a digital signature and a public key to verify the digital signature. Question 6
(a) Ashok contracts to buy Bhushan's business at the amount to be determined
by two valuers, one to be named by Ashok and the other by Bhushan. Both
Ashok and Bhushan name their,respective valuers. Before the valuation is
made, Ashok instructs his valuer not to proceed. Can Bhushan specifically
enforce this contract? . (5 marks)
(b) Arjun executed a power of attorney both in his personal capacity and in his
capacity as an executor, trustee, manager and liquidator in favour of Bheem.
Decide the liability of duty payable on the instrument. (5 marks)
(c) Aj'ay, a trustee, of a plot of land worth Rs. 1 lakh, though not authorised by
the deed of trust to sell the trust property, sells it for Rs. 2 lakh with the
intention to invest the money in a more profitable manner. Whether the sale
by the trustee is valid? Give reasons. (6 marks)
Answer 6(a)
Section 14(1)(b) of the Specific Relief Act, 1963 provides that a contract which runs into such minute and numerous details or which is dependant upon the personal qualification or volition of the parties or a contract from its nature is such that the court cannot enforce specific performance of its material terms cannot be specifically enforced.
In the present problem, Bushan cannot specifically enforce the contract as the contract from its nature.is such that it cannot be specifically enforced.
Answer 6(b)
Under Section 5 of the Indian Stamp Act, 1899 an instrument comprising or relating to several distinct matters is chargeable with the aggregate amount of the duties with which each separate instrument, relating to one of such matters, would be chargeable under the Act.
The facts of the given problem resemble to the case of Member, Board of Revenue v. Archur Paul Benthall, AIR 1956 SC 35. In this case it was held that where a person is an executive or administrator and signs an instrument containing a disposition by him in his personal capacity and a/so a disposition as executor, the two capacities are different. The court held that the power appertained to several distinct matters, distinct transactions and the power was chargeable with the aggregate amount of duty payable as if separate instruments were executed in respect of each of these capacities.
Answer 6(c)
One of the duties of the trustee is to execute the trust and obey the directions given in the instrument of the trust. That apart, under Section 36 of the Indian Trusts Act, 1882 dealing with general authority of trustee, a trustee may do all acts which are reasonable and proper for the realization, protection or benefit of the trust property and for the protection or support of a beneficiary who is competent to contract.
It may be pointed out that this is in addition to the powers expressly conferred by this Act and by the instrument of trust and subject to the restrictions contained in such instrument.
In the light of the legal provisions mentioned above, the sale by trustee is not valid.
Question 7
(a) Sohan is tried summarily by the metropolitan magistrate on the charge of committing theft and is sentenced to undergo imprisonment for a period of four months. Can Sohan challenge the decision? If so, on what grounds?
(5 marks)
(b) On the occasion of birthday of Rajat, his father Govind gives a plot of land to
him for life and after his death to his wife Sujata for life. He stipulates that
after the death of both Rajat and Sujata, their eldest unborn son will get the
property for life. After the death of eldest son, the land will be enjoyed by their
younger son absolutely. Decide the validity of the transfer. (5 marks)
(c) Under what circumstances the opinion of the third person becomes relevant
under the Indian Evidence Act, 1872? (6 marks)
Answer 7(a)
Under Section 260 of the Criminal Procedure Code, 1973, a Chief Judicial Magistrate has been authorized to try summarily any one or all the offences stipulated therein. The offences stipulated under Section 260 of the Code inter alia include theft under Section 379, 380 or 381 of the Indian Penal Code where the value of the property stolen does not exceed two hundred rupees.
Therefore, Sohan can challenge the decision of the Chief Judicial Magistrate under Section 262(2) of the Cr. P.C.
Answer 7(b)
As per Section 13 of the Transfer of Property Act, where on a transfer of property, an interest therein is created for the benefit of a person not in existence at the date of the transfer, subject to a prior interest created by the same transfer, the interest created for the benefit of such person shall not take effect unless it extends to the whole of the remaining interest of the transferor in the property.
In the present case, the interest so created for the benefit of the eldest unborn son does not take effect because the transfer doesn't extend to the whole of remaining interest in the property since he is getting only a life interest and not absolute interest. The transfer in favor of younger unborn son also fails because as provided in Section 16 of the T.P Act that if an interest is intended to take effect after or upon the failure of a prior interest by reason of the rules contained in SectJons13 and 14, in such a case when prior interest fails, the subsequent interest also fails. Answer 7(c)
The general rule is that opinion of a witness on a question whether of fact or of
(i) Opinions of experts: As per Section 45 of the Evidence Act, 1872 when the
court has to form an opinion upon a point of foreign law or of science, or art,
or as to identity of handwriting or finger impressions, the opinions upon that
point of persons specially skilled in such foreign law, science or art, or in
questions as to identity of handwriting or finger impressions are relevant facts.
Illustrations (a)
The Code also provides under Section 262(2) that no sentence of imprisonment exceeding
three months shall be passed in the case of any conviction in summary trials.
The question is, whether the death of A was caused by poison.
The opinions of experts as to the symptoms produced by the poison by
which A is supposed to have died, are relevant.
The question is, whether a certain document was written by A. Another
document is produced which is proved or admitted to have been written
by A.
The opinions of experts on the question whether the two documents were written by the same person or by different persons, are relevant. Similarly the opinions of experts on typewritten documents as to whether a given document is typed on a particular typewriter is relevant.
Facts which support or are inconsistent with the opinions of experts are also made relevant. (Section 46)
Others: In addition to the opinions of experts, opinion of any other person is also relevant in the following cases :
(a) Opinion as to the handwriting of a person if the person giving the opinion is acquainted with the handwriting of the person in question; (Section 47)
(b)
(b) Opinion as to the digital signature of any person, the opinion of the Certifying Authority which has issued the Digital Signature Certificate; (Section 47A)
(c) Opinion as to the existence of any general right or custom if the person giving the opinion is likely to be aware of the existence of such right or custom; (Section 48)
(d) Opinion as to usages etc. words and terms used in particular districts, if the person has special means of knowledge on the subject; (Section 49)
(e) Opinion expressed by conduct as the existence of any relationship by persons having special means of knowledge on the subject. (Section 50)
Question 8
(a) Rajan, a member of the society registered under the Societies Registration Act, 1860, is in arrears of subscription for the last six months which he is bound to pay according to the rules.' He wants to attend the special meeting of the society and to vote for a resolution to be put therein. Advise Rajan. (5 marks)
(b) Amar and Bimal are jointly tried for the murder of Roshan. It is proved that Amar
said, " Bimal and I murdered Roshan". Can the 'court consider the effect of this
confession as against Bimal? Give reasons. (6 marks)
(c) Anubhav owes Rs. 10,000 to the partnership firm of Bose and Chander. Bose dies leaving Chander surviving. Anubhav sues Chander for a debt of Rs. 15,000 due in his individual capacity. Can Chander set off the debt of Rs. 10,000?
(6 marks) Answer 8(a)
According to Section 15 of the Societies Registration Act, a member is a person who is admitted to the Society according to the rules and regulations thereof and who has paid a subscription or has signed the roll or list of members and has not resigned in accordance with the rules and regulations. But a person shall not be counted as a member and shall not be entitled to vote whose subscription at the time shall have been in arrear for a period exceeding three months.
In view of the above mentioned legal provisions, Rajan can not attend the special meeting and vote for the resolution.
Answer 8(b)
In the case of joint trial, the court may consider the effect of this confession as against Bimal. Section 30 of the Indian Evidence Act dealing with the confession of a co-accused says:
When more persons than one are being tried jointly for the same offence, and a confession made by one of such persons affecting himself and some other of such person is proved, the court may take into consideration such confession as against such other person as well as against the person who makes such confession.
Answer 8(c)
The case pertains to legal set off. To constitute legal set off, following conditions must be present:
1. The suit must be for recovery of money.
2. The defendant must claim ascertained money.
3.- The ascertained sum of money should be legally recoverable.
4. The sum of money so claimed should be within the pecuniary jurisdiction of the court.
In the present problem, all the requirements mentioned above are present. Therefore, Chander may set off the debt of Rs. 10,000.
INTERMEDIATE EXAMINATION
DECEMBER 2006
GENERAL AND COMMERCIAL LAWS
Time allowed: 3 hours Maximum marks: 100
NOTE: Answer SIX questions including Question No. 1 which is COMPULSORY.
Question 1
(a) Preferential treatment to certain persons belonging to backward classes in the form of reservation in education and jobs as provided in Articles 15(4) and 16(4) of the Constitution of India is a mean of ensuring the canon of equality enshrined in the preamble of the Constitution of India. Evaluate the statement. (8 marks)
(b) Write a note on'preventive detention'. - (6 marks)
(c) What are the fundamental duties imposed on the citizens of India ? (6 marks)
Answer 1 (a)
The preamble to the Constitution in nutshell contains its ideals and its aspirations. !t secures inter-alia to all its citizens - justice, social, economic and political and equality of status and of opportunity.
To achieve these ideals clausb j(4) was added to Article 15 by Constitution (First Amendment) Act, 1951 which qualified the principle laid down in Article 15(1) that the State shall not discriminate against any citizen on grounds only of religion, race, caste, sex, place of birth or any of them. However, Article 15(4) provides .that nothing in this Article shall prevent the State from making special provision for the advancement of any (a) socially and educationally backward classes of citizens; (b) scheduled castes, and (c) Scheduled tribes.
Similarly, Article 16(1) declares that there shall be equality of opportunity for all citizens in matters of employment or appointment to any office under the State; but Article 16(4) qualifies this declaration by stating that nothing in this Article shall prevent the State from making any provision for the reservation of appointments or posts in favour of any backward class of citizens which is not adequately represented in the services under the State. The power conferred on the State can only be exercised in favour of a backward class and therefore, whether a particular class of citizens is backward, is an objective factor to be determined by the State. While the State has necessarily to ascertain whether a particular class of citizens is backward or not, having regard to acceptable criteria, it is not the final word on the question; States determination is justiciable and may be challenged if it is based on irrevalent considerations \Triloki Nath Tiku v. State of J & K, AIR, 1967 SC 1283).
The two most contentious issues in the application of Article 15(4) as well as Article 16(4) have been : (i) determination of backward classes and (ii) the extent or quantum of reservation. Although Article 16(4) does not qualify 'backward class of citizens' as does Article 15(4) by the words 'socially and educationally', the problem of determining such classes is similar under both the provisions.
The definition of backward classes has not been given anywhere in the Constitution. No agreed formula has yet been found. As a mater of fact each State is experimenting with differnt tests influenced by social and political considerations as well as judicial decisions.The Courts review State decisions and arrangements in this regard to ascertain if proper criteria for determining the backward classes have been adopted.
In Indira Sawhney v. Union of India, 1992 Supp (3) SCC 217, the Supreme Court has confirmed that now Clause (4) of Article 15 enables the State to make special provisions for advancement of socially and educationally backward classes of citizens or for scheduled castes and scheduled tribes. Such provisions include reservations or quotas and can be made in the exercise of executive powers without only legislative support.Earlier the Supreme Court had held that although the Directive Principles of State Policy embodied in Article 46 of the Constitution lays down that the State should promote with special care the educational and economic interests of the weaker sections of the people and protect them from social injustice, the Directive Principles of State. Policy have to conform to and run as subsidiary to the Chapter of fundamental rights. (State of Madras v. Champakam Dorairajan, AIR 1952 SC 226).
On the question of quantum of reservation, the Supreme Court in M.R. Balajiv. State of Mysore, AIR 1963 SC 649 laid down that a special provision contemplated by Article 15(4) like reservation of posts and appointments contemplated by Article 16(4) must be within reasonable limits.....a special provision should be less than 50 per cent. In Mandal Commission case i.e. (Indira Sawhney's case), the Supreme Court upheld the validity of a total of 49.5 per cent reservation. It was further clarified in this case that Articles 15(4) and 16(4) are not exceptions to clauses (1) and (2) of those Articles or to Article 14. They are rather means of achieving right to equality enshrined in those Articles and also in the preamble to the Constitution. Thus, it is correct to hold that preferential treatment to certain persons in the form of reservation in jobs and education is a means to obtain the principle of equality.
Answer 1(b)
Preventive detention differs from the ordinary or punitive detention both in respect of its purpose and its justification. Preventive detention means the detention of a person without trial in such circumstances that the evidence in possession of the authority is not sufficient to make a legal charge or to secure the conviction of the detenu by legal proof but may still be sufficient to justify his detention.The object of preventive detention is not to punish a man for having done something but to intercept him before he does it and to prevent him from doing it. No offence is proved nor any charge formulated. The justification of such detention is suspicion or reasonable probability of the impending commission of the prejudicial act and not criminal conviction which only can be warranted by legal evidence. (Gopalan v. State of Madras, 1950 SCR 88)
Article 22 of the Constitution guarantees the fundamental right relating to protec¬tion against arrest and detention in certain cases. Article 22 contains seven clauses. Clauses (1) and (2) lay down the procedure that has to be followed when a person is arrested.Thereafter, clauses (4) to (7) deal with preventive detention.
While providing safeguards against preventive detention, Article 22(4) of the Consti¬tution stipulates a limit of three months of prevention detention unless the Advisory Board recommends, before the three months period that there is sufficient cause for the continuation of the detention. The maximum period of detention has to be fixed by the appropriate law made by Parliament.
Article 22(5) casts a dual obligation on the detaining authority—(a) to communicate to the detenu the grounds on which the detention order has been made; (b) to give him the earliest opportunity to make representation against the order of detention.
Under clause (6) a wide latitude is given to the authority in the matter of disclosure. They are given a special privilege in respect of facts which are considered not desirable to be disclosed in public interest.
Article 22(7) empowers Parliament to prescribe the maximum period of detention. !t has been held that no preventive detention law can be made under Article 22(4) unless Parliament prescribes the maximum period of detention under clause 7.
Answer 1(c)
The 42nd Amendment made to the Constitution in 1976 introduced fundamental duties under Article 51 A. The fundamental duties are imposed only on citizens. They owe these duties to the State. According to Article 51A of the Constitution, it shall be the duty of every citizen of India:-
(a) to abide by the Constitution and respect its ideals and institutions, the National Flag and the National Anthem;
(b) to cherish and follow the noble ideals which inspired our national struggle for freedom;
(c) to uphold and protect the sovereignty, unity and integrity of India;
(d) to defend the country and render national service when called upon to do so;
(e) to promote harmony and the sprit of common brotherhood amongst all the people of India transcending religious, linguistic and regional or sectional diversities; to renounce practices derogatory to the dignity of women;
(f) to value and preserve the rich heritage of our composite culture;
(g) to protect and improve the natural environment including forests, lakes, rivers and wildlife, and to have compassion for living creatures;
(h) to develop the scientific temper, humanism and the spirit of inquiry and reform; (i) to safeguard public property and to abjure violence;
(j) to strive towards excellence in all spheres of individual and collective activity so that the nation constantly rises to higher levels of endeavour and achievement.
Fundamental Duties cannot be enforced by writs. They can be promoted only by constitutional methods.
Question 2
(a) Write short note on 'temporary injunctions'and 'interlocutory orders'. (* marks)
(b) Within what period different kinds of instruments chargeable with stamp duty
but executed out of India may be stamped ? (4 marks)
(c) Distinguish between the following:
(i) 'Summons cases'and'warrant cases'.
(ii) 'Pleader'and'public prosecutor'. (4 marks each)
Answer 2(a)
Temporary Injunctions and Interlocutory orders
A temporary injunction is such as is to continue until a specified time, or until the further order of the court. It may be granted at any stage of the suit.
Under the Civil Procedural Code, the Court may grant temporary injunction to restrain any such act (as set out below) or make such other order for the purpose of staying and preventing the wasting, damaging, alienation or sale or removal or disposition of the property or dispossession of the plaintiff, or otherwise causing injury to the plaintiff in relation to any property in dispute in the suit; where it is proved by affidavit or otherwise:
(a) that any property in dispute in a suit is in danger of being wasted, damaged or alienated by any party to the suit, or wrongfully sold in execution of a decree, or
(b) that the defendant threatens, or intends to remove or dispose of his property with a view to defrauding his creditors, or
(c) that the defendant threatens to dispossess the plaintiff or otherwise cause injury to the plaintiff in relation to any property in dispute in the suit.
It would be necessary for the plaintiff to satisfy the Court that substantial and irreparable harm or injury would be suffered by him if such temporary injunction (till the disposal of the suit) is not granted and that such loss of damage or harm cannot be compensated by damages. (Order XXXIX, Rules 1 and 2, Civil Procedure Code). Interlocutory orders
Interlocutory means something intervening or happening between the commencement of legal proceedings and their termination. Interlocutory order denotes merely order of a purely interim or temporary nature which does not decide or touch the important rights or liabilities of the parties. [AmarNath v. State of Haryana, AIR (1977) SC 2185].
The Court may, on the application of any party to a suit order the sale, by any person named in such order, and in such manner and on such terms as it thinks fit, of any movable property, being the subject-matter of such suit, or attached before judgement in such suit, which is subject to speedy and natural decay, or which for any other just and sufficient cause it may be desirable to be sold at once. (Order XXXIX Rule 6 Civil Procedure Code.
Answer 2(b)
According to Section 18 of the Indian Stamp Act, every instrument chargeable with duty executed only out of India and (not being a bill of exchange or promissory note) may be stamped within three months after it has been first received in India. Section 18(2) provides that whe a such instrument cannot with reference to the description of stamp prescribed therefor, be duly stamped by a private person, it may be taken within the said period of three months to the Collector who shall stamp the same in such a manner as the State Government may by rule prescribe, with a stamp of that value as the person so taking such instrument may require and pay for. Where an instrument is brought to the Collector after the expiry of three months, the Collector may, instead of declining to stamp it, validate it under Sections 41 and 42 if he is satisfied that the omission to stamp in time was due to a reasonable cause.
Answer 2(c)
(i) Summons cases and Warrant cases
Under the Criminal Procedure Code 1973 "summons case" and "warrant case" has been defined as follows:
"Summons case" means a case relating to an offence and not being a warrant case. [Section 2(w)]
A "warrant case" means a case relating to an offence punishable with death, imprisonment for life or imprisonment for a term exceeding two years. [Section 2(x)]
Actually summons cases are those cases which are punishable with imprisonment for a term not exceeding two years.
Warrant case relates to serious offences for which severe punishment has been stipulated. Thus, a case assumes the character of a 'summons case' or a 'warrant case' according to the nature and measure of punishment which the law prescribes for the offence.
(ii) Pleader and Public Prosecutor
Pleader as per Section 2(q) of the Cr. PC, means a person authorised by or under any law for the time being in force, to practise in such Court and includes any other person appointed with the permission of the Court to act in such proceeding. It is an inclusive definition and a non-legal person appointed with the permission of the Court will also be included. In T.C. Mathani v. Distt. & Sessions Judge Thiruvananthapuram (1999 Cr. LJ 2092 SC) the Supreme Court has explained that an agent who is power of attorney holder cannot become a pleader for the party unless the party secures permission from the Court to appoint him to act in such proceedings.
According to Section 2(u) of the Cr.P.C. "public prosecutor" means any person appointed under Section 24, and includes any person acting under the directions of a Public Prosecutor.
Public prosecutor though an executive officer is, in a larger sense, also an officer of the Court and he is bound to assist the Court with his fair views and fair exercise of his functions. A public prosecutor represents the State in whose name the prosecution is conducted.
Question 3
(a) Discuss the principle of estoppel and state the conditions of its applicability.
(5 marks)
(b) Explain primary and secondary evidence of documents. When may secondary
evidence be given ? (5 marks)
(c) Describe the conditions and procedure for the dissolution of a society registered under the Societies Registration Act, 1860. (6 marks)
Answer 3(a) Principle of Estoppel
A person who has expressly made a verbal representation, on the faith of which another has acted, shall not afterwords be allowed to contradict his former statement, in order to profit by that conduct which he has induced. The principle of estoppel says that a man cannot approbate and reprobate, or that a man cannot blow hot and cold, or again that a man shall not say one thing at one time and later on say a different thing.
Section 115 of the Evidence Act incorporates this rule, which reads that when one has, by his declaration, act or omission, intentionally caused or permitted another person to believe a thing to be true and to act upon such belief, neither he nor his representative shall be allowed, in any suit or proceeding between himself and such person or his representative, to deny the truth of that thing.
Conditions of its Applicability
To bring the case within the scope of estoppel there must be :
(a) Representation by a person or his authorized agent to another in any form - a declaration, act or omission;
(b) The representation must have been of the existence of a fact and not of promise de futuro or intention which might or might not be enforceable in contract;
(c) The representation must have been meant to be relied upon;
(d) There must have been belief on the part of the other party in its truth;
(e) There must have been action on the faith of that declaration, act or omission, that is to say, the declaration, act or omission must have actually caused another to act on the faith of it, and to alter his former position to his prejudice or detriment;
(f) The misrepresentation or conduct or omission must have been the proximate cause of leading the other party to act to his prejudice;
(g) The person claiming the benefit of estoppel must show that he was not aware of the state of things. If he was aware of the real state of affairs or had means of knowledge, there can be no estoppel;
(h) Only the person to whom representation was made or for whom it was designed can avail himself of it.
A person is entitled to plead estoppel in his own individual character and not as representative of his assignee.
Answer 3(b)
Primary and Secondary Evidence of Documents
"Primary evidence" as per Section 62 of the Indian Evidence Act means the document itself produced for the inspection of the Court. Where document is executed in several parts, the Explanation to the section says each part is primary evidence of the document.
7 IGCL-December2006 Where a document is executed in counterpart, each counterpart being executed by one or same of the parties only, each counterpart is primary evidence as against the parties executing it. When a number of documents are all made by one uniform process, as in the case of printing, lithography or photography, each is primary evidence of the contents of the rest.
Secondary evidence is generally in the form of compared copies, certified copies or copies made by such mechanical processes as in themselves ensure accuracy. Section 63 defines the kind of secondary evidence permitted by the Act. According to Section 63 of the Indian Evidence Act, "secondary evidence" means and includes.
(1) certified copies given under the provisions hereafter contained;
(2) copies made from the original by mechanical processes which in themselves ensure the accuracy of the copy, and copies compared with such copies;
(3) copies made from or compared with the original;
(4) counterparts of documents as against the parties who did not execute them;
(5) oral accounts of the contents of a document given by some person who has himself seen it.
Secondary evidence may be given: •
(i) when the original is in the possession of the person against whom it is to be proved.
(ii) when the existence of the original has been admitted by the person against whom it is to be proved;
(iii) when original has been destroyed or lost;
(iv) when the original is not easily movable;
(v) when a certified copy of original is permitted by Act;
(vi) when the originals consist of numerous accounts.
Answer 3(c) Dissolution of a Society
Section 13 of the Societies Registration Act deals with the dissolution of Societies. To dissolve a Society, a general meeting of the members shall be convened. In that meeting the proposal to dissolve the Society shall be placed and it should be agreed by not less than three-fifths of the members by votes delivered in person or by proxy and thereupon it shall be dissolved forthwith or at the time agreed by not less than three-fifths of the members determining the dissolution. Steps shall be taken for the disposal and settlement of the property of the Society and its claims and liabilities, according to the rules of the Society. If there are no such rules, the governing body shall act expediently in the matter as it thinks appropriate.
In the event of any dispute arising among the said governing body or the members of the Society, the adjustment of its affe'rs shall be referred to the Court who shall make the order in this respect.
If any Government is a member of or a contributor to or otherwise interested in any Society registered under this Act, no dissolution shall take place without the consent of
IGCL- December 2006
the Government of the State of registration. In Ram Charan Agarwala v. Shridhar Misra, AIR 1952 ALL. 610, it has been held that if the Government happens to be a member of the Society, its consent has to be obtained.
However, if upon the dissolution of the Society there remains any property whatsoever after satisfying all debts and liabilities, the property or profits shall not be distributed among the members but shall be given to some other Society as is determined by votes of not less than three-fifths of the members present personally or by proxy at the time of the dissolution or if no such decision exists then by a Court.
Question 4
(a) ABC Ltd. is a pharmaceutical company having its corporate office in Mumbai.
XYZ Ltd., another pharmaceutical company, is carrying on pharmaceutical
business at Nagpur. XYZ Ltd. published an advertisement at Bangalore
constituting infringement of the registered trade mark of ABC Ltd. ABC Ltd.
intends to institute a suit for damages against XYZ Ltd. Advise where ABC Ltd.
should institute the suit. (5 marks)
(b) Sumesh, a sub-inspector of police, comes to know from a secret source that
five persons, staying in a house with deadly weapons in Kanpur, are planning to
commit murder of Gabbar, a resident of a nearby house. Sumesh apprehends
that those five persons will commit the crime at any moment. Sumesh, sub-
inspector of police, goes to that house where those five persons were staying
and arrests them along with weapons in their possession, without any warrantor
order from the magistrate. Is the arrest of all the five persons valid ? Give
reasons. (5 marks)
(c) Define the following under the Information Technology Act, 2000:
(i) Computer network, (ii) Intermediary.
(3 marks each)
Answer 4(a)
Section 20 of the C.P.C provides that subject to the limitations provided by Sections 15,16,18 and 19, every suit shall be instituted in a Court within local limits of whose jurisdiction the defendant, or each of the defendants (where there are more than one defendant) actually and voluntarily resides or carries on business or personally works for gain; or
any of the defendants, where there are more than one at the time of the commencement of the suit, actually and voluntarily resides or carries on business or personally works for gain, provided either the leave of the Court is obtained or the defendant(s) who do not reside or carry on business or personally work for gain at such place acquisce in such institution; or
where the cause of action arises, wholly or in part.
The explanation appended to the Section provides that in the case of a body corporate or company it shall be deemed to carry on business at its sole or principal office in India, or in case of any cause of action arising at any other place, if it has a subordinate office, at such place.
In the light of the legal provisions mentioned above, ABC Ltd. can file the suit for damages against XYZ Ltd, in the court within local limits of whose jurisdiction the defendant resides or carries on business. In the instant case it is Nagpur where the defendant company is carrying on business.
ABC Ltd. can also institute the suit against XYZ Ltd *at Bangalore where the cause of action arose (i.e., where advertisement constituting infringement was published). Both the options are available to the company.
Answer 4(b)
The arrest of all the persons is valid. Section 149 of the Code of Criminal Procedure, 1973, authorises a police officer to prevent the commission of any cognizable offence. If the police officer receives the information of a design to commit such an offence, he can communicate such information to his superior police officer and to any other officer whose duty it is to prevent or take cognizance of the commission of any such offence. The police officer may arrest the person without orders from Magistrate and without a warrant if the commission of such offence cannot be otherwise prevented.
In the given case, the five persons were planning to commit the murder of Gabbar and to prevent the commission of such offence he arrested them. In view of the legal provisions mentioned above, the arrest of all the five persons by Sumesh, the sub-inspector of police is valid. Answer 4(c) (i) Computer network
Computer network is an inter connection of one or more computers through various modes. As per Section 2(1) (j) of the Information Technology Act, 2000 "computer network" means the interconnection of one or more computers through -
(a) the use of satellite, microwave, terrestrial line or other communication media; and
(b) terminals or a complex consisting of two or more interconnected computers, whether or not the interconnection is continuously maintained.
(ii) Intermediary
An intermediary is a person who undertakes to discharge various functions such as sending, receiving, storing or any other service with respect to any data message on behalf of another person.
According to Section 2(1 )(w) of the Information Technology Act "intermediary", with respect to any particular electronic message, means any person who, on behalf of another person, receives, stores or transmits that message or provides any service with respect to that message.
Questions
(a) Discuss the rule of 'reasonable construction'in the interpretation of statutes.
(5 marks)
(b) "The relief of specific performance of contract is discretionary." Comment.
(5 marks)
(c) Describe the offence of 'hacking' with computer system as provided under the provisions of the Information Technology Act, 2000. Who is the officer competent to investigate an offence underthe Information Technology Act, 2000 ? (6 marks)
Answer 5(a)
Rule of Reasonable Construction
Normally, the words used in a statute have to be construed in their ordinary meaning, but in many cases, judicial approach finds that the simple device of adopting the ordinary meaning of words, does not meet the ends as a fair and reasonable construction. Exclusive reliance on the bare dictionary meaning of words' may not necessarily assist a proper construction of the statutory provision in which the words occur. Often enough interpreting the provision, it becomes necessary to have regard to the subject matter of the statute and the object which it is intended to achieve.
According to this rule, the words of a statute must be construed ut res magis valeat quampareat, so as to give a sensible meaning to them. A provision of law cannot be so interpreted as to divorce it entirely from common sense; every word or expression used in an Act should receive a natural and fair meaning.
It is the duty of a court in constructing a statute to give effect to the intention of the legislature. If, therefore, giving of literal meaning to a word used by the draftsman particularly in penal statute would defeat the object of the legislature, which is to suppress a mischief, the Court can depart from the dictionary meaning which will advance the remedy and suppress the mischief.
Answer 5(b)
Section 20 of the Specific Relief Act, 1963 lays down that the jurisdiction to grant decree for specific performance of contract is discretionary, and the court is not bound to grant such relief merely because it is lawful to do so. But the power of discretion can not be exercised in an arbitrary manner. This discretion should be based on sound and reasonable grounds guided by judicial principles and capable of correction by a Court of Appeal.
Section 20(2) lays down the following principles on which discretion can be exercised and hence specific performance can be refused by the court.
(i) where the terms of contract or the conduct of the parties at the time of entering into the contract gives the plaintiff an unfair advantage over the defendant; or
(ii) where the performance of contract would involve some hardship on the defendant, which he did not foresee, whereas its non-performance would involve no such hardship to the plaintiff;
(iii) where defendant entered into contract under circumstances which though not rendering the contract voidable, but makes it inequitable to enforce specific performance.
Section 20(3) lays down that Court may properly exercise discretion to decree specific performance in any case where the plaintiff has done substantial acts or suffered losses in consequences of a contract capable of specific performance. Under sub-section (4) of the Section 20 the court shall not refuse to any party specific performance of a contract merely on the ground that the contract is not enforceable at the instance of the other party.
Answer 5(c)
Meaning of the term "hacking" with respect to computer terminology denotes the act of obtaining unauthorised access to a computer system. Hacking is an offence listed under Chapter 11 of the Information Technology Act, 2000, which deals with offences relating to computers etc. and connected matters.
Regarding hacking, Section 66 of the Information Technology Act provides that: (i) Whoever, with intent to cause, or knowing that he is likely to cause, wrongful loss or damage to the public or any person, destroys or deletes or alters any information residing in a computer resource or diminishes its value or utility or affects it injuriously by any means, commits hacking, (ii) Whoever commits hacking, shall be punished with imprisonment upto three
years or with fine which may extend upto two lakh rupees or with both. Only a public officer of the rank of Deputy Superintendent of Police is competent to investigate an offence under the Information Technology Act, 2000.
Question 6
(a) A magistrate of the first class passes a sentence of imprisonment for a term of three years with a fine of Rs.5,000 and in lieu of non-payment thereof, an additional imprisonment for another one year. The convict feels aggrieved by the sentence.
(i) Has the convict any right to appeal against this sentence ?
(ii) Will the situation change, if the sentence is passed by the court of a chief
judicial magistrate ?
Give reasons in support of your answer. . (5 marks)
(b) On 31st December, 1997 Suresh took a loan of Rs. 10,000 from Umesh. He paid Rs.2,000 to him on 16th June, 2001 towards part-payment. After that, Umesh did not receive any amount from Suresh. Subsequently, Umesh instituted a suit for recovery of the dues from Suresh after the expiry of two years from the date of last part-payment. Decide whether Umesh will succeed in his suit.
(5 marks)
(c) Madhav moves an application for setting aside the arbitral award on the ground that he was not given a proper notice of the arbitral proceedings and thereby not being able to present his case. He furnishes sufficient proof and pleads before the court that he received the arbitral award just 15 days back. Decide with reasons —
:retion to decree bstantial acts or
(6 marks)
(i) whether Madhav will succeed in his prayer; and
(ii) whether the law of limitation will not be a bar in his case.
IGCL-December 2006 12
Answer 6(a)
Section 29 of the Code of Criminal Procedure, 1973 specifies the sentencing powers of Magistrates. As per Section 29 of the Code, a Magistrate of the first class may pass a sentence of imprisonment for a term not exceeding three years or of a fine not exceeding five thousand rupees or of both.
Further, the Section specifies that the Court of a Chief Judicial Magistrate may pass any sentence authorised by law except a sentence of death or of imprisonment for life or of imprisonment for a term exceeding seven years.
Section 30 defines the limits of Magistrate's powers to award imprisonment in default of payment of fine. It provides that the Court of a Magistrate may award such term of imprisonment in default of payment of fine as is authorised by law provided that the term:
is not in excess of the powers of the Magistrate under Section 29; and
where imprisonment has been awarded as part of the substantive sentence, it should not exceed 1/4th of the term of imprisonment which the Magistrate is competent to inflict as punishment for the offence otherwise than as imprisonment in default of payment of the fine.
The convict has a right to appeal against the sentence of the First Class Magistrate, since the sentence given by him for default of payment of fine exceeds the limit stipulated under Section 30 of the Code (i.e 1/4th).
The situation will change, as the Chief Judicial Magistrate comparatively is authorized to pass greater sentence than a Magistrate of the first class as mentioned above.
Answer 6(b)
The problem in question is governed by Section 19 of the Limitation Act, 1963. Here in this problem two issues are raised: (i) whether part-payment is an acknowledgement of payment; and (ii) whether a fresh period of limitation is available.
Under Section 19 of the Limitation Act, 1963 it is provided that where payment on account of a debt or of interest on a legacy is made before the expiration of the prescribed period of limitation by the person liable to pay the debt or legacy or by his agent duly authorized in this behalf, a fresh period of limitation shall be computed from the time when the payment was made.
Part payment is acknowledgement by conduct, but as per Section 19 of the Limitation Act it should be made before the expiry of the period of limitation. A fresh period of limitation is available only when part payment is made within the period of limitation.
In this problem, part-payment has not been made within the period of limitation. Therefore, fresh period of limitation will not be available to Umesh. The suit filed by Umesh is not maintainable.
Answer 6(c)
The grounds for setting aside an arbitral award have been spelled out in Section 34(2) of the Arbitration and Conciliation Act, 1996. Section 34(2) of the Arbitration
13 IGCL-December2006
and Conciliation Act, 1996 envisages the following grounds on which an arbitral award may be set aside.
Incapacity of a party; Invalidity of the arbitration agreement; (iii) Party applying not given proper notice of the appointment of the arbitrator or of
the arbitral proceedings; (iv) Award not in accordance with the terms of submission to arbitration in regard to
dispute; (v) Arbitral tribunal not properly constituted or the arbitral procedure not in accordance
with the agreement of the parties or with the Act; (vi) The subject matter of the dispute not capable of settlement by arbitration under
the law; (vii) Award being in conflict with the public policy of India.
Section 34(3) of the Act prescribes a time limit of three months for making an application for setting aside the arbitral award. The prescribed period of three months could be extended to a maximum period of 30 days by the Court if it is satisfied that the applicant was prevented by sufficient cause from making the application within the said period.
If the law on the point is applied to the given problem, the ground on which the Madhav (applicant) makes prayer to set aside the award is found in Section 34(2) (iii). Therefore, the court may set aside the arbitral award or may provide relief in accordance with Section 34(4) of the Act.
The law of limitation shall not create any bar, since the period of limitation has not expired in view of the provisions of Section 34(3).
Question 7
(a) A society is registered under the Societies Registration Act, 1860 for the
renovation of Shiva temples and promotion of preachings of Shaiva School of
Hindu Religion in a State. One member of the society is sued as stranger
because he is in arrears of subscription which he is bound to pay under the rules
of the society. He resists the suit on the ground that the plaintiff society is a
purely religious institution and not a charitable society established for promotion
of science, literature, fine arts, etc., as required by the Societies Registration
Act, 1860. Decide with reason*. (5 marks)
(b) Sohan, a trustee for Mohan, allows the trust to be executed solely by his co-
trustee Rohan. Rohan misappropriates the trust property. Whether Sohan is
personally liable for the loss caused to Mohan ? (5 marks)
(c) Amit transfers his property worth Rs.50,000 to Rohit and by the same deed
asks Rohit to transfer his property worth Rs.25,000 to Sumit. Before Rohit
accepts the property, Amit dies. Rohit refuses to accept the property transferred
by Amit. Discuss the rights of Sumit. . ' , (6 marks)
IGCL- December 2006 Answer 7(a)
The Supreme Court in Hindu Public and Another v. Rajdhani Puja Samithee and others, AIR 1999 SC 964, has held that a society established for a religious purpose can also be registered under the Societies Registration Act, 1860. Charitable purpose under Section 1 and 20 of the Act includes religious purpose.
Therefore in the present problem, a member of the society who is in arrears of contribution can be sued as stranger.
Answer 7(b)
In the present problem, Sohan is personally liable for the loss caused to Mohan. According to Section 15 of the Indian Trusts Act, a trustee is bound to deal with the trust properly as carefully as a man of ordinary prudence would deal with such property if it were his own. The facts of the problem resemble to illustration (h) appended to Section 15.
Answer 7(c)
This problem is based on Section 35 of the Transfer of Property Act i.e. doctrine of election. According to Section 35 of the Transfer of Property Act, in case, a person upon whom benefit is conferred rejects it, the property which was attempted to be transferred to him will revert to the transferor and it is he who will compensate the disappointed person. If the transferor dies before the person upon whom the benefit is conferred and he rejects the transfer, then the heir of the transferor will have to satisfy the disappointed person out of the property which was the subject of transfer.
Sumit is entitled to be compensated by the heirs of Amit from the Amit's property to the extent of Rs. 25,000 because Rohit's property worth Rs. 25,000 was intended by Amit to be transferred to Sumit.
As per the facts of the given case, Rohit has not accepted the property, so he will not take Amit's property and the property will revert to Amit. Had Amit been alive, it was for him to give some property to Sumit. But Amit dies before Rohit could exercise his option. In such a situation, the heirs of Amit have to compensate Sumit from Amit's property to the extent of Rs. 25,000.
Question 8
(a) Ajoy has executed a gift deed in favour of Bijoy. But prior to the registration of
gift deed, Ajoy dies. Ajoy has already given the delivery of possession to Bijoy.
The heirs of Ajoy wished to register the gift. Bijoy's brother objected on the
ground that it being a non-registered gift in the life-time of Ajoy, it cannot be
registered after the death of donor. Decide the validity of gift on the ground of
non-registration of gift deed. (5 marks)
(b) Abhay is a trustee of certain land for Bhanu, Chirag.and Dhiraj. He has been authorised to sell the land to Uday for a specified sum as mentioned in the trust deed. Bhanu, Chirag and Dhiraj, being competent to contract, consent that Abhay may sell the land to Uday for lesser sum. Whether Abhay may sell the land on the specified sum as mentioned in the trust deed or for lesser sum ?
(5 marks)
(c) Which of the following are moveable or immovable properties under the Transfer of Property Act, 1882:
(i) a right to way;
(ii) a factory;
(Hi) a right to collect lac from trees;
(iv) hereditary offices;
(v) growing crops; and
(vi) standing timber. (6 marks)
Answer 8(a)
If the donor dies before registration, the document may be presented for registration after his death and if registered, it will have the same effect as registration in his lifetime.
A gift executed in favour of Bijoy is valid even if it is not registered before the Registrar. Bijoy's brother's objection that gift is not registered is not sustainable. Registration of gift shall be binding from the date of execution of gift and not from the date of registration.
The Privy Council in Kalyana Sundram v. Karuppa, AIR 1927 PC 42, has held that the registration of gift deed of any immovable property shall operate from the date of execution of gift deed. When the instrument of gift has been handed over by the donor to donee and accepted by him, the former has done every thing in his power to complete the donation and to make it effective. If it has been presented before the Registrar for registration within the prescribed time period, the Registrar must register it. Neither death nor express revocation by the donor is ground for refusing registration provided other conditions are complied with.
Answer 8(b)
The given problem is an illustration appended to Section 11 of the Indian Trusts Act. Sections 11 to 22 of the Indian Trusts Act deal with the duties of a trustee. One of the duties of a trustee is to execute the trust. As per Section 11 of the Act, "the trustee should execute the trust and obey the directions given in the instrument of the trust. He can make any modification in these directions only with the consent of all the beneficiaries who are competent to contract".
Abhay can sell the property to Uday even on the lesser sum as the beneficiaries Bhanu, Chirag and Dhiraj being competent to contract have consented that Abhay can sell the property to Uday even on the lesser sum. Hence the sale by Abhay to Uday on lesser sum is valid.
Answer 8(c)
The following are 'immovable property'
(i) a right to way;
(ii) a factory;
(iii) a right to collect lac from trees;
(iv) hereditary offices;
The 'immovable property' does not include:
(v) growing crops
(vi) standing timber.
INTERMEDIATE EXAMINATION
JUNE 2003
GENERAL AND COMMERCIAL LAWS
Time allowed: 3 hours Maximum marks: 100
NOTE : Answer SIX questions including Question No. 1 which is COMPULSORY. .
Question 1
(a) Discuss with reference to case law the right to protection of life and persons
liberty as guaranteed by the Constitution of India. (8 marks,
(b) Explain the doctrine of eclipse. (6 marks,
(c) Explain the powers of the Parliament to make laws on the State list. (6 marks,
Answer 1(a)
Article 21 of the Indian Constitution confers on every person the fundamental
right to life and personal liberty. It says that "no person shall be deprived of his life 01
personal liberty except according to procedure established by law". Thus, Article 21
seeks to prevent encroachment upon personal liberty by the Executive except in
accordance with law and in conformity with the provisions of law. Prior to Menaka
Gandhi v. Union of India, AIR 1978 SC 597, Article 21 was understood to guarantee
the right to life arid personal liberty to citizens only against the arbitrary action of the
executive and not against legislative action. The State could interfere with the liberty
of the citizens if it could support its action by a valid law. But after Menaka Gandhi's
decision, Article 21 now protects the right to life and personal liberty of citizens from
legislative action also on certain grounds, *•"••'•••
"Personal Liberty" under Article 21 means freedom from physical restraint to persons by incarceration or otherwise. It also includes all the varieties of rights which together make up a man's personal liberties other than those which are already included in the various clauses of Article 19. In A.K. Gopalariv. State< of Madras, AIR 1950 SC 27, a narrow meaning was given to the expression "personal liberty" confining it to the liberty of the person, i.e. of the body of a person. This restricted interpretation of the expression "personal liberty" preferred by the majority in A/0 Gopalan's case namely, that the expression "personal liberty" means only liberty relating to or concerning the person or body of the individual, has not been accepted by the Supreme Court in later cases. The expression "personal liberty" is not limited to bodily restraint or to confinement to person only is well illustrated in Kharak Singh v. State of U.P., AIR 1983 SC 1295. In Satwant Singh Sawhneyv. Assistant Passport Officer, New Delhi, AIR 1997 SC 1996, it was held that right to travel abroad is included within the expression "personal liberty" and therefore, ho person can be deprived of his right to travel except according to the procedure established by law. It was reiterated in Maneka Gandhiy. Unipn of IndiQ, AIR 1978 SC 597 that personal liberty within the meaning of Article 21 includes within its ambit the, right to go abroad and no person can be deprived of this right except according to procedure prescribed bylaw.
Procedure established by law: The expression "procedure established by law" means procedure laid down by statute or prescribed by law of the State. The law laid down in A.K. Gopalanv. State of Madras, that .the expression 'procedure established by law' means only the procedure enacted by a law made by the State was held to be incorrect in the Bank Nationalisation case (1970) 1 SCC 248). Subsequently, in Maneka Gandhi's case, it was laid down, that the law must now be taken to be well settled that Article 21 does not exclude Article 19 and a law prescribing a procedure for depriving a person of 'personal liberty' will have to meet the requirements of Article 21 and also of Article 19 as well, and ex-hypothesis of Article 14. Following Maneka Gandhi, the Supreme Court has widened the ambit of Article 21 in many of its decisions as for example, solitary confinement is inhuman (Sun/7 Batra v. Delhi Administration) speedy trial is included in Article 21 (Hussainara Khatoon v. Home Secretary Bihar); detinue's right to have interviews with his lawyers and family members (Francis Coralie v. U.T. of Delhi); right to free legal service (S. Bhowmic's case); non payment of minimum wages is violation of Article 21 (Asiad Project case); right to education (Unnikrishnanv. State ofA.P.); right to information P.P. Ltd. Indian Express Newspapers; right to have free and unpolluted environment (Subhash v. State of Bihar) etc. Thus, Article 21 as interpreted to encompass numerous facets of the human personality go far beyond the narrow concept of physical liberty.
Answer 1(b)
A law made before the commencement of the Constitution remains eclipsed or dormant to the extent it comes under the shadow of the fundamental right, i.e. is inconsistent with it, but the eclipsed or dormant parts become active and effective again if the prohibition brought about by the fundamental rights is removed by the amendment of the Constitution. This is known as the doctrine of eclipse. The significance of Article 13 is that, though an existing law inconsistent with a fundamental right becomes inoperative from the date of the commencement of the Constitution, yet it is not dead altogether.
The doctrine was first evolved in Bhikaji Narain Dhakras v. State of M.P., AIR 1955 SC 781. In this case, the validity of CP and Berar Motor .Vehicles Amendment Act, 1947 (empowering the Government to regulate control and to take up the entire motor transport business), was challenged. The Act was perfectly a valid piece of legislation at the time of its enactment. But on the commencement of the Constitution, the existing law became inconsistent under Article 13(1), as it contravened the freedom to carry on trade and business under Article 19(1)(g). To remove the infirmity, the Constitution (First Amendment) Act, 1951 was passed which permitted creation of State monopoly by law in respect of motor transport business. The Court held that the Article by reason of its language could not be read as having obliterated the entire operation of the inconsistent law or having wiped it altogether from the statute books. In case of a pre-Constitution law or statute, it was held, that the doctrine of eclipse would apply. The Court stated that:
"The true position is that the impugned law became as it were, eclipsed, for the time being, by the fundamental right. The effect of the Constitution (First Amendment) Act, 1951 was to remove the shadow f.nd to make the impugned Act free from all, blemish or infirmity."
Answer 1(c)
The Constitution draws three long lists of all the conceivable legislative subjects. These lists are contained in the VIIth Schedule to the Constitution. List I is named as Union List. List II as the State List and List III as the Concurrent List. With respect to subjects enumerated in the Union List, the Union Parliament has the exclusive power to make laws. The State Legislature has no power to make laws on any of these subjects. Regarding subjects enumerated in the Sate List, the legislature of a State has exclusive power to make laws. Parliament cannot make any law on any of these subjects whether the State makes or does not make any law. For subject stated under Concurrent List, Parliament and the State legislatives have the powers to make laws.
As stated above, State legislatures have the exclusive powers to make laws with , respect to subjects enumerated in the State List. But our Constitution makes a few exceptional circumstances, when Parliament can make laws on State List.
The exceptional circumstances are:
(a) In the National Interest (Article 249): If the Upper House of the Parliament i.e. Council of State (Rajya Sabha) declares by two thirds of its members present and voting, that it is necessary or expedient in the national interest that Parliament should make a law on that matter of State List. Such a resolution is valid for one year unless renewed by a fresh resolution.
(b) During proclamation of emergency (Article 250): While proclamation of emergency is in operation, Parliament shall have the power to make laws for whole or any part of the territory of India on any matter in State List. r
\
(c) Break down of Constitutional Machinery in a State (Articles 356 and 354) (President's Rule in a State): Parliament can make with respect to all State matters as regards a State in which there is a break-down of constitutional machinery and is under Presidential rule.
(d) On request of two or more States (Article 252): If two or more States are desirous that on any particular subject included in the State List, there should be a common legislation, then they may make a request to Parliament to make such a law on that particular subject. Such request shall be made by passing resolution in the legislatures of the concerned States. The law thus made by Parliament can be adopted by other States also.
(e) Legislation for enforcing International Agreements/Treaties/Conventions (Article 253): The Constitution authorizes the Parliament to make any law on any subject included in any list to implement:
(i) any treaty, agreement or convention, with any country or countries; or
(ii) any decision made at any international conference associations or other body.
To implement such decisions, treaty or agreement, the Parliament may have to pass laws sometimes on State subjects also.
Question 2
(a) What is strict and liberal construction of statutes ?
(b) Explain the expression 'specific performance'. Who may obtain specific performance of a contract? Indicate the contracts which cannot be specifically enforced under the Specific Relief Act, 1963. (8 marks each)
Answer 2(a)
Strict and Liberal Construction
In Wiberforce on Statute Law, it is stated that what is - meant by 'strict construction' is that "Acts are not to be regarded as including anything -which is not within their letter as well as their spirit, which is not clearly and intelligibly described in the very words of the statute, as well as manifestly intended", while by 'liberal construction' is meant that "everything is to be done in advancement of the remedy that can be done consistently'with any construction of the statute". Beneficial construction intends to suppress the mischief and advance the remedy is generally preferred.
A court invokes the rule which produces a result that satisfies its sense of justice in the case before it. "Although the literal rule is the one most frequently referred to in express terms, the courts treat all three (viz. the literal rule, the golden rule and the mischief rule) as valid and refer to them as occasion demands, but do not assign any reasons for choosing one rather than another. Sometimes a court discusses all the three approaches. Sometimes it expressly rejects the 'mischief rule' in favour of the 'literal rule'. Sometimes it prefers although never expressly, the 'mischief rule' to the 'literal rule'.
In general, courts give strict interpretation of statutes relating to criminal matters. While interpreting welfare legislations, the Courts take liberal view and interpret them liberally.
Answer 2(b)
One of the remedies for breach of contract is a suit for specific performance of the contract. Specific performance means the carrying out in specie of the subject matter of an agreement. Specific performance of a contract will be enforced by courts only if damages are not an adequate remedy. Section 15 of the Specific Relief Act, 1963 lays..down that the specific performance of contract may be obtained by:
(a) any party thereto;
(b) the representative in interest or the principal, of any party thereto;
(c) where the contract is a settlement on marriage or a compromise of doubtful rights between members of the same family, any person beneficially entitled thereunder;
(d) where the contract has been entered into by tenant for life in due exercise of a power the remainderman;
(e) a reversioher in possession;
(f) a reversioner in remainder;
(g) a new company which arises out of amalgamation with another company;
(h) when the promoters of a company have, before its incorporation, entered into a contract for the purpose of the company and such a contract is warranted by the terms of the incorporation of the company..
According to Section 14 of the Specific Relief Act, 1963 read with Section 20 of the said Act, the court may refuse to grant specific performance of a contract where the case falls within the provisions of these sections such as:
(i) Where the compensation in money is an adequate relief.
(ii) Where the contract runs into minute or numerous details because of which it
would be practically impossible for a court to enforce its decree,
(iii) Where the contract is dependent upon personal qualification or personal
volition as the court cannot enforce material terms of the contract against an
unwilling party with any hope of success, (iv) Where the contract by its very nature is not capable of specific performance
e.g. contract to marry.
(v) Where the specific performance will give undue advantage to the plaintiff, (vi) Where the specific performance would cause unforeseen hardship to the
defendant which he could not foresee.
(vii) Where the specific performance would be inadequate or inequitable, (viii) Contracts to refer the dispute present or future to arbitration shall not be
specifically enforced except as provided under the law of Arbitration.
To sum up, specific relief is an equity remedy not ordinarily granted by courts. It s granted only at the discretion of the court in suitable cases. There are certain contracts enumerated as above which are not at all enforceable specifically. In such cases only compensatory relief (damages) is granted.
Question 3 " ~
(a) How can arrest be effected by the police? When can police arrest a person without warrant? Can a private person cause arrest without warrant?
(bj Discuss the procedure to be followed for arbitral proceedings by an arbitral
' tribunal under the Arbitration and Conciliation Act, '1996. (8 marks each)
Answer 3(a)
Arrest of a person can be effected by the police either with warrant or without warrant. Section 41 of the Cr. P.C. 1973 lays down the circumstances when police may arrest any person without warrant. As per the Section, a police officer may arrest a person without an order from a Magistrate and without a warrant:
(a) who has been concerned in any cognizable offence or against whom reasonable complaint has been made or credible information has been received of his having been so concerned; or
(b) who has in his possession without lawful excuse.any implement of house breaking; or
(c) who has been a proclaimed offender; or
(d) in whose possession stolen property is found and may reasonably be suspected of having committed an offence with reference to such thing; or
(e) who obstructs a police officer while in the execution of his duly or escapes from lawful custody; or
(f) who is a deserter from any of the Armed Forces of the Union; or
(g) who has been concerned in any act committed at any place out of India
which if committed in India would have been punishable as an offence; or (h) who being a released convict commits breach of any rule made under
Section 356(5); or (i) for whose arrest any requisition has been received from another police officer
specifying the person to be arrested and the offence for which the arrest is to
be made.
Under Section 42 of the Code, police can arrest a person without warrant/order when the person fails to give his whereabouts and address.
A private person can arrest a person who in his presence commits a non-bailable and cognizable offence or who is a proclaimed offender and shall without any unnecessary delay make over such arrested person to a police officer. In the absence of a police officer, the person so arrested shall be taken to the custody of the nearest police station. (Section 43)
Answer 3(b)
Sections-23 to 27 of the Arbitration and Conciliation Act, 1996 lay down the procedure to be followed in arbitration proceedings. No such procedure was laid down under the old arbitration Act. The procedure involves:
(i) Statements of claim and defence: The claimant has to submit his claim, consisting of facts supporting the claim, points at issue and the relief or remedy sought - within the period,agreed by the parties, or determined by the arbitral tribunal. Likewise, the respondent has to state the defence in respect of the claims of the claimant. Parties are required to attach to these statements, all relevant documents. They may also add references to the documents or evidence which they will submit later on. Parties may amend or supplement these statements during the proceedings, unless otherwise agreed by the parties or the arbitral tribunal considers it inappropriate to allow the amendment or supplement, due to delay in making it.
(it) Hearings and written proceedings: It is open to parties to agree for holding oral hearings for presentation of evidence and for oral arguments or, alternatively, for conducting proceedings on the basis of documents (such as affidavits). In absence of any such agreement, a decision in this regard may be taken by the arbitral tribunal. Even if the arbitral tribunal decides to conduct arbitration on the basis of documents only, it shall grant an oral hearing at the appropriate stage, on request by a party, unless such oral hearings are barred by agreement by the parties.
The arbitral tribunal shall give adequate advance notice to the parties of any hearing or of any meeting of the tribunal for inspection of documents, goods or property. All documents received and any expert report or document in evidence must be communicated to the parties.
(iii) Default of a party: It is open to the parties to agree to what constitutes a default in the proceedings. In absence of any such agreement, certain situations as stipulated under the Act are regarded as defaults, leading to certain consequences.
(iv) Expert appointment by arbitral tribunal: The arbitral tribunal may appoint one or more experts to report to it, on specific issues to be determined by the arbitral tribunal. The tribunal may require the parties to give to the expert(s), relevant information or to produce or give access to any relevant documents, goods or other property for the experts inspection. The experts reports shall be communicated to the parties, by the arbitral tribunal.
(v) Court assistance in taking evidence: The tribunal, or a party, with the approval of the tribunal, may apply to a court for assistance in taking evidence. Such an application shall specify all details as specified in Section 27(2). The court may then order that the evjdence be provided direct to the tribunal. The court may issue the same processes (summons, or commissions), as in suijs before it. Persons failing to attend, or making a default, during the conduct of the proceedings, shall be subject to the same punishments and penalties by the orders of the court, as for like offences in suits tried by the court.
(vi) Decision: The decision of the tribunal is generally by a majority of all its members. (Section 29)
Question 4
(a) What are the exceptions to the general rule that property of any kind may be transferred? Refer to the relevant provisions of the Transfer of Property Act, 1882.
(b) Discuss the provisions relating to valuation of instruments for levy of duty
under the Indian Stamp Act, 1899. (8 marks each)
Answer 4(a)
• Section 6 of the Transfer of Property Act, 1882 contains some exceptions to the general rule that property of any kind may be transferred. Consequently, the following properties cannot be transferred, namely:
(a) The chance of an heir apparent succeeding to an estate, the chafice of a relation obtaining a legacy on the death of a kinsman or any other mere possibility of a like nature cannot be transferred.
(b) A mere right of a re-entry for breach of a condition subsequent cannot be transferred to any one except the owner of the property affected thereby
(c) An easement cannot be transferred apart from the dominant heritage.
(d) An interest in property restricted in its enjoyment to the owner personally cannot be transferred by him.
(e) A right to future maintenance in whatsoever manner arising, secured or determined, cannot be transferred.
(f) A mere right to sue cannot be transferred.
(g) A public office cannot be transferred nor can the salary of a public officer, whether before or after it has become payable.
(h) Stipends allowed to military, naval, air force and civil pensioners of the Government and political pensions cannot be transferred.
(i) No transfer can be made if it is opposed to the nature of the interest affected thereby; or for any unlawful object or consideration within the meaning of Section 23 of the Indian Contract Act, 1872; or to a person legally disqualified to be transferee.
The term 'property' is not defined under the Act. But the courts have interpreted it in a comprehensive manner so as to include:
(i) copyright hi a literary composition;
(ii) an actionable claim;
(iii) an annuity;
(iv) right to collect lac from trees and
(v) mortgagor's right to redeem the mortgage.
Further, transfer may take place in present or in future but the property must be in existence. For a future property there can be no transfer.
Answer 4(b)
Section 20 to 28 of the Indian Stamp Act, 1899, deal with valuation of instruments for duty. As per Section 20, where an instrument is chargeable with ad valorem duty in respect of any money expressed in any currency other than that of India, such duty shall be calculated on the value of such money in the currency of India, according to the current rate of exchange on the date of the instrument.
In the case of an instrument chargeable with ad valorem duty in respect of any stock or any marketable or other security, such duty shall be calculated on the value of such stock or security to the average price or the value thereof on the date of the instrument. (Section 21)
Section 23 provides that where interest is expressly made payable by the terms of the instrument, such instrument shall not be phargeable with a duty higher than that with which it would have been chargeable, had no mention of interest been made therein. In the case of an instrument (not being a promissory note or bill of exchange) which is given upon the occasion of the deposit of any marketable security by way of security for money advanced or to be advanced by way of loan, or for an existing or future debt, or makes redeemable or qualifies a duly stamped transfer, intended as a security of any marketable security, it shall be chargeable with duty as if it were an agreement, chargeable with duty under Article 5(c) of Schedule I to the Act.
According to Section 24, where any property is transferred to any person in consideration (wholly or in part) of any debt due to him, or subject either certainly or contingently to the payment or transfer of any money or stock, such debt, money or stock is to be deemed the whole or part (as the case may be), of the consideration in respect whereof the transfer is chargeable with ad valorem duty.
Proviso to Section 24 operates for the benefit of assignee of the mortgage. As per the Explanation appended to the section in the case of sale of property subject to mortgage or other encumbrances, any unpaid mortgage money or money charged together with the interest, if any, due on the same shall be deemed to be part of the consideration for the sale provided that where property subject to a mortgage is transferred to the mortgagee he shall be entitled to deduct from the duty payable on the transfer the amount of any duty already paid in respect of the mortgage.
Section 25 deals with the manner of computation of duty in the case of annuities. Valuation of an annuity will b'e material, where the payment of annuity or other sum payable periodically is secured by an instrument or where the consideration for a conveyance is an annuity or other sum payable periodically.
Section 26 applies only when the instrument is chargeable with ad valorem duty. Section 26 has two provisos. Under the first proviso, in the case of mining lease, the stamp duty is to be calculated on the estimated value of the royalty or the share of the produce, as the case may be. If the l^ase is granted by the Government, stamp duty has to be paid on the amount or value of the royalty as determined by the Collector of Stamps. But when the lease has been granted by a person other than the Government, the valuation has to be at Rs. 20,000 a year. The second proviso to Section 26 is intended to cover the case where an instrument has, by accident or mistake, been insufficiently stamped.
Under Section 27, consideration and all other facts and circumstances affecting the chargeability of any instrument with duty have to be fully set forth. The rules for apportionment of the consideration have been prescribed under Section 28 of the Act.
Questions
(a) Is the registration of a will optional under the Registration Act, 1908? Explain
the manner in which it may be presented for registration: (5 marks)
(b) Explain the law relating to admissibility in evidence of a dying declaration. If the person making a dying declaration survives, is it admissible in evidence?
(5 marks)
(c) What is meant by 'digital signature' under the Information Technology Act,
2000? When is it deemed to be secure? (6 marks)
Answer 5(a)
Section 18 of the Registration Act, 1908 deals with documents of which registration is optional. Such types of documents may or may not be registered. Under clause (e) of Section 18, the registration of wills has been made optional. Section 27 provides that a will may be presented for registration at anytime or deposited in a manner provided under Sections 40-46 of the Act.
Under Section 40, the testator, or after his death any person claiming as^executor or otherwise under a will may present it to any Registrar or Sub-Registrar for Registration. In case of authority for adoption, the donor or after his death the donee or any authority to adopt or the adoptive son may present it for registration to any Registrar or Sub-Registrar.
According to Section 41, a will or an authority to adopt, if presented for registration by the testator or the donor may be registered in the same manner as any other document. If presented by any other person entitled to present it, the will shall be registered if the registering officer is satisfied about the particulars mentioned therein.
Any testator may, either personally or by duly authorised agent, deposit with any Registrar his will in a sealed cover superscribed with the name of the testator and that of his agent, if any, and with a statement of the nature of the document.
On receiving such documents, the Registrar on being satisfied shall transcribe in his Registrar Book No. 5, the superscription and shall, note the date, time, month, etc. of such receipt and shall then place and retain the sealed cover in his fire-proof box.
However, the testator may withdraw it by applying for the same and the Registrar shall deliver it accordingly. (Sections 42 to 46)
Although it is not legally binding on the parties to get the will registered, nevertheless parties tend to get it registered because registered document is a proof of its existence and it is easy to prove its contents. Since the will is a testamentary document, its registration can not gain priority over subsequently made wills.
Answer 5(b)
Section 32(1) of the fndian Evidence Act, 1860, envisages that statements written or verbal of relevant facts made by a person who is dead are themselves relevant
facts in the following case - when the statement is made by a person as to the cause of his death or as to any of the circumstances of the transaction which resulted in his death, in cases in which the cause of that person's death comes into question.
Section 32(1) is an exception to the rule that hearsay evidence should not be permitted and it makes admissible the statement of deceased whether the death is homicidal or suicidal provided the statement relates to the cause of death. The reasons for admitting such evidence are (a) that it is the best evidence available and (b) the occasion is solemn and the dying man is face to face with his maker without any motive for telling a lie. Such statements are known as-dying declarations. A dying declaration, however, is always relevant to whomsoever it might have been made. The conditions in the Section are:
(a) It must be a statement written or verbal. Verbal necessarily does not mean oral but also as including gestures made by a dying man unable to speak, in answer to questions put to him. [Queen Empress v. Abdullah (1885) ILR 7 All. 385, Alisandiriv. King LR (1937) AC 220].
(b) The statement must relate to the cause of his death or the circumstances of the transaction which resulted in his death and not the cause of the death of someone else. [Ranjit Singh v. State, AIR 1952 HP 81, 'Pakala Narayana Swami v. King Emperor (1939) LR 66].
(c) The cause of the person's death must be in question. A dying declaration would be relevant in any proceeding civil or criminal where the cause of death comes into question.
When the declarant survives, the declaration cannot be. used as dying
declaration, yet it would be previous statement of witness and the accused can make
use of it under Section 145 of the Evidence Act for the purpose of cross-examining
and contradicting the witness. It can also be used for corroboration under Section 157
of the Evidence Act, after duly proving such statement by the evidence of the person
who recorded the same. '
Answer 5(c)
"Digital Signature" under Section 2(p) of the Information Technology Act, 2000 means authentication of any electronic record by a subscriber by means of an electronic method or procedure in accordance with the provisions of Section 3.
Section 3 deals with authentication of electronic records. This section provides the conditions subject to which an electronic record may be authenticated by means of affixing digital signature. The digital signature is treated in two distinct steps. First the electronic record is converted into a message digest by using a mathematical function known as "hash function" which digitally freezes the electronic record thus ensuring the integrity of the content'of the intended communication contained in the electronic record. Any tempering with the contents of the electronic record will immediately invalidate the digital signature. Secondly, the identity of the person affixing the digital signature is authenticated through the use of private key which is attached to.the message digest and which can be verified by any person who has the public key corresponding to such private key. This will enable any person to verify whether the electronic record is retained intact or has been tampered with. It will also enable a person who has a public key to identify the originator of the electronic message
Question 6
(a) Suresh conveys property to Bhushan in trust to sell the same and pay out of
the proceeds the claims of his creditors. Suresh reserves no power of
revocation and also does not communicate to the creditors about the creation
of the trust. Can Suresh revoke the trust? What will be the position if the
creditors are parties to the agreement? (5 marks)
(b) An application for registration of a society named Kautilya Institute of Legal
Education and Training is submitted under the Societies Registration Act,'
1860. A copy of each of memorandum of association and bye-laws is
enclosed along with the prescribed fee. The Registrar refuses to register the
society on the ground that memorandum of association is not signed by
seven members. Is the refusal justified? (5 marks)
(c) Vivek moves an application for setting aside the arbitral award on the ground
that he was not given a proper notice of the arbitral proceedings and thus he
could not present his case. He furnishes sufficient proof, and pleads before
the court that he received the arbitral award just 15 days back. What is the
appropriate remedy to be provided by the court in this case? (6 marks)
Answer 6(a)
The given problem is an illustration appended to Section 78 of the Indian Trusts Act, 1882 dealing with revocation of trust. In this case:
(a) If no power of revocation has been reserved, Suresh may revoke the trust even if he has made no communication to the creditors about the creation of trust;
(b) But if the creditors are parties to the agreement, the trust cannot be revoked without their consent.
Generally, the trusts are of irrevocable nature. But where the author specifically reserves the right to revoke or where it is created for the purpose of paying out the claims of the creditors, the trust can be revoked before the creditors are informed.
Answer 6(b)
In the given problem, the refusal of the Registrar is justified.
Under the Societies Registration Act, 1860, a society may be formed by any seven or more persons associated for any literary, scientific or charitable purposes or for any other purpose as specified in Section 20 of the Act by subscribing their names to a memorandum of association containing the:
(a) name of the society;
(b) objects of the society;
(c) names and addresses and occupations of the governors, council directors, committee, or other governing body to whom by the rules.of the society, the management of its affairs is entrusted.
A fee of Rs. 50/- is to be paid to the Registrar for every such registration. A society may get itself registered with the Registrar of Joint Stock Companies by filing: (i) a copy of the memorandum; (ii) a coy of the rules and regulations of the society certified as correct by not
less than three members of the governing body; and (iii) by paying the prescribed fee (Section 1 & 2).
Before registering a society, the Registrar must satisfy that the memorandum as required by the law has been field i.e. the memorandum has been signed by at least seven persons and the copy of the rules and regulations of the society must on the face of it bear the signature of not less than three of the members of the governing body. Thereupon the society is registered under this Act. (Section 3)
Answer 6(c)
The grounds for setting aside an arbitral award have been spelled out in Section 34(2) of the Arbitration and Conciliation Act, 1996.
Section 34(2) of the Arbitration and Conciliation Act, 1996 envisages the following grounds on which an arbitral award may be set asicje:
(i) Incapacity of a party;
(ii) Invalidity of the arbitration agreement;
(iii) Arbitral tribunal not properly constituted;
(iv) Party applying not given proper notice of the appointment of the arbitrator or
of the arbitral proceedings; (v) Award not in accordance with the terms of submission to arbitration in regard
to the dispute;
(vi) Arbitral tribunal not properly constituted or the arbitral procedure not in
accordance with the agreement of the parties or with the Act; r
(vii) The subject matter of the dispute not capable of settlement by arbitration under the law;
(viii) Award being in conflict with the public policy of India.
Sub-section (3) of Section 34 of the Act prescribes a time limit of 3 months for making an application for setting aside the arbitral award. The prescribed period of three months could be extended to a maximum of 30 days by the court if it is satisfied that the applicant was prevented by sufficient cause from making the application within the said period.
If the law on the point is applied to the given problem, the ground on which the applicant makes prayer to set aside the award is found in Section 34(2)(iv) and the period of limitation has not expired in view of the provisions of Section 34(3). Thus, the Court may set aside the arbitral award or may provide relief in accordance with sub-section (4) of Section 34.
Question 7
(a) Rohit files a suit against Mohit for recovery of possession of House-X on the
ground that he is the owner of the House-X. While the suit is pending,
Gautam transfers House-X to Baldev. Ultimately, the court grants a decree in
favour of Rohit. Is this decree binding on Baldev? (5 marks)
(b) Anurag transfers Rs. 10,000 to his sister-in-law provided she deserts her
husband. Is the transfer valid? (5 marks)
(c) Star Hotel arranged food, etc., for a marriage party of Richie consisting of 60
persons on 30th June, 2000 at the rate of Rs. 200 per person. Rs. 10,000
remained unpaid. Advise Star Hotel about the period of limitation for filing a
suit. (6 marks)
Answer 7(a)
Doctrine of Us pendens as incorporated in Section 52 of the Transfer of Property Act, 1882 provides that a decree passed in the case can be enforced as against transferee in whose favour property is transferred during the pendency of the suit. However, this doctrine can be invoked when during the pendency of suit, transfer of immovable property which is subject matter of dispute in the suit is transferred by any party to the suit.
In this case, transfer of House-X in relation to which suit is pending, is made by Gautam who is not a party to the suit. Hence the doctrine of Us pendens is not applicable and cannot be invoked in this case. Thus, the decree is not binding on Baldev, the transferee. Rohit has to seek remedy only against Mohit.
Answer 7(b)
When an interest is created on the transfer of property but is made to depend on the fulfillment of a condition by the transferee, the transfer is known as conditional transfer. Such a transfer may be subject to a condition precedent or a condition subsequent. In both the cases, the condition must be valid.
Section 25 of the Transfer of Property Act, 1882 provides that an interest created on a "tlsansfer of property and dependent upon a condition fails if the fulfillment of the condition is impossible, or is forbidden by law, or is of such a nature that if permitted it would defeat the provisions of any law or is fraudulent or involves or implies injury to the person or property of another, or the Court regards it as immoral or opposed to
public policy.
•/
In view of the above-mentioned provisions of Section 25, the transfer is void. The given problem is akin to illustration (d) appended to Section 25 of the aforestated Act declaring such transfer void.
Answer 7(c)
The Limitation Act, 1963 prescribes different periods of limitation for suits, appeals and applications. The prescribed limitation period has been envisaged in the Schedule appended to the said Act. Part II of the Schedule stipulates period of limitation for suits relating to contracts. In case of a suit for the price of fo'od or drink sold by the keeper of a hotel, tavern or lodging house, the period of limitation prescribed there under is three years from the date when the food or drink is delivered.
In the light of the legal provisions stated above, Star Hotel can file a suit for the recovery of unpaid money within a period of 3 years commencing from 1a July, 2000.
Question 8
(a) A cause of action arises between two parties Surendra and Mahendra. The
courts at Meerut and Ghaziabad are competent to try the suit. But both the
parties to the contract agree to vest the jurisdiction in the court at Meerut. Is
such an agreement valid? (5 marks)
(b) Raman moves an application before the Judicial Magistrate of First Class of the area for grant of anticipatory bail in connection with a bailable offence. Will the magistrate be competent to grant him anticipatory bail? Decide.
(5 marks)
(c) A document, which Is apparently an agreement granting a franchise, is
produced in the court, but is not stamped. Examine whether- - .
(i) the document is void;
(ii) the document can be admitted on payment of penalty; and
(Hi) the parties are liable to be prosecuted. (6 marks)
Answer 8(a)
The agreement is valid. It has been held in Angile Insulations v. Davy Ashmere India Ltd. (1995) 3 Scale 203, that where there might be two or more competent courts which could entertain a suit consequent upon a part of cause of action having arisen therewith, if the parties to the contract agreed to vest jurisdiction in one such Court to try the dispute, such an agreement would be valid.
Answer 8(b)
The Magistrate is not competent. Moreover, application can not be made for a bailable offence. Under Section 438 of ,the Cr.P.C. 1973, the power of granting anticipatory bail being of unusual nature is' entrusted only to the higher echelons of judicial service, namely a Court of Session or the High Court. It is a power exercisable in case of an anticipated accusation of non-bailable offence. The Judicial Magistrate is not competent to grant anticipatory bail.
Answer 8(c)
(i) As per Section 35 of the Indian Stamp Act, 1899 instruments not duly stamped are inadmissible in evidence. But in special cases they may be admitted after imposing penalty.
(ii) A document which is not duly stamped is not a void document. It is inadmissible in evidence. Such documents can be impounded and made admissible in evidence upon payment of the prescribed penalty.
(iii) The parties are not liable to be prosecuted. The proviso to Section 43 clarifies that no prosecution shall be instituted in the case of any instrument in respect of which such a penalty has been paid, unless it appears to the Collector that the offence was committed with an intention of evading payment of the proper duty. exclusion of certain time in some cases for computation of the prescribed period of limitation. These provisions are as follows:
1. Exclusion of time in legal proceedings (Section 12): In computing the period of limitation for any suit, appeal or application, the day from which such period is to be reckoned, shall be excluded. Further, in computing the period of limitation for (a) an appeal, or (b) an application for leave to appeal, or (c) revision, or review of a judgement, the following periods shall be excluded-
the day on which the period begins to run,
the day on which the judgement complained of was pronounced,
the time requisite for obtaining a copy of the decree, sentence or order appealed from or sought to be revised or reviewed and
(iv) the time requisite for obtaining a copy of the judgement
2. Where leave to sue or appeal as a pauper is applied for (Section 13) : Thetime during which the applicant has been prosecuting in good faith his application for such leave shall be excluded.
3. Proceedings bona fide in court without jurisdiction (Section 14): The time during which the plaintiff has been prosecuting with due diligence another proceedings shall be excluded.
4. Section 15 of the Act makes provisions for exclusion of time in certain cases other than those contained in Sections 12 to 14.
5.
in the case of death on or be fore the accrual of the right to sue (Section 16): In such cases the period of limitation shall be computed from the time when there is a legal representative of then deceased capable of instituting such suit or making such application.
6.
Fraud or mistake (Section 17): Limitation in such cases will be computed from the time when such fraud became known to the person defrauded or mistake discovered.
7. Effect of acknowledgement in writing (Section 18): Where liability in writing is acknowledged against the party within the period of limitation, it would give rise to a fresh period of limitation and would run from the date of acknowledgement.
8. Payment on account of debt or of interest on legacy (Section 19): where payment on account of a debt or of interest on a legacy is made before the expiration of the prescribed period of limitation by the person liable to pay the debt or legacy or by his agent duly authorised, a fresh period of limitation shall be computed from the time when the payment was made.
9. Effect of acknowledgement of payment by another person (Section 20).
10. Substitution or addition of a new plaintiff or defendant (Section 21): In such cases, the suit shall be deemed to have been instituted when he was so made a party. However, this is subject to certain exceptions given in the Section itself.
11. Continuing breaches and torts (Section 22): In the case of a continuing breach of a contract or tort, a fresh period of limitation begins to run at every moment of the time during which the breach or the tort as the case may be continues.
1.2. Suits for compensation for acts not actionable without special damages (Section 23): The period of limitation shall be computed from the time when the injury results.
13. Computation of time mentioned in instruments (Section 24) : All instruments shall be for the purpose of the Limitation Act, be deemed to be made with reference to the Gregorian calendar (i.e., the year beginning from 1st January and ending on 31st December).
Question 4
(a) Define the term 'instrument' under the Indian Stamp Act, 1899. (4 marks)
(b) Are the following'instruments' under the Indian Stamp Act, 1899:
(i) A letter which acknowledges receipt of a certain sum as having been borrowed at a particular rate of interest and for a particular period of time and that it will be repaid with interest on the due date ?
(ii) An unsigned draft document ? (2 marks each)
(c) Write short notes on the following:
(i) Documents of which registration is optional. (4 marks)
(ii) Registration of a document executed out of India. (2 marks)
(Hi) Time limit for presentation of a document for registration. (2 marks)
Answer 4(a)
Section 2(14) of the Indian Stamp Act, 1899 defines instrument to include "every document by which any right or liability is or purports to be created, transferred, limited, extended, extinguished or recorded".The definition is an inclusive definition and is not necessarily restricted to those documents which are specifically mentioned in the definition. Briefly stated, an instrument includes conveyances, leases, mortgages, promissory notes and wills, but not ordinary letters or memoranda or accounts.
Answer 4(b)(t)
It is an instrument. It creates a liability to repay the amount with interest on the due date.
Answer 4(b)(ii)
It is not an instrument because it does not create or purport to create any right. Answer 4(c)(i)
Section 18 of the Registration Act, 1908, specifies documents of which registration is optional. These are:
(a) Instruments (other than instruments of gift and wills) which purport or operate to create, declare, assign, limit or extinguish, whether in present or future any right title or interest whether vested or contingent of a value less than one hundred rupees to or in immovable property;
(b) Instruments acknowledging the receipt or payment of any consideration on
account of the creation, declaration, assignment, limitation or extinction of any
such right, title or interest; \
The mere absence of the defendant does not of itself justify the presumption that the plaintiffs case is true. (Safyendra Nath v. Narendra, AIR 1924 Cal. 806)
Ex parte decree operates to render the matter decided resjudicata and the defendant's failure to appear will not depriveJhe plaintiff of the benefit of his decree. (Pandurang v. Shantabai, AIR 1989 SC 2240). When an ex parte decree is passed against a defendant he may apply to the Court by which the decree was passed for an order to set it aside and if he satisfies the Court that summons was not duly served or he was prevented by any sufficient cause from appearing when the suit was called on for hearing, the Court will make an order setting aside the decree as against him upon such terms as it thinks fit ard appoint a day for proceeding with the suit. However, if the decree is of such a nature that it cannot be set aside as against such defendant only, it may set aside as against all or any of the defendants also.
An ex parte decree will not be set aside by any Court merely on the ground that there has been irregularity in the service of summons, if it is satisifed that the defendant had notice of the date of hearing and had sufficient time to appear and answer the plaintiffs' claim.
Answer 5(b) Hacking
Section 66 of the Information Technology Act, 2000 deals with "hacking" with computer system. The term "hacking" with respect of computer terminology denotes the act of obtaining unauthorized access to a computer system. Section 66 of the Information Technology Act, 2000, provides that:
(1) Whoever with intent to cause, or knowing that he is likely to cause, wrongful loss or damage to the public or any person, destroys or deletes or alters any information residing in a computer resource or diminishes its value or utility or affects it injuriously by any means, commits hacking.
(2) Whoever commits hacking, shall be punished with imprisonment up to three years or with fine which may extent upto two lakh rupees or with both.
The Section imputes intention as per knowledge to the hacker. Modification of the contents of a computer will also be an offence. Modification includes addition, alteration and erasure. As is evident, the maximum punishment prescribed for hacking with computer system under Section 66(2) is imprisonment upto three years or with fine upto two lakh rupees or both.
Answer 5(c)
"Digital Signature" under Section 2(p) of the Information Technology Act, 2000 means authentication of any electronic record by a subscriber by means of an electronic method or procedure in accordance with the provisions of Section 3.
Section 3 deals with authentication of electronic records. This Section provides the conditions subject to which an electronic record may be authenticated by means of affixing digital signature. The digital signature is treated in two distinct steps. First, the electronic record is converted into a message digest by using a mathematical function known as "hash function" which digitally freezes the electronic record thus ensuring the integrity of the content of the intended communication contained in the electronic record. Any tempering with the contents of the electronic record will immediately invalidate the digital signature. Secondly, the identity of the person affixing the digital signature is authenticated through the use of private key which is attached to the message digest and which can be verified by any person who has the public key corresponding to such -private key. This will enable any person to verify whether the electronic record is retained intact or has been tampered with. It will also enable a person who has a public key to identify tlie originator of the electronic message.
Questions
(a) A property is given to Anil for life and afterwards to Bimal. Bimal transfers this
interest to Chandan. Bimal dies during the life-time of Anil. Chandan claims the
property. Decide. (6 marks)
(b) Discuss the validity of the following transfers:
(i) X, a Hindu widow, transfers her right to future maintenance, (ii) X, a Hindu widow, transfers her arrears of past maintenance.
(Hi) Transfer of right of easement apart from the dominant heritage.
(2 marks each)
(c) Rohit, a Hindu who has his self-earned property, dies leaving his widow Priya and
brother Bidur. Bidur"s succession to the property is dependent upon two factors,
viz., (i) his surviving the widow Priya; and (ii) Priya leaving the property intact.
Bidur transfers his right of succession. Is it a valid transfer ?
Explain. (4 marks)
Answer 6(a)
A vested interest may be "vested in possession" or "vested in interest". A right is said to be "vested in possession" when it is a right to present possession of property and it is said to be "vested in interest" wben it is not a right to present possession but a present right to future possession. A vested interest is transferable and heritable.
In the given problem, Bimal gets a vested interest and if Bimal transfers this interest to Chandan, Chandan will take when the life estate of Anil comes to an end. Bimal's interest, since it is vested, is also heritable. Therefore, if Bimal dies during the lifetime of Anil, Chandan will get the property after the death of Anil.
Answer 6(b)(i)
Section 6 of the Transfer of Property Act contains some exceptions to the general rule that "property of any kind may be transferred". One of such exception is a right to future maintenance in whatsoever manner arising, secured or determined, cannot be transferred. The right of a Hindu widow to maintenance is a personal right which cannot be transferred.
Answer 6(b)(li)
7 Though the right to future maintenance cannot be transferred, but under the law, the arrears of past maintenance can be transferred.
Such transfer is not permissible. This is another exception to Section 6 of the Transfer of Property Act. An easement cannot be transferred apart from the dominant heritage.
Answer 6(c)
The transfer is not valid. Under Section 6 of the Transfer of Property Act, the chance of an heir apparent or spes successions cannot be transferred.
Question 7
\
(a) Society-X consisted of 200 members in total. To dissolve the society, a general meeting of the members was convened. The number of members present in the meeting was 140. Out of 140 members, 115 members agreed to dissolve the society. Discuss with reference to the provisions of the Societies Registration Act, 1860 whether the dissolution of the society would be valid. (5 marks)
(b) Amar agrees in writing to sell a horse to Bijoyfor Rs.2,000 or Rs.3,000. Can
evidence be given to show which price was to be given ? (5 marks)
(c) An information is given to the in-charge of police station against Rahul, a small trader, that he has committed a non-cognizable offence of fraudulent use of false weights and measures. The in-charge of police station, after entering the substance of the information in the Daily Diary kept at the police station, commences investigation without the order of the magistrate. Rahul objects to this action of the police. Will the objection of Rahul be sustained ? (6 marks)
Answer 7(a)
The dissolution is not valid. As per Section 13 of the Societies Registration Act, 1860, the concurrence of three fifths of the total members of the society is required for dissolution of the society.
Section 13 stipulates that to any number not less than three fifths of the members of any society may determine that it shall be dissolved and thereupon it shall be dissolved forthwith....
Provided that no society shall be dissolved unless three fifths of the members shall have expressed a wish for such dissolution by their votes delivered in person, or by proxy, at a geneal meeting for the purpose
Answer 7(b)
As per Section 93 of the Indian Evidence Act, 1872 when the language used in the document-is, on its face, defective or ambiguous, evidence may not be given of facts which would show its meaning or supply its defects. Therefore, in the present problem, evidence cannot be given to show which price was to be given.
Answer 7(c)
The objection of Rahul will be sustained. Under Section 155(2) of Code of Criminal Procedure, 1973, a police office cannot investigate a non-cognizable offence without the previous order of the Magistrate. Section 155(2) lays down that "no police officer shall investigate a non-cognizable case without the order of Magistrate having power to try such case or commit'the case for trial." In this problem the police officer investigates without the order of Magistrate. Section 155(2) of the Code of .Criminal Procedure is a mandatory provision and non-compliance of this mandatory provision by the police may also be considered as violative of Article 21 of the Constitution. This was the opinion of Calcutta High Court in Subodh Singh v. Stete/I974f Cr.L.J 185 (Cal. HC). In view of this, Rahul's objection is legal and will be sustained.
Question 8
(a) A suit was instituted by the plaintiff company alleging infringement by the defendant
company by using trade name of biscuits and selling the same in the packing of
. identical design, etc., as that of plaintiff company. A subsequent suit was
instituted in a different court by the defendant company against the plaintiff
company with the similar allegations. Discuss the validity of the subsequent
suit. (6 marks)
(b) Explain the doctrine of constructive res judicata. (5 marks)
(c) Anurag intentionally and falsely leads Bhanu to believe that certain land belongs
to Anurag, and thereby induces Bhanu to buy and pay for it. The land afterwards
becomes the property of Anurag. Anurag seeks to set aside the sale on the
ground that at the time of sale he had no title. Decide. (5 marks)
Answer 8(a)
As per Section 10 of Civil Procedure Code, no Court shall proceed with the trial of any suit in which the matter in issue is also directly and substantially in issue in a previously instituted suit between the same parties or between parties under whom they or any of them claim, litigating under the same title, where such suit is pending in the same or any other Court in India having jurisdiction to grant the relief claimed.
The facts of the given problem are based on the case of M/s Wings pharmaceuticals (P)Ltd. andanotherv. M/s Swan pharmaceuticals and others, AIR 1999 Pat.96 where the Court held that subsequent suit should be stayed as simultaneous trial of the suits in different Courts might result in conflicting decisions as issue involved in two suits was totally identical. .
Answer 8(b)
Explanation IV appended to Section 11 of the Code of Civil Procedure contemplates the doctrine of constructive res judicata. As per the explanation, any matter, which might and ought to have been made grounds of defence or attack in such former suit, shall be deemed to have been a matter directly and substantially in issue in such suit. This is called constructive res-judicata. This doctrine is based on the following grounds of public policy:
(i) There should be an end to ligitation;
(ii) The parties to a suit should not be harassed to agitate the same issues, or matters already decided between them;
(Hi) The time of court should not be wasted over the matters that ought to have been
: and should have been decided in the former suit between the parties; -
(iv) It is a rule of convenience and not a rule of absolute justice.
Answer 8(c)
Anurag cannot be allowed to prove his want of title. Here doctrine of estoppel will apply.
The doctrine of estoppel as contemplated under Section 115 of the Indian Evidence Act, 1872 says that when one person has, by his declaration, act or omission intentionally caused or permitted another person to believe a thing to be true and to act upon such belief, neither he nor his representative shall be allowed, in any suit or proceeding between himself and such person or his representative, to deny the truth of that thing. While Article 301 imposes a general limitation on legislative power to secure that trade, commerce and intercourse shall be free throughout the territory of India, Article 302 empowers Parliament to impose reasonable general restrictions upon that freedom. The restrictions which will attract Article 301 must be those which directly and immediately restrict or impede the free flow or movement of trade. Only those taxes which directly and immediately restrict trade would fall within the purview of Article 301. Article 303(1) prohibits Parliament from giving preference from one State to another and a similar restriction is placed on the States. Article 304 (a) places imported goods from sister States on par with similar goods manufactured r produced within the State.
The object of Part XIII is not to make inter-state trade commerce and intercourse absolutely free. Reasonable restrictions in public interest are permissible. Regulator or compensatory measures cannot be regarded as violative of the freedom unless they are shown to be colourable measures to restrict the free flow of trade, commerce and intercourse.
Article 301 applies not only to inter-state trade but also to intra-state trade, commerce and intercourse. But it will not cover foreign trade or the trade beyond the territory of India. Article 301 is couched in terms of the widest amplitude. Trade, commerce and intercourse are thereby declared free and unhampered throughout the territory of India. All restrictions, which directly and immediately affect the movement of trade, are declared by Article 301 to be ineffective.
The object of the freedom declared by this Article is to ensure the economic unity of India which should not be hampered by internal barriers. In this regard, the Supreme Court laid down in Atiabari Tea Co. Ltd. v. State of Orissa, AIR 1951 S. 232 that the laws which "directly and immediately" restrict or impede the freedom of trade and commerce shall be treated unconstitutional. The word "intercourse" in this Article has been used in a very wider sense covering not only "trade and commerce but also movement and dealings even of a non-commercial nature.
Question 2
Explain the role and scope of the following in the interpretation of statutes:
(i) Mischief rule
(ii) Parimateria
(Hi) Preamble
(iv) Schedules. (4 marks each)
, Answer 2(i)
' The Mischief Rule or Heydon's rule
In 1584, in Heydon's Case, it was resolved by the Barons of the Exchequer "that for the sure and true interpretation of all statutes in general (be they penal or beneficial, restrictive or enlarging of the Common Law) four things are to be discerned and considered: (1) What was the Common Law before the making of the Act; (2) What was the mischief and defect for which the Common Law did not provide; (3) What remedy the parliament had resolved and appointed to cure the disease of the Commonwealth; and (4) The true reason of the remedy.
The rule laid down in Heydon's Case which has "now attained the status of a classic provides that the Courts must adopt that construction which "shall suppress the mischief and advance the remedy". But this does not mean that a construction should be adopted which ignores the plain natural meaning of the words or disregard the context and the collection in which they occur. (Umed Singh v. Raj Singh, AIR 1975 SC 43)
In Sodra Devi's Case (AIR 1957 SC 832), the Supreme Court observed that the rule in Heydon's Case is applicable only when the words in question are ambiguous and are reasonably capable of more than one meaning.
Answer 2(ii) Par/ - Materla
In Pan materia means upon the same matter or subject. The statutes in pari-materia are those relating to the same person or having a common purpose. The meaning of the phrase 'pan mafer/a'has been explained in an American case as "Statutes are in pari materia which relate to the same person or thing, or to the same class of persons or things
It is a well-accepted legislative practice to incorporate by reference, if the legislature so chooses, the provisions of some other Act in so far as they are relevant for the purposes of and in furtherance of the scheme and subjects of the Act. The repealed Act may be referred in pari-materia on a question of construction if they are bearing the same principle. Similarly, the regulations themselves cannot alter or vary the meaning of the words of an Act, but they may be looked at as being an interpretation placed by the appropriate Government department on the words of the statute.
Answer 2(iii) Preamble
Preamble is one of the internal aids in interpretation of the statutes. The Madras High court has observed that the preamble of a statute is not part thereof, but contains generally the motives or inducement thereof [Mills v. Wilkins, (1794) 6 Mad. 62]. It was also observed that, "the preamble is to be considered, for it is the key to open the meaning of the makers of the Act, and the mischief it was intended to remedy". The present legal practice is quite clear that where the enacting part is explicit and unambiguous, the preamble has nothing to do for the meaning or interpretation of the statute in question. But where the part of the statute is ambiguous the preamble can be taken into consideration for explaining the subject matter.
In Kamalpura Kochunni v. State of Madras, AIR 1960 SC 1080, the Supreme Court highlighted that the preamble may be legitimately consulted in case any ambiguity arises in the construction of an Act and it may be useful to fix the meaning of words used so as to keep the effect of the statute within its real scope.
Answer 2(iv) Schedules
The schedules form a part of the statute and must be read together with it for all purposes of construction. The Allahabad High Court in Ramchand Textile v. Sates Tax Officer, AIR 1961 All. 24, has held that, if there is any appearance of inconsistency
between the schedule and the enactment, the enactment shall prevail. If the enacting part and the schedule cannot be made to correspond, the latter must yield to the former.
There are two principles or rules of interpretation, which ought to be applied to the combination of an Act and its schedule. If the Act says that the schedule is to be used for a certain purpose and the heading of the part of the schedule in question shows that it is prima facie at any rate devoted to that purpose, then the Act and the schedule must be read as if the schedule were operating for that purpose only. If the language of a clause in the schedule can be satisfied without extending it beyond for a certain purpose, in spite of that, if the language of the schedule has in its words and terms that go clearly outside the purpose, the effect must be given by them and they must not be treated as limited by the heading of the part of the schedule or by the purpose mentioned in the Act for which the schedule is prima facie to be used.
Question 3
(a) What is meant by 'preventive relief under the Specific Relief Act, 1963 ? How
is it granted ? Discuss. (8 marks)
(b) Discuss the concept of spes successionis under the Transfer of Property Act,
1882. (4 marks)
(c) Explain the term 'computer network' under the Information Technology Act,
2000. (4 marks)
Answer 3(a)
The Specific Relief Act, 1963 under Part III (Sections 36 and 37) provides for preventive relief which means preventing a party from doing that which he is under an obligation not to do. It is granted at the discretion of the court by way of an injunction temporary or perpetual. Injunction is the most ordinary form of preventive relief. It is known as a "judicial process by which one, who has invaded or is threatening to invade the rights (legal or equitable) of another is restrained from continuing or commencing such wrongful act. Lord Halsbury defines injunction as "a judicial process whereby a party is ordered to refrain from doing or to do a particular act or thing".
Characteristics of an injunction
An injunction has three characteristic features;
(a) It is a judicial process.
(b) The object of this judicial process is to restrain or to prevent.
(c) The act restrained or prevented is a wrongful act. An injunction acts or operates always in personam.
An injunction may be -
Temporary, interlocutory, or ad interim
Perpetual or permanent
Mandatory
Exparte
Temporary and Perpetual injunction: The temporary injunctions are granted under Order 39 Rules 1 -2 of the Civil Procedure Code while perpetual injunctions are dealt within Section 38 of the Specific Relief Act.
As per Section 37(1) temporary injunctions are such as are to continue until a specified time, or until the further order of the Court and they may be granted at any stage of a suit, and are regulated by the Code of Civil Procedure, 1908.
Section 37(2) states that a perpetual injunction can only be granted by the decree made at the hearing and upon the merits of the suit; the defendant is thereby perpetually enjoined from the assertion of right, or from the commission of an act, which would be contrary to the rights of the plaintiff.
The temporary injunction may be dissolved at any time under Civil Procedure Code by the defendant showing specific cause to the satisfaction of the Court against the order granting the injunction, or it automatically terminates with the disposal of the suit. The general principles governing temporary and permanent injunctions are mainly the same except that a temporary injunction is granted before the plaintiff establishes his case at the trial.
Mandatory injunction: Sometimes, to prevent the breach of an obligation, it may be necessary to compel the performance of certain acts. If the Court is capable of enforcing the performance of those acts, it may in its discretion grant an injunction -
(i) to prevent the breach complained of, and also (ii) to compel performance of the requisite acts.
The injunction granted in the above cases is a mandatory injunction. It is in its nature both restitutory (restoration of a former state or position) and prohibitory. For example, A builds a house with eaves projecting over B's land, B may sue for an injunction to pull down so much of the eaves as so projecting over his land.
Exparte Injuction: Sometimes the circumstances in a case may be such that any delay in the grant of even a temporary injunction to the plaintiff would substantially harm his interest and may result in a situation which cannot be later undone. In such a case, if the Court is convinced of the urgency of the matter, it may grant an injunction even without hearing the other party. Such an injunction is called an exparte injunction. It is granted normally for a short period. It continues till the Court hears the other party against its continuation. After hearing the other party, the Court may either discharge it or extend it till the final disposal of the case.
Answer 3(b) Spes successionis
The technical expression for the chance of an heir apparent succeeding to an estate is called spes successionis. It means a mere chance or hope of succeeding to a property. This cannot be transferred under the Transfer of Property Act, 1882. This concept is applicable in case of gift, will and all sorts of transfers under Personal Laws. Spes successionis includes :
The chance of an heir apparent succeeding to an estate: This means an interest which has not arisen but which may arise in future. It is in anticipation or hope of succeeding to the estate of a deceased person. Such a chance is not property and as such cannot be transferred. As for e.g., A is the owner of the property and B is his son. B is the heir of A. During the lifetime of his father A, B has only a hope expectancy that he will inherit the property of his father. This type of property which B hopes to get after the death of the father cannot be transferred, during the lifetime of A.
The chance of a relation obtaining a legacy on the death of a kinsman: This is also a mere possibility and cannot be transferred.
Any other mere possibility of a like nature: The expression "any other mere possibility of a like nature" must be construed as a possibility belonging to the same category as a chance of an heir apparent or the chance of a relation obtaining a legacy.
Answer 3(c) Computer Network
It is an interconnection of one or more computers through various modes. As per Section 2(1 ){j) of the Information Technology Act, 2000 "computer network" means the interconnection of one or more computers through -
(i) the use of satellite, microwave, terrestrial line or other communication media; and
(ii) terminals or a complex consisting of two or more interconnected computers, whether or not the interconnection is continuously maintained.
Question 4
(a) Discuss the doctrine of stay of suit under the Code of Civil Procedure, 1908.
How far is it different with that of res judicata ? Explain. (8 marks)
(b) Explain the term 'offence' under the Code of Criminal Procedure, 1973 ?
(4 marks)
(c) Discuss the doctrine ofcypres in relation to charitable trusts in India. (4 marks) Answer 4(a) Stay of Suit
Section 10 of the Civil Procedure Code, 1908 provides that no court shall proceed with the trial of any suit in which the matter in issue is also directly and substantially in issue in a previously instituted suit between the same parties or between parties under whom they or any of them claim, litigating under the same title, where such suit is pending in the same or any other Court (in India) having jurisdiction to grant the relief claimed, or in any Court beyond the limits of India established or continued by the Central Government and having like jurisdiction, or before the Supreme Court. The principal laid down in Section 10 is referred as the rule of res subjudice i.e., a thing or a matter which is under judicial consideration.
Essential conditions for stay of suits-
(i) There must be two suits instituted at different times;
(ii) The matter in issue in the later suit should be directly and substantially in issue in the earlier suit;
(b)
(a)
(b)
(iii) Such suit should be between the same parties;
(iv) Such earlier suit is still pending either in the same Court or in any other competent Court but not before a foreign Court.
If these conditions exist, Section 10 will be applicable and the subsequent suit will be stayed.
Difference between res judicata and stay of suit (res subjudice):
The doctrine of resjudicata envisaged under Section 11 of the Civil Procedure Code bars or restraints the repetition of litigation of the same issues. Once the suit is decided by court it cannot be filed subsequently between the same parties on same cause of action. Section 11 says that once a res is judicata, it shall not be adjudged again.
— The rule of res subjudice relates to a matter which is pending judicial enquiry while res judicata relates to a matter adjudicated upon or a matter on which judgement has been pronounced.
— Res subjudice bars the trial of a suit in which the matter directly or substantially is pending adjudication in a previous suit, whereas rule of resjudicata bars the trial of a suit of an issue in which the matter directly and substantially in issue has already been adjudicated upon in a previous suit between the same parties under the same title.
— Resjudicata arises out of considerations of public policy viz., that there should be an end to litigation on the same matter.
Answer4(b) Offence
The term 'offence' has been defined under section 2(n) of the Code of Criminal Procedure, 1973 to mean any act or omission made punishable by any law for the time being in force and includes any act in respect of which a complaint may be made under Section 20 of the Cattle-trespass Act, 1871. An elaborate definition of the term "offence" has been given under Section 40 of the I PC which states that offence denotes a thing made punishable by the Code. Mens rea or guilty mind is an essential ingredient in every offence.
Answer 4(c) Doctrine of Cypres
Cypres means near to it. The doctrine of cypres applies only to charitable trusts. The reason is that a public charity is perpetual and the rule against perpetuity does not apply to it. One of the cardinal rules governing execution of charitable trusts is that the intention of the donor must be observed. This principle has been evolved as an auxiliary to this rule and is never allowed to defeat it. If the charity can be administered according to the directions of the founder, the law requires that it should be so administered. The Courts will not allow any departure from such directions on the grounds of expediency. In Halsbury's Law of England, (3rd Ed. Vol. 4, P. 317), it is stated:
IGCL-^June2005
"Where a clear charitable intention is expressed, it will not be permitted to fail because the mode, if specified, cannot be executed, but the law will substitute another mode cy pres, that is, as near as possible to the mode specified by the 'donor'.
In Rajabathar Mudaliar v. M.S. Vadivelu Mudaliar, (1970) 1 SCC12, the Supreme Court observed. 'The cy pres doctrine applies where a charitable trust is initially impossible or impracticable and the Court applies the property cy pres, viz., to some other charities as nearly as possible, resembling the original trust" However, the above doctrine is subject to the doctrine of severability, i.e., the doctrine of cy pres, applies if the nature of the charitable object is general and not specific.
Question 5
(a) Enumerate the salient features of an 'arbitrationagreement' under the Arbitration
and Conciliation Act, 1996. (6 marks)
(b) Discuss the provisions relating to valuation of instruments chargeable with ad
valorem duty in cases where the value of the subject matter is indeterminate
under the Indian Stamp Act, 1899. (6 marks)
(c) Explain the terms 'computer contaminant' and 'computer virus'as defined under
the Information Technology Act, 2000. (4 marks)
Answer 5(a) Arbitration Agreement
Under Section 2(1 )(b) of the Arbitration and Conciliation Act, 1996 "arbitration agreement" means an agreement referred to in Section 7. Under Section 7 of the Arbitration and Conciliation Act, the "arbitration agreement" has been defined to mean an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship whether contractual or not. Section 7(2) of the said Act says that an arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. It has been most emphatically stated under Section 7(3) that an arbitration agreement shall be in writing. An oral arbitration agreement is not recognized as an arbitration agreement. It is binding upon the parties unless it is influenced by fraud or coercion or undue influence, etc.
The Act provides in Section 7(4) that an arbitration agreement is in writing if it is
contained in —
(a) a document signed by the parties, or
(b) an exchange of letters, telex, telegrams or other means of telecommunication, which provide a record of the agreement, or
(c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.
Thus, arbitration agreement stands on the same footing as any other agreement. Further, Section 7(5) states that the reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.
Answer 5(b)
Section 26 deals with cases where the value of the subject matter is indeterminate. The object of this section is to protect the revenue, in cases where an instrument is chargeable with ad valorem duty, but such duty cannot be ascertained by reason of the fact that the amount of value of the subject matter of the instrument cannot be determined at the time of the execution of the instrument. This object is sought to be achieved by providing, that the executant can value the instrument as he pleases, but he shall not be entitled to recover under such document any amount in excess of the amount for which the stamp duty is sufficient.
Section 26 applies only when the instrument is chargeable with ad valorem duty. Section 26 has two provisos. Under the first proviso, in the case of mining lease, the stamp duty is to be calculated on the estimated value of the royalty or the share of the produce, as the case may be. If the lease is granted by the Government, stamp duty has to be paid on the amount or value of the royalty as determined by the Collector of Stamps. And, if subsequently any excess is claimed, proper penalty under section 35 may be paid and the claim fully recovered. But when the lease has been granted by a person other than the Government, the valuation has to be at Rs. 20.000/- a year.
The second proviso to Section 26 is intended to cover the case where an instrument has, by accident or mistake, been insufficiently stamped. The deficiency is made up in proceedings under Section 31 or 41 and the Collector having certified the amount paid, it shall be deemed to be the stamp actually used at the date of execution. By reason of this proviso, the amount claimable under the instruments would be the amount for which the duty as certified by the Collector had been paid and not the amount for which duty was originally paid.
Answer 5(c)
Computer Contaminant and Computer Virus
The Explanation appended to Section 43 of the Information Technology Act, 2000 defines the terms "computer contaminant" and "computer virus". As per the Explanation "computer contaminant" means any set of computer instructions that are designed -
(a) to modify, destroy, record, transmit data or programme residing within a computer, computer system or computer network; or
(b) by any means to usurp the normal operation of the computer, computer system or computer network.
"Computer virus" means any computer instruction, information, data or programme that destroys, damages, degrades or adversely affects the performance of a computer resource or attaches itself to another computer resource and operates when a programme, data, or instruction is executed or some other event takes place in that computer resource.
Question 6
(a) An organisation of a business community staged processions, demonstrations and agitations before the secretariat of the State Government on busy roads to press for their demands. These caused traffic jams. The State Government imposed a ban on demonstrations and marches on busy roads on working days.
The organisation alleged that the ban was an infringement of the fundamental
right of freedom as guaranteed under the Constitution of India and filed a petition
in the High Court. Decide. (6 marks)
(b) Ajoy transfers his house under a written contract of sale to Bijoy for Rs.10,00,000.
Bijpy pays Rs. 3,00,000 to Ajoy and takes possession of one of the four rooms
of'the house. No registration of documents of the contract of sale is made.
After six months of the said contract, Ajoy sells the same house to Chander for
Rs .20,00,000. Chander has no knowledge of the previous transaction between
Ajoy and Eijoy. When Chander claims the house, Bijoy takes protection of
part-performance of the contract. Will Bijoy succeed ? (5 marks)
(c) Abhay downloaded secret data from the computer network of a foreign company
engaged in the manufacture of aircrafts. He was prosecuted and fined Rs. 1
lakh by the adjudicating officer under section 43 of the Information Technology
Act, 2000. Is any remedy available to Abhay ? Advise. (5 marks)
Answer 6(a)
The imposition of ban on demonstrations and marches on busy roads on working days in public Interest to protect the fundamental rights of majority citizens is perfectly valid. No fundamental right of others is violated by the reasonable ban. Apart from traffic jams the demonstrations are creating huge loss to the public. (See Kerala Vyapari Vyavsayi Exopana Samiti v. Sfafe of Kerala and Others, AIR 2004 Ker. 302; Bombay Hawkers Union v. BMC, AIR 1985 SC 1206.)
Answer 6(b)
Bijoy will not succeed. Although all the conditions of Section 53 A of the Transfer of Property Act, 1882 are fulfilled in favour of Ajoy, but because of the proviso of this section which says that" nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof", the rule of part performance shall not be applicable in favour of first transferee. The second transferee shall be protected under Section 53A. The doctrine of part performance embodied in Section 53 A of the Transfer of Property Act will not affect the rights of a subsequent transferee for consideration without notice of the earlier contract and of its being partly performed. Answer 6(c)
Abhay can file an appeal against the order of the Adjudicating Officer under Section 57 of the Information Technology Act, 2000. Section 57(1) of the Information Technology Act, 2000 provides for the right to appeal to any person who is aggrieved by an order of the Controller or Adjudicating Officer. It says "any person aggrieved by an order made by Controller or Adjudicating Officer under this Act may prefer an appeal to Cyber Appellate Tribunal having jurisdiction in the matter." The appeal is to be filed within a period of 45 days from the date of the receipt of copy of the order by the aggrieved person.
Question 7
(a) Aman is entitled to a picture by a dead painter and a pair of rare Chinese vases. Bhuvan has possession of them. The articles are of special character to bear unascertainable market value. Can Bhuvan be compelled to deliver these articles
to Aman ? Give reasons. (6 marks) Juestion 8
(b)
A charitable society registered under the Societies Registration Act, 1860
convened a general meeting of the members to abridge its charitable purpose.
At the meeting, the secretary of the society placed before the members a written
proposal of the governing body and a special resolution for the abridgement of
purpose of the society. Out of 100 members, 90 members were present in the
meeting. The resolution was put to vote and 60 members voted in its favour.
Can the society effect abridgement of the purpose on the strength of the
resolution? Decide. (5 marks)
(c)
Rohit executes a sale deed of a house in favour of Prem. The house is situated at NOIDA, but the transferor and transferee want the sale deed to be registered at Lucknow, which is the capital of the State. Can they do so ? (5 marks)
Answer 7(a)
Bhuvan may be compelled to deliver the picture and the pair of rare Chinese vases to Aman, for there is no standard for ascertaining the actual damage which would be caused by its non-performance.
Section 10 of the Specific relief Act, 1963 dealing with contracts which can be treated valid in s
specifically enforced provides under clause (a) that the specific performance of any vnswer 8(a)
contract may in the discretion of the court be enforced when there exists no standard for
ascertaining the actual damage caused by non-performance of the act agreed to be done. The statement may r
lirender is not being joir Answer 7(b)
In the case of joint
As per Section 12 of the Societies Registration Act, 1860 the governing body is ga,nst Anand Section
empowered to abridge the purpose or purposes under the Act. For this purpose, the O.accused says:
governing body shall convene a special meeting to consider the proposal and shall
submit the proposition to the members in a written or printed report within 10 days before When more person
the special meeting is convened. The proposition must be agreed to by the votes of onfession made by or
three fifth of the members present in person or by proxy. Then a second special meeting erson is proved, the (
will be convened at an interval of one month after the first meeting. In the second uch other person as w
meeting, the agreed proposition must be confirmed by the votes of three fifths of the
members present there. answer 8(b)
In the given problem, the procedure prescribed in Section 12 of the said Act has not been complied with. Therefore, the charitable society cannot effect abridgement of the purpose on the strength of the resolution.
Answer 7(c)
As per Section 28 of Registration Act, 1908 every document mentioned in Section 17(1) clauses (a)(b)(c)(d) and (e), Section 17(2) insofar as such document affects immovable property and Section 18 clauses (a) (b) (c) and (cc) shall be presented for registration in the office of a Sub-Registrar within whose sub-district the while or some portion of the property is situate.
Therefore, in the present problem, the sale deed shall be registered at Noida where the property is situated.
Question 8
(a) Anand is on his trial for the murder of Chanchal. There is evidence to show that
Chanchal was murdered by Anand and Birender and that Birender said, "Anand
and I murdered Chanchal." Can the court take inio consideration this statement
against Anand ? Will your reply be different in case there is a joint trial against
Anand and Birender ? Give reasons. (6 marks)
(b) Amrit executed a gift deed in his life time in favour of Bhanu. The gift deed was
not registered during the life time of Amrit. Bhanu, after death of Amrit, presented
the gift deed before the Registrar for its registration. Rakshit, brother of Amrit
raised an objection for the registration of gift deed on the ground of fake signatures
of Amrit. But the witnesses to the gift deed contended that the signatures were
made before them by the donor at the time of execution of gift deed. Whether
the gift deed will be treated valid for registration under the Registration Act,
1908? - (5 marks)
(c) Sanjay instituted a suit against Manoj beyond the prescribed period of limitation.
Manoj did not raise the objection that the suit was beyond the period of limitation.
The civil court allowed the suit for a hearing and decreed. Would the decree be
treated valid in such suit ? Give reasons. (5 marks)
Answer 8(a)
The statement may not be taken into consideration by the Court against Anand, as Birender is not being jointly tried.
In the case of joint trial, the Court may consider the effect of this confession as against Anand. Section 30 of the Indian Evidence Act dealing with the confession of a co-accused says:
When more persons than one are being tried jointly for the same offence, and a confession made by one of such persons affecting himself and some other of such person is proved, the Court may take into consideration such confession as against such other person as well as against the person who makes such confession.
Answer 8(b)
If the donor dies before registration, the document may be presented for registration after his death and if registered, it will have the same effect as registration in Ns ifetime. The Privy Council in Kalyana Sundram v. Karuppa, AIR 1927 PC 42, has held that the registration of gift deed of any immovable property shall operate from the date of execution of gift deed. When the instrument of gift has been handed over by the donor to donee and accepted by him, the former has done every thing in his power to complete the donation and to make it effective. If it has been presented before the Registrar for registration within the prescribed time period, the Registrar must register it. Neither death nor express revocation by the donor is ground for refusing registration provided other conditions are complied with.
In view of the above mentioned decision of the Privy Council, here the gift deed will be treated valid for registration and the registration of deed will be treated operative from he date of execution of deed.
IGCL-June2005
Question 8
(a) Anand is on his trial for the murder of Chanchal. There is evidence to show that
Chanchal was murdered by Anand and Birender and that Birender said, "Anand
and I murdered Chanchal." Can the court take inio consideration this statement
against Anand ? Will your reply be different in case there is a joint trial against
Anand and Birender ? Give reasons. (6 marks)
(b) Amrit executed a gift deed in his life time in favour of Bhanu. The gift deed was
not registered during the life time of Amrit. Bhanu, after death of Amrit, presented
the gift deed before the Registrar for its registration. Rakshit, brother of Amrit
raised an objection for the registration of gift deed on the ground of fake signatures
of Amrit. But the witnesses to the gift deed contended that the signatures were
made before them by the donor at the time of execution of gift deed. Whether
the gift deed will be treated valid for registration under the Registration Act,
1908? - (5 marks)
(c) Sanjay instituted a suit against Manoj beyond the prescribed period of limitation.
Manoj did not raise the objection that the suit was beyond the period of limitation.
The civil court allowed the suit for a hearing and decreed. Would the decree be
treated valid in such suit ? Give reasons. (5 marks)
Answer 8(a)
The statement may not be taken into consideration by the Court against Anand, as Birender is not being jointly tried.
In the case of joint trial, the Court may consider the effect of this confession as against Anand. Section 30 of the Indian Evidence Act dealing with the confession of a co-accused says:
When more persons than one are being tried jointly for the same offence, and a confession made by one of such persons affecting himself and some other of such person is proved, the Court may take into consideration such confession as against such other person as well as against the person who makes such confession.
Answer 8(b)
If the donor dies before registration, the document may be presented for registration after his death and if registered, it will have the same effect as registration in Ns ifetime. The Privy Council in Kalyana Sundram v. Karuppa, AIR 1927 PC 42, has held that the registration of gift deed of any immovable property shall operate from the date of execution of gift deed. When the instrument of gift has been handed over by the donor to donee and accepted by him, the former has done every thing in his power to complete the donation and to make it effective. If it has been presented before the Registrar for registration within the prescribed time period, the Registrar must register it. Neither death nor express revocation by the donor is ground for refusing registration provided other conditions are complied with.
In view of the above mentioned decision of the Privy Council, here the gift deed will be treated valid for registration and the registration of deed will be treated operative from he date of execution of deed.
COST&
IGCL-June 2005 14
Answer 8(c)
Section 3 of the Limitation Act, 1963 provides that any suit, appeal, or applicatioP6 a owe
made beyond the prescribed period of limitation shall be dismissed, although limitat«oTE: All working notes si
has not been set up as a defence. It is the duty of the Court not to proceed with su
suits irrespective of the fact whether the plea of limitation has been raised or not by II
defendant. Section 3 of the Limitation Act is mandatory. The Court can suo mottotal (Answe
note of question of limitation. The question whether a suit is barred by limitation shoi a»
be decided on the facts as they stood on the date of presentation of the plaint. ~^uestion 1
effect of Section 3 is not to deprive the Court of its jurisdiction. Therefore the decision
a Court allowing a suit which has been instituted after the prescribed period of limitati (a) What is (he signif
is not vitiated for want of jurisdiction. A decree passed in a time barred suit is nol (ty Zenith Ltd. gave
nullity. Hence the decree is valid in this case. 9% debentures I for the redemptii (i) 6% Cumula and
(ii) W%Deber The holders of F debenturehold Pass (he nee transactions. (c) Pltd. purcha: shares. Acc< full satisfactic books of P L (i) shares s (ii) shares I (d) What are th
(e) State the re Vnswer1(a)
Accounting St eporting of gener 'arious users of s lublic at large. Th he progress and lountries. Accou heir clients by pi ask of preparinc ill the users for irepared in ace \ccounting star inancial statem
Answer 8(c)
Section 3 of the Limitation Act, 1963 provides that any suit, appeal, or applicatioi
made beyond the prescribed period of limitation shall be dismissed, although limitatoiE : A
has not been set up as a defence. It is the duty of the Court not to proceed with su
suits irrespective of the fact whether the plea of limitation has been raised or not by I
defendant. Section 3 of the Limitation Act is mandatory. The Court can suo motto\&
note of question of limitation. The question whether a suit is barred by limitation shoi
be decided on the facts as they stood on the date of presentation of the plaint. IuestjOr
effect of Section 3 is not to deprive the Court of its jurisdiction. Therefore the decision
a Court allowing a suit which has been instituted after the prescribed period of limitati (a; V
is not vitiated for want of jurisdiction. A decree passed in a time barred suit is nd (b) 2
nullity. Hence the decree is valid in this case. independent public office or franchise or liberty is asked to show by what right he claims it, so that the title to the office, franchise or liberty may be settled and any unauthorized person ousted.
Conditions for the grant of quo warranto : A writ of quo warranto is issued if the following conditions are proved:
(i) the office in question is public office;
(ii) the office is substantive in nature;
(iii) the office is created by a statute or by the Constitution itself; and
(iv) the office is being held without any authority and illegally by the occupant
Quo warranto will also be issued when a person validiy occupies office but acquires a disqualification later on. The fundamental basis of the proceeding of quo warranto is that the public has an interest to see that a lawful claimant does not usurp a public office. Public office is one which is created by the Constitution or a statute and the duties must be such in which public is interested. The office of the Speaker of the Legislative Assembly or Advocate General or of a High Court Judge have been held to be public offices in which public is interested.
Like any other extraordinary remedy, quo warranto is a discretionary remedy which the court may grant or refuse.
Questions
(a) What are the contracts which cannot be specifically enforced ? (6 marks)
(b) Discuss Heydon 's rule of interpretation of statutes. (5 marks)
(c) Mention the grounds under which an arbitral award may be challenged before the court under the provisions of the Arbitration and Conciliation Act, 1996.
(5 marks)
Answer 2(a)
Contracts Which Cannot be Specifically Enforced
As per Section 14 of the Specific Relief Act, 1963 following contracts cannot be specifically enforced.
(a) A contract for the non-performance of which compensation in money is an adequate relief;
(b) A contract which runs into such minute and numerous details that the court cannot enforce specific performance of its material terms or which is dependant upon the personal qualification or volition of the parties or a contract from its nature is such that the court cannot enforce specific performance;
(c) A contract which is in its nature determinable;
(d) A contract, the performance of which involves the performance of a continuous duty which the court cannot supervise.
Save as provided by the Arbitration and Conciliation Act, 1996, no contract to refer present or future difference to arbitration shall be specifically enforced; but if any person
who has made such a contract (other than an arbitration agreement to which the provisions of the said Act apply) and has refused to perform it, sues in respect of any subject which he has contracted to refer, the existence of such a contract shall bar the suit.
However, there are certain exceptions to this rule and these exceptions have been stipulated under Section 14(3) of the Specific Relief Act.
Answer 2(b)
Heydon's Rule of Interpretation
The mischief rule of interpretation originated in Heydon's case, 76 ER 637 in 1584. In this case, the Barons of the Exchequer resolved that for the sure and true interpretation of all statistics in general, (be they penal or beneficial, restrictive or enlarging of the Common Law) four things are to be discerned and considered:
(1) What was the Common Law before the making of the Act;
(2) What was the mischief and defect for which the Common Law did not provide;
(3) What remedy the Parliament had resolved and appointed to cure the disease of the Commonwealth; and
(4) The true reason of the remedy.
When the material words are capable of bearing two or more constructions, the most firmly established rule for construction of such words is the rule laid down in Heydon's case which has "now attained the status of a classic". The rule directs that the Courts must adopt that construction which "shall suppress the mischief and advance the remedy". But this does not mean that a construction should be adopted which ignores the plain natural meaning of the words or disregard the context and the collection in which they occur. (See Umed Singh v. Raj Singh, A.I.R. 1975 S.C. 43) The Supreme Court has applied this rule in many of its decisions.
Answer 2(c)
As per Section 34(2) of the Arbitration and Conciliation Act, 1996 an arbitral award
may be challenged on the following grounds: (i) Incapacity of a party, (ii) Invalidity of the arbitration agreement, (iii) Party applying was not given proper notice of the appointment of arbitrator or of
the arbitral proceedings, (iv) Award not in accordance with the terms of submission to arbitration in regard to
the dispute.
the dispute, (v) Arbitral Tribunal not properly constituted or the procedure adopted not in
accordance with the agreement, (vi) The subject matter of dispute is not capable of settlement by arbitration under
the law. (vii)
Award is in conflict with the public policy.
-->-»-»*<-vr( nnt in
Section 34(3) of the Act prescribes the time limit for making an application for setting aside the arbitral award. As per this sub-section, an application cannot be made after three months have elapsed from the date on which the party making that application had received the arbitral award or if a request had been made under Section 33 from the date on which that request had been disposed of by the arbitral tribunal. The period of three months could be extended to a maximum of 30 days by the court if it is satisfied that the applicant was prevented by "sufficient cause" from making the application within the said period.
Question 3
Write notes on any four of the following:
(i) Constructive trust
(ii) Effect of acknowledgement on the period of limitation
(Hi) Doctrine of holding out
(iv) Effect of non-registration of documents required to be compulsorily registered
(v) Network service providers. (4 marks each)
Answer 3(i) Constructive Trust
This is a trust imposed by the law without having regard to the intention of the parties. As for example, when a trustee, agent, executor, partner, director of a company, legal adviser or other person bound in a fiduciary character to protect the interests of another, gains some pecuniary advantage for himself by availing himself of that character, he should hold the advantage so gained for the benefit of such other person. A, a partner, negotiating a transaction on behalf of the firm, clandestinely stipulates with the party with whom he is negotiating for payment to himself of a lakh of rupees. He should hold the amount for the benefit of the partnership.
A person is said to stand in fiduciary relation to another when he has rights and duties which he is bound to exercise for the benefit of that other.
AnswerS(ii)
Effect of Acknowledgement on the Period of Limitation
Section 18 of the Limitation Act, 1963 deals with the effect of acknowledgement of liability in respect of property or right on the period of limitation. As per Section 18 of the Act, following requirements should be present for a valid acknowledgement:
1. There must be an admission or acknowledgement;
2. Such acknowledgement must be in respect of any property or right;
3. It must be made before the expiry of period of limitation; and
4. It must be in writing and signed by the party against whom such property or right is claimed.
If all the above requirements are satisfied, a fresh period of limitation shall be computed from the time when the acknowledgement was signed.
if the said house is in a dilapidated condition and is likely to endanger human
life, health or safety ? (6 marks)
(b) Arpit pledges certain jewels to Rakshit to secure a loan. Rakshit disposes of
jewels before he is entitled to do so. Arpit without having paid or tendered the
amount of the loan, sues Rakshit for possession of the jewels. Is Arpit entitled
to do so ? (5 marks)
(c) Pankaj is the owner of a ship. He takes an insurance policy declaring fraudulently that the ship is sea-worthy. But, the ship is not sea-worthy. Has the insurance company any right against Pankaj ? Give answer with reasons. (5 marks)
Answer 5(a)
In the present problem, the rights and liabilities of the landlord and tenant are governed by the Rent Laws. Therefore, jurisdiction of the court cannot be circumvented and the tenant cannot be evicted by an order under Section 144 of the Code of Criminal Procedure, 1973. Therefore, the orders of the Sub-Divisional Magistrate are null and void. Heirs of the tenant may resist the orders and they will succeed. But if the said house is in dilapidated condition and dangerous human life, health or safety, such order under section 144 of the Code of Criminal Procedure, 1973 is valid.
Answer 5(b)
evoke the digital signature! Arpit is not entitled to the possession of jewels whatever right he may have to
secure their safe custody in view of the provisions of Section 7 of the Specific Relief
which provides that "for the possession of specific movable property, a person
must be entitled to immediate possession".
; In this case Arpit is not entitled until he pays off the loan. The suit should be dismissed r system was compromised Answer 5(c)
The insurance company may obtain the cancellation of the policy. Section 31 (1) of the Specific Relief Act, 1963 provides that any person against whom a written instrument is void or voidable, and who has reasonable apprehension that such instrument if left outstanding may cause him serious injury, may sue to have it adjudged void or voidable, and the Court may, in its discretion so adjudge it and order it to be delivered up and cancelled.
In the given problem, the subject matter has been fraudulently represented as navigable. The insurance company may obtain the cancellation of the policy from the Court since the relief of cancellation of instruments is founded upon the administration of protective justice.
Question 6
(a) Angad transfers his property worth Rs.50,000 to Bheem and by the same document asks Bheem to transfer his property worth Rs.25,000 to Chander. Bheem refuses to accept the gift of such property. Meanwhile, Angad dies before Bheem exercises his option. Decide the rights of Chander. (6 marks)
(b) Ajeet resides at Bhopal, Baljeet at Indore and Charanjeet at Lucknow. Ajeet, Baljeet and Charanjeet being together at Kolkata, Baljeet and Charanjeet make a joint promissory note payable gn demand and deliver it to Ajeet. Where caQuestion 7 Ajeet sue Baljeet and Charanjeet for the amount of the promissory note ? (5 marks
(c)
Rakesh, a member of a society, is in arrears of subscription which he is bourn
to pay according to rules of the society. Can he be sued as stranger under th
Societies Registration Act, 1860 ? (5 marks
Answer 6(a)
This problem is based on Section 35 of the Transfer of Property Act i.e. doctrine o election.
(b)
The heirs of Angad will have to compensate Chander from Angad's property to thf extent of Rs. 2,500. It may be noted that Bheem's property worth Rs. 2,500 was intendei by A to be transferred to C.
/c\
As per the facts of the given case, Bheem has not accepted the property, so he wil not take Angad's property and the property will revert to Angad. Had Angad been alive it was for him to give some property to Chander. But Angad dies before Bheem coulc exercise his option. In such a situation, the heirs of Angad have to compensate Chandei from Angad's property to the extent of Rs. 2,500.
Answer 6(b)
According to Section 20 of the Code of Civil Procedure, 1908 every suit shall bejhe principle of c
instituted in a court within the local limits of whose jurisdiction
(a) the defendant or each of the defendants where there are more than one, at the
commencement of the suit, actually or voluntarily resides or carries on business
or personally works for gain; or
(b) any of the defendants, where there are more than one, at the commencement ol .
the suit, actually or voluntarily resides or carries on business or personally
works for gain provided that in such case either the leave of the Court is given
or the defendants who do not reside, or carry on business or personally work forcode, 1 973, nc
gain as aforesaid, acquiesce in each institution; or
(c) the cause of action wholly or in part arises. Magistrate
In the present problem, Ajeet can file a suit against Baljeet and Charanjeet at Kolkata^ the cause of action arose at Kolkata where the joint promissory note was delivered by Baljeet and Charanjeet to Ajeet. Ajeet can also file the suit at Indore oi The private Lucknow where the defendants Baljeet and Charanjeet reside but he can do so eitheibecause in view with the consent express or implied of the other defendants or with the prior permissionpolice officer an
of the court. _ t. „
Answer 6(c)
Rakesh may be sued as stranger under Societies Registration Act, 1860. According to Section 10 of the said Act, a member of the society is liable to be sued as strangei where he is in arrear of a subscription which he is bound to pay according to the rules, oi where he has detained any property or destroyed any property of the society.
(3)
Ashish was dismissed from the service. He filed a writ petition in the High Court
for quashing the order of dismissal on the ground that he was not given reasonable
opportunity to refute the allegations made against him and that the action taken
against him was mala fide. The petition was dismissed on merit. Thereafter, he
instituted a suit in the Court of Civil Judge in which he challenged the order of
dismissal on the grounds inter alia that he had been appointed by the Inspector
General of Police and that the Deputy Inspector General of Police is not
competent to dismiss him by virtue of Article 311(1) of the Constitution of India.
Decide. (6 marks)
(b) Manav is tried summarily by the Chief Judicial Magistrate on the charge of committing theft and is sentenced to undergo rigorous imprisonment for six months. Manav wants to challenge this decision. Can he do so ? Discuss.
(5 marks)
(c) An accused person makes a confessional statement to the police officer in the
hearing and presence of a private person. Can the private person give evidence
of the confessional statement made by the accused person so as to be proved
against the accused ? (5 marks)
Answer 7(a)
The subsequent suit after dismissal of writ petition on merit cannot be allowed by the principle of constructive res-judicata. The argument given in this suit was an important plea which was within his knowledge and could well have been taken in the writ petition but he contended himself by raising other pleas that he was not afforded a reasonable opportunity to meet the case against him in the departmental enquiry and that the action taken against him was mala-fide. Therefore, in the subsequent suit he cannot be allowed to take plea that he was dismissed by subordinate authority.
Answer 7(b)
Manav can challenge the decision. According to Section 262(2) of Criminal Procedure Code, 1973, no sentence of imprisonment for a term exceeding three months can be passed in case of conviction in a summary trial. Thus, sentence of six months imprisonment could not have been legally awarded in the given case by the Chief Judicial Magistrate.
Answer 7(c)
The private person cannot give evidence of the confession made by the accused because in view of Section 25 of the Evidence Act, such statement is a confession to a police officer and cannot be proved.
Question 8
(a) One morning, scientists at an atomic research centre found a rude-nuclear
message splashed across their computer screens. Someone had breached the
atomic research centre's advanced security system and sensitive mail. What
offence has been committed in the atomic research centre ? (6 marks)
(b) By an agreement, Anamika transferred to Sipasha a decree of a court by which
she was entitled to possess 500 b/ghas of land. Is it necessary to register such
a transfer under the Registration Act, 1908 ? (5 marks)
(c) Am/t, a trustee of certain land for Mohan, Rohan and Sohan, is authorised to sell the land to Biju for a specified sum. Mohan, Rohan and Sohan being competent to contract, consent that Amit may seil the land to Chirag for a lesser sum. Can Amit sell the land for less than the specified sum ?
(5 marks)
Answer 8(a)
This is act of hacking. Hacking is an offence listed under Chapter 11 of the Information Technology Act, 2000, which deals with offences relating to computers etc. and connected matters.
Regarding hacking, Section 66 of the Information Technology Act provides as under-Hacking with computer system
(i) Whoever, with intent to cause, or knowing that he is likely to cause, wrongful loss or damage to the public or any person, destroys or deletes or alters any information residing in a computer resource or diminishes its value or utility or affects it injuriously by any means, commits hacking.
(ii) Whoever commits hacking, shall be punished with imprisonment upto three years or with fine which may extend upto two lakh rupees or with both.
Answer 8(b)
The transfer is required to be registered under the Registration Act, 1908. Section 17(e) of the Registration Act provides that non testamentary instruments transferring or assigning any decree or order of a court or any award, when such decree, order or award purports to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent of value of one hundred and upwards in immovable property, such decree or order or award is required to be registered.
However, the State Government is empowered to exempt any leases executed which do not exceed five years and the annual rents reserved which do not exceed 50 rupees, from the operation of this sub-section.
Answer 8(c)
Amit may sell the land for less than the specified sum
The given problem is an illustration appended to Section 11 of the Indian Trusts Act, 1882. As per Section 11 of the Indian Trusts Act, the trustee has to fulfill the purpose of the trust and to obey the directions of the author of the trust given at the time of its creation. He can make any modification in these directions only with the consent of all the beneficiaries who are competent to contract. If a beneficiary is incompetent to contract his consent may be given by the Principal Civil Court of original jurisdiction.
INTERMEDIATE EXAMINATION
JUNE 2007
GENERAL AND COMMERCIAL LAWS
Time allowed: 3 hours Maximum marks : 100
NOTE : Answer SIX questions including Question No. 1 which is COMPULSORY.
Question 1
(a) "The Constitution of India is basically federal with certain unitary features".
._ (8 marks)
W)OS,n6l
9QO£.oe(3.o} (b) Discuss briefly whether the law made by the Parliament with respect to a subject
included in the State List and made applicable to the State is valid. (6 marks)
(c) What are the presumptions in the interpretation of statutes when the intention of
legislature is not clear ? . (6 marks)
Answer 1 (a)
The Constitution of India is basically federal in character with many striking unitary features. The Constitution of India possesses all the essential features of a federal system. A federal system has the following essential features:
Dual Government
Distribution of powers between the Union Government and the State Governments.
(iii) Supremacy of the Constitution,
(iv) A written and rigid Constitution,
(v) Authority of the Courts.
The Constitution of India possesses all the above-mentioned features of a federal Government.
At the same time, the following features of the Constitution are indicative of its unitary character:
(i) President of India is the Constitutional Head of the executive of the Union and the appointment of Governors is made by him. They are answerable to the President and hold office till they enjoy pleasure of the President;
(ii) Appointment and transfers of the Chief Justice and the Judges of the High Court by the President;
(iii) Parliament's powers to form States and alteration of boundaries etc. of the existing
States;
\.
(iv) Supremacy of Parliament in legislative matters;
(v) Parliament's power to legislate on subjects of State list under special circumstances;
Answer 4(a)(i)
Rule of ejusdem generis
The expression, 'ejusdem generis' means 'of the same kind'. Normally, general words should be given their natural meaning like all other words unless the context requires otherwise. But when a general word follows specific words of a distinct category, the general word may be given a restricted meaning of the same category. The general expression takes its meaning from the preceding particular expressions because the legislature by using the particular words of a distinct genus has shown its intention to that effect. If the preceding specific words do not belong to a distinct genus, this rule is not applicable.
It is merely a rule of construction to aid the courts to find out the true intention of the Legislature (Jage Ram v. State ofHaryana, AIR 1971 SC1033).To apply the rule, the following conditions must exist:
(1) The statute contains an enumeration by specific words,
(2) The members of the enumeration constitute a class,
(3) The class is not exhausted by the enumeration,
(4) A general term follows the enumeration,
(5) There is a distinct genus which comprises more than one species, and
(6) There is no clearly manifested intent that the general term be given a broader meaning that the doctrine requires. (Thackeray Singh. v. Revenue Minister, AIR 1965J&K102).
The rule of ejusdem generis must be applied with great caution because, it implies a departure from the natural meaning of words, in order to give them a meaning or supposed intention of the legislature. The rule must be controlled by the fundamental rule that statutes must be construed so as to carry out the object sought to be accomplished.The rule requires that specific words are all of one genus, in which case, the general words may be presumed to be restricted to that genus.
Whether the rule of ejusdem generis should be applied or not to a particular provision depends upon the purpose and object of the provision which is intended to be achieved.
Answer 4(a)(ii)
Jurisdiction of Arbitral Tribunals
Jurisdiction in law means the authority to take cognizance and decide matters in respect whereof, the court, tribunal or authority is empowered to perform its functions. Arbitral tribunal under Section16 is empowered to rule on its own jurisdiction, and to consider objections with respect to validity or existence of the arbitration agreement. For that purpose, an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.
A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence. A party cannot however, be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of an arbitrator. A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter is so alleged during the arbitral proceedings. The arbitral tribunal may, in either case, admit a later plea if it considers the delay is justified. Where the arbitral tribunal rejects the plea, it will continue with the proceedings and make an arbitral award. A party aggrieved by such an arbitral award may make an application to the court for setting it aside under Section 34.
Answer 4(a)(iii)
"Digital Signature" under Section 2(p) of the Information Technology Act, 2000 means authentication of any electronic record by a subscriber by means of an electronic method or procedure in accordance with the provisions of Section 3.
Section 3 deals with authentication of electronic records. This section provides the conditions subject to which an electronic record may be authenticated by means of affixing digital signature. The digital signature is treated in two distinct steps. First the electronic record is converted into a message digest by using a mathematical function known as "hash function" which digitally freezes the electronic record thus ensuring the integrity of the content of the intended communication contained in the electronic record. Any tempering with the contents of the electronic record will immediately invalidate the digital signature. Secondly, the identity of the person affixing the digital signature is authenticated through the use of private key which is attached to the message digest and which can be verified by any person who has the public key corresponding to such private key. This will enable any person to verify whether the electronic record is retained intact or has been tampered with. It will also enable a person who has a public key to identify the originator of the electronic message.
Answer 4(b)
(i) A condition which destroys or divests the rights upon the happening of an event is known as condition subsequent.
An award can be corrected by an arbitral tribunal within 30 days from the date of the award.
Hacking with a computer system is a crime punishable with an imprisonment which may extend up to three years.
(iv) No sentence of imprisonment for a term exceeding three months shall be passed in any conviction in summary trials.
Answer 4(c)
(i) (d)
(ii) (d)
(iii) (b)
(iv) (d)
Question 5
(a) Discuss the relationship between 'Fundamental Rights'and 'Directive Principles
of the State Policy'. (6 marks)
(b) What are the circumstances under which the court may, in its discretion, award
damages instead of specific performance of a contract ? (5 marks)
(5 marks)
(c) When can the magistrate take cognizance of an offence ? Answer 5(a)
The Constitution of India seeks to secure to the people "Liberty of thought, expression, belief, faith and worship; Equality of status and of opportunity; and Fraternity assuring the dignity of the individual". With this object, the fundamental rights are envisaged in Part III of the Constitution. These are:
(i) Right to Equality - Articles 1 4 to 1 8;
(ii) Right to Freedom - Articles 1 9 to 22;
(iii) Right against exploitation - Articles 23 and 24;
(iv) Right to Freedom of Religion - Articles 25 to 28;
(v) Guttural and Educational Rights - Articles 29 and 30.
(vi) Right to Constitutional Remedies - Article 32.
Fundamental rights are deemed essential to protect the rights and liberties of people of India against the encroachment of the State power. In Maneka Gandhi v. Union of India, AIR1978 SC 597 the Supreme Court laid down that these rights represent the values cherished by the people of this country, to protect the dignity of the individual, to create conditions for the dignity of the individual and to create conditions for the fullest development of human personality. Fundamental rights can be enforced in the courts of law.
On the other hand the Directive Principles of State Policy contained in Part IV of the Constitution set out the aims and objects to be taken up by the State in the governance of the country. Articles 36 to 51 provide different kinds of social, economic and community welfare character of Directive Principles. The Directive Principles cannot be enforced in the courts of law.
The Directives, however, differ from the fundamental rights or the ordinary laws of the land in the following respects:
(i) The Directives are not enforceable in the courts and do not create any justiciable rights in favour of individuals.
(ii) The Directives require to be implemented by legislation and so long as there is no law carrying out the policy laid down in a Directive, neither the State nor an individual can violate any existing law.
(iii) The Directives per-se does not confer upon or take away any legislative power from the appropriate legislature.
(iv) The courts cannot declare any law as void on the ground that it contravenes any of the Directive Principles.
(v) The courts are not competent to compel the Government to carry out any Directives or to make any law for that purpose.
(vi) Though it is the duty of the State to implement the Directives, it can do so only subject to the limitations imposed by the different provisions of the Constitution upon the exercise of the legislative and executive power by the State.
Fundamental Rights assure political freedom to citizens protecting them from excessive State action whereas Directive Principles aim at securing social and economic , freedoms by appropriate State action. Fundamental Rights and Directive Principles together constitute the conscience of the Constitution and represent basic rights inherent in people of this country.The Directive Principles of the State Policy are not subordinate to Fundamental Rights strictly speaking, but should conform and run as subsidiary to Fundamental Rights.
Answer 5(b)
The circumstances in which a court would award damages in lieu of specific performance are:
(a) Where specific performance could have been granted but in the circumstances of the case the court in its discretion considers that it would be better to award damages instead of specific performance.
(b) Though specific performance is refused, plaintiff is entitled to compensation for breach of the contract.
(c) If the circumstances are such that specific performance would not be granted as for example, where plaintiff has disentitled himself to the specific performance, damages cannot be awarded under Section 21 in lieu of specific performance. (Section 21, Specific Relief Act)
Answer 5(c) Jt.:u;ij.
Section 190 of the Code of Criminal Procedure, 1973 relates to cognizance of offences by Magistrates. The court can take cognizance of an offence only when conditions requisite for initiation of proceedings before it are fulfilled otherwise the court does not obtain jurisdiction to try the offence (Mohd. Safi, AIR 1966 SC 69).
Any Magistrate of first class and of the second class specially empowered may take cognizance of an offence upon:
(1) receiving a complaint of facts constituting such offence;
(2) a police report of such facts;
(3) information received from any person other than a police officer;
(4) his own knowledge that such offence has been committed.
Question 6
(a) Discuss the remedies available to a person who has been refused to register a Answer 6(c)
document by a Sub-Registrar. Can registration of documents be refused on the
ground of under-valuation for stamp duty ? (6 marks)
(b) Chanchal sues Indian Online Ltd. (IOL) for allowing a subscriber Rajat to use its chatroom for making video tapes and photographs of child pornography in which Chanchal's minor son appears. The complaint alleged that IOL was negligent per se in allowing Rajat to use its facilities for producing obscene materials, therefore, is liable under criminal law and under the Information Technology Act,
2000. IOL contends that it has no knowledge of such transmission of unlawful
information. Decide the liability of IOL (5 marks)
(c) A document, which is apparently an agreement granting a franchise, is produced in the Court, but is not stamped. Examine, citing relevant provisions of the Indian Stamp Act, 1899, whether —
(i) the document is void; or
(ii) the document can be admitted on payment ot penalty; or
(Hi) the parties are liable to be prosecuted ? (5 marks)
Answer 6(a)
According toSfeclon 72(1) of the Registration Act, 1908 an appeal shall lie against an order of a Sub-Registrar refusing to admit a document to registration (whether the registration of such document is compulsory or optional) to the Registrar to whom such Sub-Registrar is subordinate if presented to such Registrar within thirty days from the date of the order; and the Registrar may reverse or alter such order.This does not apply where the refusal is on the ground of denial of execution.
If the order of the Registrar directs the document to be registered and the document is duly presented for registration within thirty days after the making of such order, the Sub-Registrar shall obey the same, and thereupon shall, so far as may be practicable, follow the procedure prescribed in Sections 58, 59 and 60; and such registration shall take effect as if the document had been registered when it was first duly presented for registration. [Section 72(2)]
Registration cannot be refused on the ground of under-valuation for stamp or any other extraneous reason. (Mulla (1998), page 308)
Answer 6(b)
Indian Online Ltd. (IOL) is not liable for subscriber, Rajat using its chat room for making videotapes and photographs of Child pornography because offence was committed without his knowledge.
Section 79 of Information Technology Act, 2000 declares that no network service provider shall be liable "under this Act, rule or regulation made thereunder", for any third party information or data made available by him, if he proves that the offence or contravention was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence or contravention.
In Doc v. American Online Inc. on the similar facts, the court held that AOI is not liable for the unlawful act of subscriber.
Answer 6(c)
(i) As per Section 35 of the Indian Stamp Act, 1899 instruments not duly stamped are inadmissible in evidence. But in special cases they may be admitted after imposing penalty.
(ii) A document which is not duly stamped is not a void document. It is inadmissible in evidence. Such documents can be impounded and made admissible in evidence upon payment of the prescribed penalty.
(iii) The parties are hot liable to be prosecuted. The proviso to Section 43 clarifies that no prosecution shall be instituted in the case of any instrument in respect of which such a penalty has been paid, unless it appears to the Collector that the offence was committed with an intention of evading payment of the proper duty.
Question 7
(a) Bijoy executed a contract for purchasing a piece of land in Delhi from Ajoy. Just
after the execution of contract, Bijoy proceeded to England and he is not expected
to return to India before six months. Chirag, a good friend of Ajoy who has
general power of attorney to act on behalf of Bijoy, gets the said sale deed
registered. Is this registration valid ? (6 marks)
(b) Atul living in Delhi, is a trustee for Bimal, living in Chennai. Atul remits certain amount from trust fund to Bimal by bills drawn by a person from undoubted credit in favour of the trustee as such and payable at Chennai. The bills are dishonoured. Is Atul, the trustee, liable for the loss of trust fund ? (5 marks)
(c) Ratan is charged with forging a particular document. The prosecution produces
in evidence a number of documents apparently forged, found in possession of
the accused. Are these documents admissible in evidence ? (5 marks)
Answer 7(a)
Registration of sale deed made by Chirag is not valid. Section 32 of the Registration Act, 1908 specifies the persons who can present documents for registration at the proper registration office. Such persons are as follows:
(a) some person executing or claiming under the same, or in the case of a copy of a decree or order, claiming under the decree or order, or
(b) the representative or assign of such person, or
(c) the agent of such person, representative or assign, duly authorised by power-of-attorney executed and authenticated in the manner provided under Section 33.
Under Section 33 of the Registration Act, a special power of attorney is required. A general power of attorney will not do. Section 33 requires that a power of attorney, in order to be recognised as giving authority to the agent to get the document registered, should be executed before and then authenticated by the Registrar within whose district or sub-district the principal resides.
Chirag a good friend of Ajoy does not fall in any of the categories mentioned above. Further, Chirag has only general power of attorney and not the special power of attorney as provided under Section 33. Therefore, the registration got done by Chirag is not valid.
Answer 7(b)
As per Section 15 of the Indian Trusts Act, 1882 a trustee is bound to deal with the trust property as carefully as a man of ordinary prudence would deal with such property if it were his own.
Atul is not liable to make good the loss of trust fund as he took sufficient care as required by a trustee. The facts of the problem are similar to that of illustration (a) appended to Section 15 of the Indian Trusts Act, 1882. Act, 1872 provides that facts which, though not in issue are so connected with a fact in issue as to form part of the same transaction, are relevant, whether they occurred at the same time and place or at different time and places.
In the present problem, facts that number of documents forged and found in the possession of accused are not so connected as to form part of the same transaction (forgery). Thus, documents found in the possession of accused are not admissible in evidence.
Question 8
(a) Amba, a society registered under the Societies Registration Act, 1860, with a
view to amalgamate with another registered society, convened a general meeting
of its members. At the meeting, the secretary of the society placed a special
resolution regarding amalgamation. Out of 50 members, 49 members attended
the meeting, the resolution was put to vote and 30 members voted in favour of
the resolution. Whether the society Amba can effect the amalgamation with the
said society on the basis of the resolution passed ? State the reasons for your
answer. (6 marks)
(b) Avinash, residing in Delhi, requests his friend Bishnoy, residing in Lucknow, for a loan of Rs. 10 lakh. Bishnoy asks Avinash to come to Lucknow and collect the cheque for the said amount. Accordingly, Avinash collects the cheque at Lucknow. Avinash has failed to repay the loan. Bishnoy wants to institute a suit for the recovery of loan against Avinash. Mention the place where Bishnoy can file a suit against Avinash. Give reasons in support of your answer.
(5 marks)
(c) Ram agrees to sell and deliver a ship to Shyam, to be paid for by Shyam's acceptance of four bills of exchange, for sum amounting to Rs.50,000 to be drawn by Ram on Shyam. The bills are drawn and accepted, but the ship is not delivered according to the agreement. Ram sues Shyam on one of the bills. State with reasons whether Shyam can obtain cancellation against all bills ? (5 marks)
Answer 8(a)
Society Amba cannot effect the amalgamation as proper procedure provided for amalgamation has not been followed by the society.
As per Section 12 of the Societies Registration Act, 1860 the governing body shall convene a special meeting to consider the proposal and shall submit the proposition to the members in a written or printed report sent or delivered 10 days previous to the special meeting convened.The propositions must be agreed by the votes of three-fifths of the members present in person or by proxy.
Then a second special meeting will be convened, at an interval of one month after the first meeting. In the second meeting the agreed proposition must be confirmed by three-fifths of the members present there.
Only after that the proposition if confirmed shall be carried into effect.
Answer 8(b) –
A suit on a promissory note or cheque lies at the place where it is drawn signed and dated. The common rule that the debtor must seek his creditor does not apply to promissory notes or cheques etc. A suit on pronote lies at the maker's place. Where no cash was advanced and the loan was by way of cheque, the place where the defendant got the cheque from the plaintiff gives rise to a part of the cause of action and the plaintiff can file a suit for recovery of the loan in the court of that place.
In the present problem, Bishnoy can file a suit against Avinash for the recovery of loan at Lucknow.
Answer 8(c)
The facts in the given problem are based on the case of Anglo Danubian Co. v. Rogerson (1867) L R 4 Eg. 3.
Relief of cancellation under Section 31 of the Specific Relief Act, 1963, would be available when (i) an instrument is void or voidable against the plaintiff; (ii) where the plaintiff may apprehend serious injury if the instrument is left outstanding; and (iii) where it is proper under the circumstances of the case to grant the relief.
The underlying principal of reJief under Section 31 is founded upon the administration of protective justice for fear. The party is relieved upon the principle, as it is technically called quia timetle., forfearthat such agreement, securities deeds or other instruments may be vexatiously and injuriously used against him when the evidence to impeach them may be lost, or that they may throw a cloud of suspicion over his title or interest.
In the light of the provisions of Section 31 of the specific Relief Act, Ram may obtain cancellation of all the bills.
DECEMBER 2003
GENERAL AND COMMERCIAL LAWS
Time allowed : 3 hours Maximum marks : 100
NOTE: Answer SIX questions including Question No. 1 which is COMPULSORY.
Question 1
Discuss the following under the Constitution of India :
(i) Fundamental duties.
(ii) Safeguards in a law providing for preventive detention.
(Hi) Writ of habeas corpus.
(iv) Ordinance making powers of the President of India. (5 marks each)
Answer 1(1)
Fundamental duties have been enumerated under Part IVA of the Constitution. Article 51A of the Constitution contains provisions relating to fundamental duties. According to Articles 51A of the Constitution, it shall be the duty of every citizen of India-
(a) To abide by the Constitution and respect its ideals and institutions, the National flag and the National Anthem.
(b) To cherish and follow the noble ideals which inspired our national struggle for freedom;
(c) To uphold and protect the sovereignty, unity and integrity of India;
(d) To defend the country and render national service when called upon to do so;
(e) To promote harmony and the spirit of common brotherhood amongst all the people of India transcending religious, linguistic and regional or sectional diversities;
(f) to renounce practices derogatory to the dignity of women;
(g) To value and preserve the rich heritage of our composite culture;
(h) To protect and improve the natural environment including forests, lakes, rivers and wild life, and to have compassion for living creatures;
(i) To develop the scientific temper, humanism and the spirit of inquiry and reform; (j) To safeguard public property and to abjure violence;
(k) To strive towards excellence in all spheres of individual and collective activity so that the nation constantly rises to higher levels of endeavour and achievement.
As is evident the fundamental duties enumerated in Article 51A of the Constitution are addressed to the citizens. They owe these duties to the State. It may be pointed out that these duties are not enforceable through a Court of law.
Answer 1(ii)
Preventive detention means the detention of a person without trial in such circumstances that the evidence in possession of the authority is not sufficient to make a legal charge or to secure the conviction of the detenu by legal proof but may still be sufficient to justify his detention. The object of preventive detention is to prevent the individual not merely from acting in a way but from achieving a particular object. No offence is proved nor any charge formulated, but the justification is suspicion or reasonable probability and not criminal conviction which only can be warranted by legal evidence.(Gopa/an v. State of Madras, AIR 1950 SCR 88)
Article 22 of the Constitution guarantees the fundamental right relating to protection against arrest and detention in certain cases. Articles 22 contains seven clauses. Clauses (1) and (2) lay down the procedure that has to be followed when a man is arrested. Thereafter, clause (4) to (7) deal with preventive detention.
While providing safeguards against preventive detention, Article 22(4) of the Constitution stipulates a limit of three months of prevention detention unless the Advisory Board recommends, before the three months period that there is sufficient cause for the continuation of the detention. The maximum period of detention has to be fixed by the appropriate law made by Parliament.
Article 22(5) casts a dual obligation on the detaining authority - (a) to communicate to the detenu the grounds on which the detention order has been made; (b) to give him the earliest opportunity to make representation against the order of detention.
Under clause (6) a wide latitude is given to the authority in the matter of disclosure. They are given a special privilege in respect of facts which are considered not desirable to be disclosed in public interest.
Article 22(7) empowers Parliament to prescribe the maximum period of detention. It has been held that no preventive detention law can be made under Article 22(4) unless Parliament prescribes the maximum period of detention under clause 7.
Answer 1(iii)
The writ of habeas corpus is a remedy available to a person who is confined without legal justification. The words "habeas corpus" literally mean "to have a body". This writ is used to secure release of a person who has been detained unlawfully or without legal justification. The great value of this writ is that it enables an immediate determination of a persons' right to freedom. This writ is issued to the authority who has the aggrieved person in his custody.
Under Article 32 of the Constitution, the Supreme Court can issue writ of habeas corpus against a person / authority who has detained a person without legal justification. Likewise the High Court under Article 226 of the Constitution can issue writ of habeas corpus in similar circumstances provided that the person or authority against whom the writ is sought is within the territorial jurisdiction of that High Court on the date of filing the writ petition.
Answer! (iv)
The Ordinance making power is the most important legislative power conferred on the President of India under Article 123 of the Indian Constitution. The President can legislate by Ordinances at any time when a parliamentary enactment is not possible. This power enables the Executive to meet a sudden situation arising in the country when Parliament is not in session and which it cannot deal with under the ordinary law. This power is co-extensive with legislative power of the Parliament.
The power has following peculiarities:
(1) The President has to satisfy himself that circumstances exist which render it necessary for him to take immediate action.
(2) This power has to be exercised by the President on the advice of Council of Ministers.
(3) The Ordinance must be laid before Parliament when it reassembles and shall automatically cease to have effect at the expiration of 6 weeks from the date of reassembly unless disapproved earlier by the Parliament.
(4) This power is available only when the two houses of Parliament (Lok Sabha and Rajya Sabha) have been prorogued or are otherwise not in session. However, Ordinance can be made even if only one house is in session, when law cannot be made by that house in session alone.
The Ordinance is to be laid before each house of the Parliament when it reconvenes after making of the Ordinance. The Ordinance shall cease to operate at the expiry of six weeks from the reassembly of Parliament. An Ordinance has the same force and effect as an Act of Parliament.
Question 2 (4 marks each)
Write notes on any four of the following :
(i) Ut res magis valeat quam pereat
(ii) (ii) Alternate dispute resolution
(iii) (Hi) Documents whose registration is optional
(iv) (iv) Legal recognition to electronic records
(v) (v) Doctrine of pith and substance.
Question 2(i) :: Ut res magis valeat quam pereat
The rule of reasonable construction implies that a statute must be construed reasonably. It is one of the primary rules of interpretation of statutes. A statute or any enacting provision therein must be so construed as to make it effective and operative. A construction should be rejected if it results in hardship, serious inconvenience, injustice, absurdity or anomaly.
As perthis rule, the courts will reject the construction which will defeat the intention of the legislature even though there may be inexactitude in the language used. Preference should be given to such construction which affords consistency and certainty facilitating smooth working of the legal system. Courts may even depart from the dictionary (literal) meaning of a word and give such sensible meaning which will advance remedy and suppress the mischief intended. If the litera legis i.e. letter of law is not clear, interpretation must be ratio legis, i.e. according to the purpose, policy, object or spirit of law.
Answer 2(ii) :: Alternate dispute resolution
There is a growing awareness that courts will not be in a position to bear the entire burden of justice system. A very large number of disputes lend themselves to resolution alternative modes such as arbitration, mediation, conciliation, negotiation, etc. The ADR processes provide procedural flexibility, save valuable time and money and avoid the stress of a conventional trial.
ADR works almost in all disputes including commercial, civil, labour and family disputes in respect of which the parties are entitled to conclude a settlement. ADR techniques have been proven to work in the business environment, especially in respect of disputes involving joint ventures, construction projects, partnership differences, intellectual property, personal injury, product liability, professional liability, real estate, securities, contract interpretation and performance and insurance coverage.
At present ADR services are offered in India in a very rudimentary form. There is, therefore an urgent need to establish and promote ADR services for resolution of both domestic and international disputes in India.These services need to be nourished on sound conceptions, expertise in their implementation and comprehensive and modern facilities.
Answer 2(iii) :: Documents whose registration is optional
Section 18 of the Registration Act, 1908 specifies the documents, of which registration is optional. It provides that any of the following documents may be registered under this Act, namely:
(a) Instruments (other than instruments of gift and wills) which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest whether vested or contingent of value less than one hundred rupees, to or in immovable property.
(b) Instruments acknowledging the receipt or payment of any consideration on account of the creation, declaration, assignment, limitation or extinction of any such right, title or interest;
(c) Leases of immovable property for any term not exceeding one year and leases exempted under Section 17;
(d) Instruments transferring or assigning any decree or order of a court or any award when such decree or order or award purports or operates to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent of a value less than one hundred rupees, to or in immovable property;
(e) Instruments (other than wills) which purport or operate to create declare, assign, limit or extinguish any right, title or interest to or in moveable property;
(f) wills; and
(g) other documents not required by Section 17 to be registered.
Answer 2(iv) :: Legal recognition to electronic records
The Information Technology Act, 2000 under Section 4 grants legal recognition to electronic records by laying down that where any law provides that "information or any other matter is in - writing or in typewritten or printed form then, such requirement is deemed to have been satisfied, if such information or matter is -
(i) rendered or made available in an electronic form; and
(ii) accessible, so as to be usable for a subsequent reference.
It may be pointed out that "information" as defined in Section 2(v) of the said Act, includes data, text, images, sound, voice, codes, computer programs, software and data-bases or micro-film or computer-generated "micro-fiche". Thus, Section 4 of the Information Technology Act practically equates electronic record with a manual or typed or printed record.
Answer 2(v) :: Doctrine of pith and substance
The rule of pith and substance means that where a law in reality and substance falls within an item on which the legislature which enacted that law is competent to legislate, then such law shall not become invalid merely because it incidentally touches a matter outside the competence of legislature. In a federal Constitution, as was observed by Gwyer C.J. "it must inevitably happen from time to time that legislation though purporting to deal with a subject in one list touches also upon a subject in another list, and the different provisions of the enactment may be so closely interwined that blind adherence to a strictly verbal interpretation would result in a large number of statutes being declared invalid because the legislature enacting them may appearto have legislated in a forbidden sphere" (Prafulla Kumarv. Bank ofKhulna, AIR 1947 PC 60), Therefore, where such overlapping occurs, the question must be asked, what is, "pith and substance" of the enactment in question and in which list its true nature and character is to be found. For this purpose, the enactment as a whole with its object and effect must be considered.
Questions
(a) What do you understand by 'conciliation' ? How are the conciliators
appointed? Discuss their role in arriving at a settlement agreement. (8 marks)
(b) Distinguish between 'temporary injunction'and 'perpetual injunction'. (4 M)
(c) "Where once time has begun to run, no subsequent disability or inability to
institute suit or make an application can stop it." Explain. (4 Mks)
Answer 3(a)
Conciliation means the settling of disputes without litigation (Warton's Law Laxicon. Conciliation is an informal process in which the conciliator (the third party) tries to bring the disputants to an agreement. He does this by lowering tensions, improving communications, interpreting issues, providing technical assistance, exploring potential solutions and bringing about a negotiated settlement. The Arbitration and Conciliation Act, 1996 gives a formal recognition to conciliation in India.
Appointment of Conciliator: As per Section 64(1) of the Arbitration and Conciliation Act, 1996
(1) If there is one conciliator in a conciliation proceedings, there should be an agreement on his name,
(2) If there are two conciliators, each party should appoint one each, and
(3) If there are three conciliators in conciliation proceedings, the third conciliator will be an agreed person who will act as a presiding conciliator.
Further, the parties may enlist the assistance of a suitable institution or person to recommend the names of suitable individuals or to appoint one or more persons as conciliators to which the parties should agree. However, in recommending or appointing individuals to act as conciliator, the institution or person should have regard to such considerations as are likely to secure the appointment of independent and impartial conciliators.
Role of Conciliator:
As per Section 67 of the Act, the conciliator's role is to provide assistance in an independent and impartial manner to the parties to reach an amicable settlement of their dispute and to conduct the conciliation proceedings in such a manner as he considers appropriate. He is guided by principles of objectivity, fairness and justice. The conciliator may conduct the conciliation proceedings in an appropriate manner taking into consideration all circumstances and wishes of the parties. The conciliator's role is not confined merely in providing assistance, but also extends to making proposals for settlement of disputes. The conciliator may make proposals for a settlement of dispute at any stage of the proceedings. He may invite the parties to meet him or communicate with them orally or in writing, individually or together[Section 69(1)]. He may not disclose the information to the other party , when a party has given it under specific condition that it be kept confidential. But in other cases, the conciliator discloses substance of the factual information concerning the dispute so that the other party may have the opportunity to present any explanation which he considers appropriate. (Section 70)
Answer 3(b)
Temporary injunctions are granted under Order 39, Rule 1 -2 of the Civil Procedure Code, 1908, while perpetual injunctions are granted under Section 38 of the Specific Relief Act, 1963.
Temporary injunction can be granted at any stage of proceedings and can be dissolved at any stage of proceedings. Temporary injunction is granted before plaintiff establishing his case at the trial and continue upto a specified time.
Perpetual injunction can only be granted after hearing the defendant and upon the merits of the suit.
Temporary injunction is granted for maximum period of suit and automatically terminates with disposal of suit or till further order of the Court whereas in perpetual injunction the defendant is perpetually restrained from the assertion of right or from commission of an act which would be contrary to rights of plaintiff. It is usually granted to prevent breach of an obligation existing in favour of plaintiff when defendant invades or threatens to invade plaintiff's right to enjoyment of property.
Temporary injunction may be replaced by perpetual injunction on merits of the case but not vice-versa.
Answer 3(c) 7
Section 9 of the Limitation Act, 1 963 provides where once time has begun to run no subsequent disability or inability to institute a suit can stop it provided that where letters of administration to the estate of a auditor have been granted to his debtor, the running of period of limitation for a suit to recover debt shall be suspended while the administration continues. This Section is based on the general principle that once a right to sue has accrued and time has started running, it could not stop unless there was some direct obstruction to the remedy itself, or unless the case fell within some of the exceptions provided in the Limitation Act. The statute of Limitation Act is a self-contained statute and no equitable consideration can be imported in it, apart from the provisions made therein.
Section 9 imports the common law rule (time when once it has commenced to run in any case will not cease to be so by reason of any subsequent event. This rule applies only to suits and applications and not to appeals, unless case is covered under any exemptions. For the application of this rule, the right to move the application or cause of action must exist and subsisting on the date on which a particular application is made. If right or cause of action has already extinguished, no question of bar of limitation will arise.
It may be pointed out that Section 9 refers only to subsequent disability or inability to sue or make an application. It has nothing to do with a case where execution has been stayed by an order. The time during which the execution cannot go on because of an order resulting in the stay of execution is expressly excluded by Section 15(1) of the Limitation Act.
Question 4 :: Distinguish between any four of the following :
(i) 'Summons cases' and 'warrant cases'.
(ii) 'Judgment', 'decree' and 'order1.
(Hi) 'Trust' and 'bailment'.
(iv) 'Mortgage 'and 'charge '.
(v) 'Cognizable offence' and 'non-cognizable offence'.
Answer 4(i)
Section 2(w) and 2(x) of the Code of Criminal Procedure, 1973 define the terms "summons case" and "warrant case". Accordingly, "summons case" means a case relating to an offence and not being a warrant case. "Warrant case" means a case relating to an offence punishable with death, imprisonment for life or imprisonment for a term exceeding two years. Thus, it can be seen that the distinction between these two terms is based on the quantum of punishment that can be awarded. In other words, cases which are punishable with imprisonment for two years are summons cases, and the rest are all warrant cases.
Answer 4(ii)
Judgment as defined in Section 2(9) of the Civil Procedure Code, 1908 means the statement given by the judge on the grounds of a decree or order. Thus a judgment sets out the grounds and reasons for the judge to have arrived at the decision. In other words, a "judgment" is the decision of a court of justice upon the respective rights and claims of the parties to an action in a suit submitted to it for determination. (State of Tamil Nadu v. S Thangaval, AIR 1997 SC 2283)
Decree is defined in Section 2(2) of the said Code as
(i) the formal expression of an adjudication which, so far as regards the court expressing it;
(ii) conclusively;
(iii) determines the rights of the parties
(iv) with regard to all or any of the matters in controversy;
(v) in the suit and may be either preliminary or final. But decree does not include
(a) any adjudication from which an appeal lies, as an appeal from an order or;
(b) any order of dismissal for default. According to the explanation appended to the definition, a decree may be partly preliminary or partly final.
A decree comes into existence as soon as a judgment is pronounced and not on the date when it is sealed and signed.
"Order" as set out in Section 2(14) of the Civil Procedure Code means the formal expression of any decision of a civil court, which is not a decree.
Answer 4(iii)
The definition of bailment is given in Section 148 of the Indian Contract Act, 1872.
A "bailment" is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them.
'Trust" according to Indian Trusts Act is
(i) an obligation annexed to the ownership of property and
(ii) arising out of confidence reposed in and
(iii) accepted by the owner or declared and accepted by him,
(iv) for the benefit of another, or of another and the owner. The difference between a trust and a bailment is as under:
(i) A trustee becomes the full owner of the trust property. A bailee acquires special property only.
The obligation of the bailee is legal, whereas that of a trustee is equitable.
A bailment may be created for movable property only. A trust may be created for both movable and immovable properties.
Answer 4(iv)
(a) A mortgage is transfer of an interest in the property made by the mortgagor as a security for the loan, while the charge is not the transfer of any interest in the property though it is security for the payment of an amount.
(b) A charge may be created by act of parties or by operation of law. A mortgage can only be created by act of parties.
(c) A mortgage deed must be registered and attested by two witnesses, while a charge need not be made in writing, and if reduced to writing, it need not be attested or registered.
(d) In certain types of mortgage (viz., mortgage by conditional sale and anomalous mortgage) the mortgagor can foreclose the mortgaged property but in charge, the charge-holder cannot foreclose though he can get the property sold as in a simple mortgage.
(e) A charge as a general rule, cannot be enforced against a transferee for consideration without notice. But in a mortgage, the transferee of mortgaged property from the mortgagor, can only acquire the remaining interest of the mortgagor, and is therefore, only bound by the mortgage.
(f) In a charge created by act of parties, the specification of the particular fund or property negatives a personal liability and the remedy of the charge-holder is against the property only. In a mortgage, there can be security as well as personal liability.
Answer 4(v)
As per Section 2(c) of the Cr.P.C. 1973 "cognizable offence" means an offence for which a police officer may arrest the offender without warrant in accordance with First Schedule of Criminal Procedure Code or under any other law for the time being in force. Murder, culpable homicide, dacoity, abetting mutiny, counterfeiting coins are some instances of cognizable offences. As is evident, the magnitude of cognizable offences is quite grave and the punishment provided is quite heavy.
"Non cognizable offence" as per Section 2(l) of the Code means a case in which a police officer has no authority to arrest without warrant. The instances of non-cognisable offences are undue influence at an election, simple hurt, false claim in a Court of law etc. It needs special authority to arrest the offender i.e., it requires warrant for arrest. Non cognizable offences are less serious in nature as compared to cognizable offences.
Question 5
(a) Discuss the 'doctrine of part-performance' under the Transfer of Property Act, 1882. (5 marks)
(b) Explain the term 'distinct matters'relating to instruments liable for payment of duty under the Indian Stamp Act, 1899. (5 marks)
(c) Mention the circumstances under which suits by and against societies may be filed under the Societies Registration Act, 1860. Explain. (6 marks)
Answer 5(a)
The doctrine of part-performance operates as an exception to the principle that equity will only enforce specific performance of a contract that is valid at law and provable in Courts of Law. The doctrine has been statutorily recognised under the Transfer of Property Act (Section 53A), Specific Relief Act (Section 27A) and Indian Registration Act (Section 49).
Essentials of the doctrine of part-performance
1. There should be a contract to transfer immoveable property.
2. The contract should be -
(a) in writing and signed by the transferor himself, or on his behalf;
(b) for consideration;
(c) to enable the court to ascertain with reasonable certainty the terms of the contract
3. The contract should have been part-performed —
(a) the intended transferee should in part-performance of the agreement take, possession of the property (or any part of it) proposed to be transferred, or
(b) when the intended transferee is already in possession, he should continue possession in part-performance of the contract, and do some act in furtherance of the contract.
4. The intended transferee should perform his part of the contract or must be willing to do so.
5. When the contract has thus been partly performed all rights and liabilities under the contract should arise and be enforceable as between the parties to the contract notwithstanding that the transaction has not been completed.
6. The application of the doctrine shall not affect the rights of a transferee for consideration who has no notice of the contract or of the performance thereof.
Answer 5(b)
The expression distinct matter means distinct transaction (Ram Swarup v. Joti, (1933) Allahabad Law Journal 427, Board of Revenue Madras v. Narasimhan, AIR 1961 Mad 504.
Under Section 5, of the Indian Stamp Act, 1899 an instrument comprising or relating to several distinct matters is chargeable with the aggregate amount of the duties with which each separate instrument, relating to one of such matters, would be chargeable under the Act. The Section deals with multifarious instruments. Section 5 applies even where the two (or more) matters are of the same description.
Illustrations as to distinct matters :
(i) A document containing both an agreement for the dissolution of a partnership and a bond, is chargeable with the aggregate of the duties with which two such separate instruments would be chargeable. The two are distinct matters. (Chinmoyee Basuv. Sankare Prasad Singh, AIR 1955 Cal. 561, cf AIR 1936 Lah. 449)
(ii) A grant of annuity by several persons requires only one stamp (because there is only one transaction).
(iii) A lease to joint tenants requires only one stamp.
(iv) A conveyance by several persons jointly relating to their separate interest in certain shares in an incorporated company requires only one stamp.
(v) A power of attorney executed by several persons authorizing the agent to do similar acts for them in relation to different subject matter is chargeable under Section 5, where they have no common interest.
Answer 5(c)
A society registered under the Societies Registration Act, 1860 is a legal entity. It can sue and can be sued in the name of the President, Chairman or Principal Secretary or Trustees as determined by the rules of the society. If there is no law, then authorized person by the governing council or the general body may sue on behalf of the society (Section 6).
Section 7 of the Act provides that no suit or proceeding in any civil court shall abate or discontinue if the person in whose name the suit has been brought is dying or ceasing to fill the character, such suit shall be continued in the name of or against the successor of such person.
The provisions of Section 6 and 7 are not mandatory. Even the general authority to sue or to be sued can be given to the Chairman or Secretary or Trustees on behalf of the society. But an authority given by the governing body has to be limited to the occasion concerned. The object is that the registered societies should not embark upon needless and endless litigations.
Question 6
(a) Arun bequeaths certain property to Barun, requesting him to distribute it among such members of Chaman's family, as Barun should think most deserving. Can Chaman enforce this trust ? (5 marks)
(b) Ram executed a gift deed of certain immovable properties in favour of his brother Shyam. By another deed, Shyam made provision for the living expenses of Ram and created a charge in his favour on some properties included in the above mentioned gift deed in order to secure the payment of these living expenses. The government authority insists that deed executed by Shyam is liable to full duty. Decide with reasons. (5 marks)
(c) Explain the terms 'investigation', 'inquiry'and 'trial'in a criminal case under the
Code of Criminal Procedure, 1973. (6 marks)
Answer 6(a)
As per Section 6 of the Indian Trust Act, 1882 for the creation of a trust, the author of the trust should indicate with reasonable certainty by any words or acts
(a) an intention on his part to create a trust
(b) the property in respect of which trust is created
(c) the purpose of the trust for which it is created and the beneficiaries of
the trust.
The words used to create a trust must be clear and certain so as to explain a clear intention to create a trust.
In the present problem, the trust is not created as the beneficiaries are not indicated with reasonable certainty.
Answer 6(b)
According to Section 4 of the Indian Stamp Act, 1899 where in the case of any sale, mortgage or settlement, several instruments are employed for completing the transaction
(a) the only principal instrument shall be chargeable with the duty prescribed for the conveyance, mortgage or settlement, and
(b) each of the other instruments shall be chargeable with a duty of one rupee.
, In the present problem, the two documents i.e. deeds, one executed by Ram and another executed by Shyam are part of the same transaction. They amount to a settlement and the provisions of Section 4 of the Stamp Act are attracted (Maharaj Someshar Dutta, ILR 37 ALL 264). Therefore, the concerned Government authority should not insist for full duty. The deed executed by Shyam is chargeable with a duty of one rupee and not with full duty.
Answer 6(c)
The three terms - investigation, inquiry and trial denote three different stages of a criminal case. Investigation includes all the proceedings under the Cr.P.C., 1973 for the collection of evidence conducted by a police officer or by any person (other than a Magistrate) who is authorized by a Magistrate in this behalf. [Section 2(h), Cr.P.C, 1973]
Inquiry means every inquiry other than a trial, conducted under this Code by a Magistrate or Court [Section 2(g) Cr.P.C, 1973].
Trial is the final stage in a criminal case and starts when inquiry is concluded.
Question 7
(a) Bab/oo borrowed Rs.5,000 from Shambhu, which was recorded on a printed paper and stored in computer as the computer output. After some time, Shambhu demanded money from Babloo, which the latter refused to pay. Shambhu filed a suit for recovery of money from Babloo on the basis of computer records. Whether the court can treat it as sufficient proof for granting relief to Shambhu against Babloo under the Indian Evidence Act, 1872 ? (5 marks)
(b) Sunil gives property worth Rs.2,000 only to Anil and adds a condition that Anil should sell the property for Rs.50,000 and not below this amount. Is this condition valid? Give reasons. (5 marks)
(c) Amrish was found guilty of damaging the data stored in a computer. The adjudicating officer fined him Rs. 1,00,000 and directed the amount to be paid to the aggrieved person. Advise Amrish about the course of action against this decision under the Information Technology Act, 2000. (6 marks)
Answer 7(a)
Section 65A of the Indian Evidence Act, 1872 provides that the contents of electronic records may be proved in accordance with the provisions of Section 65B. Shambhu can file a suit for recovery of money from Babloo on the basis of computer record which is admissible under the Indian Evidence Act as an evidence. The Court will treat it as sufficient proof for granting relief to Shambhu against Babloo.
Answer 7(b)
The condition is not valid because it places absolute restriction on the transfer of property. Section 10 of the Transfer of Property Act, 1882 says that when property is transferred, the transferee should not be restrained absolutely from alienating the property. One may give property to another subject to a condition but the condition should not be such which absolutely prevents the transferee from alienating the property.
In the given problem, Sunil gives to Anil property worth only Rs. 2000 and adds a condition that Anil should sell the property for Rs. 50,000 and not below that amount. The condition becomes at once invalid because no one will buy the property which is only worth Rs. 2,000 for Rs. 50,000.
Answer 7(c)
The course of action available to Amrish in this case, is that he can file an appeal under Section 57 of the Information Technology Act against the decision of the Adjudication Officer before the Cyber Appellate Tribunal. The appeal is to be filed within a period of 45 days.
Question 8
(a) On 31st Decr, 1995, Govind took loan from Ghanshyam. On 16th June, 1999, Govind made only part payment. After that no payment was made. Ghanshyam subsequently filed a suit against Govind for recovery of the debt after the expiry of two years from the date of part payment. Is the suit maintainable? (5 M)
(b) A magistrate of the first class passes a sentence of imprisonment for a term of three years with a fine of Rs.5,000, and in case of failure to pay the fine an additional imprisonment for another one year. The convict feels aggrieved by the sentence. Can he prefer an appeal against the judgment ? (5 marks)
(c) An illegitimate son of a deceased owner of a property gets possession of the property to which he is not legally entitled but his name is entered in the papers as owner. He mortgages the property. On the date of mortgage, the rightful owner's suit against him for recovery and possession was pending and it was decreed subsequently. When the rightful owner sought to avoid the mortgage, the mortgagee resisted the claim by pleading that mortgager was the ostensible owner of the property when he mortgaged it. Decide. (6 marks)
Answer 8(a)
Part payment is acknowledgement by conduct, but under Section 19 of the Limitation Act it should be made before the expiry of the period of limitation. A fresh period of limitation is available only when part payment is made within the period of limitation.
In the present problem, part payment by Govind is made after the expiry of limitation period.Therefore, fresh period of limitation will not be available to Ghanshyam. The suit filed by Ghanshyam is not maintainable.
Answer 8(b)
The convict may appeal against the judgment of the Magistrate. Under Section 30 of the Cr.P.C 1973, the Court of a Magistrate may award such term of imprisonment in default of payment of fine as is authorized by law provided the term is not in excess of the powers of the Magistrate under Section 29 of the Code (a Magistrate under Section 29 can impose imprisonment for a term of three years or a fine of Rs. 5000 or of both) and shall not where the imprisonment has been awarded as a part of the substantive sentence exceed one-fourth of the term of imprisonment which the Magistrate is competent to inflict as punishment for the offence otherwise than as imprisonment in default of payment of the fine.
Answer 8(c)
As oer Section 41 of the Transfer of Property Act,1882 where a person with the ""1 express or implied of the persons interested in immovable property is the tc--—J*B owner of such property and transfers the same for consideration, the transfer Pgil'not be voidable on the ground that the transferor was not authorized to make it.
In the given problem, the illegitimate son of a deceased owner gets possession illegally, without the consent of rightful owner. Therefore illegitimate son cannot be treated as ostensible owner of the property. The mortgagee's claim is not valid. The property will vest in rightful owner.
INTERMEDIATE EXAMINATION
DECEMBER 2004
GENERAL AND COMMERCIAL LAWS
Time allowed : 3 hours Maximum marks : 100
NOTE: Answer SIX questions including Question No. 1 which is COMPULSORY.
Question 1
(a) Discuss the legislative powers of the Parliament and State Assemblies with respect to different subjects of legislation as provided under the Constitution of India. (8 marks)
(b) Discuss the position of fundamental rights vis-a-vis directive principles of State policy. (6 marks)
(c) What is 'delegated legislation' ? What are the limits under which powers of delegated legislation may be exercised ? (6 marks)
Answer 1 (a)
A federal Constitution establishes a dual polity as it comprises two levels of Government. At one level there exists a Central Government having jurisdiction over the whole country and reaching down to the person and property of every individual therein. At the other level, there exists the States into which the country is divided under the Constitution. The two levels of Government divide and share the totality of governmental functions and powers between themselves. A federal Constitution thus envisages a division of governmental functions and powers between the Certre and the regions by the sanction of the Constitution.
The Constitution of India substantially follows the pattern of the Government of India Act, 1935 for the purpose of distribution of legislative powers'between Union and States subject to the modification that the residuary subjects have been left for the Union as in Canada. The Constitution draws three long lists—the Union List, the State List and the Concurrent List. These lists are contained in the Vllth Schedule to the Constitution.
Union List on which Parliament is empowered to legislate contains 97 entries and includes subjects of national interest or importance. For example, defence of India, foreign affairs, atomic energy, war and peace, railways, posts and telegraphs, banking, currency, coinage and legal tender, trade and commerce with foreign countries, foreign loans and soon.
The State List consists of 66 entries. Entries 19, 20, 29, 36 have been deleted by Constitutional amendments. The subjects which are of local or regional interest and on which local control is more expedient have been assigned to the State List. These include police, prisons, public order, public health and sanitation, trade and commerce within the State, agriculture, education, forest, state taxes and duties and so on. State has the exclusive power to legislate over these matters.
Concurrent List consists of 47 entries. Those subjects which ordinarily are of local interest yet need uniformity on national level or at least with respect to some parts of the country, i.e., with respect to more than one State have been allotted to the Concurrent List. Criminal law, marriage and divorce, transfer of property, contracts, economic and social planning, commercial and industrial insurance, monopolies, social security and social insurance, legal, medical and other professions, price control are some of the illustrative matters included in the Concurrent List. New entries 11 A, 17A, 178,20Aand 33A have been added by Constitutional amendments.
As stated above, residuary powers under Article 248 vest with the Parliament. On the subject enumerated in Concurrent List, both Parliament and State Legislatures can make laws. In case of conflict between Centre and State laws on a subject, the Central law will prevail. Entry 97 of the Union List provides that Parliament has exclusive powers to make laws with respect to any matter not mentioned in the State List or in the Concurrent List. Parliament also has power to legislate on State subject under Articles 249, 250, 252, 253 and 356(b), while a State can never make a law on any Union List matter. Thus, from the scheme of distribution of legislative powers between State and Union, it is evident that the framers of the Constitution have given more powers to the Union as against States.
Answer 1(b)
The Constitution of India seeks to secure to the people "Liberty of thought, expression, belief, faith and worship: Equality of status and of opportunity: and Fraternity assuring the dignity of the individual". With this object, the fundamental rights are envisaged in Part III of the Constitution. These are:
(i) Right to Equality - Articles 14 to 18;
(ii) Right to Freedom -Articles 19 to 22;
(iii) Right against exploitation - Articles 23 and 24;
(iv) Right to Freedom of Religion -Articles 25 to 28;
(v) Cultural and Educational Rights -Article 29 and 30.
(vi) Right to Constitutional Remedies - Article 32.
Fundamental rights are deemed essential to protect the rights and liberties of people of India against the encroachment of the State power. In Maneka Gandhi v. Union of India, AIR 1978 SC 597, the Supreme Court laid down that these rights represent the values cherished by the people of this country to protect the dignity of the individual, to create conditions for the dignity of the individual and to create conditions for the fullest development of human personality. Fundamental rights can be enforced in the courts of law.
On the other hand the Directive Principles of State Policy contained in Part IV of the Constitution set out the aims and objects to be taken up by the State in the Governance of the country. The idea of Welfare State can be achieved if the State endeavours to implement them with high sense of moral duty. Articles 36 to 51 provide different kinds of social, economic and community welfare character of Directive Principles. The Directive Principles cannot be enforced in the courts of law.
The Directive Principles have the following features:
(i) The Directives are not enforceable in the courts and do not create any justiciable rights in favour of individuals.
(ii) he legislature must itself lay down the legislative policy and principles and must afford guidance to rule making body;
(iii) Act delegating law-making powers shall be invalid if it lays down no principles and standards for guidance.
(iv) If the legislature has performed its essential function of laying down the policy of the law providing guidance there is no constitutional bar against delegation of subsidiary or ancillary powers in that behalf to an outside authority.
Question 2
(a) Discuss the ejusdem generis rule of interpretation. (6 marks)
(b) If one person fraudulently uses the 'domain name'of another, what legal remedy is available to the aggrieved party ? (5 marks)
(c) What are the documents of which registration is not compulsory under the
Registration Act, 1908? (5 marks)
Answer 2(a):: Rule of ejusdem generis
The expression, 'ejusdem generis' means 'of the same kind'. Normally, general words should be given their natural meaning like all other words unless the context requires otherwise. But when a general word follows specific words of a distinct category, the general word may be given a restricted meaning of the same category. The general expression takes its meaning from the preceding particular expressions because the legislature by using the particular words of a distinct genus has shown its intention to that effect. If the preceding specific words do not belong to a distinct genus, this rule is not applicable.
It is merely a rule of construction to aid the courts to find out the true intention of the legislature (Jage Ram v. State ofHaryana, AIR 1971 SC1033). To apply the rule, the following conditions must exist:
(1) The statute contains an enumeration by specific words,
(2) The members of the enumeration constitute a class,
(3) The class is not exhausted by the enumeration,
(4) A general term follows the enumeration,
(5) There is a distinct genus which comprises more than one species, and
(6) There is no clearly manifested intent that the general term be given a broader meaning that the doctrine requires. (Thakura Singh. v. Revenue Minister, AIR 1965J&K102)
The rule of ejusdem generis must be applied with great caution because it implies a departure from the natural meaning of words, in order to give them a meaning or supposed intention of.the legislature. The rule must be controlled by the fundamental rule that statutes must be construed so as to carry out the object sought to be accomplished. The rule requires that specific words are all of one genus, in which case, the general words may be presumed to be restricted to that genus.
Whether the rule of ejusdem generis should be applied or not to a particular provision depends upon the purpose and object of the provision, which is intended to be achieved.
Answer 2(b)
The Information Technology Act, 2000 does not make any specific remedial provision if any person legally or fraudulently uses other person's domain name, However, such conduct is actionable under the law of torts. Judicial decisions in India and in other countries suggest that the tort of 'passing off is wide enough to afford legal redress (the damages) to a person who is the holder of a particular domain name and who suffers harm as a result of the fraudulent use of his domain name by other person. Such conduct has been regarded as falling under the tort of 'passing off.
The principles relating to 'passing off were held to be applicable to domain names in RediffCommunication Ltd. v. Cyberbooth (2000) 1 Recent Arbitration Judgements, 562 (Bombay High Court). In this case the domain name 'Rediff (of Plaintiff) and domain name Rediff (of defendant) were held to be deceptively similar and capable of causing deception as business activities of both the parties were similar. The grant of a temporary injunction restraining the, defendant from using the name was held to be proper. The similar view was taken by the High Court of Delhi in Yahoo Inc. v. Akash Arora (1999) 2 Recent Arbitration Judgements, 176 (Delhi).
Answer 2(c)
Section 18 of the Registration Act, 1908 specifies the documents, of which registration is not compulsory but optional. They are as follows:
(1) Instruments, (other than instruments of gift and will) which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, vested or contingent, of value less than Rs.100/- to or in immovable property;
(2) Instrument acknowledging the receipt or payment of any consideration on account of the creation, declaration, assignment, limitation or extinction of any such right, title or interest;
(3) Leases of immovable property for any term not exceeding one year.
(4) Instruments transferring or assigning any decree or order of a court or award when they purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest of a value less than one hundred rupees, to or in immovable property;
(5) Instruments (other than will) which create, declare, assign, limit or extinguish any right, title or interest to or in movable property.
(6) Wills; and
(7) Other documents not required to be registered u/s 17.
Question 3
(c) What purposes are prohibited for creation of a valid trust ? What are the effects of a void trust ? (5 marks)
Answer 3(a)
It is one of the principles of the English Criminal Law that a crime is not committed if the mind of the person doing the act in question be innocent. It is said that 'actus non facitream nisimens sit rea', i.e. the intention and act must both concur to constitute the crime and that is why it is said that guilty mind is generally necessary for liability in criminal law. The general rule to be stated is "there must be a mind at fault before there can be a crime".
In modern times this principle or maxim does not have so wide application. It has undergone a modification owing to the greater precision of modern statutes. It is impossible to apply it generally to all statutes. Crimes are, in the present day, much more accurately defined by statute than they formally were. However, mens rea is considered as essential element in every act of offence. But three exceptions to this rule have been pointed out in Sherras v. De Rutzen:
(a) cases not criminal in real sense but which in public interest are prohibited under a penalty e.g Revenue Acts;
(b) public nuisances;
(c) cases criminal in form but which are .really only a summary mode of enforcing civil rights.
The doctrine of mens rea has no application to the offences under IPC as all offences under IPC are defined mentioning the state of mind of the accused.
Answer 3(b)
Section 10 of the Code of Civil Procedure, 1908 provides the rule with regard to stay of suits where things are under consideration by a court. This section reads —"no court shall proceed with the trial of any suit in which the matter in issue is also directly and substantially in issue in a previously instituted suit between the same parties or between parties under whom they or any of them claim litigating under the same title where such suit is pending in the same or any other court in India having jurisdiction to grant the relief claimed, or in any court beyond the limits of India established or continued by the Central Government and having like jurisdiction, or before the Supreme Court."
However, the pendency of a suit in a foreign court does not bar the courts in India from trying a suit founded on the same cause of action. For the application of doctrine of res subjudice the following conditions must be fulfilled:
(1) A previously instituted suit is pending in a court.
(2) The matter in issue in second suit is also directly and substantially in issue in the previously instituted suit.
(3) The previously instituted suit is still pending in the same court or in any other court in India.
(4) The court in which previous suit is pending has jurisdiction to grant relief.
(5) Parties in two suits are same.
(6) Parties are litigating under same title in both the suits Madras High Court in Kunthe Sankara Eaman v. Vankapa Bhatia AIR 1954 Mad. 820 has laid down that for application of res sub judice what is essential is that there must be substantial identity between matters in dispute and parties.
Answer 3(c)
The Indian Trusts Act, 1882 allows creation of.a trust for any lawful purpose. What is lawful purpose can be gathered from Section 4 of the said Act which provides that the purpose of a trust is lawful unless:
1. it is forbidden by law;
2. it is of such nature that if permitted, would defeat the provisions of any law;
3. it is fraudulent;
4. it implies injury to any person or property of another;
5. the court regards it as immoral and against public policy.
Thus, a trust which does not fall in any of the above prohibitions is deemed to be for lawful purpose. If the purpose of the trust is unlawful the trust is void and the trust is extinguished. It is a nullity and cannot be enforced.
Question 4
(a) If a person is dispossessed of immovable property without his consent and
otherwise than in due course of law, what legal remedy is available to him if he
does not establish his title ? (6 marks)
(b) Define 'arbitration agreement'. What are the essentials for a valid arbitration
agreement ? (5 marks)
(c) Which party is responsible for payment of duty on different kinds of instruments under the Indian Stamp Act, 1899 ? (5 marks)
Answer 4(a)
Section 5 and 6 of the Specific Relief Act, 1963 provides for the remedy for a person for recovering possession of property i.e. immovable property. Section 5 lays down that 'person entitled to the possession of specific immovable property may recover it in the manner provided by the Code of Civil Procedure 1908. It means a suit for ejectment on the basis of title could be brought.
Section 6(1) deals with situations where a person has been dispossessed from immovable property without his consent and due course of law and provides that in case any person is dispossessed without his consent of immovable property otherwise than in due course of law, he or any person claiming through him may by suit recover possession thereof notwithstanding any title that may be set-up in such suit.
Sub-section (2) further provides that, no suit shall be brought:
(a) after the expiry of six months from the date of dispossession;
(b) against the Government;
(c) no appeal shall lie from any orders or decree passed in any suit instituted under this Section.
Therefore ,'to attract Section 6 following conditons must exist;
(a) Plaintiff has been dispossessed.
(b) Plaintiff has been dispossessed without his consent and without due process of law.
(c) Plaintiff has been dispossessed during last six months from the date of institution of suit.
If the above conditions are fulfilled then no quesiton of title of the plaintiff or of the defendant can be raised or gone into. Plaintiff's previous possession is sufficient to give relief under this Section. The plaintiff must be in legal possession of the property under some right. In M/s Chandra & Co. v. Stefe ofRajasthan (AIR 1976 SC 1628) the court held that State Government cannot forcibly evict a person who was in peaceful possession and the High Court upon a petition under Article 226 may provide appropriate relief to the aggrieved. In NairSer 'je Society v. K.C. Alexander (MR 1968 SC 1165) the Supreme Court held that suit .jn be brought after six months under this Section. In Somnathv. SPRajMR 1970 SC 846 the Supreme Court laid down that 'Section 9 (now Section 6) of the Specific Relief Act is in no way inconsistent with the position that as against a wrong doer, prior possession of plaintiff in an action of ejectment is sufficient title even if suit is brought more than six months after the act of dispossession. The wrong doer cannot take plea that the title and right to possession are in a Third person'. •
Answer 4(b)
Under Section 7 of the Arbitration and Conciliation Act, 1996, 'arbitration agreement" has been defined to mean an agreement by parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.
Section 7(2) provides that an arbitration agreement may be in the form of an arbitration clause in a contract or in the form of separate agreement. The agreement shall be in writing. Section 7(4) provides that an agreement is in writing if it is contained in a document signed by the parties, an exchange of letters, telex, telegrams or other means of telecommunication, which provide a record of the agreement or an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. Under Section 7(5), it is further provided that the reference in a contract or a document containing an arbitration clause constitutes an arbitration agreement, if the contract is in writing and the reference is such as to make that arbitration clause part of the contract. Whatever be the form or contents of the agreement, if it is necessary for the Act to apply then there should be a mandatory requirement for settlement of dispute by means of arbitration. In RukmanibaiGuptav. Collector, Vaba/pur(1980) 4 SCC 556, the Supreme Court laid down that no particular form of agreement is necessary.
Thus, arbitration agreement stands on the same footing as any other agreement. It is binding upon the parties unless it is influenced by fraud or coercion or undue influence, etc. As per Section 7, one of the essential ingredients of an arbitration agreement is that it should be in writing. An oral arbitration agreement is not recognized as an arbitration agreement according to this Section.
Section 7(3) only requires that an agreement by the parties should be in writing. It is not necessary that the words arbitration, arbitrator or arbitration agreement should appear in the arbitration clause so long as the parties have valid agreement to allow the matter of dJspute to be decided by persons of their own choice.
Under the present law, certain disputes such as matrimonial disputes, criminal prosecutions, questions relating to guardianship about the validity of a will, etc. are treated as not suitable for arbitration. Subject to this qualification Section 7(1) of the Act. makes it permissible to enter into an arbitration agreement "in respect of a defined legal relationship, whether contractual or not".
Answer 4(c)
Section 29 of the Indian Stamp Act, 1899, specifies the persons liable to pay the stamp duty in different instruments although the said section is not exhaustive. In the absence of an agreement, the expense of the stamp duty shall be borne:
(i) By the person drawing, making, executing any instrument of the following kinds:
Administration bond, Agreement relating to deposit of title deeds, power or pledge, Bill of Exchange, Bond-Bottomry Bond, the customs Bond, debenture, indemnity bond, mortgage deed, prornissory note, release deed, transfer of share, Respondentia Bond, security Bond, or Mortgage deed;
(ii) In the case of policy of insurance other than fire insurance by the person effecting the insurance;
(iii) In the case of a policy of fire insurance—by the person issuing the policy;
(iv) In the case of a conveyance including reconveyance of mortgaged property- by the grantee, in case of a lease or agreement to lease by the lessee or intended lessee;
(v) In the case of counterpart of a lease-by the lessor;
(vi) In the case of instrument of exchange-by the parties in equal shares;
(vii) In the case of certificate of sale-by the purchaser of the property to which such certificate relates; and
(viii) In the cases of partition—by the parties thereto in proportion to their respective shares in the whole property partitioned or when the partition is made in execution of an order passed by a Revenue Authority or Civil Court or Arbitrator, in such proportion as such authority, court or arbitrator directs.
Question 5
(a) Ajoy, after learning that Chancier had been murdered by Bijoy, went to the spot and found that the body of Chander was being taken to the house of Chander by four persons who told him that Bijoy had murdered Chander and he had run away. Is the statement of Ajoy that he was told by four persons that Bijoy had murdered Chander and run away admissible as an evidence ? (6 marks)
(b) Anand bequeaths his house to trustees, declaring that they may sell it with the consent ofBhanu. Bhanu gives a general prospective assent in writing to any sale which the trustees may make. The trustees then enter into a contract with Chetan to sell him the house. Chetan refuses to carry out the contract. Can trustees specifically enforce the contract ? (5 marks)
(c) Ramesh owed Rs.50,000 to Brijesh on a bond which fell due on 1st January, 2002. Brijesh died in an accident on 30th June, 2003 without having brought any suit, and was succeeded by his son Mohan of 12 years of age. Is Mohan entitled to any extension of time because of his minority ? (5 marks)
Answer 5(a)
The statement of Ajoy that he was told by four persons that Bijoy had murdered Chanderand had run away does not form part ofresgesfaeand is therefore, inadmissible under Section 6 of the Evidence Act.
As per Section 6 of the Indian Evidence Act, 1872 "facts which though not in issue, are so connected with a fact in issue as to form part of the same transaction, are relevant, whether they occurred at the same time and place or at different times and places."
The evidence of a statement of a by-stander as to an occurrence will be admissible in evidence as part of res gestae. The word 'by-standers' means the persons who are present at the time of the incident and not the persons who gather on the spot after the incident (46 P.L.R. 353); (1945) Lah. 146).
Answer 5(b)
The trustees cannot specifically enforce this contract, as in the absence of Bhanu's consent to the sale to Chetan, the title which they can give to Chetan is, as the law stands, not free from reasonable doubt. The reason is that Section 17(1 )(b) of the Specific Relief Act, provides that a contract to sell or hire property cannot be specifically enforced in favour of a seller or lessor if he had no title to the property or he entered into contract believing that he had title to property but cannot give a title free from reasonable doubt when it should be given as per contract or as per court order. The provisions of this Act can be applied only if specific permission has been given for sale of the particular or specific property. It is the duty of the vendor to make a reasonable, clear and marketable title about which there must not be any reasonable doubt.
Answer 5(c)
Section 9 of the Limitation Act, 1963 clearly says that once the time has begun to run, no subsequent disability or inability to institute a suit or make an application stops it. However, where, letters of administration to the estate of a creditor has been granted to his debtor, the running of the period of limitation for a suit to recover the debt shall be suspended while the administration continues.
In the present problem, Mohan is not entitled to any extension of time on account of his minority because when the cause of action arose in this case Brijesh was alive and the period of limitation started during his lifetime i.e. 1st January 2002.
Question 6
(a) A requisition was received by the sub-inspector of a police station from another police-station to arrest one Sameerin connection with the commission of a non-cognizable offence. Can the sub-inspector arrest Sameer ? (6 marks)
(b) While a suit relating to a bunglow is pending between Ram and Shyam, Gita transferred the bunglow in favour of Sita. The court passes a decree in favour of Ram. Ram starts proceedings for execution of the decree against Sita. Will Ram succeed ? (5 marks)
(c) Aman filed a suft'against Bhuvan for obtaining a house and land property of Chaman on the ground that Chaman had bequeathed those properties to him by a will. But, Aman failed to prove the will and his suit was dismissed. Now, Aman files a fresh suit to get the properties of Chaman on the ground that he is the only and nearest heir to Chaman. Will Aman succeed ? (5 marks)
Answer 6(a)
In the present problem, arrest is required to be made in connection with a non-cognizable offence for which warrant is necessary. Therefore, Sameer cannot be legally arrested without warrant. The sub-inspector cannot arrest Sameer on the basis of requisition alone.
Section 41(1)(i) of the Code of Criminal Procedure, 1973 provides that police can arrest a person without warrant for whose arres't a requisition is received from other police station only when the offence, in connection of which requisition is made, is such for which arrest warrant is not required.
Answer 6(b)
In this problem transfer of Bungalow in relation to which suit is pending, is made by Gita who is not a party to the suit. Therefore, the doctrine of Us pendens is not applicable and thus decree is not enforceable against Sita, the transferee. The doctrine of Us pendens requires that during the pendency of suit transfer of immovable property which is subject matter of dispute in the suit should be made by any party to the suit and not by a stranger. (Section 52 of Transfer of Property Act, 1882)
Answer 6(c)
Explanation IV to Section 11 of C. PC 1908 provides that any matter which might and ought to have been made ground of defence or attack in a former suit, shall be deemed to have been a matter directly and substantially in issue in such suit. In simple terms it means that all the grounds of attack or defence must be given at the earliest stage in any proceeding, if it could have been known reasonably befoehand. Parties cannot bring the grounds of attack or defence stage by stage. Therefore, the ground that Aman is entitled to get the properties as the only and nearest heir of Chaman shall be deemed to be a matter directly and substantially in issue in former suit and it ought to have been taken up by Aman in that suit itself since it was a ground known already to Aman. Thus, fresh suit is barred by the application of doctrine of resjudicata and Aman will not succeed.
Question 7
(a) A special meeting of the governing body of a society registered under the Societies Registration Act, 1860 was convened to consider the proposal for altering its purposes. The proposal was submitted to the members in a written report. The proposal was agreed to by the votes of three-fourths of members present and voting in person.
A second special meeting was convened after ten days of the first meeting. In
the said meeting, the agreed proposal was confirmed by three-fifths of the total
members. Is the alteration valid ? (6 marks)
(b) Rajesh mortgages a building of the value of Rs. 70,000 to Suresh for Rs. 50,000. Rajesh, subsequently, sells the building to Suresh. An unpaid amount of Rs. 5,000 against interest is also outstanding at the time of sale. Determine the value on which the stamp duty is payable in this transfer of property.
(5 marks)
(c) Ajit sells a house to Baljit by a written document in 1997 and delivers possession thereof to Baljit. But the document is not registered. After one year, Ajit sues Baljit to take back possession of the house on the ground that because of non¬registration, the document has no validity. Will Ajit succeed ? (5 marks)
Answer 7(a)
According to Section 12 of the Societies Registration Act, 1860 whenever the governing body of the Society considers it advisable to alter, extend or abridge its purpose or to amalgamate the Society with any other Society either wholly or partially, it shall convene a special meeting to consider the proposal and shall submit the proposition to the members in a written or printed report, sent or delivered 10 days prior to the special meeting convened. The propositions must be agreed by the votes of three-fifths of the members present in person or by proxy. Then a second special meeting will be convened, at an interval of one month after the first meeting. In the second meeting the agreed proposition must be confirmed by three-fifths of the members present there. Only after that the proposition if confirmed shall be carried into effect. In Shridhar Mishra v. Jai Chandra, (AIR 1959, All 598) the court held that provisions of this Section are mandatory .
In the present problem the procedure provided under Section 12 has not been complied with. Therefore as the second meeting was convened after 10 days while it should have been conveyed at an interval of one month after first meeting the alteration of purpose is not valid and cannot be carried into effect.
Answer 7(b)
Explanation to Section 24 of the Indian Stamp Act, 1999, provides that in the case of sale of property subject to mortgage or other encumbrances any unpaid mortgage money or money charged together with interest, if any due on the same shall be deemed to be part of the consideration for the sale, provided that where property subject to a mortgage is transferred to the mortgagee he shall be entitled to deduct from the duty payable on the transfer the amount of any duty already paid in respect of the mortgage.
In the present problem, in the light of above rule, a stamp duty is payable on Rs.70,000 + 5 000 i.e. Rs. 75,000 less the amount of stamp duty already paid for the mortgage. Hence stamp duty is payable on Rs. 25,000 now, if the duty on mortgaged amount of Rs. 50,000 has already been paid.
Answer 7(c)
As per Section 49 of the Registration Act, 1908 if a document is to be registered but has not been registered, it cannot affect any immovable property or cannot be admitted in evidence of any transaction affecting such property unless it has been registered.
However, the proviso to Section 49 of the Registration Act, 1908 provides that an unregistered document affecting immovable property and required by this Act or by the Transfer of Property Act, 1882 to be registered, may be received as evidence of a contract in a suit for specific performance or as evidence of any collateral transaction not required to be effected by registered instrument.
In the present problem, Ajit will not succeed because of the effect of Section 53Aof the Transfer of Property Act, 1882 and Section 49 of the Registration Act, 1908. The Instrument of transfer is admissible even without registration.
Question 8
(a) Under the terms of an arbitration agreement, the court appointed Anurag, chairman
of the arbitral tribunal, as the arbitrator. During the pendency of the arbitration,
Anurag was demoted and ceased to be the chairman of arbitral tribunal. The
parties to the dispute objected to his continuance as arbitrator on the ground
that he had now become disqualified. Is he entitled to continue as the arbitrator?
Decide: (6 marks)
(b) Amar bequeaths certain property to Akbar, having the fullest confidence that he
will dispose it of for the benefit of Anthony. Explain whether a valid trust is
constituted by this instrument ? (5 marks)
(c) Arjun owed money to Bheem. Bheem transferred the debt by deed of gift to
Chander. Subsequently, Bheem transferred it for value to Deepak. Who is
entitled to the amount ? (5 marks)
Answer 8(a)
Facts of this problem are based on the case Construction India Ltd. v. Secretary, Works Department, Government ofOrissa, 1998 2, SCC 89. The Supreme Court in this case held that if an arbitrator was demoted from the office of chairman of the Tribunal during pendency of the arbitration proceedings, he would not cease to have jurisdiction. He would be entitled to continue with the matter. The court observed that parties may rely on his experience or special skill, when arbitrator is designated by name. Unless clear intention is spelt out in the agreement that he would continue to be an arbitrator only so long as he holds a particular office, a mere reference to the office held by arbitrator will not disqualify him from being an arbitrator after he ceases to hold that office. In this problem Mr. Anurag will continue as arbitrator and his demotion will have no effect.
Answer 8(b)
Section 6 of the Trust Act, 1882 provides the conditions for creation of valid trust. The Section provides that a trust is created when the author of the trust indicates with reasonable certainty by any words or act (a) an intention on his part to create thereby a trust; (b) the purpose of the trust (c) the beneficiary and (d) the trust property, and transfers the trust property to the trustee.
In the present problem, Amar creates a valid trust for Anthony, as there is reasonable certainty regarding purpose of trust in the instrument of trust. Problem is based on illustration (a) appended ta Section 6 of the Indian Trusts Act, 1882.
Answer 8(c)
In the given problem, the first transfer is in favour of Chander. An actionable claim may be transferred even without consideration, hence this transfer is valid. The Second transfer of same actionable claim to Deepak for consideration cannot deprive Chander of the rights, which he had already acquired. Chander is therefore entitled to the money.
INTERMEDIATE EXAMINATION
DECEMBER 2005 GENERAL AND COMMERCIAL LAWS
Time allowed: 3 hours , Maximum marks: 100
Note: Answer SIX questions including Question No. 1 which is COMPULSORY.
Question 1
(a) "None of the fundamental rights to freedom is absolute." Comment and explain
the reasonable restrictions which can be imposed on the freedom of speech
and expression. .- (8 marks)
(b) On what grounds and against whom can the writ of certiorari be issued?
(6 marks)
(c) Discuss in brief the rule of colourable legislation. (6 marks)
Answer 1(a)
Article 19 of the Constitution guarantees to the citizens of India six fundamental freedoms which are exercisable by them throughout and in all parts of India. As per Article 19(1), all citizens shall have the right -
(a) to freedom of speech and expression;
(b) to assemble peaceably and without arms;
(c) to form associations or unions
(d) to move freely, throughout the territory of India;
(e) to reside and settle in any part of the territory of India;
(f) (omitted)
(g) to practise any profession, or to carry on any occupation, trade or business.
The freedoms enumerated in Article 19(1) are those great and basic rights which are recognized as the natural rights inherent in the status of a citizen. But at the same time, these freedoms are not absolute but subject to reasonable restrictions. Accordingly, clauses (2) to (6) of Article19 recognize the right of the State to make laws imposing 'reasonable restrictions' on these freedoms in the interests of the general public, security of the State, public order, decency and morality, and for other reasons set out in these sub-clauses. The principle on which the power of the State to impose restriction is based is that all individual rights of a person are held subject to such reasonable limitations and regulations as may be necessary for the protection of the general welfare.
Right to freedom of speech and expression
A democratic Government attaches great importance to this freedom because without freedom of speech and expression the appeal to reason which is the basis of democracy cannot be made. The freedom of speech and expression under Article 19(1)(a) means the right to express one's convictions and opinions freely by word of mouth, writing, printing, pictures or any other mode.
IGCL-Dec. 2005 2
One may express oneself even by signs. This freedom includes the freedom of press as it partakes of the same basic nature and characteristic (Maneka Gandhi v. Union of India, AIR 1978 S.C. 597). The Courts have held that this right includes right to publish one's opinion, right to circulation and propagation of one's ideas, freedom of peaceful demonstration, dramatic performance and cinematography. It may also include any other mode of expression of one's ideas. The Supreme Court in Cricket Association of Bengal v. Ministry of Information & Broadcasting (Govt. of India), AIR 1995 SC 1236, has held that this freedom includes the right to communicate through any media - print, electronic and audio visual.
The freedom of speech and of the press does not confer an absolute right to speak or publish without responsibility whatever one may choose. This freedom as mentioned above, is subject to reasonable restrictions and clause (2) of Article 19 specifies the limits upto which the freedom of speech and expression may be restricted. It enables the legislature to impose by law reasonable restrictions on the freedom of speech and expression in the interests of:
(1) The sovereignty and integrity of India;
(2) The security of the State;
(3) Friendly relations with foreign States;
(4) Public Order;
(5) Decency or morality; or
(6) In relation to contempt of court;
(7) Defamation or incitement to an offence.
Reasonableness of the restriction is an ingredient common to all the clauses of Article 19. The Constitution no where defines the expression 'reasonable restrictions'. The determination by the Legislature of what constitutes a reasonable restriction is not final or conclusive; it is subject to supervision by the court. No abstract standard reasonableness can be laid down as applicable to all cases. The nature of the right alleged to have been infringed, the underlying purpose of the restrictions imposed, the extent and urgency of the evil sought to be remedied thereby, the disproportion of the imposition and prevailing conditions at the time should all enter into the judicial verdict.
The Supreme Court has considered the question of reasonableness on several occasions and has laid down several tests and guidelines to indicate what in particular circumstances can be regarded as a reasonable restriction. One of the tests is to bear in mind the Directive Principles of State Policy. Other tests include that the restrictions must not be arbitrary or of an excessive nature so as to go beyond the requirement of the interests of the general public; Restrictions must examine the nature and extent, the purport and the content of the right, the nature of the evil sought to be remedied by the statute; there must be a direct and proximate nexus or a reasonable connection between the restriction imposed and the object which is sought to be achieved; Another important test is that so far as the nature of reasonableness is concerned, it has to be viewed not only from the point of view of citizens but the problem before the legislature and the object which is sought to be achieved by the statute.
In order to judge the quality of reasonableness no abstract or general pattern or fixed principle can be laid down so as to be of universal application and the same will have to vary from case to case.
Answer 1(b)
The writ of certiorari is a judicial order directed by the Supreme Court or High Court to any constitutional, statutory or non statutory body or person requiring the records of any action to be certified by the court and dealt with according to law. Under the Constitution of India, such power of writ jurisdiction is vested with the Supreme Court under Article 32 and with the High Courts under Article 226.
A writ of certiorari can be issued to a judicial or quasi judicial body on the following grounds:
(i) Lack or excess of jurisdiction
(ii) Abuse of jurisdiction
(iii) Violation of the principles of natural justice
(iv) Error of law apparent on the face of record.
Lack or excess of jurisdiction: Lack of jurisdiction refers to such situations where the authority has no jurisdiction at all to take action. Excess of jurisdiction refers to cases where authority has jurisdiction but it exceeds its permitted limits.
Abuse of jurisdiction: An authority shall be deemed to have abused the jurisdiction when it exercises its power for an improper purpose or on extraneous considerations or in bad faith or leaves out a relevant consideration or does not exercise the power by itself but at the instance and discretion of some one else.
Violation of the principles of natural justice: Law recognizes two principles of natural justice:
(a) Bias; (b) Rule of audi alteram partem which means right to fair hearing. The requirement of reasoned decisions is also added to these two as the third principle of natural justice. The writ of certiorari will lie to set aside the decisions in violation of the principles of natural justice.
Error of law apparent on the face of record: Error apparent on the face of record shall include not a mere error but a manifest error based on clear ignorance or disregard of the law or on a wrong proposition of the law or on clear inconsistency between facts and the law and the decision.
Answer 1(c)
Colourable Legislation .
Where legislative powers are divided into two bodies which have to act within their respective specific legislative spheres, there questions do arise as to whether the legislation in a particular case has or has not in respect of subject matter of the statute, or in the method of enacting it, transgressed the limits of its constitutional powers. Such transgression may be patent or direct, but it may be disguised, covert and indirect. In the later class of legislation the expression 'colourable legislation has been applied in certain judicial decisions.
Rule of colourable legislation conveys that although a legislature in passing a statute purports to act within the limits of its powers, yet in substance and in reality it transgresses those powers, the transgression being veiled by what appears on
IGCL-Dec. 2005 4
proper examination to be a mere practice or disguise. In other words, it is the substance of the Act that is material and not merely the form and if the subject matter in substance is something, which is beyond the powers of the legislature to legislate upon, the form in which the law is clothed would not save from declaring it as ultravires.
In Shakammerayana v. State of Mysore AIR 1966 SC 1571, the Supreme Court observed that the doctrine of colourable legislation is relevant only in connection with the question of legislative competence. Objections based on colourable legislation have relevance only in situations when the power is restricted to particular topics and an attempt is made to escape legal fetters imposed on its powers by resorting to forms of legislation calculated to mask the real subject matter.
Question 2
(a) Explain the golden rule of interpretation of statutes. (5 marks)
(b) When does the payment of interest or part-payment of principal amount by the
debtor extend the period of limitation ? Discuss. (5 marks)
(c) Discuss the law embodied in the doctrine of feeding the grant by estoppel under
the Transfer of Property Act, 1882. (6 marks)
Answer 2(a)
Golden Rule of Interpretation
Golden Rule of interpretation is a modification of the principle of grammatical rule of interpretation. The golden rule is that the words of a statute must prima facie be given their ordinary meaning. Natural and ordinary meaning should not be departed from unless it can be shown that the legal context in which the words are used requires a different meaning. On the face of it, this rule solves all problems and is, therefore known as the golden rule. Since the literal meaning is modified to some extent, this approach is called the modifying method of interpretation. This rule suggests that consequences or effects of an interpretation deserve a lot more importance because these are clues to the true meaning of legislation.
There may be cases where even though literal interpretation may include certain consequences not intended by the legislature, the court shall not so interpret because some lawful justification is available for doing so. Whenever, more than one construction is possible that which appears most reasonable shall be given effect to. The court will try to avoid unreasonable and anomalous results.
Answer 2(b)
Section 19 of the Limitation Act, 1963 stipulates the law for extension of the period of limitation when part payment of the principal amount or payment of interest is made. As per Section 19 of the Act, where payment on account of a debt or of interest on a legacy is made before the expiration of the prescribed period by the person liable to pay the debt or legacy or by his agent duly authorized in this behalf, a fresh period of limitation shall be computed from the time when the payment was made.
The proviso to the Section says that, save in the case of payment of interest made before the 1st day of January, 1928 an acknowledgement of the payment must
appear in the handwriting of, or in a writing signed by the person making the payment.
The explanation appended to the Section further provides that:
(a) where mortgaged land is in the possession of the mortgagee, the receipt of the rent or.produce of such land shall be deemed to be a payment;
(b) 'debt' dogs^not include money payable under a decree or order of a court for the purpose, of this Section.
Thus, according to this section a fresh period of limitation becomes available to the creditor when part-payment of debt is made by the debtor before the expiration of the period of limitation.
Answer 2(c)
Doctrine of feeding the grant by Estoppel has been embodied in" Section 43 of the Transfer of property Act, 1882. As per Section 43, where a person fraudulently or erroneously represents that he is authorized to transfer certain immoveable property and professes to transfer such property for consideration, such transfer shall, at the option of the transferee, operate on any interest which the transferor may acquire in such property at any time during which the contract of transfer subsists. Nothing in this Section shall impair the right of transferees in good faith for consideration without notice of the existence of the said option.
In order to invoke this section, the transferee must prove that: (i) there was a representation, fraudulent or erroneous;
it was to the effect that the transferor is entitled to transfer the immoveable property;
the transferor is found to have subsequently acquired the interest which he professed to transfer;
(iv) the transfer of property was for consideration; (v) the transferee has not rescinded the contract;
(vi) the transferee acted in good-faith for consideration and without notice of the rights under the prior transfer.
Question 3 .
(a) State the contracts which can be specifically enforced under the Specific Relief
Act, 1963. (5 marks)
(b) How and when a trust can be revoked and extinguished? (5 marks)
(c) Write short notes on the following, (i) Doctrine of sufficient cause
(ii) Actionable claims. (3 marks each)
Answer 3(a)
Contracts which can be specifically enforced have been dealt with under Section 10 of the Specific Relief Act, 1963. It says that except as otherwise provided in this Chapter, the specific performance of any contract may, in the discretion of the Court, be enforced (a) when there exists no standard for ascertaining the actual damage caused by the non-performance of the act agreed to be done, or (b) when the act
agreed to be done is such that compensation in money for its non-performance would not'afford adequate relief. The explanation provides that unless and until the contrary is proved, the Court shall presume:
(i) that the breach of a contract to transfer immovable property cannot be
adequately relieved by compensation in money, and
(ii) that the breach of a contract to transfer movable property can be so relieved except in the two cases: (a) where the property is not an ordinary article of commerce or is of special value or interest to the plaintiff, or consists of goods which are not easily obtainable in the market, (b) where the property is held by the defendant as the agent or trustee of the plaintiff. So, under this Section, contracts for sale of patent right, copy right, shares of a company which are not easily available, future property, chattels of special value, etc., are specifically enforceable.
Further, specific performance of contracts connected with trusts may in the discretion of the court be specifically enforced. Section 11 lays down that except as otherwise provided in this Act, specific performance of a contract may, in the discretion of the Court, be enforced when the act agreed to be done is in the performance wholly or partly of a trust. But if a trustee enters into a contract in excess of his powers then such a contract cannot be specifically enforced. Furthermore, under Section 12 of the Act, the court may grant the specific performance of a part of a contract in certain cases mentioned therein. Answer 3(b)
Section 77 and 78 of the Indian Trusts Act, 1882 deal with extinction and revocation of a trust.
As per Section 77, a trust is extinguished:
(a) When its purpose is completely fulfilled; or
(b) When its purpose becomes unlawful; or
(c) When the fulfillment of its purpose becomes impossible by destruction of the trust-property or otherwise; or
(d) When the trust being revocable, is expressly revoked. Revocation of a Trust: If a trust is created by a will, it may be revoked by the revocation of the will. A trust which has been created otherwise, can be revoked only:
(a) With the consent of all the beneficiaries competent to contract;
(b) By the exercise of a power of revocation expressly reserved by the author of the trust (in cases of trusts declared orally or by non-testamentary instruments); or
(c) Where the trust is created for the payment of debts of the author of the trust and has not been communicated to the creditors - at the pleasure of the author of the trust. (Section 78) Answer 3(c)(i)
Section 5 of the Limitation Act, 1963 allows the extension of prescribed period of limitation in certain cases on sufficient cause being shown for the delay. Section 5
provides that any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908, may be admitted after the prescribed period if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period.
It is clarified by the explanation appended to Section 5 that the fact that the appellant or applicant was misled by any order, practice or judgement of the High Court in ascertaining or computing the prescribed period may be a sufficient cause within the meaning of this Section.
Thus, the Court may admit an application or appeal even after the expiry of the specified period of limitation if it is satisfied with the applicant or the appellant, as the case may be as to sufficient cause for not making it within time.
The Section is not applicable to applications made under any of the provisions of Order XXI of the Code of Civil Procedure, 190ff and also to suits. It applies only to appeals or applications as specified therein. The reason for non-applicability of the Section to suits is that, the period of limitation allowed in most of the suits extends from 31o 12 years whereas in appeals and application it does not exceed 6 months.
The party applying for condonation of delay should satisfy the Court for not making an appeal or application within the prescribed period for sufficient cause. The term sufficient cause has not been defined in the Limitation Act. It depends on the circumstances of each case.
Answer 3(c)(ii)
Section 3 of the Transfer of Property Act defines "actionable claim" as a claim to any debt, other than a debt secured by mortgage of immoveable property or by hypothecation or pledge of moveable property, or to any beneficial interest in moveable property not in the possession, either actual or constructive, of the claimant, which the Civil courts recognize as affording grounds for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent.
Actionable claims are claims, to unsecured debts. If a debt is secured by the mortgage of immoveable property it is not an actionable claim, because the Section clearly excludes such a debt. A debt is a liquidated money obligation which is usually recoverable by a suit. To create a debt, first of all, there must be a liquidated or definite sum which is actually due. For example, arrears of rent due. The term debt may also include a sum of money which is due in the sense that it exists, but is not actually payable until a later date. Another essential of an actionable claim is that it is not in possession of a person and the person can claim such a debt by bringing an action in a Court of law. As for instance, arrears of rent due; money due under the Insurance Policy; a partner's right to sue for accounts of dissolved partnership.
The Section also says that it must be a claim to any debt which the Civil Courts recognize as affording grounds for relief to the person who claims it.
Question 4 .
(a) Discuss the essential ingredients of an arbitral award. On what grounds may an
award be challenged before the court under the provisions of the Arbitration and
Conciliation Act, 1996? (8 marks)
(b) Differentiate between the following in the context of the Code of Civil Procedure, 1908:
(i) 'Set off, 'counter claim' and 'equitable set off.
(ii) 'Reference', 'review' and 'revision'. (4 marks each)
Answer 4(a)
The definition of arbitral award under Section 2(1 )(c) of the Arbitration and Conciliation Act,1996 does not give much details of an arbitral award. It says "arbitral award" includes an interim award. In fact, an award is a document incorporating the adjudication or determination of a matter in dispute by the person competent to adjudicate and determine the dispute. An arbitral award is such adjudication by the arbitral Tribunal to whom dispute is referred.
Essential Ingredients: As per Section 31 of the Arbitration and Conciliation Act, 1996 an arbitral award shall be made in writing and shall be signed by the members of he arbitral Tribunal. If the arbitral Tribunal consists of more than one arbitrator it will be sufficient if the majority of the members of the Tribunal sign it provided reasons are given for the omitted signatures.
An arbitral Tribunal must state reasons for its award except when the parties have agreed that no reasons be given, or when the award is on agreed terms under Section 30 of the Act. The arbitral award shall state its date and the place of arbitration determined according to Section 20 of the Act. After the award is made, a signed copy shall be given to each party.
The arbitral Tribunal may grant interest if the arbitral award is for the payment of money for the period between the date on which the cause of action arose and the date on which the award is made. This is subject to the agreement of the parties to the contrary. The Tribunal may grant interest at a rate as it deems reasonable, on the whole or part of the money found due, for the whole or any part of the period. Award may include directions of the arbitral Tribunal regarding costs of the arbitration.
An award may be challenged before a Court. The 'Court' means the Principal Civil Court of original jurisdiction in a district including High Court exercising its original civil jurisdiction but does not include any Civil Court below the rank of Principal Civil Court. An arbitral award may be challenged on the following grounds under Section 34(2) of the Arbitration and Conciliation Act 1996.
(i) Incapacity of a party.
(ii) Invalidity of the arbitration agreement.
(iii) Party applying was not given proper notice of the appointment of arbitrator or of the arbitral proceedings.
(iv) Award dealing with a dispute not contemplated by or not falling within the terms of the submission to arbitration.
(v) Arbitral Tribunal not properly constituted or the procedure adopted not in accordance with the agreement.
(vi) The subject matter of dispute is not capable of settlement by arbitration under the law.
(vii) Award is in conflict with the public policy.
Sub-section (3) of Section 34 of the Act prescribes the time limit for making an application for setting aside the arbitral award. As per this sub-section, an application cannot be made after three months have elapsed from the date on which the party making that application had received the arbitral award or if a request had been made under Section 33 from the date on which that request had been disposed of by the arbitral Tribunal. The period of three months could be extended to a maximum of 30 days by the Court if it is satisfied that the applicant was prevented by "sufficient cause" from making the application within the said period.
Answer 4(b)(i)
Set-off
Order 8, Rule 6 deals with set-off which is a reciprocal acquittal of debts between the plaintiff and defendant. It has the effect of extinguishing the plaintiff's claim to the extent of the amount claimed by the defendant as a counter claim.
Under Order VIII Rule 6 where in a suit for the recovery of money the defendant claims to sef off against the plaintiff's demand any ascertained sum of money legally recoverable by him from the plaintiff not exceeding the pecuniary jurisdiction of the Court and where both parties fill the same character as in the plaintiff's suit, the defendant may, at the first hearing of the suit, but not afterwards unless permitted by the Court, present a written statement containing the particulars of the debt sought to be set-off.
Counter-claim
A defendant in a suit may, in addition to his right of pleading a set-off under Rule 6, set up by way of counter-claim against the claim of the plaintiff, any right or claim in respect of a cause of action accruing to the defendant against the plaintiff either before or after the filling of the suit but before the defendant has delivered his defence or before the time limited for delivering his defence has expired, whether such counter-claim is in the nature of claim for damages or not. Such counter-claim must be within the pecuniary jurisdiction of the Court. (Order 8, Rule 6A)
Equitable set-off
Sometimes, the defendant is permitted to claim set-off in respect of an unascertained sum of money where the claim arises out of the same transaction, or transactions which can be considered as one transaction, or where there is knowledge on both sides of an existing debt due to one party and a credit by the other party found on and trusting to such debt as a means of discharging it. Generally the suits emerge from cross-demands in the same transaction and this doctrine is intended to save the defendant from having to take recourse to a separate cross-suit. In India distinction between legal and equitable set-off is recognised. Order 8, Rule 6 contains provisions as to legal set-off. Order 8, Rule 6A recognises the counter-claim by the defendant. An equitable set-off can be claimed independently of the Code. The Common Law Courts in England do not recognise equitable claims.
Answer 4(b)(ii)
Section 113, 114, 115 and Orders 46, 47 of Part VIII of Code of Civil Procedure deal with the reference, review and revision.
IGCL-Dec. 2005 10
Reference
The only Court to which a reference can be made is the High Court. Any other Court has the following powers to make a reference under Section 113.
Where the Court is satisfied that a case pending before it involves a question as to the validity of any Act, Ordinance or Regulation or of any provision contained therein, the determination of which is necessary for the disposal of the case, and is of opinion that such Act, Ordinance, Regulation or provision is invalid or inoperative but has not been declared by the High Court to which that Court is subordinate or by the Supreme Court, the Court shall state a case setting out its opinion and the reason therefor and refer the same for the opinion of the High Court. Order 46 Rule 1 provides following conditions for reference:
(i) there must be a pending suit or appeal or execution and there arises a question of law in such suit etc.
(ii) (iii) (iv)
(v)
from decision of such suit there is no appeal. , .: ;,
there is reasonable doubt on such questions. -
the Court draws up a statement of the facts of the case and the point on which doubt is entertained, the Court express its own opinion on the point.
The purpose of Section 113 is to enable the subordinate Court, to obtain in non-appealable cases the opinion of High Court on question of law for doing justice to the parties.
Review
Section 114 and Order 47 Rule 1 of the Code confer the right of review. These provisions provide that any person aggrieved by a decree or order may apply for review of the judgement of the Court which passed the decree on the .following grounds:
(i) discovery by the applicant of new and important matter or evidence which after the exercise of due diligence, was not within his knowledge or could not be produced by him at the time when the decree was passed or order made; or
on account of some mistake or error apparent on the face of the record; or for any other sufficient reason, and the Court may make such orders thereon as Jt thinks fit.
Revision
Section 115 of the Code provides that the High Court may call for the record of any case which has been decided by the Court subordinate to such High Court and in which no appeal lies thereto, and if such subordinate Court appears -(i) to have exercised a jurisdiction not vested in it by law; or (ii) to have failed to exercise a jurisdiction so vested; or (iii) to have acted in the exercise of its jurisdiction illegally or with material
irregularity. The High Court may make such orders as it thinks fit. Question 5
(a) Discuss in brief the procedure for formation and registration of a society under
the Societies Registration Act, 1860. (5 marks)
(b) Briefly explain the law relating to the place for registering documents pertaining
to land and other documents. (5 marks)
(c) Explain the following terms under the Information Technology Act, 2000: (i) Digital signatures, (ii) Originator.
(Hi) Asymmetric crypto system. (2 marks each)
Answer 5(a)
Under the Societies Registration Act, 1860, a society may be formed by any seven or more persons associated for any literary, scientific or charitable purposes or for any other purpose as specified in Section 20 of the Act by subscribing their names to a memorandum of association containing the :
(a) name of the society;
(b) objects of the society;
(c) names and addresses and occupations of the governors, council directors, committee, or other governing body to whom by the rules of the society, the management of its affairs is entrusted.
A fee of Rs.50/- is to be paid to the Registrar for every such registration. A society may get itself registered with the Registrar of Joint Stock companies by filing:
(i) a copy of the memorandum of association;
(ii) a copy of the rules and regulations of the society certified as correct by not less than three members of the governing body; and
(iii) by paying the prescribed fee (Section 1 & 2).
Before registering a society, the Registrar must satisfy that the memorandum as required by the law has been field i.e., the memorandum has been signed by at least seven persons and the copy of the rules and regulations of the society must on the face of it bear the signature of not less than three of the members of the governing body. Thereupon the society is registered under this Act. (Section 3)
Answer 5(b)
Section 28 of the Registration Act, 1908 provides that documents affecting immovable property mentioned in Section 17(1)(a)(b)(c)(d) and (e), and Section 17(2), etc. shall be presented for registration in the office of a Sub-Registrar within whose sub-district the whole or some portion of the relevant property is situated.
Regarding other documents, it has been stipulated under Section 29 of the Act that every document not being a document referred to in Section 28 or a copy of the decree or order, may be presented for registration either in the office of the Sub-Registrar in whose sub-district the document was executed, or in the office of any other Sub-Registrar under the State Government at which all the persons executing and claiming under the document desire the same to be registered.
Answer 5(c)(i)
"Digital Signature" under Section 2(1 )(p) of the Information Technology Act, 2000 means authentication of any electronic record by a subscriber by means of an electronic method or procedure in accordance with the provisions of Section 3.
Section 3 deals with authentication of electronic records. This section provides the conditions subject to which an electronic record may be authenticated by means of affixing digital signature. The digital signature is treated in two distinct steps. First the electronic record is converted into a message digest by using a mathematical function known as "hash function" which digitally freezes the electronic record thus ensuring the integrity of the content of the intended communication contained in the electronic record. Any tempering with the contents of the electronic record will immediately invalidate the digital signature. Secondly, the identity of the person affixing the digital signature is authenticated through the use of private key which is attached to the message digest and which can be verified by any person who has the public key corresponding to such private key. This will enable any person to verify whether the electronic record is retained intact or has been tampered with. It will also enable a person who has a public key to identify the originator of the electronic message.
Answer 5(c)(ii)
"Originator" under the Information Technology Act, 2000 means a person who sends, generates, stores or transmits any electronic message or causes any electronic message to be sent, generated, stored or transmitted to any other person, but does not include an intermediary. [Section 2(1)(za)J Answer 5(c)(iii)
Under Section 2(1 )(f) of the Information Technology Act, 2000, "asymmetric crypto system" means a system of a secure key pair, consisting of a private key for creating a digital signature and a public key to verify the digital signature. Question 6
(a) Ashok contracts to buy Bhushan's business at the amount to be determined
by two valuers, one to be named by Ashok and the other by Bhushan. Both
Ashok and Bhushan name their,respective valuers. Before the valuation is
made, Ashok instructs his valuer not to proceed. Can Bhushan specifically
enforce this contract? . (5 marks)
(b) Arjun executed a power of attorney both in his personal capacity and in his
capacity as an executor, trustee, manager and liquidator in favour of Bheem.
Decide the liability of duty payable on the instrument. (5 marks)
(c) Aj'ay, a trustee, of a plot of land worth Rs. 1 lakh, though not authorised by
the deed of trust to sell the trust property, sells it for Rs. 2 lakh with the
intention to invest the money in a more profitable manner. Whether the sale
by the trustee is valid? Give reasons. (6 marks)
Answer 6(a)
Section 14(1)(b) of the Specific Relief Act, 1963 provides that a contract which runs into such minute and numerous details or which is dependant upon the personal qualification or volition of the parties or a contract from its nature is such that the court cannot enforce specific performance of its material terms cannot be specifically enforced.
In the present problem, Bushan cannot specifically enforce the contract as the contract from its nature.is such that it cannot be specifically enforced.
Answer 6(b)
Under Section 5 of the Indian Stamp Act, 1899 an instrument comprising or relating to several distinct matters is chargeable with the aggregate amount of the duties with which each separate instrument, relating to one of such matters, would be chargeable under the Act.
The facts of the given problem resemble to the case of Member, Board of Revenue v. Archur Paul Benthall, AIR 1956 SC 35. In this case it was held that where a person is an executive or administrator and signs an instrument containing a disposition by him in his personal capacity and a/so a disposition as executor, the two capacities are different. The court held that the power appertained to several distinct matters, distinct transactions and the power was chargeable with the aggregate amount of duty payable as if separate instruments were executed in respect of each of these capacities.
Answer 6(c)
One of the duties of the trustee is to execute the trust and obey the directions given in the instrument of the trust. That apart, under Section 36 of the Indian Trusts Act, 1882 dealing with general authority of trustee, a trustee may do all acts which are reasonable and proper for the realization, protection or benefit of the trust property and for the protection or support of a beneficiary who is competent to contract.
It may be pointed out that this is in addition to the powers expressly conferred by this Act and by the instrument of trust and subject to the restrictions contained in such instrument.
In the light of the legal provisions mentioned above, the sale by trustee is not valid.
Question 7
(a) Sohan is tried summarily by the metropolitan magistrate on the charge of committing theft and is sentenced to undergo imprisonment for a period of four months. Can Sohan challenge the decision? If so, on what grounds?
(5 marks)
(b) On the occasion of birthday of Rajat, his father Govind gives a plot of land to
him for life and after his death to his wife Sujata for life. He stipulates that
after the death of both Rajat and Sujata, their eldest unborn son will get the
property for life. After the death of eldest son, the land will be enjoyed by their
younger son absolutely. Decide the validity of the transfer. (5 marks)
(c) Under what circumstances the opinion of the third person becomes relevant
under the Indian Evidence Act, 1872? (6 marks)
Answer 7(a)
Under Section 260 of the Criminal Procedure Code, 1973, a Chief Judicial Magistrate has been authorized to try summarily any one or all the offences stipulated therein. The offences stipulated under Section 260 of the Code inter alia include theft under Section 379, 380 or 381 of the Indian Penal Code where the value of the property stolen does not exceed two hundred rupees.
Therefore, Sohan can challenge the decision of the Chief Judicial Magistrate under Section 262(2) of the Cr. P.C.
Answer 7(b)
As per Section 13 of the Transfer of Property Act, where on a transfer of property, an interest therein is created for the benefit of a person not in existence at the date of the transfer, subject to a prior interest created by the same transfer, the interest created for the benefit of such person shall not take effect unless it extends to the whole of the remaining interest of the transferor in the property.
In the present case, the interest so created for the benefit of the eldest unborn son does not take effect because the transfer doesn't extend to the whole of remaining interest in the property since he is getting only a life interest and not absolute interest. The transfer in favor of younger unborn son also fails because as provided in Section 16 of the T.P Act that if an interest is intended to take effect after or upon the failure of a prior interest by reason of the rules contained in SectJons13 and 14, in such a case when prior interest fails, the subsequent interest also fails. Answer 7(c)
The general rule is that opinion of a witness on a question whether of fact or of
(i) Opinions of experts: As per Section 45 of the Evidence Act, 1872 when the
court has to form an opinion upon a point of foreign law or of science, or art,
or as to identity of handwriting or finger impressions, the opinions upon that
point of persons specially skilled in such foreign law, science or art, or in
questions as to identity of handwriting or finger impressions are relevant facts.
Illustrations (a)
The Code also provides under Section 262(2) that no sentence of imprisonment exceeding
three months shall be passed in the case of any conviction in summary trials.
The question is, whether the death of A was caused by poison.
The opinions of experts as to the symptoms produced by the poison by
which A is supposed to have died, are relevant.
The question is, whether a certain document was written by A. Another
document is produced which is proved or admitted to have been written
by A.
The opinions of experts on the question whether the two documents were written by the same person or by different persons, are relevant. Similarly the opinions of experts on typewritten documents as to whether a given document is typed on a particular typewriter is relevant.
Facts which support or are inconsistent with the opinions of experts are also made relevant. (Section 46)
Others: In addition to the opinions of experts, opinion of any other person is also relevant in the following cases :
(a) Opinion as to the handwriting of a person if the person giving the opinion is acquainted with the handwriting of the person in question; (Section 47)
(b)
(b) Opinion as to the digital signature of any person, the opinion of the Certifying Authority which has issued the Digital Signature Certificate; (Section 47A)
(c) Opinion as to the existence of any general right or custom if the person giving the opinion is likely to be aware of the existence of such right or custom; (Section 48)
(d) Opinion as to usages etc. words and terms used in particular districts, if the person has special means of knowledge on the subject; (Section 49)
(e) Opinion expressed by conduct as the existence of any relationship by persons having special means of knowledge on the subject. (Section 50)
Question 8
(a) Rajan, a member of the society registered under the Societies Registration Act, 1860, is in arrears of subscription for the last six months which he is bound to pay according to the rules.' He wants to attend the special meeting of the society and to vote for a resolution to be put therein. Advise Rajan. (5 marks)
(b) Amar and Bimal are jointly tried for the murder of Roshan. It is proved that Amar
said, " Bimal and I murdered Roshan". Can the 'court consider the effect of this
confession as against Bimal? Give reasons. (6 marks)
(c) Anubhav owes Rs. 10,000 to the partnership firm of Bose and Chander. Bose dies leaving Chander surviving. Anubhav sues Chander for a debt of Rs. 15,000 due in his individual capacity. Can Chander set off the debt of Rs. 10,000?
(6 marks) Answer 8(a)
According to Section 15 of the Societies Registration Act, a member is a person who is admitted to the Society according to the rules and regulations thereof and who has paid a subscription or has signed the roll or list of members and has not resigned in accordance with the rules and regulations. But a person shall not be counted as a member and shall not be entitled to vote whose subscription at the time shall have been in arrear for a period exceeding three months.
In view of the above mentioned legal provisions, Rajan can not attend the special meeting and vote for the resolution.
Answer 8(b)
In the case of joint trial, the court may consider the effect of this confession as against Bimal. Section 30 of the Indian Evidence Act dealing with the confession of a co-accused says:
When more persons than one are being tried jointly for the same offence, and a confession made by one of such persons affecting himself and some other of such person is proved, the court may take into consideration such confession as against such other person as well as against the person who makes such confession.
Answer 8(c)
The case pertains to legal set off. To constitute legal set off, following conditions must be present:
1. The suit must be for recovery of money.
2. The defendant must claim ascertained money.
3.- The ascertained sum of money should be legally recoverable.
4. The sum of money so claimed should be within the pecuniary jurisdiction of the court.
In the present problem, all the requirements mentioned above are present. Therefore, Chander may set off the debt of Rs. 10,000.
INTERMEDIATE EXAMINATION
DECEMBER 2006
GENERAL AND COMMERCIAL LAWS
Time allowed: 3 hours Maximum marks: 100
NOTE: Answer SIX questions including Question No. 1 which is COMPULSORY.
Question 1
(a) Preferential treatment to certain persons belonging to backward classes in the form of reservation in education and jobs as provided in Articles 15(4) and 16(4) of the Constitution of India is a mean of ensuring the canon of equality enshrined in the preamble of the Constitution of India. Evaluate the statement. (8 marks)
(b) Write a note on'preventive detention'. - (6 marks)
(c) What are the fundamental duties imposed on the citizens of India ? (6 marks)
Answer 1 (a)
The preamble to the Constitution in nutshell contains its ideals and its aspirations. !t secures inter-alia to all its citizens - justice, social, economic and political and equality of status and of opportunity.
To achieve these ideals clausb j(4) was added to Article 15 by Constitution (First Amendment) Act, 1951 which qualified the principle laid down in Article 15(1) that the State shall not discriminate against any citizen on grounds only of religion, race, caste, sex, place of birth or any of them. However, Article 15(4) provides .that nothing in this Article shall prevent the State from making special provision for the advancement of any (a) socially and educationally backward classes of citizens; (b) scheduled castes, and (c) Scheduled tribes.
Similarly, Article 16(1) declares that there shall be equality of opportunity for all citizens in matters of employment or appointment to any office under the State; but Article 16(4) qualifies this declaration by stating that nothing in this Article shall prevent the State from making any provision for the reservation of appointments or posts in favour of any backward class of citizens which is not adequately represented in the services under the State. The power conferred on the State can only be exercised in favour of a backward class and therefore, whether a particular class of citizens is backward, is an objective factor to be determined by the State. While the State has necessarily to ascertain whether a particular class of citizens is backward or not, having regard to acceptable criteria, it is not the final word on the question; States determination is justiciable and may be challenged if it is based on irrevalent considerations \Triloki Nath Tiku v. State of J & K, AIR, 1967 SC 1283).
The two most contentious issues in the application of Article 15(4) as well as Article 16(4) have been : (i) determination of backward classes and (ii) the extent or quantum of reservation. Although Article 16(4) does not qualify 'backward class of citizens' as does Article 15(4) by the words 'socially and educationally', the problem of determining such classes is similar under both the provisions.
The definition of backward classes has not been given anywhere in the Constitution. No agreed formula has yet been found. As a mater of fact each State is experimenting with differnt tests influenced by social and political considerations as well as judicial decisions.The Courts review State decisions and arrangements in this regard to ascertain if proper criteria for determining the backward classes have been adopted.
In Indira Sawhney v. Union of India, 1992 Supp (3) SCC 217, the Supreme Court has confirmed that now Clause (4) of Article 15 enables the State to make special provisions for advancement of socially and educationally backward classes of citizens or for scheduled castes and scheduled tribes. Such provisions include reservations or quotas and can be made in the exercise of executive powers without only legislative support.Earlier the Supreme Court had held that although the Directive Principles of State Policy embodied in Article 46 of the Constitution lays down that the State should promote with special care the educational and economic interests of the weaker sections of the people and protect them from social injustice, the Directive Principles of State. Policy have to conform to and run as subsidiary to the Chapter of fundamental rights. (State of Madras v. Champakam Dorairajan, AIR 1952 SC 226).
On the question of quantum of reservation, the Supreme Court in M.R. Balajiv. State of Mysore, AIR 1963 SC 649 laid down that a special provision contemplated by Article 15(4) like reservation of posts and appointments contemplated by Article 16(4) must be within reasonable limits.....a special provision should be less than 50 per cent. In Mandal Commission case i.e. (Indira Sawhney's case), the Supreme Court upheld the validity of a total of 49.5 per cent reservation. It was further clarified in this case that Articles 15(4) and 16(4) are not exceptions to clauses (1) and (2) of those Articles or to Article 14. They are rather means of achieving right to equality enshrined in those Articles and also in the preamble to the Constitution. Thus, it is correct to hold that preferential treatment to certain persons in the form of reservation in jobs and education is a means to obtain the principle of equality.
Answer 1(b)
Preventive detention differs from the ordinary or punitive detention both in respect of its purpose and its justification. Preventive detention means the detention of a person without trial in such circumstances that the evidence in possession of the authority is not sufficient to make a legal charge or to secure the conviction of the detenu by legal proof but may still be sufficient to justify his detention.The object of preventive detention is not to punish a man for having done something but to intercept him before he does it and to prevent him from doing it. No offence is proved nor any charge formulated. The justification of such detention is suspicion or reasonable probability of the impending commission of the prejudicial act and not criminal conviction which only can be warranted by legal evidence. (Gopalan v. State of Madras, 1950 SCR 88)
Article 22 of the Constitution guarantees the fundamental right relating to protec¬tion against arrest and detention in certain cases. Article 22 contains seven clauses. Clauses (1) and (2) lay down the procedure that has to be followed when a person is arrested.Thereafter, clauses (4) to (7) deal with preventive detention.
While providing safeguards against preventive detention, Article 22(4) of the Consti¬tution stipulates a limit of three months of prevention detention unless the Advisory Board recommends, before the three months period that there is sufficient cause for the continuation of the detention. The maximum period of detention has to be fixed by the appropriate law made by Parliament.
Article 22(5) casts a dual obligation on the detaining authority—(a) to communicate to the detenu the grounds on which the detention order has been made; (b) to give him the earliest opportunity to make representation against the order of detention.
Under clause (6) a wide latitude is given to the authority in the matter of disclosure. They are given a special privilege in respect of facts which are considered not desirable to be disclosed in public interest.
Article 22(7) empowers Parliament to prescribe the maximum period of detention. !t has been held that no preventive detention law can be made under Article 22(4) unless Parliament prescribes the maximum period of detention under clause 7.
Answer 1(c)
The 42nd Amendment made to the Constitution in 1976 introduced fundamental duties under Article 51 A. The fundamental duties are imposed only on citizens. They owe these duties to the State. According to Article 51A of the Constitution, it shall be the duty of every citizen of India:-
(a) to abide by the Constitution and respect its ideals and institutions, the National Flag and the National Anthem;
(b) to cherish and follow the noble ideals which inspired our national struggle for freedom;
(c) to uphold and protect the sovereignty, unity and integrity of India;
(d) to defend the country and render national service when called upon to do so;
(e) to promote harmony and the sprit of common brotherhood amongst all the people of India transcending religious, linguistic and regional or sectional diversities; to renounce practices derogatory to the dignity of women;
(f) to value and preserve the rich heritage of our composite culture;
(g) to protect and improve the natural environment including forests, lakes, rivers and wildlife, and to have compassion for living creatures;
(h) to develop the scientific temper, humanism and the spirit of inquiry and reform; (i) to safeguard public property and to abjure violence;
(j) to strive towards excellence in all spheres of individual and collective activity so that the nation constantly rises to higher levels of endeavour and achievement.
Fundamental Duties cannot be enforced by writs. They can be promoted only by constitutional methods.
Question 2
(a) Write short note on 'temporary injunctions'and 'interlocutory orders'. (* marks)
(b) Within what period different kinds of instruments chargeable with stamp duty
but executed out of India may be stamped ? (4 marks)
(c) Distinguish between the following:
(i) 'Summons cases'and'warrant cases'.
(ii) 'Pleader'and'public prosecutor'. (4 marks each)
Answer 2(a)
Temporary Injunctions and Interlocutory orders
A temporary injunction is such as is to continue until a specified time, or until the further order of the court. It may be granted at any stage of the suit.
Under the Civil Procedural Code, the Court may grant temporary injunction to restrain any such act (as set out below) or make such other order for the purpose of staying and preventing the wasting, damaging, alienation or sale or removal or disposition of the property or dispossession of the plaintiff, or otherwise causing injury to the plaintiff in relation to any property in dispute in the suit; where it is proved by affidavit or otherwise:
(a) that any property in dispute in a suit is in danger of being wasted, damaged or alienated by any party to the suit, or wrongfully sold in execution of a decree, or
(b) that the defendant threatens, or intends to remove or dispose of his property with a view to defrauding his creditors, or
(c) that the defendant threatens to dispossess the plaintiff or otherwise cause injury to the plaintiff in relation to any property in dispute in the suit.
It would be necessary for the plaintiff to satisfy the Court that substantial and irreparable harm or injury would be suffered by him if such temporary injunction (till the disposal of the suit) is not granted and that such loss of damage or harm cannot be compensated by damages. (Order XXXIX, Rules 1 and 2, Civil Procedure Code). Interlocutory orders
Interlocutory means something intervening or happening between the commencement of legal proceedings and their termination. Interlocutory order denotes merely order of a purely interim or temporary nature which does not decide or touch the important rights or liabilities of the parties. [AmarNath v. State of Haryana, AIR (1977) SC 2185].
The Court may, on the application of any party to a suit order the sale, by any person named in such order, and in such manner and on such terms as it thinks fit, of any movable property, being the subject-matter of such suit, or attached before judgement in such suit, which is subject to speedy and natural decay, or which for any other just and sufficient cause it may be desirable to be sold at once. (Order XXXIX Rule 6 Civil Procedure Code.
Answer 2(b)
According to Section 18 of the Indian Stamp Act, every instrument chargeable with duty executed only out of India and (not being a bill of exchange or promissory note) may be stamped within three months after it has been first received in India. Section 18(2) provides that whe a such instrument cannot with reference to the description of stamp prescribed therefor, be duly stamped by a private person, it may be taken within the said period of three months to the Collector who shall stamp the same in such a manner as the State Government may by rule prescribe, with a stamp of that value as the person so taking such instrument may require and pay for. Where an instrument is brought to the Collector after the expiry of three months, the Collector may, instead of declining to stamp it, validate it under Sections 41 and 42 if he is satisfied that the omission to stamp in time was due to a reasonable cause.
Answer 2(c)
(i) Summons cases and Warrant cases
Under the Criminal Procedure Code 1973 "summons case" and "warrant case" has been defined as follows:
"Summons case" means a case relating to an offence and not being a warrant case. [Section 2(w)]
A "warrant case" means a case relating to an offence punishable with death, imprisonment for life or imprisonment for a term exceeding two years. [Section 2(x)]
Actually summons cases are those cases which are punishable with imprisonment for a term not exceeding two years.
Warrant case relates to serious offences for which severe punishment has been stipulated. Thus, a case assumes the character of a 'summons case' or a 'warrant case' according to the nature and measure of punishment which the law prescribes for the offence.
(ii) Pleader and Public Prosecutor
Pleader as per Section 2(q) of the Cr. PC, means a person authorised by or under any law for the time being in force, to practise in such Court and includes any other person appointed with the permission of the Court to act in such proceeding. It is an inclusive definition and a non-legal person appointed with the permission of the Court will also be included. In T.C. Mathani v. Distt. & Sessions Judge Thiruvananthapuram (1999 Cr. LJ 2092 SC) the Supreme Court has explained that an agent who is power of attorney holder cannot become a pleader for the party unless the party secures permission from the Court to appoint him to act in such proceedings.
According to Section 2(u) of the Cr.P.C. "public prosecutor" means any person appointed under Section 24, and includes any person acting under the directions of a Public Prosecutor.
Public prosecutor though an executive officer is, in a larger sense, also an officer of the Court and he is bound to assist the Court with his fair views and fair exercise of his functions. A public prosecutor represents the State in whose name the prosecution is conducted.
Question 3
(a) Discuss the principle of estoppel and state the conditions of its applicability.
(5 marks)
(b) Explain primary and secondary evidence of documents. When may secondary
evidence be given ? (5 marks)
(c) Describe the conditions and procedure for the dissolution of a society registered under the Societies Registration Act, 1860. (6 marks)
Answer 3(a) Principle of Estoppel
A person who has expressly made a verbal representation, on the faith of which another has acted, shall not afterwords be allowed to contradict his former statement, in order to profit by that conduct which he has induced. The principle of estoppel says that a man cannot approbate and reprobate, or that a man cannot blow hot and cold, or again that a man shall not say one thing at one time and later on say a different thing.
Section 115 of the Evidence Act incorporates this rule, which reads that when one has, by his declaration, act or omission, intentionally caused or permitted another person to believe a thing to be true and to act upon such belief, neither he nor his representative shall be allowed, in any suit or proceeding between himself and such person or his representative, to deny the truth of that thing.
Conditions of its Applicability
To bring the case within the scope of estoppel there must be :
(a) Representation by a person or his authorized agent to another in any form - a declaration, act or omission;
(b) The representation must have been of the existence of a fact and not of promise de futuro or intention which might or might not be enforceable in contract;
(c) The representation must have been meant to be relied upon;
(d) There must have been belief on the part of the other party in its truth;
(e) There must have been action on the faith of that declaration, act or omission, that is to say, the declaration, act or omission must have actually caused another to act on the faith of it, and to alter his former position to his prejudice or detriment;
(f) The misrepresentation or conduct or omission must have been the proximate cause of leading the other party to act to his prejudice;
(g) The person claiming the benefit of estoppel must show that he was not aware of the state of things. If he was aware of the real state of affairs or had means of knowledge, there can be no estoppel;
(h) Only the person to whom representation was made or for whom it was designed can avail himself of it.
A person is entitled to plead estoppel in his own individual character and not as representative of his assignee.
Answer 3(b)
Primary and Secondary Evidence of Documents
"Primary evidence" as per Section 62 of the Indian Evidence Act means the document itself produced for the inspection of the Court. Where document is executed in several parts, the Explanation to the section says each part is primary evidence of the document.
7 IGCL-December2006 Where a document is executed in counterpart, each counterpart being executed by one or same of the parties only, each counterpart is primary evidence as against the parties executing it. When a number of documents are all made by one uniform process, as in the case of printing, lithography or photography, each is primary evidence of the contents of the rest.
Secondary evidence is generally in the form of compared copies, certified copies or copies made by such mechanical processes as in themselves ensure accuracy. Section 63 defines the kind of secondary evidence permitted by the Act. According to Section 63 of the Indian Evidence Act, "secondary evidence" means and includes.
(1) certified copies given under the provisions hereafter contained;
(2) copies made from the original by mechanical processes which in themselves ensure the accuracy of the copy, and copies compared with such copies;
(3) copies made from or compared with the original;
(4) counterparts of documents as against the parties who did not execute them;
(5) oral accounts of the contents of a document given by some person who has himself seen it.
Secondary evidence may be given: •
(i) when the original is in the possession of the person against whom it is to be proved.
(ii) when the existence of the original has been admitted by the person against whom it is to be proved;
(iii) when original has been destroyed or lost;
(iv) when the original is not easily movable;
(v) when a certified copy of original is permitted by Act;
(vi) when the originals consist of numerous accounts.
Answer 3(c) Dissolution of a Society
Section 13 of the Societies Registration Act deals with the dissolution of Societies. To dissolve a Society, a general meeting of the members shall be convened. In that meeting the proposal to dissolve the Society shall be placed and it should be agreed by not less than three-fifths of the members by votes delivered in person or by proxy and thereupon it shall be dissolved forthwith or at the time agreed by not less than three-fifths of the members determining the dissolution. Steps shall be taken for the disposal and settlement of the property of the Society and its claims and liabilities, according to the rules of the Society. If there are no such rules, the governing body shall act expediently in the matter as it thinks appropriate.
In the event of any dispute arising among the said governing body or the members of the Society, the adjustment of its affe'rs shall be referred to the Court who shall make the order in this respect.
If any Government is a member of or a contributor to or otherwise interested in any Society registered under this Act, no dissolution shall take place without the consent of
IGCL- December 2006
the Government of the State of registration. In Ram Charan Agarwala v. Shridhar Misra, AIR 1952 ALL. 610, it has been held that if the Government happens to be a member of the Society, its consent has to be obtained.
However, if upon the dissolution of the Society there remains any property whatsoever after satisfying all debts and liabilities, the property or profits shall not be distributed among the members but shall be given to some other Society as is determined by votes of not less than three-fifths of the members present personally or by proxy at the time of the dissolution or if no such decision exists then by a Court.
Question 4
(a) ABC Ltd. is a pharmaceutical company having its corporate office in Mumbai.
XYZ Ltd., another pharmaceutical company, is carrying on pharmaceutical
business at Nagpur. XYZ Ltd. published an advertisement at Bangalore
constituting infringement of the registered trade mark of ABC Ltd. ABC Ltd.
intends to institute a suit for damages against XYZ Ltd. Advise where ABC Ltd.
should institute the suit. (5 marks)
(b) Sumesh, a sub-inspector of police, comes to know from a secret source that
five persons, staying in a house with deadly weapons in Kanpur, are planning to
commit murder of Gabbar, a resident of a nearby house. Sumesh apprehends
that those five persons will commit the crime at any moment. Sumesh, sub-
inspector of police, goes to that house where those five persons were staying
and arrests them along with weapons in their possession, without any warrantor
order from the magistrate. Is the arrest of all the five persons valid ? Give
reasons. (5 marks)
(c) Define the following under the Information Technology Act, 2000:
(i) Computer network, (ii) Intermediary.
(3 marks each)
Answer 4(a)
Section 20 of the C.P.C provides that subject to the limitations provided by Sections 15,16,18 and 19, every suit shall be instituted in a Court within local limits of whose jurisdiction the defendant, or each of the defendants (where there are more than one defendant) actually and voluntarily resides or carries on business or personally works for gain; or
any of the defendants, where there are more than one at the time of the commencement of the suit, actually and voluntarily resides or carries on business or personally works for gain, provided either the leave of the Court is obtained or the defendant(s) who do not reside or carry on business or personally work for gain at such place acquisce in such institution; or
where the cause of action arises, wholly or in part.
The explanation appended to the Section provides that in the case of a body corporate or company it shall be deemed to carry on business at its sole or principal office in India, or in case of any cause of action arising at any other place, if it has a subordinate office, at such place.
In the light of the legal provisions mentioned above, ABC Ltd. can file the suit for damages against XYZ Ltd, in the court within local limits of whose jurisdiction the defendant resides or carries on business. In the instant case it is Nagpur where the defendant company is carrying on business.
ABC Ltd. can also institute the suit against XYZ Ltd *at Bangalore where the cause of action arose (i.e., where advertisement constituting infringement was published). Both the options are available to the company.
Answer 4(b)
The arrest of all the persons is valid. Section 149 of the Code of Criminal Procedure, 1973, authorises a police officer to prevent the commission of any cognizable offence. If the police officer receives the information of a design to commit such an offence, he can communicate such information to his superior police officer and to any other officer whose duty it is to prevent or take cognizance of the commission of any such offence. The police officer may arrest the person without orders from Magistrate and without a warrant if the commission of such offence cannot be otherwise prevented.
In the given case, the five persons were planning to commit the murder of Gabbar and to prevent the commission of such offence he arrested them. In view of the legal provisions mentioned above, the arrest of all the five persons by Sumesh, the sub-inspector of police is valid. Answer 4(c) (i) Computer network
Computer network is an inter connection of one or more computers through various modes. As per Section 2(1) (j) of the Information Technology Act, 2000 "computer network" means the interconnection of one or more computers through -
(a) the use of satellite, microwave, terrestrial line or other communication media; and
(b) terminals or a complex consisting of two or more interconnected computers, whether or not the interconnection is continuously maintained.
(ii) Intermediary
An intermediary is a person who undertakes to discharge various functions such as sending, receiving, storing or any other service with respect to any data message on behalf of another person.
According to Section 2(1 )(w) of the Information Technology Act "intermediary", with respect to any particular electronic message, means any person who, on behalf of another person, receives, stores or transmits that message or provides any service with respect to that message.
Questions
(a) Discuss the rule of 'reasonable construction'in the interpretation of statutes.
(5 marks)
(b) "The relief of specific performance of contract is discretionary." Comment.
(5 marks)
(c) Describe the offence of 'hacking' with computer system as provided under the provisions of the Information Technology Act, 2000. Who is the officer competent to investigate an offence underthe Information Technology Act, 2000 ? (6 marks)
Answer 5(a)
Rule of Reasonable Construction
Normally, the words used in a statute have to be construed in their ordinary meaning, but in many cases, judicial approach finds that the simple device of adopting the ordinary meaning of words, does not meet the ends as a fair and reasonable construction. Exclusive reliance on the bare dictionary meaning of words' may not necessarily assist a proper construction of the statutory provision in which the words occur. Often enough interpreting the provision, it becomes necessary to have regard to the subject matter of the statute and the object which it is intended to achieve.
According to this rule, the words of a statute must be construed ut res magis valeat quampareat, so as to give a sensible meaning to them. A provision of law cannot be so interpreted as to divorce it entirely from common sense; every word or expression used in an Act should receive a natural and fair meaning.
It is the duty of a court in constructing a statute to give effect to the intention of the legislature. If, therefore, giving of literal meaning to a word used by the draftsman particularly in penal statute would defeat the object of the legislature, which is to suppress a mischief, the Court can depart from the dictionary meaning which will advance the remedy and suppress the mischief.
Answer 5(b)
Section 20 of the Specific Relief Act, 1963 lays down that the jurisdiction to grant decree for specific performance of contract is discretionary, and the court is not bound to grant such relief merely because it is lawful to do so. But the power of discretion can not be exercised in an arbitrary manner. This discretion should be based on sound and reasonable grounds guided by judicial principles and capable of correction by a Court of Appeal.
Section 20(2) lays down the following principles on which discretion can be exercised and hence specific performance can be refused by the court.
(i) where the terms of contract or the conduct of the parties at the time of entering into the contract gives the plaintiff an unfair advantage over the defendant; or
(ii) where the performance of contract would involve some hardship on the defendant, which he did not foresee, whereas its non-performance would involve no such hardship to the plaintiff;
(iii) where defendant entered into contract under circumstances which though not rendering the contract voidable, but makes it inequitable to enforce specific performance.
Section 20(3) lays down that Court may properly exercise discretion to decree specific performance in any case where the plaintiff has done substantial acts or suffered losses in consequences of a contract capable of specific performance. Under sub-section (4) of the Section 20 the court shall not refuse to any party specific performance of a contract merely on the ground that the contract is not enforceable at the instance of the other party.
Answer 5(c)
Meaning of the term "hacking" with respect to computer terminology denotes the act of obtaining unauthorised access to a computer system. Hacking is an offence listed under Chapter 11 of the Information Technology Act, 2000, which deals with offences relating to computers etc. and connected matters.
Regarding hacking, Section 66 of the Information Technology Act provides that: (i) Whoever, with intent to cause, or knowing that he is likely to cause, wrongful loss or damage to the public or any person, destroys or deletes or alters any information residing in a computer resource or diminishes its value or utility or affects it injuriously by any means, commits hacking, (ii) Whoever commits hacking, shall be punished with imprisonment upto three
years or with fine which may extend upto two lakh rupees or with both. Only a public officer of the rank of Deputy Superintendent of Police is competent to investigate an offence under the Information Technology Act, 2000.
Question 6
(a) A magistrate of the first class passes a sentence of imprisonment for a term of three years with a fine of Rs.5,000 and in lieu of non-payment thereof, an additional imprisonment for another one year. The convict feels aggrieved by the sentence.
(i) Has the convict any right to appeal against this sentence ?
(ii) Will the situation change, if the sentence is passed by the court of a chief
judicial magistrate ?
Give reasons in support of your answer. . (5 marks)
(b) On 31st December, 1997 Suresh took a loan of Rs. 10,000 from Umesh. He paid Rs.2,000 to him on 16th June, 2001 towards part-payment. After that, Umesh did not receive any amount from Suresh. Subsequently, Umesh instituted a suit for recovery of the dues from Suresh after the expiry of two years from the date of last part-payment. Decide whether Umesh will succeed in his suit.
(5 marks)
(c) Madhav moves an application for setting aside the arbitral award on the ground that he was not given a proper notice of the arbitral proceedings and thereby not being able to present his case. He furnishes sufficient proof and pleads before the court that he received the arbitral award just 15 days back. Decide with reasons —
:retion to decree bstantial acts or
(6 marks)
(i) whether Madhav will succeed in his prayer; and
(ii) whether the law of limitation will not be a bar in his case.
IGCL-December 2006 12
Answer 6(a)
Section 29 of the Code of Criminal Procedure, 1973 specifies the sentencing powers of Magistrates. As per Section 29 of the Code, a Magistrate of the first class may pass a sentence of imprisonment for a term not exceeding three years or of a fine not exceeding five thousand rupees or of both.
Further, the Section specifies that the Court of a Chief Judicial Magistrate may pass any sentence authorised by law except a sentence of death or of imprisonment for life or of imprisonment for a term exceeding seven years.
Section 30 defines the limits of Magistrate's powers to award imprisonment in default of payment of fine. It provides that the Court of a Magistrate may award such term of imprisonment in default of payment of fine as is authorised by law provided that the term:
is not in excess of the powers of the Magistrate under Section 29; and
where imprisonment has been awarded as part of the substantive sentence, it should not exceed 1/4th of the term of imprisonment which the Magistrate is competent to inflict as punishment for the offence otherwise than as imprisonment in default of payment of the fine.
The convict has a right to appeal against the sentence of the First Class Magistrate, since the sentence given by him for default of payment of fine exceeds the limit stipulated under Section 30 of the Code (i.e 1/4th).
The situation will change, as the Chief Judicial Magistrate comparatively is authorized to pass greater sentence than a Magistrate of the first class as mentioned above.
Answer 6(b)
The problem in question is governed by Section 19 of the Limitation Act, 1963. Here in this problem two issues are raised: (i) whether part-payment is an acknowledgement of payment; and (ii) whether a fresh period of limitation is available.
Under Section 19 of the Limitation Act, 1963 it is provided that where payment on account of a debt or of interest on a legacy is made before the expiration of the prescribed period of limitation by the person liable to pay the debt or legacy or by his agent duly authorized in this behalf, a fresh period of limitation shall be computed from the time when the payment was made.
Part payment is acknowledgement by conduct, but as per Section 19 of the Limitation Act it should be made before the expiry of the period of limitation. A fresh period of limitation is available only when part payment is made within the period of limitation.
In this problem, part-payment has not been made within the period of limitation. Therefore, fresh period of limitation will not be available to Umesh. The suit filed by Umesh is not maintainable.
Answer 6(c)
The grounds for setting aside an arbitral award have been spelled out in Section 34(2) of the Arbitration and Conciliation Act, 1996. Section 34(2) of the Arbitration
13 IGCL-December2006
and Conciliation Act, 1996 envisages the following grounds on which an arbitral award may be set aside.
Incapacity of a party; Invalidity of the arbitration agreement; (iii) Party applying not given proper notice of the appointment of the arbitrator or of
the arbitral proceedings; (iv) Award not in accordance with the terms of submission to arbitration in regard to
dispute; (v) Arbitral tribunal not properly constituted or the arbitral procedure not in accordance
with the agreement of the parties or with the Act; (vi) The subject matter of the dispute not capable of settlement by arbitration under
the law; (vii) Award being in conflict with the public policy of India.
Section 34(3) of the Act prescribes a time limit of three months for making an application for setting aside the arbitral award. The prescribed period of three months could be extended to a maximum period of 30 days by the Court if it is satisfied that the applicant was prevented by sufficient cause from making the application within the said period.
If the law on the point is applied to the given problem, the ground on which the Madhav (applicant) makes prayer to set aside the award is found in Section 34(2) (iii). Therefore, the court may set aside the arbitral award or may provide relief in accordance with Section 34(4) of the Act.
The law of limitation shall not create any bar, since the period of limitation has not expired in view of the provisions of Section 34(3).
Question 7
(a) A society is registered under the Societies Registration Act, 1860 for the
renovation of Shiva temples and promotion of preachings of Shaiva School of
Hindu Religion in a State. One member of the society is sued as stranger
because he is in arrears of subscription which he is bound to pay under the rules
of the society. He resists the suit on the ground that the plaintiff society is a
purely religious institution and not a charitable society established for promotion
of science, literature, fine arts, etc., as required by the Societies Registration
Act, 1860. Decide with reason*. (5 marks)
(b) Sohan, a trustee for Mohan, allows the trust to be executed solely by his co-
trustee Rohan. Rohan misappropriates the trust property. Whether Sohan is
personally liable for the loss caused to Mohan ? (5 marks)
(c) Amit transfers his property worth Rs.50,000 to Rohit and by the same deed
asks Rohit to transfer his property worth Rs.25,000 to Sumit. Before Rohit
accepts the property, Amit dies. Rohit refuses to accept the property transferred
by Amit. Discuss the rights of Sumit. . ' , (6 marks)
IGCL- December 2006 Answer 7(a)
The Supreme Court in Hindu Public and Another v. Rajdhani Puja Samithee and others, AIR 1999 SC 964, has held that a society established for a religious purpose can also be registered under the Societies Registration Act, 1860. Charitable purpose under Section 1 and 20 of the Act includes religious purpose.
Therefore in the present problem, a member of the society who is in arrears of contribution can be sued as stranger.
Answer 7(b)
In the present problem, Sohan is personally liable for the loss caused to Mohan. According to Section 15 of the Indian Trusts Act, a trustee is bound to deal with the trust properly as carefully as a man of ordinary prudence would deal with such property if it were his own. The facts of the problem resemble to illustration (h) appended to Section 15.
Answer 7(c)
This problem is based on Section 35 of the Transfer of Property Act i.e. doctrine of election. According to Section 35 of the Transfer of Property Act, in case, a person upon whom benefit is conferred rejects it, the property which was attempted to be transferred to him will revert to the transferor and it is he who will compensate the disappointed person. If the transferor dies before the person upon whom the benefit is conferred and he rejects the transfer, then the heir of the transferor will have to satisfy the disappointed person out of the property which was the subject of transfer.
Sumit is entitled to be compensated by the heirs of Amit from the Amit's property to the extent of Rs. 25,000 because Rohit's property worth Rs. 25,000 was intended by Amit to be transferred to Sumit.
As per the facts of the given case, Rohit has not accepted the property, so he will not take Amit's property and the property will revert to Amit. Had Amit been alive, it was for him to give some property to Sumit. But Amit dies before Rohit could exercise his option. In such a situation, the heirs of Amit have to compensate Sumit from Amit's property to the extent of Rs. 25,000.
Question 8
(a) Ajoy has executed a gift deed in favour of Bijoy. But prior to the registration of
gift deed, Ajoy dies. Ajoy has already given the delivery of possession to Bijoy.
The heirs of Ajoy wished to register the gift. Bijoy's brother objected on the
ground that it being a non-registered gift in the life-time of Ajoy, it cannot be
registered after the death of donor. Decide the validity of gift on the ground of
non-registration of gift deed. (5 marks)
(b) Abhay is a trustee of certain land for Bhanu, Chirag.and Dhiraj. He has been authorised to sell the land to Uday for a specified sum as mentioned in the trust deed. Bhanu, Chirag and Dhiraj, being competent to contract, consent that Abhay may sell the land to Uday for lesser sum. Whether Abhay may sell the land on the specified sum as mentioned in the trust deed or for lesser sum ?
(5 marks)
(c) Which of the following are moveable or immovable properties under the Transfer of Property Act, 1882:
(i) a right to way;
(ii) a factory;
(Hi) a right to collect lac from trees;
(iv) hereditary offices;
(v) growing crops; and
(vi) standing timber. (6 marks)
Answer 8(a)
If the donor dies before registration, the document may be presented for registration after his death and if registered, it will have the same effect as registration in his lifetime.
A gift executed in favour of Bijoy is valid even if it is not registered before the Registrar. Bijoy's brother's objection that gift is not registered is not sustainable. Registration of gift shall be binding from the date of execution of gift and not from the date of registration.
The Privy Council in Kalyana Sundram v. Karuppa, AIR 1927 PC 42, has held that the registration of gift deed of any immovable property shall operate from the date of execution of gift deed. When the instrument of gift has been handed over by the donor to donee and accepted by him, the former has done every thing in his power to complete the donation and to make it effective. If it has been presented before the Registrar for registration within the prescribed time period, the Registrar must register it. Neither death nor express revocation by the donor is ground for refusing registration provided other conditions are complied with.
Answer 8(b)
The given problem is an illustration appended to Section 11 of the Indian Trusts Act. Sections 11 to 22 of the Indian Trusts Act deal with the duties of a trustee. One of the duties of a trustee is to execute the trust. As per Section 11 of the Act, "the trustee should execute the trust and obey the directions given in the instrument of the trust. He can make any modification in these directions only with the consent of all the beneficiaries who are competent to contract".
Abhay can sell the property to Uday even on the lesser sum as the beneficiaries Bhanu, Chirag and Dhiraj being competent to contract have consented that Abhay can sell the property to Uday even on the lesser sum. Hence the sale by Abhay to Uday on lesser sum is valid.
Answer 8(c)
The following are 'immovable property'
(i) a right to way;
(ii) a factory;
(iii) a right to collect lac from trees;
(iv) hereditary offices;
The 'immovable property' does not include:
(v) growing crops
(vi) standing timber.
INTERMEDIATE EXAMINATION
JUNE 2003
GENERAL AND COMMERCIAL LAWS
Time allowed: 3 hours Maximum marks: 100
NOTE : Answer SIX questions including Question No. 1 which is COMPULSORY. .
Question 1
(a) Discuss with reference to case law the right to protection of life and persons
liberty as guaranteed by the Constitution of India. (8 marks,
(b) Explain the doctrine of eclipse. (6 marks,
(c) Explain the powers of the Parliament to make laws on the State list. (6 marks,
Answer 1(a)
Article 21 of the Indian Constitution confers on every person the fundamental
right to life and personal liberty. It says that "no person shall be deprived of his life 01
personal liberty except according to procedure established by law". Thus, Article 21
seeks to prevent encroachment upon personal liberty by the Executive except in
accordance with law and in conformity with the provisions of law. Prior to Menaka
Gandhi v. Union of India, AIR 1978 SC 597, Article 21 was understood to guarantee
the right to life arid personal liberty to citizens only against the arbitrary action of the
executive and not against legislative action. The State could interfere with the liberty
of the citizens if it could support its action by a valid law. But after Menaka Gandhi's
decision, Article 21 now protects the right to life and personal liberty of citizens from
legislative action also on certain grounds, *•"••'•••
"Personal Liberty" under Article 21 means freedom from physical restraint to persons by incarceration or otherwise. It also includes all the varieties of rights which together make up a man's personal liberties other than those which are already included in the various clauses of Article 19. In A.K. Gopalariv. State< of Madras, AIR 1950 SC 27, a narrow meaning was given to the expression "personal liberty" confining it to the liberty of the person, i.e. of the body of a person. This restricted interpretation of the expression "personal liberty" preferred by the majority in A/0 Gopalan's case namely, that the expression "personal liberty" means only liberty relating to or concerning the person or body of the individual, has not been accepted by the Supreme Court in later cases. The expression "personal liberty" is not limited to bodily restraint or to confinement to person only is well illustrated in Kharak Singh v. State of U.P., AIR 1983 SC 1295. In Satwant Singh Sawhneyv. Assistant Passport Officer, New Delhi, AIR 1997 SC 1996, it was held that right to travel abroad is included within the expression "personal liberty" and therefore, ho person can be deprived of his right to travel except according to the procedure established by law. It was reiterated in Maneka Gandhiy. Unipn of IndiQ, AIR 1978 SC 597 that personal liberty within the meaning of Article 21 includes within its ambit the, right to go abroad and no person can be deprived of this right except according to procedure prescribed bylaw.
Procedure established by law: The expression "procedure established by law" means procedure laid down by statute or prescribed by law of the State. The law laid down in A.K. Gopalanv. State of Madras, that .the expression 'procedure established by law' means only the procedure enacted by a law made by the State was held to be incorrect in the Bank Nationalisation case (1970) 1 SCC 248). Subsequently, in Maneka Gandhi's case, it was laid down, that the law must now be taken to be well settled that Article 21 does not exclude Article 19 and a law prescribing a procedure for depriving a person of 'personal liberty' will have to meet the requirements of Article 21 and also of Article 19 as well, and ex-hypothesis of Article 14. Following Maneka Gandhi, the Supreme Court has widened the ambit of Article 21 in many of its decisions as for example, solitary confinement is inhuman (Sun/7 Batra v. Delhi Administration) speedy trial is included in Article 21 (Hussainara Khatoon v. Home Secretary Bihar); detinue's right to have interviews with his lawyers and family members (Francis Coralie v. U.T. of Delhi); right to free legal service (S. Bhowmic's case); non payment of minimum wages is violation of Article 21 (Asiad Project case); right to education (Unnikrishnanv. State ofA.P.); right to information P.P. Ltd. Indian Express Newspapers; right to have free and unpolluted environment (Subhash v. State of Bihar) etc. Thus, Article 21 as interpreted to encompass numerous facets of the human personality go far beyond the narrow concept of physical liberty.
Answer 1(b)
A law made before the commencement of the Constitution remains eclipsed or dormant to the extent it comes under the shadow of the fundamental right, i.e. is inconsistent with it, but the eclipsed or dormant parts become active and effective again if the prohibition brought about by the fundamental rights is removed by the amendment of the Constitution. This is known as the doctrine of eclipse. The significance of Article 13 is that, though an existing law inconsistent with a fundamental right becomes inoperative from the date of the commencement of the Constitution, yet it is not dead altogether.
The doctrine was first evolved in Bhikaji Narain Dhakras v. State of M.P., AIR 1955 SC 781. In this case, the validity of CP and Berar Motor .Vehicles Amendment Act, 1947 (empowering the Government to regulate control and to take up the entire motor transport business), was challenged. The Act was perfectly a valid piece of legislation at the time of its enactment. But on the commencement of the Constitution, the existing law became inconsistent under Article 13(1), as it contravened the freedom to carry on trade and business under Article 19(1)(g). To remove the infirmity, the Constitution (First Amendment) Act, 1951 was passed which permitted creation of State monopoly by law in respect of motor transport business. The Court held that the Article by reason of its language could not be read as having obliterated the entire operation of the inconsistent law or having wiped it altogether from the statute books. In case of a pre-Constitution law or statute, it was held, that the doctrine of eclipse would apply. The Court stated that:
"The true position is that the impugned law became as it were, eclipsed, for the time being, by the fundamental right. The effect of the Constitution (First Amendment) Act, 1951 was to remove the shadow f.nd to make the impugned Act free from all, blemish or infirmity."
Answer 1(c)
The Constitution draws three long lists of all the conceivable legislative subjects. These lists are contained in the VIIth Schedule to the Constitution. List I is named as Union List. List II as the State List and List III as the Concurrent List. With respect to subjects enumerated in the Union List, the Union Parliament has the exclusive power to make laws. The State Legislature has no power to make laws on any of these subjects. Regarding subjects enumerated in the Sate List, the legislature of a State has exclusive power to make laws. Parliament cannot make any law on any of these subjects whether the State makes or does not make any law. For subject stated under Concurrent List, Parliament and the State legislatives have the powers to make laws.
As stated above, State legislatures have the exclusive powers to make laws with , respect to subjects enumerated in the State List. But our Constitution makes a few exceptional circumstances, when Parliament can make laws on State List.
The exceptional circumstances are:
(a) In the National Interest (Article 249): If the Upper House of the Parliament i.e. Council of State (Rajya Sabha) declares by two thirds of its members present and voting, that it is necessary or expedient in the national interest that Parliament should make a law on that matter of State List. Such a resolution is valid for one year unless renewed by a fresh resolution.
(b) During proclamation of emergency (Article 250): While proclamation of emergency is in operation, Parliament shall have the power to make laws for whole or any part of the territory of India on any matter in State List. r
\
(c) Break down of Constitutional Machinery in a State (Articles 356 and 354) (President's Rule in a State): Parliament can make with respect to all State matters as regards a State in which there is a break-down of constitutional machinery and is under Presidential rule.
(d) On request of two or more States (Article 252): If two or more States are desirous that on any particular subject included in the State List, there should be a common legislation, then they may make a request to Parliament to make such a law on that particular subject. Such request shall be made by passing resolution in the legislatures of the concerned States. The law thus made by Parliament can be adopted by other States also.
(e) Legislation for enforcing International Agreements/Treaties/Conventions (Article 253): The Constitution authorizes the Parliament to make any law on any subject included in any list to implement:
(i) any treaty, agreement or convention, with any country or countries; or
(ii) any decision made at any international conference associations or other body.
To implement such decisions, treaty or agreement, the Parliament may have to pass laws sometimes on State subjects also.
Question 2
(a) What is strict and liberal construction of statutes ?
(b) Explain the expression 'specific performance'. Who may obtain specific performance of a contract? Indicate the contracts which cannot be specifically enforced under the Specific Relief Act, 1963. (8 marks each)
Answer 2(a)
Strict and Liberal Construction
In Wiberforce on Statute Law, it is stated that what is - meant by 'strict construction' is that "Acts are not to be regarded as including anything -which is not within their letter as well as their spirit, which is not clearly and intelligibly described in the very words of the statute, as well as manifestly intended", while by 'liberal construction' is meant that "everything is to be done in advancement of the remedy that can be done consistently'with any construction of the statute". Beneficial construction intends to suppress the mischief and advance the remedy is generally preferred.
A court invokes the rule which produces a result that satisfies its sense of justice in the case before it. "Although the literal rule is the one most frequently referred to in express terms, the courts treat all three (viz. the literal rule, the golden rule and the mischief rule) as valid and refer to them as occasion demands, but do not assign any reasons for choosing one rather than another. Sometimes a court discusses all the three approaches. Sometimes it expressly rejects the 'mischief rule' in favour of the 'literal rule'. Sometimes it prefers although never expressly, the 'mischief rule' to the 'literal rule'.
In general, courts give strict interpretation of statutes relating to criminal matters. While interpreting welfare legislations, the Courts take liberal view and interpret them liberally.
Answer 2(b)
One of the remedies for breach of contract is a suit for specific performance of the contract. Specific performance means the carrying out in specie of the subject matter of an agreement. Specific performance of a contract will be enforced by courts only if damages are not an adequate remedy. Section 15 of the Specific Relief Act, 1963 lays..down that the specific performance of contract may be obtained by:
(a) any party thereto;
(b) the representative in interest or the principal, of any party thereto;
(c) where the contract is a settlement on marriage or a compromise of doubtful rights between members of the same family, any person beneficially entitled thereunder;
(d) where the contract has been entered into by tenant for life in due exercise of a power the remainderman;
(e) a reversioher in possession;
(f) a reversioner in remainder;
(g) a new company which arises out of amalgamation with another company;
(h) when the promoters of a company have, before its incorporation, entered into a contract for the purpose of the company and such a contract is warranted by the terms of the incorporation of the company..
According to Section 14 of the Specific Relief Act, 1963 read with Section 20 of the said Act, the court may refuse to grant specific performance of a contract where the case falls within the provisions of these sections such as:
(i) Where the compensation in money is an adequate relief.
(ii) Where the contract runs into minute or numerous details because of which it
would be practically impossible for a court to enforce its decree,
(iii) Where the contract is dependent upon personal qualification or personal
volition as the court cannot enforce material terms of the contract against an
unwilling party with any hope of success, (iv) Where the contract by its very nature is not capable of specific performance
e.g. contract to marry.
(v) Where the specific performance will give undue advantage to the plaintiff, (vi) Where the specific performance would cause unforeseen hardship to the
defendant which he could not foresee.
(vii) Where the specific performance would be inadequate or inequitable, (viii) Contracts to refer the dispute present or future to arbitration shall not be
specifically enforced except as provided under the law of Arbitration.
To sum up, specific relief is an equity remedy not ordinarily granted by courts. It s granted only at the discretion of the court in suitable cases. There are certain contracts enumerated as above which are not at all enforceable specifically. In such cases only compensatory relief (damages) is granted.
Question 3 " ~
(a) How can arrest be effected by the police? When can police arrest a person without warrant? Can a private person cause arrest without warrant?
(bj Discuss the procedure to be followed for arbitral proceedings by an arbitral
' tribunal under the Arbitration and Conciliation Act, '1996. (8 marks each)
Answer 3(a)
Arrest of a person can be effected by the police either with warrant or without warrant. Section 41 of the Cr. P.C. 1973 lays down the circumstances when police may arrest any person without warrant. As per the Section, a police officer may arrest a person without an order from a Magistrate and without a warrant:
(a) who has been concerned in any cognizable offence or against whom reasonable complaint has been made or credible information has been received of his having been so concerned; or
(b) who has in his possession without lawful excuse.any implement of house breaking; or
(c) who has been a proclaimed offender; or
(d) in whose possession stolen property is found and may reasonably be suspected of having committed an offence with reference to such thing; or
(e) who obstructs a police officer while in the execution of his duly or escapes from lawful custody; or
(f) who is a deserter from any of the Armed Forces of the Union; or
(g) who has been concerned in any act committed at any place out of India
which if committed in India would have been punishable as an offence; or (h) who being a released convict commits breach of any rule made under
Section 356(5); or (i) for whose arrest any requisition has been received from another police officer
specifying the person to be arrested and the offence for which the arrest is to
be made.
Under Section 42 of the Code, police can arrest a person without warrant/order when the person fails to give his whereabouts and address.
A private person can arrest a person who in his presence commits a non-bailable and cognizable offence or who is a proclaimed offender and shall without any unnecessary delay make over such arrested person to a police officer. In the absence of a police officer, the person so arrested shall be taken to the custody of the nearest police station. (Section 43)
Answer 3(b)
Sections-23 to 27 of the Arbitration and Conciliation Act, 1996 lay down the procedure to be followed in arbitration proceedings. No such procedure was laid down under the old arbitration Act. The procedure involves:
(i) Statements of claim and defence: The claimant has to submit his claim, consisting of facts supporting the claim, points at issue and the relief or remedy sought - within the period,agreed by the parties, or determined by the arbitral tribunal. Likewise, the respondent has to state the defence in respect of the claims of the claimant. Parties are required to attach to these statements, all relevant documents. They may also add references to the documents or evidence which they will submit later on. Parties may amend or supplement these statements during the proceedings, unless otherwise agreed by the parties or the arbitral tribunal considers it inappropriate to allow the amendment or supplement, due to delay in making it.
(it) Hearings and written proceedings: It is open to parties to agree for holding oral hearings for presentation of evidence and for oral arguments or, alternatively, for conducting proceedings on the basis of documents (such as affidavits). In absence of any such agreement, a decision in this regard may be taken by the arbitral tribunal. Even if the arbitral tribunal decides to conduct arbitration on the basis of documents only, it shall grant an oral hearing at the appropriate stage, on request by a party, unless such oral hearings are barred by agreement by the parties.
The arbitral tribunal shall give adequate advance notice to the parties of any hearing or of any meeting of the tribunal for inspection of documents, goods or property. All documents received and any expert report or document in evidence must be communicated to the parties.
(iii) Default of a party: It is open to the parties to agree to what constitutes a default in the proceedings. In absence of any such agreement, certain situations as stipulated under the Act are regarded as defaults, leading to certain consequences.
(iv) Expert appointment by arbitral tribunal: The arbitral tribunal may appoint one or more experts to report to it, on specific issues to be determined by the arbitral tribunal. The tribunal may require the parties to give to the expert(s), relevant information or to produce or give access to any relevant documents, goods or other property for the experts inspection. The experts reports shall be communicated to the parties, by the arbitral tribunal.
(v) Court assistance in taking evidence: The tribunal, or a party, with the approval of the tribunal, may apply to a court for assistance in taking evidence. Such an application shall specify all details as specified in Section 27(2). The court may then order that the evjdence be provided direct to the tribunal. The court may issue the same processes (summons, or commissions), as in suijs before it. Persons failing to attend, or making a default, during the conduct of the proceedings, shall be subject to the same punishments and penalties by the orders of the court, as for like offences in suits tried by the court.
(vi) Decision: The decision of the tribunal is generally by a majority of all its members. (Section 29)
Question 4
(a) What are the exceptions to the general rule that property of any kind may be transferred? Refer to the relevant provisions of the Transfer of Property Act, 1882.
(b) Discuss the provisions relating to valuation of instruments for levy of duty
under the Indian Stamp Act, 1899. (8 marks each)
Answer 4(a)
• Section 6 of the Transfer of Property Act, 1882 contains some exceptions to the general rule that property of any kind may be transferred. Consequently, the following properties cannot be transferred, namely:
(a) The chance of an heir apparent succeeding to an estate, the chafice of a relation obtaining a legacy on the death of a kinsman or any other mere possibility of a like nature cannot be transferred.
(b) A mere right of a re-entry for breach of a condition subsequent cannot be transferred to any one except the owner of the property affected thereby
(c) An easement cannot be transferred apart from the dominant heritage.
(d) An interest in property restricted in its enjoyment to the owner personally cannot be transferred by him.
(e) A right to future maintenance in whatsoever manner arising, secured or determined, cannot be transferred.
(f) A mere right to sue cannot be transferred.
(g) A public office cannot be transferred nor can the salary of a public officer, whether before or after it has become payable.
(h) Stipends allowed to military, naval, air force and civil pensioners of the Government and political pensions cannot be transferred.
(i) No transfer can be made if it is opposed to the nature of the interest affected thereby; or for any unlawful object or consideration within the meaning of Section 23 of the Indian Contract Act, 1872; or to a person legally disqualified to be transferee.
The term 'property' is not defined under the Act. But the courts have interpreted it in a comprehensive manner so as to include:
(i) copyright hi a literary composition;
(ii) an actionable claim;
(iii) an annuity;
(iv) right to collect lac from trees and
(v) mortgagor's right to redeem the mortgage.
Further, transfer may take place in present or in future but the property must be in existence. For a future property there can be no transfer.
Answer 4(b)
Section 20 to 28 of the Indian Stamp Act, 1899, deal with valuation of instruments for duty. As per Section 20, where an instrument is chargeable with ad valorem duty in respect of any money expressed in any currency other than that of India, such duty shall be calculated on the value of such money in the currency of India, according to the current rate of exchange on the date of the instrument.
In the case of an instrument chargeable with ad valorem duty in respect of any stock or any marketable or other security, such duty shall be calculated on the value of such stock or security to the average price or the value thereof on the date of the instrument. (Section 21)
Section 23 provides that where interest is expressly made payable by the terms of the instrument, such instrument shall not be phargeable with a duty higher than that with which it would have been chargeable, had no mention of interest been made therein. In the case of an instrument (not being a promissory note or bill of exchange) which is given upon the occasion of the deposit of any marketable security by way of security for money advanced or to be advanced by way of loan, or for an existing or future debt, or makes redeemable or qualifies a duly stamped transfer, intended as a security of any marketable security, it shall be chargeable with duty as if it were an agreement, chargeable with duty under Article 5(c) of Schedule I to the Act.
According to Section 24, where any property is transferred to any person in consideration (wholly or in part) of any debt due to him, or subject either certainly or contingently to the payment or transfer of any money or stock, such debt, money or stock is to be deemed the whole or part (as the case may be), of the consideration in respect whereof the transfer is chargeable with ad valorem duty.
Proviso to Section 24 operates for the benefit of assignee of the mortgage. As per the Explanation appended to the section in the case of sale of property subject to mortgage or other encumbrances, any unpaid mortgage money or money charged together with the interest, if any, due on the same shall be deemed to be part of the consideration for the sale provided that where property subject to a mortgage is transferred to the mortgagee he shall be entitled to deduct from the duty payable on the transfer the amount of any duty already paid in respect of the mortgage.
Section 25 deals with the manner of computation of duty in the case of annuities. Valuation of an annuity will b'e material, where the payment of annuity or other sum payable periodically is secured by an instrument or where the consideration for a conveyance is an annuity or other sum payable periodically.
Section 26 applies only when the instrument is chargeable with ad valorem duty. Section 26 has two provisos. Under the first proviso, in the case of mining lease, the stamp duty is to be calculated on the estimated value of the royalty or the share of the produce, as the case may be. If the l^ase is granted by the Government, stamp duty has to be paid on the amount or value of the royalty as determined by the Collector of Stamps. But when the lease has been granted by a person other than the Government, the valuation has to be at Rs. 20,000 a year. The second proviso to Section 26 is intended to cover the case where an instrument has, by accident or mistake, been insufficiently stamped.
Under Section 27, consideration and all other facts and circumstances affecting the chargeability of any instrument with duty have to be fully set forth. The rules for apportionment of the consideration have been prescribed under Section 28 of the Act.
Questions
(a) Is the registration of a will optional under the Registration Act, 1908? Explain
the manner in which it may be presented for registration: (5 marks)
(b) Explain the law relating to admissibility in evidence of a dying declaration. If the person making a dying declaration survives, is it admissible in evidence?
(5 marks)
(c) What is meant by 'digital signature' under the Information Technology Act,
2000? When is it deemed to be secure? (6 marks)
Answer 5(a)
Section 18 of the Registration Act, 1908 deals with documents of which registration is optional. Such types of documents may or may not be registered. Under clause (e) of Section 18, the registration of wills has been made optional. Section 27 provides that a will may be presented for registration at anytime or deposited in a manner provided under Sections 40-46 of the Act.
Under Section 40, the testator, or after his death any person claiming as^executor or otherwise under a will may present it to any Registrar or Sub-Registrar for Registration. In case of authority for adoption, the donor or after his death the donee or any authority to adopt or the adoptive son may present it for registration to any Registrar or Sub-Registrar.
According to Section 41, a will or an authority to adopt, if presented for registration by the testator or the donor may be registered in the same manner as any other document. If presented by any other person entitled to present it, the will shall be registered if the registering officer is satisfied about the particulars mentioned therein.
Any testator may, either personally or by duly authorised agent, deposit with any Registrar his will in a sealed cover superscribed with the name of the testator and that of his agent, if any, and with a statement of the nature of the document.
On receiving such documents, the Registrar on being satisfied shall transcribe in his Registrar Book No. 5, the superscription and shall, note the date, time, month, etc. of such receipt and shall then place and retain the sealed cover in his fire-proof box.
However, the testator may withdraw it by applying for the same and the Registrar shall deliver it accordingly. (Sections 42 to 46)
Although it is not legally binding on the parties to get the will registered, nevertheless parties tend to get it registered because registered document is a proof of its existence and it is easy to prove its contents. Since the will is a testamentary document, its registration can not gain priority over subsequently made wills.
Answer 5(b)
Section 32(1) of the fndian Evidence Act, 1860, envisages that statements written or verbal of relevant facts made by a person who is dead are themselves relevant
facts in the following case - when the statement is made by a person as to the cause of his death or as to any of the circumstances of the transaction which resulted in his death, in cases in which the cause of that person's death comes into question.
Section 32(1) is an exception to the rule that hearsay evidence should not be permitted and it makes admissible the statement of deceased whether the death is homicidal or suicidal provided the statement relates to the cause of death. The reasons for admitting such evidence are (a) that it is the best evidence available and (b) the occasion is solemn and the dying man is face to face with his maker without any motive for telling a lie. Such statements are known as-dying declarations. A dying declaration, however, is always relevant to whomsoever it might have been made. The conditions in the Section are:
(a) It must be a statement written or verbal. Verbal necessarily does not mean oral but also as including gestures made by a dying man unable to speak, in answer to questions put to him. [Queen Empress v. Abdullah (1885) ILR 7 All. 385, Alisandiriv. King LR (1937) AC 220].
(b) The statement must relate to the cause of his death or the circumstances of the transaction which resulted in his death and not the cause of the death of someone else. [Ranjit Singh v. State, AIR 1952 HP 81, 'Pakala Narayana Swami v. King Emperor (1939) LR 66].
(c) The cause of the person's death must be in question. A dying declaration would be relevant in any proceeding civil or criminal where the cause of death comes into question.
When the declarant survives, the declaration cannot be. used as dying
declaration, yet it would be previous statement of witness and the accused can make
use of it under Section 145 of the Evidence Act for the purpose of cross-examining
and contradicting the witness. It can also be used for corroboration under Section 157
of the Evidence Act, after duly proving such statement by the evidence of the person
who recorded the same. '
Answer 5(c)
"Digital Signature" under Section 2(p) of the Information Technology Act, 2000 means authentication of any electronic record by a subscriber by means of an electronic method or procedure in accordance with the provisions of Section 3.
Section 3 deals with authentication of electronic records. This section provides the conditions subject to which an electronic record may be authenticated by means of affixing digital signature. The digital signature is treated in two distinct steps. First the electronic record is converted into a message digest by using a mathematical function known as "hash function" which digitally freezes the electronic record thus ensuring the integrity of the content'of the intended communication contained in the electronic record. Any tempering with the contents of the electronic record will immediately invalidate the digital signature. Secondly, the identity of the person affixing the digital signature is authenticated through the use of private key which is attached to.the message digest and which can be verified by any person who has the public key corresponding to such private key. This will enable any person to verify whether the electronic record is retained intact or has been tampered with. It will also enable a person who has a public key to identify the originator of the electronic message
Question 6
(a) Suresh conveys property to Bhushan in trust to sell the same and pay out of
the proceeds the claims of his creditors. Suresh reserves no power of
revocation and also does not communicate to the creditors about the creation
of the trust. Can Suresh revoke the trust? What will be the position if the
creditors are parties to the agreement? (5 marks)
(b) An application for registration of a society named Kautilya Institute of Legal
Education and Training is submitted under the Societies Registration Act,'
1860. A copy of each of memorandum of association and bye-laws is
enclosed along with the prescribed fee. The Registrar refuses to register the
society on the ground that memorandum of association is not signed by
seven members. Is the refusal justified? (5 marks)
(c) Vivek moves an application for setting aside the arbitral award on the ground
that he was not given a proper notice of the arbitral proceedings and thus he
could not present his case. He furnishes sufficient proof, and pleads before
the court that he received the arbitral award just 15 days back. What is the
appropriate remedy to be provided by the court in this case? (6 marks)
Answer 6(a)
The given problem is an illustration appended to Section 78 of the Indian Trusts Act, 1882 dealing with revocation of trust. In this case:
(a) If no power of revocation has been reserved, Suresh may revoke the trust even if he has made no communication to the creditors about the creation of trust;
(b) But if the creditors are parties to the agreement, the trust cannot be revoked without their consent.
Generally, the trusts are of irrevocable nature. But where the author specifically reserves the right to revoke or where it is created for the purpose of paying out the claims of the creditors, the trust can be revoked before the creditors are informed.
Answer 6(b)
In the given problem, the refusal of the Registrar is justified.
Under the Societies Registration Act, 1860, a society may be formed by any seven or more persons associated for any literary, scientific or charitable purposes or for any other purpose as specified in Section 20 of the Act by subscribing their names to a memorandum of association containing the:
(a) name of the society;
(b) objects of the society;
(c) names and addresses and occupations of the governors, council directors, committee, or other governing body to whom by the rules.of the society, the management of its affairs is entrusted.
A fee of Rs. 50/- is to be paid to the Registrar for every such registration. A society may get itself registered with the Registrar of Joint Stock Companies by filing: (i) a copy of the memorandum; (ii) a coy of the rules and regulations of the society certified as correct by not
less than three members of the governing body; and (iii) by paying the prescribed fee (Section 1 & 2).
Before registering a society, the Registrar must satisfy that the memorandum as required by the law has been field i.e. the memorandum has been signed by at least seven persons and the copy of the rules and regulations of the society must on the face of it bear the signature of not less than three of the members of the governing body. Thereupon the society is registered under this Act. (Section 3)
Answer 6(c)
The grounds for setting aside an arbitral award have been spelled out in Section 34(2) of the Arbitration and Conciliation Act, 1996.
Section 34(2) of the Arbitration and Conciliation Act, 1996 envisages the following grounds on which an arbitral award may be set asicje:
(i) Incapacity of a party;
(ii) Invalidity of the arbitration agreement;
(iii) Arbitral tribunal not properly constituted;
(iv) Party applying not given proper notice of the appointment of the arbitrator or
of the arbitral proceedings; (v) Award not in accordance with the terms of submission to arbitration in regard
to the dispute;
(vi) Arbitral tribunal not properly constituted or the arbitral procedure not in
accordance with the agreement of the parties or with the Act; r
(vii) The subject matter of the dispute not capable of settlement by arbitration under the law;
(viii) Award being in conflict with the public policy of India.
Sub-section (3) of Section 34 of the Act prescribes a time limit of 3 months for making an application for setting aside the arbitral award. The prescribed period of three months could be extended to a maximum of 30 days by the court if it is satisfied that the applicant was prevented by sufficient cause from making the application within the said period.
If the law on the point is applied to the given problem, the ground on which the applicant makes prayer to set aside the award is found in Section 34(2)(iv) and the period of limitation has not expired in view of the provisions of Section 34(3). Thus, the Court may set aside the arbitral award or may provide relief in accordance with sub-section (4) of Section 34.
Question 7
(a) Rohit files a suit against Mohit for recovery of possession of House-X on the
ground that he is the owner of the House-X. While the suit is pending,
Gautam transfers House-X to Baldev. Ultimately, the court grants a decree in
favour of Rohit. Is this decree binding on Baldev? (5 marks)
(b) Anurag transfers Rs. 10,000 to his sister-in-law provided she deserts her
husband. Is the transfer valid? (5 marks)
(c) Star Hotel arranged food, etc., for a marriage party of Richie consisting of 60
persons on 30th June, 2000 at the rate of Rs. 200 per person. Rs. 10,000
remained unpaid. Advise Star Hotel about the period of limitation for filing a
suit. (6 marks)
Answer 7(a)
Doctrine of Us pendens as incorporated in Section 52 of the Transfer of Property Act, 1882 provides that a decree passed in the case can be enforced as against transferee in whose favour property is transferred during the pendency of the suit. However, this doctrine can be invoked when during the pendency of suit, transfer of immovable property which is subject matter of dispute in the suit is transferred by any party to the suit.
In this case, transfer of House-X in relation to which suit is pending, is made by Gautam who is not a party to the suit. Hence the doctrine of Us pendens is not applicable and cannot be invoked in this case. Thus, the decree is not binding on Baldev, the transferee. Rohit has to seek remedy only against Mohit.
Answer 7(b)
When an interest is created on the transfer of property but is made to depend on the fulfillment of a condition by the transferee, the transfer is known as conditional transfer. Such a transfer may be subject to a condition precedent or a condition subsequent. In both the cases, the condition must be valid.
Section 25 of the Transfer of Property Act, 1882 provides that an interest created on a "tlsansfer of property and dependent upon a condition fails if the fulfillment of the condition is impossible, or is forbidden by law, or is of such a nature that if permitted it would defeat the provisions of any law or is fraudulent or involves or implies injury to the person or property of another, or the Court regards it as immoral or opposed to
public policy.
•/
In view of the above-mentioned provisions of Section 25, the transfer is void. The given problem is akin to illustration (d) appended to Section 25 of the aforestated Act declaring such transfer void.
Answer 7(c)
The Limitation Act, 1963 prescribes different periods of limitation for suits, appeals and applications. The prescribed limitation period has been envisaged in the Schedule appended to the said Act. Part II of the Schedule stipulates period of limitation for suits relating to contracts. In case of a suit for the price of fo'od or drink sold by the keeper of a hotel, tavern or lodging house, the period of limitation prescribed there under is three years from the date when the food or drink is delivered.
In the light of the legal provisions stated above, Star Hotel can file a suit for the recovery of unpaid money within a period of 3 years commencing from 1a July, 2000.
Question 8
(a) A cause of action arises between two parties Surendra and Mahendra. The
courts at Meerut and Ghaziabad are competent to try the suit. But both the
parties to the contract agree to vest the jurisdiction in the court at Meerut. Is
such an agreement valid? (5 marks)
(b) Raman moves an application before the Judicial Magistrate of First Class of the area for grant of anticipatory bail in connection with a bailable offence. Will the magistrate be competent to grant him anticipatory bail? Decide.
(5 marks)
(c) A document, which Is apparently an agreement granting a franchise, is
produced in the court, but is not stamped. Examine whether- - .
(i) the document is void;
(ii) the document can be admitted on payment of penalty; and
(Hi) the parties are liable to be prosecuted. (6 marks)
Answer 8(a)
The agreement is valid. It has been held in Angile Insulations v. Davy Ashmere India Ltd. (1995) 3 Scale 203, that where there might be two or more competent courts which could entertain a suit consequent upon a part of cause of action having arisen therewith, if the parties to the contract agreed to vest jurisdiction in one such Court to try the dispute, such an agreement would be valid.
Answer 8(b)
The Magistrate is not competent. Moreover, application can not be made for a bailable offence. Under Section 438 of ,the Cr.P.C. 1973, the power of granting anticipatory bail being of unusual nature is' entrusted only to the higher echelons of judicial service, namely a Court of Session or the High Court. It is a power exercisable in case of an anticipated accusation of non-bailable offence. The Judicial Magistrate is not competent to grant anticipatory bail.
Answer 8(c)
(i) As per Section 35 of the Indian Stamp Act, 1899 instruments not duly stamped are inadmissible in evidence. But in special cases they may be admitted after imposing penalty.
(ii) A document which is not duly stamped is not a void document. It is inadmissible in evidence. Such documents can be impounded and made admissible in evidence upon payment of the prescribed penalty.
(iii) The parties are not liable to be prosecuted. The proviso to Section 43 clarifies that no prosecution shall be instituted in the case of any instrument in respect of which such a penalty has been paid, unless it appears to the Collector that the offence was committed with an intention of evading payment of the proper duty. exclusion of certain time in some cases for computation of the prescribed period of limitation. These provisions are as follows:
1. Exclusion of time in legal proceedings (Section 12): In computing the period of limitation for any suit, appeal or application, the day from which such period is to be reckoned, shall be excluded. Further, in computing the period of limitation for (a) an appeal, or (b) an application for leave to appeal, or (c) revision, or review of a judgement, the following periods shall be excluded-
the day on which the period begins to run,
the day on which the judgement complained of was pronounced,
the time requisite for obtaining a copy of the decree, sentence or order appealed from or sought to be revised or reviewed and
(iv) the time requisite for obtaining a copy of the judgement
2. Where leave to sue or appeal as a pauper is applied for (Section 13) : Thetime during which the applicant has been prosecuting in good faith his application for such leave shall be excluded.
3. Proceedings bona fide in court without jurisdiction (Section 14): The time during which the plaintiff has been prosecuting with due diligence another proceedings shall be excluded.
4. Section 15 of the Act makes provisions for exclusion of time in certain cases other than those contained in Sections 12 to 14.
5.
in the case of death on or be fore the accrual of the right to sue (Section 16): In such cases the period of limitation shall be computed from the time when there is a legal representative of then deceased capable of instituting such suit or making such application.
6.
Fraud or mistake (Section 17): Limitation in such cases will be computed from the time when such fraud became known to the person defrauded or mistake discovered.
7. Effect of acknowledgement in writing (Section 18): Where liability in writing is acknowledged against the party within the period of limitation, it would give rise to a fresh period of limitation and would run from the date of acknowledgement.
8. Payment on account of debt or of interest on legacy (Section 19): where payment on account of a debt or of interest on a legacy is made before the expiration of the prescribed period of limitation by the person liable to pay the debt or legacy or by his agent duly authorised, a fresh period of limitation shall be computed from the time when the payment was made.
9. Effect of acknowledgement of payment by another person (Section 20).
10. Substitution or addition of a new plaintiff or defendant (Section 21): In such cases, the suit shall be deemed to have been instituted when he was so made a party. However, this is subject to certain exceptions given in the Section itself.
11. Continuing breaches and torts (Section 22): In the case of a continuing breach of a contract or tort, a fresh period of limitation begins to run at every moment of the time during which the breach or the tort as the case may be continues.
1.2. Suits for compensation for acts not actionable without special damages (Section 23): The period of limitation shall be computed from the time when the injury results.
13. Computation of time mentioned in instruments (Section 24) : All instruments shall be for the purpose of the Limitation Act, be deemed to be made with reference to the Gregorian calendar (i.e., the year beginning from 1st January and ending on 31st December).
Question 4
(a) Define the term 'instrument' under the Indian Stamp Act, 1899. (4 marks)
(b) Are the following'instruments' under the Indian Stamp Act, 1899:
(i) A letter which acknowledges receipt of a certain sum as having been borrowed at a particular rate of interest and for a particular period of time and that it will be repaid with interest on the due date ?
(ii) An unsigned draft document ? (2 marks each)
(c) Write short notes on the following:
(i) Documents of which registration is optional. (4 marks)
(ii) Registration of a document executed out of India. (2 marks)
(Hi) Time limit for presentation of a document for registration. (2 marks)
Answer 4(a)
Section 2(14) of the Indian Stamp Act, 1899 defines instrument to include "every document by which any right or liability is or purports to be created, transferred, limited, extended, extinguished or recorded".The definition is an inclusive definition and is not necessarily restricted to those documents which are specifically mentioned in the definition. Briefly stated, an instrument includes conveyances, leases, mortgages, promissory notes and wills, but not ordinary letters or memoranda or accounts.
Answer 4(b)(t)
It is an instrument. It creates a liability to repay the amount with interest on the due date.
Answer 4(b)(ii)
It is not an instrument because it does not create or purport to create any right. Answer 4(c)(i)
Section 18 of the Registration Act, 1908, specifies documents of which registration is optional. These are:
(a) Instruments (other than instruments of gift and wills) which purport or operate to create, declare, assign, limit or extinguish, whether in present or future any right title or interest whether vested or contingent of a value less than one hundred rupees to or in immovable property;
(b) Instruments acknowledging the receipt or payment of any consideration on
account of the creation, declaration, assignment, limitation or extinction of any
such right, title or interest; \
The mere absence of the defendant does not of itself justify the presumption that the plaintiffs case is true. (Safyendra Nath v. Narendra, AIR 1924 Cal. 806)
Ex parte decree operates to render the matter decided resjudicata and the defendant's failure to appear will not depriveJhe plaintiff of the benefit of his decree. (Pandurang v. Shantabai, AIR 1989 SC 2240). When an ex parte decree is passed against a defendant he may apply to the Court by which the decree was passed for an order to set it aside and if he satisfies the Court that summons was not duly served or he was prevented by any sufficient cause from appearing when the suit was called on for hearing, the Court will make an order setting aside the decree as against him upon such terms as it thinks fit ard appoint a day for proceeding with the suit. However, if the decree is of such a nature that it cannot be set aside as against such defendant only, it may set aside as against all or any of the defendants also.
An ex parte decree will not be set aside by any Court merely on the ground that there has been irregularity in the service of summons, if it is satisifed that the defendant had notice of the date of hearing and had sufficient time to appear and answer the plaintiffs' claim.
Answer 5(b) Hacking
Section 66 of the Information Technology Act, 2000 deals with "hacking" with computer system. The term "hacking" with respect of computer terminology denotes the act of obtaining unauthorized access to a computer system. Section 66 of the Information Technology Act, 2000, provides that:
(1) Whoever with intent to cause, or knowing that he is likely to cause, wrongful loss or damage to the public or any person, destroys or deletes or alters any information residing in a computer resource or diminishes its value or utility or affects it injuriously by any means, commits hacking.
(2) Whoever commits hacking, shall be punished with imprisonment up to three years or with fine which may extent upto two lakh rupees or with both.
The Section imputes intention as per knowledge to the hacker. Modification of the contents of a computer will also be an offence. Modification includes addition, alteration and erasure. As is evident, the maximum punishment prescribed for hacking with computer system under Section 66(2) is imprisonment upto three years or with fine upto two lakh rupees or both.
Answer 5(c)
"Digital Signature" under Section 2(p) of the Information Technology Act, 2000 means authentication of any electronic record by a subscriber by means of an electronic method or procedure in accordance with the provisions of Section 3.
Section 3 deals with authentication of electronic records. This Section provides the conditions subject to which an electronic record may be authenticated by means of affixing digital signature. The digital signature is treated in two distinct steps. First, the electronic record is converted into a message digest by using a mathematical function known as "hash function" which digitally freezes the electronic record thus ensuring the integrity of the content of the intended communication contained in the electronic record. Any tempering with the contents of the electronic record will immediately invalidate the digital signature. Secondly, the identity of the person affixing the digital signature is authenticated through the use of private key which is attached to the message digest and which can be verified by any person who has the public key corresponding to such -private key. This will enable any person to verify whether the electronic record is retained intact or has been tampered with. It will also enable a person who has a public key to identify tlie originator of the electronic message.
Questions
(a) A property is given to Anil for life and afterwards to Bimal. Bimal transfers this
interest to Chandan. Bimal dies during the life-time of Anil. Chandan claims the
property. Decide. (6 marks)
(b) Discuss the validity of the following transfers:
(i) X, a Hindu widow, transfers her right to future maintenance, (ii) X, a Hindu widow, transfers her arrears of past maintenance.
(Hi) Transfer of right of easement apart from the dominant heritage.
(2 marks each)
(c) Rohit, a Hindu who has his self-earned property, dies leaving his widow Priya and
brother Bidur. Bidur"s succession to the property is dependent upon two factors,
viz., (i) his surviving the widow Priya; and (ii) Priya leaving the property intact.
Bidur transfers his right of succession. Is it a valid transfer ?
Explain. (4 marks)
Answer 6(a)
A vested interest may be "vested in possession" or "vested in interest". A right is said to be "vested in possession" when it is a right to present possession of property and it is said to be "vested in interest" wben it is not a right to present possession but a present right to future possession. A vested interest is transferable and heritable.
In the given problem, Bimal gets a vested interest and if Bimal transfers this interest to Chandan, Chandan will take when the life estate of Anil comes to an end. Bimal's interest, since it is vested, is also heritable. Therefore, if Bimal dies during the lifetime of Anil, Chandan will get the property after the death of Anil.
Answer 6(b)(i)
Section 6 of the Transfer of Property Act contains some exceptions to the general rule that "property of any kind may be transferred". One of such exception is a right to future maintenance in whatsoever manner arising, secured or determined, cannot be transferred. The right of a Hindu widow to maintenance is a personal right which cannot be transferred.
Answer 6(b)(li)
7 Though the right to future maintenance cannot be transferred, but under the law, the arrears of past maintenance can be transferred.
Such transfer is not permissible. This is another exception to Section 6 of the Transfer of Property Act. An easement cannot be transferred apart from the dominant heritage.
Answer 6(c)
The transfer is not valid. Under Section 6 of the Transfer of Property Act, the chance of an heir apparent or spes successions cannot be transferred.
Question 7
\
(a) Society-X consisted of 200 members in total. To dissolve the society, a general meeting of the members was convened. The number of members present in the meeting was 140. Out of 140 members, 115 members agreed to dissolve the society. Discuss with reference to the provisions of the Societies Registration Act, 1860 whether the dissolution of the society would be valid. (5 marks)
(b) Amar agrees in writing to sell a horse to Bijoyfor Rs.2,000 or Rs.3,000. Can
evidence be given to show which price was to be given ? (5 marks)
(c) An information is given to the in-charge of police station against Rahul, a small trader, that he has committed a non-cognizable offence of fraudulent use of false weights and measures. The in-charge of police station, after entering the substance of the information in the Daily Diary kept at the police station, commences investigation without the order of the magistrate. Rahul objects to this action of the police. Will the objection of Rahul be sustained ? (6 marks)
Answer 7(a)
The dissolution is not valid. As per Section 13 of the Societies Registration Act, 1860, the concurrence of three fifths of the total members of the society is required for dissolution of the society.
Section 13 stipulates that to any number not less than three fifths of the members of any society may determine that it shall be dissolved and thereupon it shall be dissolved forthwith....
Provided that no society shall be dissolved unless three fifths of the members shall have expressed a wish for such dissolution by their votes delivered in person, or by proxy, at a geneal meeting for the purpose
Answer 7(b)
As per Section 93 of the Indian Evidence Act, 1872 when the language used in the document-is, on its face, defective or ambiguous, evidence may not be given of facts which would show its meaning or supply its defects. Therefore, in the present problem, evidence cannot be given to show which price was to be given.
Answer 7(c)
The objection of Rahul will be sustained. Under Section 155(2) of Code of Criminal Procedure, 1973, a police office cannot investigate a non-cognizable offence without the previous order of the Magistrate. Section 155(2) lays down that "no police officer shall investigate a non-cognizable case without the order of Magistrate having power to try such case or commit'the case for trial." In this problem the police officer investigates without the order of Magistrate. Section 155(2) of the Code of .Criminal Procedure is a mandatory provision and non-compliance of this mandatory provision by the police may also be considered as violative of Article 21 of the Constitution. This was the opinion of Calcutta High Court in Subodh Singh v. Stete/I974f Cr.L.J 185 (Cal. HC). In view of this, Rahul's objection is legal and will be sustained.
Question 8
(a) A suit was instituted by the plaintiff company alleging infringement by the defendant
company by using trade name of biscuits and selling the same in the packing of
. identical design, etc., as that of plaintiff company. A subsequent suit was
instituted in a different court by the defendant company against the plaintiff
company with the similar allegations. Discuss the validity of the subsequent
suit. (6 marks)
(b) Explain the doctrine of constructive res judicata. (5 marks)
(c) Anurag intentionally and falsely leads Bhanu to believe that certain land belongs
to Anurag, and thereby induces Bhanu to buy and pay for it. The land afterwards
becomes the property of Anurag. Anurag seeks to set aside the sale on the
ground that at the time of sale he had no title. Decide. (5 marks)
Answer 8(a)
As per Section 10 of Civil Procedure Code, no Court shall proceed with the trial of any suit in which the matter in issue is also directly and substantially in issue in a previously instituted suit between the same parties or between parties under whom they or any of them claim, litigating under the same title, where such suit is pending in the same or any other Court in India having jurisdiction to grant the relief claimed.
The facts of the given problem are based on the case of M/s Wings pharmaceuticals (P)Ltd. andanotherv. M/s Swan pharmaceuticals and others, AIR 1999 Pat.96 where the Court held that subsequent suit should be stayed as simultaneous trial of the suits in different Courts might result in conflicting decisions as issue involved in two suits was totally identical. .
Answer 8(b)
Explanation IV appended to Section 11 of the Code of Civil Procedure contemplates the doctrine of constructive res judicata. As per the explanation, any matter, which might and ought to have been made grounds of defence or attack in such former suit, shall be deemed to have been a matter directly and substantially in issue in such suit. This is called constructive res-judicata. This doctrine is based on the following grounds of public policy:
(i) There should be an end to ligitation;
(ii) The parties to a suit should not be harassed to agitate the same issues, or matters already decided between them;
(Hi) The time of court should not be wasted over the matters that ought to have been
: and should have been decided in the former suit between the parties; -
(iv) It is a rule of convenience and not a rule of absolute justice.
Answer 8(c)
Anurag cannot be allowed to prove his want of title. Here doctrine of estoppel will apply.
The doctrine of estoppel as contemplated under Section 115 of the Indian Evidence Act, 1872 says that when one person has, by his declaration, act or omission intentionally caused or permitted another person to believe a thing to be true and to act upon such belief, neither he nor his representative shall be allowed, in any suit or proceeding between himself and such person or his representative, to deny the truth of that thing. While Article 301 imposes a general limitation on legislative power to secure that trade, commerce and intercourse shall be free throughout the territory of India, Article 302 empowers Parliament to impose reasonable general restrictions upon that freedom. The restrictions which will attract Article 301 must be those which directly and immediately restrict or impede the free flow or movement of trade. Only those taxes which directly and immediately restrict trade would fall within the purview of Article 301. Article 303(1) prohibits Parliament from giving preference from one State to another and a similar restriction is placed on the States. Article 304 (a) places imported goods from sister States on par with similar goods manufactured r produced within the State.
The object of Part XIII is not to make inter-state trade commerce and intercourse absolutely free. Reasonable restrictions in public interest are permissible. Regulator or compensatory measures cannot be regarded as violative of the freedom unless they are shown to be colourable measures to restrict the free flow of trade, commerce and intercourse.
Article 301 applies not only to inter-state trade but also to intra-state trade, commerce and intercourse. But it will not cover foreign trade or the trade beyond the territory of India. Article 301 is couched in terms of the widest amplitude. Trade, commerce and intercourse are thereby declared free and unhampered throughout the territory of India. All restrictions, which directly and immediately affect the movement of trade, are declared by Article 301 to be ineffective.
The object of the freedom declared by this Article is to ensure the economic unity of India which should not be hampered by internal barriers. In this regard, the Supreme Court laid down in Atiabari Tea Co. Ltd. v. State of Orissa, AIR 1951 S. 232 that the laws which "directly and immediately" restrict or impede the freedom of trade and commerce shall be treated unconstitutional. The word "intercourse" in this Article has been used in a very wider sense covering not only "trade and commerce but also movement and dealings even of a non-commercial nature.
Question 2
Explain the role and scope of the following in the interpretation of statutes:
(i) Mischief rule
(ii) Parimateria
(Hi) Preamble
(iv) Schedules. (4 marks each)
, Answer 2(i)
' The Mischief Rule or Heydon's rule
In 1584, in Heydon's Case, it was resolved by the Barons of the Exchequer "that for the sure and true interpretation of all statutes in general (be they penal or beneficial, restrictive or enlarging of the Common Law) four things are to be discerned and considered: (1) What was the Common Law before the making of the Act; (2) What was the mischief and defect for which the Common Law did not provide; (3) What remedy the parliament had resolved and appointed to cure the disease of the Commonwealth; and (4) The true reason of the remedy.
The rule laid down in Heydon's Case which has "now attained the status of a classic provides that the Courts must adopt that construction which "shall suppress the mischief and advance the remedy". But this does not mean that a construction should be adopted which ignores the plain natural meaning of the words or disregard the context and the collection in which they occur. (Umed Singh v. Raj Singh, AIR 1975 SC 43)
In Sodra Devi's Case (AIR 1957 SC 832), the Supreme Court observed that the rule in Heydon's Case is applicable only when the words in question are ambiguous and are reasonably capable of more than one meaning.
Answer 2(ii) Par/ - Materla
In Pan materia means upon the same matter or subject. The statutes in pari-materia are those relating to the same person or having a common purpose. The meaning of the phrase 'pan mafer/a'has been explained in an American case as "Statutes are in pari materia which relate to the same person or thing, or to the same class of persons or things
It is a well-accepted legislative practice to incorporate by reference, if the legislature so chooses, the provisions of some other Act in so far as they are relevant for the purposes of and in furtherance of the scheme and subjects of the Act. The repealed Act may be referred in pari-materia on a question of construction if they are bearing the same principle. Similarly, the regulations themselves cannot alter or vary the meaning of the words of an Act, but they may be looked at as being an interpretation placed by the appropriate Government department on the words of the statute.
Answer 2(iii) Preamble
Preamble is one of the internal aids in interpretation of the statutes. The Madras High court has observed that the preamble of a statute is not part thereof, but contains generally the motives or inducement thereof [Mills v. Wilkins, (1794) 6 Mad. 62]. It was also observed that, "the preamble is to be considered, for it is the key to open the meaning of the makers of the Act, and the mischief it was intended to remedy". The present legal practice is quite clear that where the enacting part is explicit and unambiguous, the preamble has nothing to do for the meaning or interpretation of the statute in question. But where the part of the statute is ambiguous the preamble can be taken into consideration for explaining the subject matter.
In Kamalpura Kochunni v. State of Madras, AIR 1960 SC 1080, the Supreme Court highlighted that the preamble may be legitimately consulted in case any ambiguity arises in the construction of an Act and it may be useful to fix the meaning of words used so as to keep the effect of the statute within its real scope.
Answer 2(iv) Schedules
The schedules form a part of the statute and must be read together with it for all purposes of construction. The Allahabad High Court in Ramchand Textile v. Sates Tax Officer, AIR 1961 All. 24, has held that, if there is any appearance of inconsistency
between the schedule and the enactment, the enactment shall prevail. If the enacting part and the schedule cannot be made to correspond, the latter must yield to the former.
There are two principles or rules of interpretation, which ought to be applied to the combination of an Act and its schedule. If the Act says that the schedule is to be used for a certain purpose and the heading of the part of the schedule in question shows that it is prima facie at any rate devoted to that purpose, then the Act and the schedule must be read as if the schedule were operating for that purpose only. If the language of a clause in the schedule can be satisfied without extending it beyond for a certain purpose, in spite of that, if the language of the schedule has in its words and terms that go clearly outside the purpose, the effect must be given by them and they must not be treated as limited by the heading of the part of the schedule or by the purpose mentioned in the Act for which the schedule is prima facie to be used.
Question 3
(a) What is meant by 'preventive relief under the Specific Relief Act, 1963 ? How
is it granted ? Discuss. (8 marks)
(b) Discuss the concept of spes successionis under the Transfer of Property Act,
1882. (4 marks)
(c) Explain the term 'computer network' under the Information Technology Act,
2000. (4 marks)
Answer 3(a)
The Specific Relief Act, 1963 under Part III (Sections 36 and 37) provides for preventive relief which means preventing a party from doing that which he is under an obligation not to do. It is granted at the discretion of the court by way of an injunction temporary or perpetual. Injunction is the most ordinary form of preventive relief. It is known as a "judicial process by which one, who has invaded or is threatening to invade the rights (legal or equitable) of another is restrained from continuing or commencing such wrongful act. Lord Halsbury defines injunction as "a judicial process whereby a party is ordered to refrain from doing or to do a particular act or thing".
Characteristics of an injunction
An injunction has three characteristic features;
(a) It is a judicial process.
(b) The object of this judicial process is to restrain or to prevent.
(c) The act restrained or prevented is a wrongful act. An injunction acts or operates always in personam.
An injunction may be -
Temporary, interlocutory, or ad interim
Perpetual or permanent
Mandatory
Exparte
Temporary and Perpetual injunction: The temporary injunctions are granted under Order 39 Rules 1 -2 of the Civil Procedure Code while perpetual injunctions are dealt within Section 38 of the Specific Relief Act.
As per Section 37(1) temporary injunctions are such as are to continue until a specified time, or until the further order of the Court and they may be granted at any stage of a suit, and are regulated by the Code of Civil Procedure, 1908.
Section 37(2) states that a perpetual injunction can only be granted by the decree made at the hearing and upon the merits of the suit; the defendant is thereby perpetually enjoined from the assertion of right, or from the commission of an act, which would be contrary to the rights of the plaintiff.
The temporary injunction may be dissolved at any time under Civil Procedure Code by the defendant showing specific cause to the satisfaction of the Court against the order granting the injunction, or it automatically terminates with the disposal of the suit. The general principles governing temporary and permanent injunctions are mainly the same except that a temporary injunction is granted before the plaintiff establishes his case at the trial.
Mandatory injunction: Sometimes, to prevent the breach of an obligation, it may be necessary to compel the performance of certain acts. If the Court is capable of enforcing the performance of those acts, it may in its discretion grant an injunction -
(i) to prevent the breach complained of, and also (ii) to compel performance of the requisite acts.
The injunction granted in the above cases is a mandatory injunction. It is in its nature both restitutory (restoration of a former state or position) and prohibitory. For example, A builds a house with eaves projecting over B's land, B may sue for an injunction to pull down so much of the eaves as so projecting over his land.
Exparte Injuction: Sometimes the circumstances in a case may be such that any delay in the grant of even a temporary injunction to the plaintiff would substantially harm his interest and may result in a situation which cannot be later undone. In such a case, if the Court is convinced of the urgency of the matter, it may grant an injunction even without hearing the other party. Such an injunction is called an exparte injunction. It is granted normally for a short period. It continues till the Court hears the other party against its continuation. After hearing the other party, the Court may either discharge it or extend it till the final disposal of the case.
Answer 3(b) Spes successionis
The technical expression for the chance of an heir apparent succeeding to an estate is called spes successionis. It means a mere chance or hope of succeeding to a property. This cannot be transferred under the Transfer of Property Act, 1882. This concept is applicable in case of gift, will and all sorts of transfers under Personal Laws. Spes successionis includes :
The chance of an heir apparent succeeding to an estate: This means an interest which has not arisen but which may arise in future. It is in anticipation or hope of succeeding to the estate of a deceased person. Such a chance is not property and as such cannot be transferred. As for e.g., A is the owner of the property and B is his son. B is the heir of A. During the lifetime of his father A, B has only a hope expectancy that he will inherit the property of his father. This type of property which B hopes to get after the death of the father cannot be transferred, during the lifetime of A.
The chance of a relation obtaining a legacy on the death of a kinsman: This is also a mere possibility and cannot be transferred.
Any other mere possibility of a like nature: The expression "any other mere possibility of a like nature" must be construed as a possibility belonging to the same category as a chance of an heir apparent or the chance of a relation obtaining a legacy.
Answer 3(c) Computer Network
It is an interconnection of one or more computers through various modes. As per Section 2(1 ){j) of the Information Technology Act, 2000 "computer network" means the interconnection of one or more computers through -
(i) the use of satellite, microwave, terrestrial line or other communication media; and
(ii) terminals or a complex consisting of two or more interconnected computers, whether or not the interconnection is continuously maintained.
Question 4
(a) Discuss the doctrine of stay of suit under the Code of Civil Procedure, 1908.
How far is it different with that of res judicata ? Explain. (8 marks)
(b) Explain the term 'offence' under the Code of Criminal Procedure, 1973 ?
(4 marks)
(c) Discuss the doctrine ofcypres in relation to charitable trusts in India. (4 marks) Answer 4(a) Stay of Suit
Section 10 of the Civil Procedure Code, 1908 provides that no court shall proceed with the trial of any suit in which the matter in issue is also directly and substantially in issue in a previously instituted suit between the same parties or between parties under whom they or any of them claim, litigating under the same title, where such suit is pending in the same or any other Court (in India) having jurisdiction to grant the relief claimed, or in any Court beyond the limits of India established or continued by the Central Government and having like jurisdiction, or before the Supreme Court. The principal laid down in Section 10 is referred as the rule of res subjudice i.e., a thing or a matter which is under judicial consideration.
Essential conditions for stay of suits-
(i) There must be two suits instituted at different times;
(ii) The matter in issue in the later suit should be directly and substantially in issue in the earlier suit;
(b)
(a)
(b)
(iii) Such suit should be between the same parties;
(iv) Such earlier suit is still pending either in the same Court or in any other competent Court but not before a foreign Court.
If these conditions exist, Section 10 will be applicable and the subsequent suit will be stayed.
Difference between res judicata and stay of suit (res subjudice):
The doctrine of resjudicata envisaged under Section 11 of the Civil Procedure Code bars or restraints the repetition of litigation of the same issues. Once the suit is decided by court it cannot be filed subsequently between the same parties on same cause of action. Section 11 says that once a res is judicata, it shall not be adjudged again.
— The rule of res subjudice relates to a matter which is pending judicial enquiry while res judicata relates to a matter adjudicated upon or a matter on which judgement has been pronounced.
— Res subjudice bars the trial of a suit in which the matter directly or substantially is pending adjudication in a previous suit, whereas rule of resjudicata bars the trial of a suit of an issue in which the matter directly and substantially in issue has already been adjudicated upon in a previous suit between the same parties under the same title.
— Resjudicata arises out of considerations of public policy viz., that there should be an end to litigation on the same matter.
Answer4(b) Offence
The term 'offence' has been defined under section 2(n) of the Code of Criminal Procedure, 1973 to mean any act or omission made punishable by any law for the time being in force and includes any act in respect of which a complaint may be made under Section 20 of the Cattle-trespass Act, 1871. An elaborate definition of the term "offence" has been given under Section 40 of the I PC which states that offence denotes a thing made punishable by the Code. Mens rea or guilty mind is an essential ingredient in every offence.
Answer 4(c) Doctrine of Cypres
Cypres means near to it. The doctrine of cypres applies only to charitable trusts. The reason is that a public charity is perpetual and the rule against perpetuity does not apply to it. One of the cardinal rules governing execution of charitable trusts is that the intention of the donor must be observed. This principle has been evolved as an auxiliary to this rule and is never allowed to defeat it. If the charity can be administered according to the directions of the founder, the law requires that it should be so administered. The Courts will not allow any departure from such directions on the grounds of expediency. In Halsbury's Law of England, (3rd Ed. Vol. 4, P. 317), it is stated:
IGCL-^June2005
"Where a clear charitable intention is expressed, it will not be permitted to fail because the mode, if specified, cannot be executed, but the law will substitute another mode cy pres, that is, as near as possible to the mode specified by the 'donor'.
In Rajabathar Mudaliar v. M.S. Vadivelu Mudaliar, (1970) 1 SCC12, the Supreme Court observed. 'The cy pres doctrine applies where a charitable trust is initially impossible or impracticable and the Court applies the property cy pres, viz., to some other charities as nearly as possible, resembling the original trust" However, the above doctrine is subject to the doctrine of severability, i.e., the doctrine of cy pres, applies if the nature of the charitable object is general and not specific.
Question 5
(a) Enumerate the salient features of an 'arbitrationagreement' under the Arbitration
and Conciliation Act, 1996. (6 marks)
(b) Discuss the provisions relating to valuation of instruments chargeable with ad
valorem duty in cases where the value of the subject matter is indeterminate
under the Indian Stamp Act, 1899. (6 marks)
(c) Explain the terms 'computer contaminant' and 'computer virus'as defined under
the Information Technology Act, 2000. (4 marks)
Answer 5(a) Arbitration Agreement
Under Section 2(1 )(b) of the Arbitration and Conciliation Act, 1996 "arbitration agreement" means an agreement referred to in Section 7. Under Section 7 of the Arbitration and Conciliation Act, the "arbitration agreement" has been defined to mean an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship whether contractual or not. Section 7(2) of the said Act says that an arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. It has been most emphatically stated under Section 7(3) that an arbitration agreement shall be in writing. An oral arbitration agreement is not recognized as an arbitration agreement. It is binding upon the parties unless it is influenced by fraud or coercion or undue influence, etc.
The Act provides in Section 7(4) that an arbitration agreement is in writing if it is
contained in —
(a) a document signed by the parties, or
(b) an exchange of letters, telex, telegrams or other means of telecommunication, which provide a record of the agreement, or
(c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.
Thus, arbitration agreement stands on the same footing as any other agreement. Further, Section 7(5) states that the reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.
Answer 5(b)
Section 26 deals with cases where the value of the subject matter is indeterminate. The object of this section is to protect the revenue, in cases where an instrument is chargeable with ad valorem duty, but such duty cannot be ascertained by reason of the fact that the amount of value of the subject matter of the instrument cannot be determined at the time of the execution of the instrument. This object is sought to be achieved by providing, that the executant can value the instrument as he pleases, but he shall not be entitled to recover under such document any amount in excess of the amount for which the stamp duty is sufficient.
Section 26 applies only when the instrument is chargeable with ad valorem duty. Section 26 has two provisos. Under the first proviso, in the case of mining lease, the stamp duty is to be calculated on the estimated value of the royalty or the share of the produce, as the case may be. If the lease is granted by the Government, stamp duty has to be paid on the amount or value of the royalty as determined by the Collector of Stamps. And, if subsequently any excess is claimed, proper penalty under section 35 may be paid and the claim fully recovered. But when the lease has been granted by a person other than the Government, the valuation has to be at Rs. 20.000/- a year.
The second proviso to Section 26 is intended to cover the case where an instrument has, by accident or mistake, been insufficiently stamped. The deficiency is made up in proceedings under Section 31 or 41 and the Collector having certified the amount paid, it shall be deemed to be the stamp actually used at the date of execution. By reason of this proviso, the amount claimable under the instruments would be the amount for which the duty as certified by the Collector had been paid and not the amount for which duty was originally paid.
Answer 5(c)
Computer Contaminant and Computer Virus
The Explanation appended to Section 43 of the Information Technology Act, 2000 defines the terms "computer contaminant" and "computer virus". As per the Explanation "computer contaminant" means any set of computer instructions that are designed -
(a) to modify, destroy, record, transmit data or programme residing within a computer, computer system or computer network; or
(b) by any means to usurp the normal operation of the computer, computer system or computer network.
"Computer virus" means any computer instruction, information, data or programme that destroys, damages, degrades or adversely affects the performance of a computer resource or attaches itself to another computer resource and operates when a programme, data, or instruction is executed or some other event takes place in that computer resource.
Question 6
(a) An organisation of a business community staged processions, demonstrations and agitations before the secretariat of the State Government on busy roads to press for their demands. These caused traffic jams. The State Government imposed a ban on demonstrations and marches on busy roads on working days.
The organisation alleged that the ban was an infringement of the fundamental
right of freedom as guaranteed under the Constitution of India and filed a petition
in the High Court. Decide. (6 marks)
(b) Ajoy transfers his house under a written contract of sale to Bijoy for Rs.10,00,000.
Bijpy pays Rs. 3,00,000 to Ajoy and takes possession of one of the four rooms
of'the house. No registration of documents of the contract of sale is made.
After six months of the said contract, Ajoy sells the same house to Chander for
Rs .20,00,000. Chander has no knowledge of the previous transaction between
Ajoy and Eijoy. When Chander claims the house, Bijoy takes protection of
part-performance of the contract. Will Bijoy succeed ? (5 marks)
(c) Abhay downloaded secret data from the computer network of a foreign company
engaged in the manufacture of aircrafts. He was prosecuted and fined Rs. 1
lakh by the adjudicating officer under section 43 of the Information Technology
Act, 2000. Is any remedy available to Abhay ? Advise. (5 marks)
Answer 6(a)
The imposition of ban on demonstrations and marches on busy roads on working days in public Interest to protect the fundamental rights of majority citizens is perfectly valid. No fundamental right of others is violated by the reasonable ban. Apart from traffic jams the demonstrations are creating huge loss to the public. (See Kerala Vyapari Vyavsayi Exopana Samiti v. Sfafe of Kerala and Others, AIR 2004 Ker. 302; Bombay Hawkers Union v. BMC, AIR 1985 SC 1206.)
Answer 6(b)
Bijoy will not succeed. Although all the conditions of Section 53 A of the Transfer of Property Act, 1882 are fulfilled in favour of Ajoy, but because of the proviso of this section which says that" nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof", the rule of part performance shall not be applicable in favour of first transferee. The second transferee shall be protected under Section 53A. The doctrine of part performance embodied in Section 53 A of the Transfer of Property Act will not affect the rights of a subsequent transferee for consideration without notice of the earlier contract and of its being partly performed. Answer 6(c)
Abhay can file an appeal against the order of the Adjudicating Officer under Section 57 of the Information Technology Act, 2000. Section 57(1) of the Information Technology Act, 2000 provides for the right to appeal to any person who is aggrieved by an order of the Controller or Adjudicating Officer. It says "any person aggrieved by an order made by Controller or Adjudicating Officer under this Act may prefer an appeal to Cyber Appellate Tribunal having jurisdiction in the matter." The appeal is to be filed within a period of 45 days from the date of the receipt of copy of the order by the aggrieved person.
Question 7
(a) Aman is entitled to a picture by a dead painter and a pair of rare Chinese vases. Bhuvan has possession of them. The articles are of special character to bear unascertainable market value. Can Bhuvan be compelled to deliver these articles
to Aman ? Give reasons. (6 marks) Juestion 8
(b)
A charitable society registered under the Societies Registration Act, 1860
convened a general meeting of the members to abridge its charitable purpose.
At the meeting, the secretary of the society placed before the members a written
proposal of the governing body and a special resolution for the abridgement of
purpose of the society. Out of 100 members, 90 members were present in the
meeting. The resolution was put to vote and 60 members voted in its favour.
Can the society effect abridgement of the purpose on the strength of the
resolution? Decide. (5 marks)
(c)
Rohit executes a sale deed of a house in favour of Prem. The house is situated at NOIDA, but the transferor and transferee want the sale deed to be registered at Lucknow, which is the capital of the State. Can they do so ? (5 marks)
Answer 7(a)
Bhuvan may be compelled to deliver the picture and the pair of rare Chinese vases to Aman, for there is no standard for ascertaining the actual damage which would be caused by its non-performance.
Section 10 of the Specific relief Act, 1963 dealing with contracts which can be treated valid in s
specifically enforced provides under clause (a) that the specific performance of any vnswer 8(a)
contract may in the discretion of the court be enforced when there exists no standard for
ascertaining the actual damage caused by non-performance of the act agreed to be done. The statement may r
lirender is not being joir Answer 7(b)
In the case of joint
As per Section 12 of the Societies Registration Act, 1860 the governing body is ga,nst Anand Section
empowered to abridge the purpose or purposes under the Act. For this purpose, the O.accused says:
governing body shall convene a special meeting to consider the proposal and shall
submit the proposition to the members in a written or printed report within 10 days before When more person
the special meeting is convened. The proposition must be agreed to by the votes of onfession made by or
three fifth of the members present in person or by proxy. Then a second special meeting erson is proved, the (
will be convened at an interval of one month after the first meeting. In the second uch other person as w
meeting, the agreed proposition must be confirmed by the votes of three fifths of the
members present there. answer 8(b)
In the given problem, the procedure prescribed in Section 12 of the said Act has not been complied with. Therefore, the charitable society cannot effect abridgement of the purpose on the strength of the resolution.
Answer 7(c)
As per Section 28 of Registration Act, 1908 every document mentioned in Section 17(1) clauses (a)(b)(c)(d) and (e), Section 17(2) insofar as such document affects immovable property and Section 18 clauses (a) (b) (c) and (cc) shall be presented for registration in the office of a Sub-Registrar within whose sub-district the while or some portion of the property is situate.
Therefore, in the present problem, the sale deed shall be registered at Noida where the property is situated.
Question 8
(a) Anand is on his trial for the murder of Chanchal. There is evidence to show that
Chanchal was murdered by Anand and Birender and that Birender said, "Anand
and I murdered Chanchal." Can the court take inio consideration this statement
against Anand ? Will your reply be different in case there is a joint trial against
Anand and Birender ? Give reasons. (6 marks)
(b) Amrit executed a gift deed in his life time in favour of Bhanu. The gift deed was
not registered during the life time of Amrit. Bhanu, after death of Amrit, presented
the gift deed before the Registrar for its registration. Rakshit, brother of Amrit
raised an objection for the registration of gift deed on the ground of fake signatures
of Amrit. But the witnesses to the gift deed contended that the signatures were
made before them by the donor at the time of execution of gift deed. Whether
the gift deed will be treated valid for registration under the Registration Act,
1908? - (5 marks)
(c) Sanjay instituted a suit against Manoj beyond the prescribed period of limitation.
Manoj did not raise the objection that the suit was beyond the period of limitation.
The civil court allowed the suit for a hearing and decreed. Would the decree be
treated valid in such suit ? Give reasons. (5 marks)
Answer 8(a)
The statement may not be taken into consideration by the Court against Anand, as Birender is not being jointly tried.
In the case of joint trial, the Court may consider the effect of this confession as against Anand. Section 30 of the Indian Evidence Act dealing with the confession of a co-accused says:
When more persons than one are being tried jointly for the same offence, and a confession made by one of such persons affecting himself and some other of such person is proved, the Court may take into consideration such confession as against such other person as well as against the person who makes such confession.
Answer 8(b)
If the donor dies before registration, the document may be presented for registration after his death and if registered, it will have the same effect as registration in Ns ifetime. The Privy Council in Kalyana Sundram v. Karuppa, AIR 1927 PC 42, has held that the registration of gift deed of any immovable property shall operate from the date of execution of gift deed. When the instrument of gift has been handed over by the donor to donee and accepted by him, the former has done every thing in his power to complete the donation and to make it effective. If it has been presented before the Registrar for registration within the prescribed time period, the Registrar must register it. Neither death nor express revocation by the donor is ground for refusing registration provided other conditions are complied with.
In view of the above mentioned decision of the Privy Council, here the gift deed will be treated valid for registration and the registration of deed will be treated operative from he date of execution of deed.
IGCL-June2005
Question 8
(a) Anand is on his trial for the murder of Chanchal. There is evidence to show that
Chanchal was murdered by Anand and Birender and that Birender said, "Anand
and I murdered Chanchal." Can the court take inio consideration this statement
against Anand ? Will your reply be different in case there is a joint trial against
Anand and Birender ? Give reasons. (6 marks)
(b) Amrit executed a gift deed in his life time in favour of Bhanu. The gift deed was
not registered during the life time of Amrit. Bhanu, after death of Amrit, presented
the gift deed before the Registrar for its registration. Rakshit, brother of Amrit
raised an objection for the registration of gift deed on the ground of fake signatures
of Amrit. But the witnesses to the gift deed contended that the signatures were
made before them by the donor at the time of execution of gift deed. Whether
the gift deed will be treated valid for registration under the Registration Act,
1908? - (5 marks)
(c) Sanjay instituted a suit against Manoj beyond the prescribed period of limitation.
Manoj did not raise the objection that the suit was beyond the period of limitation.
The civil court allowed the suit for a hearing and decreed. Would the decree be
treated valid in such suit ? Give reasons. (5 marks)
Answer 8(a)
The statement may not be taken into consideration by the Court against Anand, as Birender is not being jointly tried.
In the case of joint trial, the Court may consider the effect of this confession as against Anand. Section 30 of the Indian Evidence Act dealing with the confession of a co-accused says:
When more persons than one are being tried jointly for the same offence, and a confession made by one of such persons affecting himself and some other of such person is proved, the Court may take into consideration such confession as against such other person as well as against the person who makes such confession.
Answer 8(b)
If the donor dies before registration, the document may be presented for registration after his death and if registered, it will have the same effect as registration in Ns ifetime. The Privy Council in Kalyana Sundram v. Karuppa, AIR 1927 PC 42, has held that the registration of gift deed of any immovable property shall operate from the date of execution of gift deed. When the instrument of gift has been handed over by the donor to donee and accepted by him, the former has done every thing in his power to complete the donation and to make it effective. If it has been presented before the Registrar for registration within the prescribed time period, the Registrar must register it. Neither death nor express revocation by the donor is ground for refusing registration provided other conditions are complied with.
In view of the above mentioned decision of the Privy Council, here the gift deed will be treated valid for registration and the registration of deed will be treated operative from he date of execution of deed.
COST&
IGCL-June 2005 14
Answer 8(c)
Section 3 of the Limitation Act, 1963 provides that any suit, appeal, or applicatioP6 a owe
made beyond the prescribed period of limitation shall be dismissed, although limitat«oTE: All working notes si
has not been set up as a defence. It is the duty of the Court not to proceed with su
suits irrespective of the fact whether the plea of limitation has been raised or not by II
defendant. Section 3 of the Limitation Act is mandatory. The Court can suo mottotal (Answe
note of question of limitation. The question whether a suit is barred by limitation shoi a»
be decided on the facts as they stood on the date of presentation of the plaint. ~^uestion 1
effect of Section 3 is not to deprive the Court of its jurisdiction. Therefore the decision
a Court allowing a suit which has been instituted after the prescribed period of limitati (a) What is (he signif
is not vitiated for want of jurisdiction. A decree passed in a time barred suit is nol (ty Zenith Ltd. gave
nullity. Hence the decree is valid in this case. 9% debentures I for the redemptii (i) 6% Cumula and
(ii) W%Deber The holders of F debenturehold Pass (he nee transactions. (c) Pltd. purcha: shares. Acc< full satisfactic books of P L (i) shares s (ii) shares I (d) What are th
(e) State the re Vnswer1(a)
Accounting St eporting of gener 'arious users of s lublic at large. Th he progress and lountries. Accou heir clients by pi ask of preparinc ill the users for irepared in ace \ccounting star inancial statem
Answer 8(c)
Section 3 of the Limitation Act, 1963 provides that any suit, appeal, or applicatioi
made beyond the prescribed period of limitation shall be dismissed, although limitatoiE : A
has not been set up as a defence. It is the duty of the Court not to proceed with su
suits irrespective of the fact whether the plea of limitation has been raised or not by I
defendant. Section 3 of the Limitation Act is mandatory. The Court can suo motto\&
note of question of limitation. The question whether a suit is barred by limitation shoi
be decided on the facts as they stood on the date of presentation of the plaint. IuestjOr
effect of Section 3 is not to deprive the Court of its jurisdiction. Therefore the decision
a Court allowing a suit which has been instituted after the prescribed period of limitati (a; V
is not vitiated for want of jurisdiction. A decree passed in a time barred suit is nd (b) 2
nullity. Hence the decree is valid in this case. independent public office or franchise or liberty is asked to show by what right he claims it, so that the title to the office, franchise or liberty may be settled and any unauthorized person ousted.
Conditions for the grant of quo warranto : A writ of quo warranto is issued if the following conditions are proved:
(i) the office in question is public office;
(ii) the office is substantive in nature;
(iii) the office is created by a statute or by the Constitution itself; and
(iv) the office is being held without any authority and illegally by the occupant
Quo warranto will also be issued when a person validiy occupies office but acquires a disqualification later on. The fundamental basis of the proceeding of quo warranto is that the public has an interest to see that a lawful claimant does not usurp a public office. Public office is one which is created by the Constitution or a statute and the duties must be such in which public is interested. The office of the Speaker of the Legislative Assembly or Advocate General or of a High Court Judge have been held to be public offices in which public is interested.
Like any other extraordinary remedy, quo warranto is a discretionary remedy which the court may grant or refuse.
Questions
(a) What are the contracts which cannot be specifically enforced ? (6 marks)
(b) Discuss Heydon 's rule of interpretation of statutes. (5 marks)
(c) Mention the grounds under which an arbitral award may be challenged before the court under the provisions of the Arbitration and Conciliation Act, 1996.
(5 marks)
Answer 2(a)
Contracts Which Cannot be Specifically Enforced
As per Section 14 of the Specific Relief Act, 1963 following contracts cannot be specifically enforced.
(a) A contract for the non-performance of which compensation in money is an adequate relief;
(b) A contract which runs into such minute and numerous details that the court cannot enforce specific performance of its material terms or which is dependant upon the personal qualification or volition of the parties or a contract from its nature is such that the court cannot enforce specific performance;
(c) A contract which is in its nature determinable;
(d) A contract, the performance of which involves the performance of a continuous duty which the court cannot supervise.
Save as provided by the Arbitration and Conciliation Act, 1996, no contract to refer present or future difference to arbitration shall be specifically enforced; but if any person
who has made such a contract (other than an arbitration agreement to which the provisions of the said Act apply) and has refused to perform it, sues in respect of any subject which he has contracted to refer, the existence of such a contract shall bar the suit.
However, there are certain exceptions to this rule and these exceptions have been stipulated under Section 14(3) of the Specific Relief Act.
Answer 2(b)
Heydon's Rule of Interpretation
The mischief rule of interpretation originated in Heydon's case, 76 ER 637 in 1584. In this case, the Barons of the Exchequer resolved that for the sure and true interpretation of all statistics in general, (be they penal or beneficial, restrictive or enlarging of the Common Law) four things are to be discerned and considered:
(1) What was the Common Law before the making of the Act;
(2) What was the mischief and defect for which the Common Law did not provide;
(3) What remedy the Parliament had resolved and appointed to cure the disease of the Commonwealth; and
(4) The true reason of the remedy.
When the material words are capable of bearing two or more constructions, the most firmly established rule for construction of such words is the rule laid down in Heydon's case which has "now attained the status of a classic". The rule directs that the Courts must adopt that construction which "shall suppress the mischief and advance the remedy". But this does not mean that a construction should be adopted which ignores the plain natural meaning of the words or disregard the context and the collection in which they occur. (See Umed Singh v. Raj Singh, A.I.R. 1975 S.C. 43) The Supreme Court has applied this rule in many of its decisions.
Answer 2(c)
As per Section 34(2) of the Arbitration and Conciliation Act, 1996 an arbitral award
may be challenged on the following grounds: (i) Incapacity of a party, (ii) Invalidity of the arbitration agreement, (iii) Party applying was not given proper notice of the appointment of arbitrator or of
the arbitral proceedings, (iv) Award not in accordance with the terms of submission to arbitration in regard to
the dispute.
the dispute, (v) Arbitral Tribunal not properly constituted or the procedure adopted not in
accordance with the agreement, (vi) The subject matter of dispute is not capable of settlement by arbitration under
the law. (vii)
Award is in conflict with the public policy.
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Section 34(3) of the Act prescribes the time limit for making an application for setting aside the arbitral award. As per this sub-section, an application cannot be made after three months have elapsed from the date on which the party making that application had received the arbitral award or if a request had been made under Section 33 from the date on which that request had been disposed of by the arbitral tribunal. The period of three months could be extended to a maximum of 30 days by the court if it is satisfied that the applicant was prevented by "sufficient cause" from making the application within the said period.
Question 3
Write notes on any four of the following:
(i) Constructive trust
(ii) Effect of acknowledgement on the period of limitation
(Hi) Doctrine of holding out
(iv) Effect of non-registration of documents required to be compulsorily registered
(v) Network service providers. (4 marks each)
Answer 3(i) Constructive Trust
This is a trust imposed by the law without having regard to the intention of the parties. As for example, when a trustee, agent, executor, partner, director of a company, legal adviser or other person bound in a fiduciary character to protect the interests of another, gains some pecuniary advantage for himself by availing himself of that character, he should hold the advantage so gained for the benefit of such other person. A, a partner, negotiating a transaction on behalf of the firm, clandestinely stipulates with the party with whom he is negotiating for payment to himself of a lakh of rupees. He should hold the amount for the benefit of the partnership.
A person is said to stand in fiduciary relation to another when he has rights and duties which he is bound to exercise for the benefit of that other.
AnswerS(ii)
Effect of Acknowledgement on the Period of Limitation
Section 18 of the Limitation Act, 1963 deals with the effect of acknowledgement of liability in respect of property or right on the period of limitation. As per Section 18 of the Act, following requirements should be present for a valid acknowledgement:
1. There must be an admission or acknowledgement;
2. Such acknowledgement must be in respect of any property or right;
3. It must be made before the expiry of period of limitation; and
4. It must be in writing and signed by the party against whom such property or right is claimed.
If all the above requirements are satisfied, a fresh period of limitation shall be computed from the time when the acknowledgement was signed.
if the said house is in a dilapidated condition and is likely to endanger human
life, health or safety ? (6 marks)
(b) Arpit pledges certain jewels to Rakshit to secure a loan. Rakshit disposes of
jewels before he is entitled to do so. Arpit without having paid or tendered the
amount of the loan, sues Rakshit for possession of the jewels. Is Arpit entitled
to do so ? (5 marks)
(c) Pankaj is the owner of a ship. He takes an insurance policy declaring fraudulently that the ship is sea-worthy. But, the ship is not sea-worthy. Has the insurance company any right against Pankaj ? Give answer with reasons. (5 marks)
Answer 5(a)
In the present problem, the rights and liabilities of the landlord and tenant are governed by the Rent Laws. Therefore, jurisdiction of the court cannot be circumvented and the tenant cannot be evicted by an order under Section 144 of the Code of Criminal Procedure, 1973. Therefore, the orders of the Sub-Divisional Magistrate are null and void. Heirs of the tenant may resist the orders and they will succeed. But if the said house is in dilapidated condition and dangerous human life, health or safety, such order under section 144 of the Code of Criminal Procedure, 1973 is valid.
Answer 5(b)
evoke the digital signature! Arpit is not entitled to the possession of jewels whatever right he may have to
secure their safe custody in view of the provisions of Section 7 of the Specific Relief
which provides that "for the possession of specific movable property, a person
must be entitled to immediate possession".
; In this case Arpit is not entitled until he pays off the loan. The suit should be dismissed r system was compromised Answer 5(c)
The insurance company may obtain the cancellation of the policy. Section 31 (1) of the Specific Relief Act, 1963 provides that any person against whom a written instrument is void or voidable, and who has reasonable apprehension that such instrument if left outstanding may cause him serious injury, may sue to have it adjudged void or voidable, and the Court may, in its discretion so adjudge it and order it to be delivered up and cancelled.
In the given problem, the subject matter has been fraudulently represented as navigable. The insurance company may obtain the cancellation of the policy from the Court since the relief of cancellation of instruments is founded upon the administration of protective justice.
Question 6
(a) Angad transfers his property worth Rs.50,000 to Bheem and by the same document asks Bheem to transfer his property worth Rs.25,000 to Chander. Bheem refuses to accept the gift of such property. Meanwhile, Angad dies before Bheem exercises his option. Decide the rights of Chander. (6 marks)
(b) Ajeet resides at Bhopal, Baljeet at Indore and Charanjeet at Lucknow. Ajeet, Baljeet and Charanjeet being together at Kolkata, Baljeet and Charanjeet make a joint promissory note payable gn demand and deliver it to Ajeet. Where caQuestion 7 Ajeet sue Baljeet and Charanjeet for the amount of the promissory note ? (5 marks
(c)
Rakesh, a member of a society, is in arrears of subscription which he is bourn
to pay according to rules of the society. Can he be sued as stranger under th
Societies Registration Act, 1860 ? (5 marks
Answer 6(a)
This problem is based on Section 35 of the Transfer of Property Act i.e. doctrine o election.
(b)
The heirs of Angad will have to compensate Chander from Angad's property to thf extent of Rs. 2,500. It may be noted that Bheem's property worth Rs. 2,500 was intendei by A to be transferred to C.
/c\
As per the facts of the given case, Bheem has not accepted the property, so he wil not take Angad's property and the property will revert to Angad. Had Angad been alive it was for him to give some property to Chander. But Angad dies before Bheem coulc exercise his option. In such a situation, the heirs of Angad have to compensate Chandei from Angad's property to the extent of Rs. 2,500.
Answer 6(b)
According to Section 20 of the Code of Civil Procedure, 1908 every suit shall bejhe principle of c
instituted in a court within the local limits of whose jurisdiction
(a) the defendant or each of the defendants where there are more than one, at the
commencement of the suit, actually or voluntarily resides or carries on business
or personally works for gain; or
(b) any of the defendants, where there are more than one, at the commencement ol .
the suit, actually or voluntarily resides or carries on business or personally
works for gain provided that in such case either the leave of the Court is given
or the defendants who do not reside, or carry on business or personally work forcode, 1 973, nc
gain as aforesaid, acquiesce in each institution; or
(c) the cause of action wholly or in part arises. Magistrate
In the present problem, Ajeet can file a suit against Baljeet and Charanjeet at Kolkata^ the cause of action arose at Kolkata where the joint promissory note was delivered by Baljeet and Charanjeet to Ajeet. Ajeet can also file the suit at Indore oi The private Lucknow where the defendants Baljeet and Charanjeet reside but he can do so eitheibecause in view with the consent express or implied of the other defendants or with the prior permissionpolice officer an
of the court. _ t. „
Answer 6(c)
Rakesh may be sued as stranger under Societies Registration Act, 1860. According to Section 10 of the said Act, a member of the society is liable to be sued as strangei where he is in arrear of a subscription which he is bound to pay according to the rules, oi where he has detained any property or destroyed any property of the society.
(3)
Ashish was dismissed from the service. He filed a writ petition in the High Court
for quashing the order of dismissal on the ground that he was not given reasonable
opportunity to refute the allegations made against him and that the action taken
against him was mala fide. The petition was dismissed on merit. Thereafter, he
instituted a suit in the Court of Civil Judge in which he challenged the order of
dismissal on the grounds inter alia that he had been appointed by the Inspector
General of Police and that the Deputy Inspector General of Police is not
competent to dismiss him by virtue of Article 311(1) of the Constitution of India.
Decide. (6 marks)
(b) Manav is tried summarily by the Chief Judicial Magistrate on the charge of committing theft and is sentenced to undergo rigorous imprisonment for six months. Manav wants to challenge this decision. Can he do so ? Discuss.
(5 marks)
(c) An accused person makes a confessional statement to the police officer in the
hearing and presence of a private person. Can the private person give evidence
of the confessional statement made by the accused person so as to be proved
against the accused ? (5 marks)
Answer 7(a)
The subsequent suit after dismissal of writ petition on merit cannot be allowed by the principle of constructive res-judicata. The argument given in this suit was an important plea which was within his knowledge and could well have been taken in the writ petition but he contended himself by raising other pleas that he was not afforded a reasonable opportunity to meet the case against him in the departmental enquiry and that the action taken against him was mala-fide. Therefore, in the subsequent suit he cannot be allowed to take plea that he was dismissed by subordinate authority.
Answer 7(b)
Manav can challenge the decision. According to Section 262(2) of Criminal Procedure Code, 1973, no sentence of imprisonment for a term exceeding three months can be passed in case of conviction in a summary trial. Thus, sentence of six months imprisonment could not have been legally awarded in the given case by the Chief Judicial Magistrate.
Answer 7(c)
The private person cannot give evidence of the confession made by the accused because in view of Section 25 of the Evidence Act, such statement is a confession to a police officer and cannot be proved.
Question 8
(a) One morning, scientists at an atomic research centre found a rude-nuclear
message splashed across their computer screens. Someone had breached the
atomic research centre's advanced security system and sensitive mail. What
offence has been committed in the atomic research centre ? (6 marks)
(b) By an agreement, Anamika transferred to Sipasha a decree of a court by which
she was entitled to possess 500 b/ghas of land. Is it necessary to register such
a transfer under the Registration Act, 1908 ? (5 marks)
(c) Am/t, a trustee of certain land for Mohan, Rohan and Sohan, is authorised to sell the land to Biju for a specified sum. Mohan, Rohan and Sohan being competent to contract, consent that Amit may seil the land to Chirag for a lesser sum. Can Amit sell the land for less than the specified sum ?
(5 marks)
Answer 8(a)
This is act of hacking. Hacking is an offence listed under Chapter 11 of the Information Technology Act, 2000, which deals with offences relating to computers etc. and connected matters.
Regarding hacking, Section 66 of the Information Technology Act provides as under-Hacking with computer system
(i) Whoever, with intent to cause, or knowing that he is likely to cause, wrongful loss or damage to the public or any person, destroys or deletes or alters any information residing in a computer resource or diminishes its value or utility or affects it injuriously by any means, commits hacking.
(ii) Whoever commits hacking, shall be punished with imprisonment upto three years or with fine which may extend upto two lakh rupees or with both.
Answer 8(b)
The transfer is required to be registered under the Registration Act, 1908. Section 17(e) of the Registration Act provides that non testamentary instruments transferring or assigning any decree or order of a court or any award, when such decree, order or award purports to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent of value of one hundred and upwards in immovable property, such decree or order or award is required to be registered.
However, the State Government is empowered to exempt any leases executed which do not exceed five years and the annual rents reserved which do not exceed 50 rupees, from the operation of this sub-section.
Answer 8(c)
Amit may sell the land for less than the specified sum
The given problem is an illustration appended to Section 11 of the Indian Trusts Act, 1882. As per Section 11 of the Indian Trusts Act, the trustee has to fulfill the purpose of the trust and to obey the directions of the author of the trust given at the time of its creation. He can make any modification in these directions only with the consent of all the beneficiaries who are competent to contract. If a beneficiary is incompetent to contract his consent may be given by the Principal Civil Court of original jurisdiction.
INTERMEDIATE EXAMINATION
JUNE 2007
GENERAL AND COMMERCIAL LAWS
Time allowed: 3 hours Maximum marks : 100
NOTE : Answer SIX questions including Question No. 1 which is COMPULSORY.
Question 1
(a) "The Constitution of India is basically federal with certain unitary features".
._ (8 marks)
W)OS,n6l
9QO£.oe(3.o} (b) Discuss briefly whether the law made by the Parliament with respect to a subject
included in the State List and made applicable to the State is valid. (6 marks)
(c) What are the presumptions in the interpretation of statutes when the intention of
legislature is not clear ? . (6 marks)
Answer 1 (a)
The Constitution of India is basically federal in character with many striking unitary features. The Constitution of India possesses all the essential features of a federal system. A federal system has the following essential features:
Dual Government
Distribution of powers between the Union Government and the State Governments.
(iii) Supremacy of the Constitution,
(iv) A written and rigid Constitution,
(v) Authority of the Courts.
The Constitution of India possesses all the above-mentioned features of a federal Government.
At the same time, the following features of the Constitution are indicative of its unitary character:
(i) President of India is the Constitutional Head of the executive of the Union and the appointment of Governors is made by him. They are answerable to the President and hold office till they enjoy pleasure of the President;
(ii) Appointment and transfers of the Chief Justice and the Judges of the High Court by the President;
(iii) Parliament's powers to form States and alteration of boundaries etc. of the existing
States;
\.
(iv) Supremacy of Parliament in legislative matters;
(v) Parliament's power to legislate on subjects of State list under special circumstances;
Answer 4(a)(i)
Rule of ejusdem generis
The expression, 'ejusdem generis' means 'of the same kind'. Normally, general words should be given their natural meaning like all other words unless the context requires otherwise. But when a general word follows specific words of a distinct category, the general word may be given a restricted meaning of the same category. The general expression takes its meaning from the preceding particular expressions because the legislature by using the particular words of a distinct genus has shown its intention to that effect. If the preceding specific words do not belong to a distinct genus, this rule is not applicable.
It is merely a rule of construction to aid the courts to find out the true intention of the Legislature (Jage Ram v. State ofHaryana, AIR 1971 SC1033).To apply the rule, the following conditions must exist:
(1) The statute contains an enumeration by specific words,
(2) The members of the enumeration constitute a class,
(3) The class is not exhausted by the enumeration,
(4) A general term follows the enumeration,
(5) There is a distinct genus which comprises more than one species, and
(6) There is no clearly manifested intent that the general term be given a broader meaning that the doctrine requires. (Thackeray Singh. v. Revenue Minister, AIR 1965J&K102).
The rule of ejusdem generis must be applied with great caution because, it implies a departure from the natural meaning of words, in order to give them a meaning or supposed intention of the legislature. The rule must be controlled by the fundamental rule that statutes must be construed so as to carry out the object sought to be accomplished.The rule requires that specific words are all of one genus, in which case, the general words may be presumed to be restricted to that genus.
Whether the rule of ejusdem generis should be applied or not to a particular provision depends upon the purpose and object of the provision which is intended to be achieved.
Answer 4(a)(ii)
Jurisdiction of Arbitral Tribunals
Jurisdiction in law means the authority to take cognizance and decide matters in respect whereof, the court, tribunal or authority is empowered to perform its functions. Arbitral tribunal under Section16 is empowered to rule on its own jurisdiction, and to consider objections with respect to validity or existence of the arbitration agreement. For that purpose, an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.
A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence. A party cannot however, be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of an arbitrator. A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter is so alleged during the arbitral proceedings. The arbitral tribunal may, in either case, admit a later plea if it considers the delay is justified. Where the arbitral tribunal rejects the plea, it will continue with the proceedings and make an arbitral award. A party aggrieved by such an arbitral award may make an application to the court for setting it aside under Section 34.
Answer 4(a)(iii)
"Digital Signature" under Section 2(p) of the Information Technology Act, 2000 means authentication of any electronic record by a subscriber by means of an electronic method or procedure in accordance with the provisions of Section 3.
Section 3 deals with authentication of electronic records. This section provides the conditions subject to which an electronic record may be authenticated by means of affixing digital signature. The digital signature is treated in two distinct steps. First the electronic record is converted into a message digest by using a mathematical function known as "hash function" which digitally freezes the electronic record thus ensuring the integrity of the content of the intended communication contained in the electronic record. Any tempering with the contents of the electronic record will immediately invalidate the digital signature. Secondly, the identity of the person affixing the digital signature is authenticated through the use of private key which is attached to the message digest and which can be verified by any person who has the public key corresponding to such private key. This will enable any person to verify whether the electronic record is retained intact or has been tampered with. It will also enable a person who has a public key to identify the originator of the electronic message.
Answer 4(b)
(i) A condition which destroys or divests the rights upon the happening of an event is known as condition subsequent.
An award can be corrected by an arbitral tribunal within 30 days from the date of the award.
Hacking with a computer system is a crime punishable with an imprisonment which may extend up to three years.
(iv) No sentence of imprisonment for a term exceeding three months shall be passed in any conviction in summary trials.
Answer 4(c)
(i) (d)
(ii) (d)
(iii) (b)
(iv) (d)
Question 5
(a) Discuss the relationship between 'Fundamental Rights'and 'Directive Principles
of the State Policy'. (6 marks)
(b) What are the circumstances under which the court may, in its discretion, award
damages instead of specific performance of a contract ? (5 marks)
(5 marks)
(c) When can the magistrate take cognizance of an offence ? Answer 5(a)
The Constitution of India seeks to secure to the people "Liberty of thought, expression, belief, faith and worship; Equality of status and of opportunity; and Fraternity assuring the dignity of the individual". With this object, the fundamental rights are envisaged in Part III of the Constitution. These are:
(i) Right to Equality - Articles 1 4 to 1 8;
(ii) Right to Freedom - Articles 1 9 to 22;
(iii) Right against exploitation - Articles 23 and 24;
(iv) Right to Freedom of Religion - Articles 25 to 28;
(v) Guttural and Educational Rights - Articles 29 and 30.
(vi) Right to Constitutional Remedies - Article 32.
Fundamental rights are deemed essential to protect the rights and liberties of people of India against the encroachment of the State power. In Maneka Gandhi v. Union of India, AIR1978 SC 597 the Supreme Court laid down that these rights represent the values cherished by the people of this country, to protect the dignity of the individual, to create conditions for the dignity of the individual and to create conditions for the fullest development of human personality. Fundamental rights can be enforced in the courts of law.
On the other hand the Directive Principles of State Policy contained in Part IV of the Constitution set out the aims and objects to be taken up by the State in the governance of the country. Articles 36 to 51 provide different kinds of social, economic and community welfare character of Directive Principles. The Directive Principles cannot be enforced in the courts of law.
The Directives, however, differ from the fundamental rights or the ordinary laws of the land in the following respects:
(i) The Directives are not enforceable in the courts and do not create any justiciable rights in favour of individuals.
(ii) The Directives require to be implemented by legislation and so long as there is no law carrying out the policy laid down in a Directive, neither the State nor an individual can violate any existing law.
(iii) The Directives per-se does not confer upon or take away any legislative power from the appropriate legislature.
(iv) The courts cannot declare any law as void on the ground that it contravenes any of the Directive Principles.
(v) The courts are not competent to compel the Government to carry out any Directives or to make any law for that purpose.
(vi) Though it is the duty of the State to implement the Directives, it can do so only subject to the limitations imposed by the different provisions of the Constitution upon the exercise of the legislative and executive power by the State.
Fundamental Rights assure political freedom to citizens protecting them from excessive State action whereas Directive Principles aim at securing social and economic , freedoms by appropriate State action. Fundamental Rights and Directive Principles together constitute the conscience of the Constitution and represent basic rights inherent in people of this country.The Directive Principles of the State Policy are not subordinate to Fundamental Rights strictly speaking, but should conform and run as subsidiary to Fundamental Rights.
Answer 5(b)
The circumstances in which a court would award damages in lieu of specific performance are:
(a) Where specific performance could have been granted but in the circumstances of the case the court in its discretion considers that it would be better to award damages instead of specific performance.
(b) Though specific performance is refused, plaintiff is entitled to compensation for breach of the contract.
(c) If the circumstances are such that specific performance would not be granted as for example, where plaintiff has disentitled himself to the specific performance, damages cannot be awarded under Section 21 in lieu of specific performance. (Section 21, Specific Relief Act)
Answer 5(c) Jt.:u;ij.
Section 190 of the Code of Criminal Procedure, 1973 relates to cognizance of offences by Magistrates. The court can take cognizance of an offence only when conditions requisite for initiation of proceedings before it are fulfilled otherwise the court does not obtain jurisdiction to try the offence (Mohd. Safi, AIR 1966 SC 69).
Any Magistrate of first class and of the second class specially empowered may take cognizance of an offence upon:
(1) receiving a complaint of facts constituting such offence;
(2) a police report of such facts;
(3) information received from any person other than a police officer;
(4) his own knowledge that such offence has been committed.
Question 6
(a) Discuss the remedies available to a person who has been refused to register a Answer 6(c)
document by a Sub-Registrar. Can registration of documents be refused on the
ground of under-valuation for stamp duty ? (6 marks)
(b) Chanchal sues Indian Online Ltd. (IOL) for allowing a subscriber Rajat to use its chatroom for making video tapes and photographs of child pornography in which Chanchal's minor son appears. The complaint alleged that IOL was negligent per se in allowing Rajat to use its facilities for producing obscene materials, therefore, is liable under criminal law and under the Information Technology Act,
2000. IOL contends that it has no knowledge of such transmission of unlawful
information. Decide the liability of IOL (5 marks)
(c) A document, which is apparently an agreement granting a franchise, is produced in the Court, but is not stamped. Examine, citing relevant provisions of the Indian Stamp Act, 1899, whether —
(i) the document is void; or
(ii) the document can be admitted on payment ot penalty; or
(Hi) the parties are liable to be prosecuted ? (5 marks)
Answer 6(a)
According toSfeclon 72(1) of the Registration Act, 1908 an appeal shall lie against an order of a Sub-Registrar refusing to admit a document to registration (whether the registration of such document is compulsory or optional) to the Registrar to whom such Sub-Registrar is subordinate if presented to such Registrar within thirty days from the date of the order; and the Registrar may reverse or alter such order.This does not apply where the refusal is on the ground of denial of execution.
If the order of the Registrar directs the document to be registered and the document is duly presented for registration within thirty days after the making of such order, the Sub-Registrar shall obey the same, and thereupon shall, so far as may be practicable, follow the procedure prescribed in Sections 58, 59 and 60; and such registration shall take effect as if the document had been registered when it was first duly presented for registration. [Section 72(2)]
Registration cannot be refused on the ground of under-valuation for stamp or any other extraneous reason. (Mulla (1998), page 308)
Answer 6(b)
Indian Online Ltd. (IOL) is not liable for subscriber, Rajat using its chat room for making videotapes and photographs of Child pornography because offence was committed without his knowledge.
Section 79 of Information Technology Act, 2000 declares that no network service provider shall be liable "under this Act, rule or regulation made thereunder", for any third party information or data made available by him, if he proves that the offence or contravention was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence or contravention.
In Doc v. American Online Inc. on the similar facts, the court held that AOI is not liable for the unlawful act of subscriber.
Answer 6(c)
(i) As per Section 35 of the Indian Stamp Act, 1899 instruments not duly stamped are inadmissible in evidence. But in special cases they may be admitted after imposing penalty.
(ii) A document which is not duly stamped is not a void document. It is inadmissible in evidence. Such documents can be impounded and made admissible in evidence upon payment of the prescribed penalty.
(iii) The parties are hot liable to be prosecuted. The proviso to Section 43 clarifies that no prosecution shall be instituted in the case of any instrument in respect of which such a penalty has been paid, unless it appears to the Collector that the offence was committed with an intention of evading payment of the proper duty.
Question 7
(a) Bijoy executed a contract for purchasing a piece of land in Delhi from Ajoy. Just
after the execution of contract, Bijoy proceeded to England and he is not expected
to return to India before six months. Chirag, a good friend of Ajoy who has
general power of attorney to act on behalf of Bijoy, gets the said sale deed
registered. Is this registration valid ? (6 marks)
(b) Atul living in Delhi, is a trustee for Bimal, living in Chennai. Atul remits certain amount from trust fund to Bimal by bills drawn by a person from undoubted credit in favour of the trustee as such and payable at Chennai. The bills are dishonoured. Is Atul, the trustee, liable for the loss of trust fund ? (5 marks)
(c) Ratan is charged with forging a particular document. The prosecution produces
in evidence a number of documents apparently forged, found in possession of
the accused. Are these documents admissible in evidence ? (5 marks)
Answer 7(a)
Registration of sale deed made by Chirag is not valid. Section 32 of the Registration Act, 1908 specifies the persons who can present documents for registration at the proper registration office. Such persons are as follows:
(a) some person executing or claiming under the same, or in the case of a copy of a decree or order, claiming under the decree or order, or
(b) the representative or assign of such person, or
(c) the agent of such person, representative or assign, duly authorised by power-of-attorney executed and authenticated in the manner provided under Section 33.
Under Section 33 of the Registration Act, a special power of attorney is required. A general power of attorney will not do. Section 33 requires that a power of attorney, in order to be recognised as giving authority to the agent to get the document registered, should be executed before and then authenticated by the Registrar within whose district or sub-district the principal resides.
Chirag a good friend of Ajoy does not fall in any of the categories mentioned above. Further, Chirag has only general power of attorney and not the special power of attorney as provided under Section 33. Therefore, the registration got done by Chirag is not valid.
Answer 7(b)
As per Section 15 of the Indian Trusts Act, 1882 a trustee is bound to deal with the trust property as carefully as a man of ordinary prudence would deal with such property if it were his own.
Atul is not liable to make good the loss of trust fund as he took sufficient care as required by a trustee. The facts of the problem are similar to that of illustration (a) appended to Section 15 of the Indian Trusts Act, 1882. Act, 1872 provides that facts which, though not in issue are so connected with a fact in issue as to form part of the same transaction, are relevant, whether they occurred at the same time and place or at different time and places.
In the present problem, facts that number of documents forged and found in the possession of accused are not so connected as to form part of the same transaction (forgery). Thus, documents found in the possession of accused are not admissible in evidence.
Question 8
(a) Amba, a society registered under the Societies Registration Act, 1860, with a
view to amalgamate with another registered society, convened a general meeting
of its members. At the meeting, the secretary of the society placed a special
resolution regarding amalgamation. Out of 50 members, 49 members attended
the meeting, the resolution was put to vote and 30 members voted in favour of
the resolution. Whether the society Amba can effect the amalgamation with the
said society on the basis of the resolution passed ? State the reasons for your
answer. (6 marks)
(b) Avinash, residing in Delhi, requests his friend Bishnoy, residing in Lucknow, for a loan of Rs. 10 lakh. Bishnoy asks Avinash to come to Lucknow and collect the cheque for the said amount. Accordingly, Avinash collects the cheque at Lucknow. Avinash has failed to repay the loan. Bishnoy wants to institute a suit for the recovery of loan against Avinash. Mention the place where Bishnoy can file a suit against Avinash. Give reasons in support of your answer.
(5 marks)
(c) Ram agrees to sell and deliver a ship to Shyam, to be paid for by Shyam's acceptance of four bills of exchange, for sum amounting to Rs.50,000 to be drawn by Ram on Shyam. The bills are drawn and accepted, but the ship is not delivered according to the agreement. Ram sues Shyam on one of the bills. State with reasons whether Shyam can obtain cancellation against all bills ? (5 marks)
Answer 8(a)
Society Amba cannot effect the amalgamation as proper procedure provided for amalgamation has not been followed by the society.
As per Section 12 of the Societies Registration Act, 1860 the governing body shall convene a special meeting to consider the proposal and shall submit the proposition to the members in a written or printed report sent or delivered 10 days previous to the special meeting convened.The propositions must be agreed by the votes of three-fifths of the members present in person or by proxy.
Then a second special meeting will be convened, at an interval of one month after the first meeting. In the second meeting the agreed proposition must be confirmed by three-fifths of the members present there.
Only after that the proposition if confirmed shall be carried into effect.
Answer 8(b) –
A suit on a promissory note or cheque lies at the place where it is drawn signed and dated. The common rule that the debtor must seek his creditor does not apply to promissory notes or cheques etc. A suit on pronote lies at the maker's place. Where no cash was advanced and the loan was by way of cheque, the place where the defendant got the cheque from the plaintiff gives rise to a part of the cause of action and the plaintiff can file a suit for recovery of the loan in the court of that place.
In the present problem, Bishnoy can file a suit against Avinash for the recovery of loan at Lucknow.
Answer 8(c)
The facts in the given problem are based on the case of Anglo Danubian Co. v. Rogerson (1867) L R 4 Eg. 3.
Relief of cancellation under Section 31 of the Specific Relief Act, 1963, would be available when (i) an instrument is void or voidable against the plaintiff; (ii) where the plaintiff may apprehend serious injury if the instrument is left outstanding; and (iii) where it is proper under the circumstances of the case to grant the relief.
The underlying principal of reJief under Section 31 is founded upon the administration of protective justice for fear. The party is relieved upon the principle, as it is technically called quia timetle., forfearthat such agreement, securities deeds or other instruments may be vexatiously and injuriously used against him when the evidence to impeach them may be lost, or that they may throw a cloud of suspicion over his title or interest.
In the light of the provisions of Section 31 of the specific Relief Act, Ram may obtain cancellation of all the bills.
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