Gauhati
University Business Laws Solved Papers
4 (Sem–1/CBCS)
BUSL
2020 (Held in
2021)
BUSINESS LAWS (Honours)
Full Marks: 80
Time: Three hours
The figures in the margin
indicate full marks for the questions.
Answer either in
English or in Assamese
1. (a) Choose the correct option from the following: 1×5=5
(i) The Indian Contract
Act, 1872 came into force on
a) 1st January, 1872.
b) 1st April, 1872.
c) 1st July, 1872.
d) 1st September, 1872.
Ans: d) 1st September, 1872.
(ii) In a sale there is an
implied condition on the part of the seller that he
a) is in possession of the goods.
b) will have the right to sell.
c) will possess the goods.
d) has a right to sell the goods.
Ans: d) has a right to sell the
goods.
(iii) The provisions regarding
maximum number of members in a partnership are given in
a) The Companies Act.
b) The Partnership Act.
c) The Contract Act.
d) The Societies Registration Act.
Ans: a) The Companies Act.
(iv) The Right to
Information Act, 2005 came into force on
a) 12th January, 2005.
b) 12th April, 2005.
c) 12th October, 2005.
d) 12th December, 2005.
Ans: c) 12th October, 2005.
(v) A contract of indemnity
is a
a) contingent contract.
b) wagering contract.
c) quasi contract.
d) future contract.
Ans: a) contingent contract.
(b)
State whether the following statements are correct or incorrect: 1×5=5
a) A bill of exchange needs acceptance.
Ans: True
b) The Sale of Goods Act, 1930 came into
force from 1st July, 1930.
Ans: True
c) A contract with or by a minor is a valid
contract.
Ans: False
d) An agent cannot work for more than one
principal.
Ans: False
e) Registration of limited liability
partnership shall be with the Registrar of Companies.
Ans: True
2. Answer the following questions in brief: 2×5=10
a) What is void agreement?
Ans: An agreement not enforceable at law is a void agreement.
Originally it is a valid agreement but due to certain reasons it becomes void
after its formation. A void agreement cannot be enforced by either party.
b) Write two elements of a contract of indemnity.
Ans: Essentials of Indemnity:
1. Parties: There are two parties in a contract of Indemnity –
Indemnifier and Indemnified. The person who gives the indemnity is called the
indemnifier and the person to whom indemnity is given is called indemnified.
2. Promise: There must be expressed or implied promise by one party
to other party in respect of indemnity.
c) Write two differences between sale and hire-purchase.
Ans: Difference between Hire Purchase
system and Sale
Although hire purchase system could
ultimately result in sale of goods, the sale in normal sense and sale under
hire purchase system are not the same. The following are the differences
between Hire Purchase and Sale.
|
Hire
Purchase |
Sale |
|
Hire purchase is governed by the Hire Purchase
Act, 1972. |
A ‘sale’ is governed by the sale of Goods
Act, 1930. |
|
In case of Hire purchase, the ownership of
goods is transferred to buyer on payment of all installments. |
In case of sale, the ownership of the goods
is transferred to the buyer immediately. |
|
In case of hire purchase, the payment is
made in installments. |
In case of sale, the buyer makes payment in
lump sum. |
d) Who are the parties to a cheque?
Ans: Parties of a cheque:
1. Drawer: A drawer is a person, who draws
a cheque.
2. Drawee: A drawee is a bank on whom a
cheque is drawn.
3. Payee : A payee is a person in whose
favour a cheque is drawn
e) Write two differences between partnership and
co-ownership.
Ans: Difference between Partnership and
Co-ownership
|
Basis |
Partnership |
Co-ownership |
|
1. Basis of creation |
Partnership is arises from contract
not from status. |
Co-ownership may be arises from
contract or from status. |
|
2. Covered by |
Partnership is covered under the
Indian Partnership Act’ 1932. |
Co-ownership is not covered under the
Indian Partnership Act’ 1932. |
Also Read:
Business Laws Solved Question Papers' 2019, Gauhati University
Business Laws Solved Question Papers' 2020 (Held in 2021), Gauhati University
Business Laws Solved Question Papers' 2021 (Held in 2022), Gauhati University
3. Answer any four of the following questions: 5×4=20
a) Briefly explain various kinds of contract on the basis
of formation and performance.
Types of Contracts
|
On the
basis of performance |
On the
basis of formation |
|
1.
Executed contract 2.
Executory contract |
1.
Expressed contract 2.
Implied contract 3.
Quasi contract 4.
Standard Form |
The
above various types of contract are mentioned below:
a) Executed
Contract: An executed contract is that contract in which both the parties
to the contract have performed their respective promises.
b) Executory
Contract: An Executory contract is that contract in which both the parties
to it have yet to perform their promises.
c) Express
Contract: In express contracts, the terms are stated in writing expressly.
d) Implied
Contract: An implied contract is one which is the result of the conduct of
the parties. For example when a person boards a public bus or drinks a cup of
tea in a restaurant there is an implied contract and he has to pay the charges
for it.
e) Quasi contract: In
quasi contract, all the essentials of a contract are absent but the law imposes
a contract on the basis of doctrine of unjust enrichment.
f) Standard form
contract: Those contracts, in which one party proposes to other party with
pre-determined fixed conditions or terms for contract and other party has to
accept or refuse but cannot alter any term or condition, are called standard
form contract.
b) Briefly state different types of partners.
Ans: Different
Types of Partners: The different types of Partners
are:
(i) Active Partner: A person who is actively, actually or
effectively engaged in the conduct of business of the partnership firm is known
as an Active Partner. He is the agent of the other partners and has authority
to bind the firm and the other partners in the ordinary course of business.
(ii) Sleeping or Dormant Partner: A sleeping partner is one
who does not take an active part in the conduct of business of the firm. He
invests capital and shares the profits of the firm and is also equally liable
along with other partners for all the liabilities of the firm.
(iii) Nominal Partner: A person who lends his name to the
firm, without having any real interest in it is called a Nominal Partner. He
does not invest any capital in the business nor does he takes any active part
in the business nor does he share any profit of the firm. However he is liable
along with other partners for all the liabilities of the firm.
(iv) Partner in Profit only: Where a partner agrees with the
other partners that he shall share only profits and shall not be liable for any
losses of the firm he is called Partner in Profit only. However he remains
liable to the creditors for the debts of the firm since under the Partnership
Act the liabilities of the partners is joint, several and unlimited.
(v) Sub-Partner: Where a partner agrees to share his profits
earned form the firm with a third person then that third person is known as the
sub-partner. A sub-partner has no rights against the firm and cannot represent
himself as a partner of the firm. He is in no way connected with the firm and
is thus not liable for the liabilities of the firm.
(vi) Partner by Estoppel or by Holding Out: Sometimes
strangers represent themselves to be partners in a firm and thereby induce
third parties to give credits to the firm such strangers are called as partners
by Estoppel or Partners by Holding Out.
c) State the rights of bailee.
Ans: Rights of a Bailee
a) Right
to necessary expenses (Section 158): As per Section
158 says that whereby conditions of the bailment, the goods are to be kept
or to be carried or to have work done upon them by the bailee for the bailer
and the bailee is to receive no remuneration, the bailer shall repay to the
bailee the necessary expenses incurred by him for the purpose of bailment.
Thus, a bailee is entitled to recover the charges as agreed upon, or if there
is no such agreement, the bailee is entitled to all lawful expenses according
to this section.
b) Right
to compensation (Section 164): As per section 164,
the bailer is responsible to the bailee for any loss which the bailee may
sustain by reason that the bailer was not entitled to make the bailment, or to
receive back the goods, or to give directions respecting them. This means that
if the bailer had no right to bail the goods and if still bails them, he will
be responsible for any loss that the bailee may incur because of this.
c) Right
of Lien (Section 170-171): In general, Lien means
the right to keep the possession of the property of a person until that person
clear the debts. In case of bailment, the bailee has the right to keep the
possession of the property of the bailer until the bailer pays lawful charges
to the bailee. Thus, right of Lien is probably the most important of rights of
a bailee because it gives the bailee the power to get paid for his
services.
d) Right
to Sue (Section 180-181): Section 180 enables a
bailee to sue any person who has wrongfully deprived him of the use or
possession of the goods bailed or has done them any injury. The bailee's rights
and remedies against the wrong doer are same as those of the owner. An action
may be brought either by the bailer or the bailee.
d) Briefly explain the quasi-contracts dealt with under
the Indian Contract Act.
Ans:
Quasi Contract: It means a contract which lacks one or more of the essentials
of a contract. In a contract, a promisor voluntarily undertakes an obligation
in favour of the promisee. When a similar obligation is imposed by law upon a
person for the benefit of another even in the absence of a contract. Such
contracts are the quasi-contracts. Quasi contract are declared by law as valid
contracts on the basis of principles
of equity i.e. no person
shall be allowed to enrich himself at the expense of another the legal
obligations of parties remains same.
Nature of Quasi contracts:
a) A quasi contract does not arise from any
formal agreement but is imposed by law.
b) Every quasi contract based upon the principle
of equity and good conscience.
c) A quasi contract is always a right to money
and generally though not always to a liquidated sum of money.
d) A suit for its breach may be filed in the same
way as in case of a complete contract.
e) The right grouted to a party under a quasi-contract
is not available to him against the whole world but against particular
person(s) only.
e) Distinguish between promissory note and cheque.
Ans: Difference between
Promissory Note and Cheque:
|
Basis |
Promissory
Note |
Cheque |
|
Nature |
It is an unconditional promise by
the maker to pay the money. |
It is an unconditional order to the
bank to pay certain sum of money. |
|
Days of Grace |
Three days of grace are allowed for
payment. |
No days of grace are allowed for
payment. |
|
Crossing |
A promissory note cannot be crossed.
|
A cheque can be crossed. |
|
Stamping |
A promissory note must be stamped. |
A cheque does not require a stamp. |
|
Drawer |
The maker of a promissory note is
one who pays the money. |
The drawer of a cheque is one who
withdraws the money from the drawee. |
|
Payee |
The maker of promissory note cannot
be payee. |
The drawer of a cheque can be the
payee. |
f) Explain different types of goods under the Sale of
Goods Act, 1930.
Ans: Goods may
be classified into various types as under:
1. Existing goods: These are goods which are owned and possessed
by the seller at the time of sale. Only existing goods can be the
subject-matter of a sale. The existing goods may be –
Specific goods: These are goods which are identified and agreed
upon at the time of contract of sale is made. For e.g. a person visits a Titan
showroom and identifies a watch for purchase.
Ascertained goods: Though commonly used as similar in meaning to
specific goods, these are the goods which become ascertained subsequent to the
formation of contract of sale. For e.g. from say 10 Sony T.V. a person
identifies the particular T.V.
Unascertained goods: These are the goods which are not identified
and agreed upon at the time of the contract of sale. They are defined only by description
and may form part of a lot. For e.g. a shopkeeper has a bag containing 50 kg of
sugar. He agrees to sell 10 kg sugar to X out of that bag The 10 kg of sugar is
unascertained goods as they are yet to be identified from the bag containing 50
kg.
2. Future Goods: These are goods which a seller does not possess
at the time of the contract but which will be manufactured, or produced, or
acquired by him after the making of the contract of sale. [Section 2(6)]. A
contract of present sale of future goods, though expresses as an actual sale,
purports to operate as an agreement to sell the goods and not a sale. This is
because the ownership of a thing cannot be transferred before that thing comes
into existence.
3. Contingent Goods: It is a type of future goods but these are
goods the acquisition of which by the seller depends upon a contingency which
may or may not happen.
4. What is consideration in a contract? Discuss the rules
relating to consideration. 2+8=10
Ans: Consideration
and Its Essentials
Section 2 (d) of Indian Contract Act, 1872, defines consideration
as “When at the desire of the promisor the promise or any other person has done
or abstained from doing or does or abstains from doing something, such act
abstinence or promise is called a consideration for the promisor.”
Consideration is based on the term ‘quid-pro-quo’ which means ‘something in return’. When a person makes a promise to other, he
does so with an intention to get some benefit from him. This act to do or to
refrain from doing something is known as consideration.
Consideration is an advantage or benefit which moves from one
party to another. It is the essence of bargain. It is the reciprocal promise
i.e. to do something or abstain from doing something in return of a promise. It
is necessary for an agreement to be enforceable by law. In consideration both
the parties give something & get something in return. It may be in cash or
kind.
The
following are the rules related to the consideration
(i)
Consideration must move at the desire of promisor. If it is
done at the instance of a third party without the desire of the promisor, it is
not consideration. Act done at the desire of a third party is not a
consideration. Act must be done voluntarily at the desire of the promisor.
(ii) It
may move from the Promisee or any other person in the Indian Law
so that a stranger to the consideration may maintain a suit. A consideration
may move from the promise or any other person. Consideration from a third party
is a valid consideration. Under English Law, however, consideration must move
from the Promisee only.
(iii)
Consideration may be past, present or future. The words
used in Section 2(d) are “has done or abstained from doing (past), or does or
abstains from doing (present), or promises to do or to abstain from doing
(future) something” This means consideration may be past, present or future.
(iv) It
must be real & not illusory, infinite or vague. Although
consideration need not be adequate, it must be real, competent and of some
value in the eye of law. Physical impossibility, legal impossibility, uncertain
consideration & illusory consideration.
(v) Consideration must not be unlawful, illegal,
immoral or opposed to public policy. The
consideration given for an agreement must not be unlawful. Where it is
unlawful, the courts do not allow an action on the agreement.
(vi)
Consideration need not be adequate.
Consideration as already explained means “something in return”. This “something
given”. The law simply provides that a contract should be supported by
consideration. So long as consideration exists, the courts are not concerned as
to its adequacy, provided it is of some value. “The adequacy of the
consideration is for the parties to consider at the time of making the
agreement, not for the court when it is sought to be enforced.”
Or
Discuss the essential elements of a valid contract. 10
Ans:
Essential Elements of a contract:
Section10
of the Act provide “All agreements are contracts if they are made by the free
consent of the parties competent to contract for lawful object & are not
hereby expressly declared void.”
An agreement in
order to become a contract must be enforceable by law. Agreements, which do not
fulfill the essential requirements of a contract, are not enforceable.
Thus when an
agreement enables a person to compel another to do something or not to do
something it is called a contract. Thus all contracts are agreements but all
agreements are not contracts. In order to become a valid contract an
agreement must possess the following essential elements:
a)
Offer
& Acceptance: There must be two parties to an agreement
i.e. one making the offer & other party accepting it. Acceptance of must be
unconditional & absolute. A part of an offer cannot be accepted. The terms
of an offer must be definite. The acceptance must be in the mode as prescribed
& must be communicated. The acceptor of an offer must accept it in the same
way & same sense & at the same time as offered by the offeror i.e.
there must be consensus ad idem.
b)
Intention
to create legal relationship: When two parties enter into a
contract their intention must be to create legal relationship. If there is no
such intention between the parties, there is no contract between them.
Agreements of a social or domestic nature to do not constitute contracts.
c)
Lawful
consideration: An agreement to be enforceable by law must be
supported by consideration. “Consideration” means an advantage or benefit which
one party receives from another. It is the essence of bargain. The agreement is
legally enforceable only when both parties give something or get something in
return. An agreement to do something without getting anything in return is not
a contract. Contract must be in cash or kind.
d)
Capacity
to Contract-Competency: The parties competent to contract must
be capable of contracting i.e. they must be of the age of majority, they must
be of sound mind & they must not be disqualified from contracting by any
law to which they are subject to. An
agreement with minors, lunatics, drunkards, etc. is not contract & does not
get a legal title.
e)
Free
Consent: It is necessary between the contracting
parties to have a free & genuine consent to an agreement. The consent of
parties is said to be free when the contracting parties are of the same mind on
the materials of a contract. They must mean the same thing at the same time the
parties must not enter into a contract under undue influence, coercion,
misrepresentation etc. If these flaws are present in an agreement it does not
become a contract.
f)
Lawful
object: The object of an agreement must be lawful. It
should not be illegal, immoral or it should not oppose public policy. If an
agreement suffers from a legal flaw with respect to object it is not
enforceable by law & so it is not a contract.
g)
Agreement
not declared void: For an agreement to be a contract it is
necessary for the agreement must not be expressly declared void by any law in
force in the country.
h)
Possibility
& Certainty of performance: The terms of an agreement must not be
vague or indefinite. It should be certain. The agreement must be to do a thing
which is possible. For e.g. an agreement to sell a car for Rs. 100/- if sun
does not rise tomorrow. This agreement is impossible & so not enforceable
by law.
5. (a) Discuss the rights of surety against the creditor
and the principal debtor. 6
Ans: Right of surety:
1. Right of surety against creditor:
A) Right to securities: On default of
principal debtor, when the surety issued by the creditor to compensate the
surety has the right to the benefit of all securities which the creditor has
against the principal debtor at the time of contract of guarantee.
b) Right of set-off: If the surety
issued by the creditor, he is entitled to use all the defenses against the
creditor principal debtor.
2. Right against principal debtor:
a) Right to indemnity: (Sec.
145 of the Indian Contract Act,1872) In every contract of guarantee there is an
implied promise by the principal debtor to indemnify the surety, and the surety
is entitled to recover from the principal debtor whatever sum he has rightfully
paid under the guarantee, but no sums which he has paid wrongfully.
b) Right to Subrogation: (Sec. 140
of the Indian Contract Act, 1872) According to Section 140 of the Indian
Contract Act 1872, where a guaranteed debt has become due, or default of the
principal debtor to perform a guaranteed duty has taken place, the surety upon
payment or performance of all that he is liable for, is invested with all the
rights which the creditor had against the principal debtor.
(b) Explain the duties of an agent. 4
Ans: Duties of
Agents
a)
Duty to follow
instructions given by the principal: Agent should follow the
instructions given by the principal while conducting business and in the
absence of any such directions, according to the custom which prevails in doing
business of the same kind at the same place.
b)
Duty of reasonable
care:
Agent must take due care and skill while performing his duties. If agent comes
across any complicated situation, he has to communicate that situation to
principal and his advice is to be obtained.
c)
Be honest: Agent should
behave in his capacity as agent; he should not run the transaction in his own
name.
d)
Duty not to make
secret profit:
Agent should not make secret profits by utilizing reputation of the
principal.
e)
Duty to protect
the property of principal: Agent should safe guard property of principal particularly
upon happening of events like death of principal, insolvency of principal, etc.
Or
State the essential elements of a contract of sale. Also
distinguish between sale and agreement to sell. 5+5=10
Ans: The essentials of a contract of
sale are:-
1. Numbers of parties: Since a contract of sale involves a change
of ownership, it follows that the buyer and the seller must be different
persons. A sale is a bilateral contract. A man cannot buy from or sell goods to
himself. To this rule there is one exception provided for in section 4(1) of
the Sale of Goods Act. A part-owner can sell goods to another part-owner.
Therefore a partner may sell goods to his firm and the firm may sell goods to a
partner.
2. Goods: The subject-matter of the contract of
sale must be ‘goods’. According to Section 2(7) “goods means every kind of
movable property other than actionable claims and money; and includes stock and
shares, growing crops, grass, and things attached to or forming part of the
land which are agreed to be severed before sale or under the contract of sale.”
Goodwill, trademarks, copyrights, patents right, water, gas, electricity,,
decree of a court of law, are all regarded as goods. In the case of land the
grass which forms part of land have to be separated from the land. Thus where
trees sold so that they could be cut out and separated from the land and then
taken away by the buyer, it was held that there was a contract for sale of
movable property or goods (Kursell vs Timber Operators & Contractors Ltd.).
But contracts for sale of things ‘forming part of the land itself’ are not
contracts for sale of goods.
3. Price: The consideration for a contract of sale is price. Price
means money consideration. If it is anything other than money, it will not be
sale. But if the exchange is made partly for goods and partly for price, it
will still amount to sale. However, the price may be paid or promises to be
paid.
4. Transfer of property:
'Property' here means ownership. Transfer of property in the goods is another
essential of a contract of sale of goods. A mere transfer of possession of the
goods cannot be termed as sale. To constitute a contract of sale the seller
must either transfer or agree to transfer the property in the goods to the
buyer. Further, the term 'property', as used in the Sale of Goods Act, means
'general property' in goods as distinguished from 'special property' [Sec.
2(11)]. If P, who owns certain goods, pledges them to R, he has general
property in the goods, whereas R (the Pawnee) has special property or interest
in the goods to the extent of the amount of advance he has made to the Pawnor.
Similarly, in the case of bailment of goods for the purpose of repair, the
bailee has special interest in goods bailed to the extent of his labour
charges.
5. No formalities to be observed (Sec. 5):
The sale of Goods Act does not prescribe any particular form to constitute a
valid contract of sale. A contract of sale of goods can be made by mere offer
and acceptance. The offer may be made either by the seller or the buyer and the
same must be accepted by the other. Neither payment nor delivery is necessary
at the time of making the contract of sale. Further, such a contract may be
made either orally or in writing or partly orally and partly in writing or may
be even implied from the conduct of the parties. Where articles are exhibited
for sale and a customer picks up one and the sales assistant packs the same for
him, there has resulted a contract of sale of goods by the conduct of the
parties.
Difference between ‘Sale’ and
‘agreement to sell’.
|
Basis |
Sale |
Agreement to Sell |
|
Definition |
Where
under a contract of sale, the property in the goods is transferred from the
seller to the buyer (i.e. at once); the contract is called a ‘sale’. |
where
the transfer of the property in the goods is to take place at a further time
or subject to some condition thereafter to be fulfilled, the contract is
called an ‘agreement of sell’ |
|
Transfer
of ownership |
Transfer
of ownership of goods takes place immediately. |
Transfer
of ownership of goods is to take place at a future time or subject to
fulfillment of some condition. |
|
Executed
contract or Executory contract |
It
is an executed contract. |
It
is an Executory contract. |
|
Conveyance
of property |
Buyer
gets a right to enjoy the goods against the whole world including seller. |
Buyer
does not get such right. |
|
Transfer
of risk |
Transfer
of risk of loss of goods takes place immediately because ownership is
transferred. |
Transfer
of risk of loss of goods does not take place because ownership is not
transferred. |
6. (a) Distinguish between Partnership and Limited
Liability Partnership. 6
Ans:
Difference between Partnership and Limited Liability
Partnership
|
Basis |
Partnership |
LLP |
|
1. Law |
It is created
under Indian Partnership Act, 1932. |
It is created
under LLP Act, 2008. |
|
2. Name |
There is no
guideline about the name of the partnership. |
The term “LLP”
is added with the name of an LLP. |
|
3. Separate
legal entity |
Partnership
does not have separate legal entity distinct from its members. |
It has a
separate legal entity distinct from its members. |
|
4. Liability |
Liability of
partners is unlimited. |
Liability of
partners is limited. |
|
5. Charter
document |
Partnership
deed is a charter of a partnership firm which denotes it scope of operation
and rights and duties of the partners. |
LLP agreement
is a charter of the LLP which denotes its scope of operation and rights and
duties of the partners. |
|
6. Number of
members |
Minimum number of partners is 2 and maximum 100 for a
partnership firm. |
Minimum number of partners is 2 but in case of limited liability
partnership there is no maximum limit. |
(b) State various documents required for registration of
limited liability partnership. 4
Ans: LLP is simply a combination of
Partnership and Company form of business organisation. It is a corporate
business vehicle that enables profession expertise and entrepreneurial
initiative to combine and operate in flexible, innovative and efficient manner.
It provides an alternative to the traditional partnership firm with unlimited
liability.
LLP is required
to be registered with registrar of companies (ROC). Both documents relating to
partners and LLP are required for registration of an LLP.
Documents of
Partners:
a) ID proofs the
partners such as PAN card.
b) Address proof
of the partners such as electricity bill, telephone bill, mobile bill,
passport, driving license etc.
c) Photographs
of the partners.
d) In case of
foreign nationals and NRIs, passport of the foreign nationals.
Documents of
LLP:
a) Registered
office proof of the LLP.
b) Digital
signature certificate duly signed by the authorised signatory.
Or
Explain the procedures of registration of partnership
firm. Also state the benefits of registration of partnership firm. 6+4=10
Ans: Procedure of Registration of partnership firms:
The
registration of a partnership is not compulsory but to avoid future problems it
is necessary for a firm to get itself registered under the Indian Partnership
Act, 1932. Sec. 58 of the Indian Partnership Act lays down the provisions
relating to the registration of a firm. If partners want to get their firm
registered, they have to file statement in the prescribed form. The statement
can be send by post or delivered to the registrar of the area in which the
place of business is situated. The following points must be stated in the
statement of registration:
a)
The firm’s name
b)
The principal place of business of the
firm
c)
The names of any other places of
business
d)
The date when each partner joined the
firm
e)
The name and address of the firm
f)
The duration of the firm
The statement of registration shall be signed by the partners or
their authorised agents. When the registrar is satisfied that the provisions of
Sec. 58 have been duly complied with, he shall record an entry of this
statement in the register of firms and shall file the statement.
Consequences
of Non-registration of firms
The Indian Partnership Act does not make registration of a firm
compulsory nor does it impose any penalty for non-registration. It is optional
for the firm to get itself registered or not. However, Section 69 puts
down certain disabilities to a non-registered firm which normally forces the
partners the partners to get the firm registered. The effects of non-registration
are as follows:
(a) No suit by a partner against other partners or firm: A
partner of an unregistered firm cannot sue the firm or any partner of the firm
to enforce a right arising from the contract or conferred by the Partnership
Act. He can do so only if the firm is registered and the person suing is shown
as a partner in the register of firms.
(b) No suit against any third party: An unregistered firm
cannot sue a third party to enforce a right arising from a contract. The firm
can only do so if the firm is registered and the person suing is shown as a
partner in the register of firms.
(c) No right to counter claim or to claim setoff: An
unregistered firm or any partner thereof cannot claim setoff in the proceedings
instituted against a firm by a third party to enforce a right arising from a
contract. Setoff means a claim by the firm which would reduce the amount of
money payable to the claimant.
(d) Arbitration proceedings: In Jagdish Chandra Gupta
vs. Kajaria Traders (India) Limited it was held that arbitration
proceedings were barred if the firm was unregistered.
So in order to avoid such consequences, it is necessary for every
firm is to get registration.
7. (a) State the privileges enjoyed by a holder in due
course. 5
Ans: Holder in Due Course enjoys the
following rights and privileges:
a)
He possesses better title free from
all defects: He always possesses better title than that of his transferor or
any of the previous parties and can give to the subsequent parties the good
title that he possesses. The holder in due course is entitled to recover the
amount of the instrument from any or all of the previous parties.
b)
All prior parties liable: All prior
parties to the instrument i.e. its maker or drawer, acceptor or endorser, is
liable thereon to a holder in due course until the instrument is duly
satisfied. The holder in due course can file a suit against the parties liable
to pay in his own name.
c)
No effect of conditional delivery:
Where a negotiable instrument delivered conditionally or for a special purpose
and is negotiated to a holder in due course, a valid delivery of it is
conclusively presumed and he acquires good title to it.
d)
Right in case of fictitious bills:
Where both drawer and payee of a bill are fictitious persons, the acceptor is
liable on the bill to a holder in due course.
e)
Right of the holder in due course in
case of inchoate instrument: If a negotiable instrument was originally an
inchoate (incomplete) instrument and subsequent transferor completed the instrument
for a sum greater than what was the intention of the market, the right of a
holder in due course to recover the money of the instrument is not at all
affected.
(b) Explain various types of crossing of a cheque. 5
Ans: Types of
crossing:
1. General crossing: A
general crossing is a crossing where a cheque simply bears two parallel lines
with or without any words and without any specification. According to Sec. 123
of the Negotiable Instrument Act, 1881, “When a cheque bears across its face an
addition of the words. “and company” or any abbreviations thereof between two
parallel transverse line or of two parallel transverse lines simply either or
without the words, “Not Negotiable” that addition shall be deemed a general
crossing. Simplify, In case of General crossing words such as “and company”,
“not Negotiable”, “Account payee” etc. may be inserted between the lines.
A general crossing cheque protects the drawer and also the payee
or the holder thereof. Whenever a drawer desires to make payment to an
outstation party, he can cross the cheque so that even if the cheque is lost,
it means only a piece of paper is lost and nothing beyond that. If by any
chance, it is encashed by a third and unauthorized person, it is possible to
find out to whose account the amount is credited and the unauthorized person
can be identifies and suitable action taken against him.
2. Special crossing: Section 124 of the
Negotiable Instruments Act, 1881 defines special crossing as “where a cheque
bears across its face, an addition of the name of a banker with or without the
words “not negotiable”, that addition shall be deemed a crossing and the cheque
shall be deemed to be crossed specially and to be crossed to that banker.”
Thus, in case of
special crossing, the name of a particular bank is written in between the
parallel lines. The main implication of this type of crossing is that the
amount of the cheque will be paid to the specified banker whose name is written
in between the lines. Special crossing is in a particular bank and
by special crossing, he is assured of double safety, safety to the drawer and
safety to the payee.
3. Account
payee crossing: This type of crossing is done by adding the words ‘Account
Payee’. This can be made both in general crossing and special crossing. The
implication of this type of crossing is that the collecting banker has to
collect the amount of the cheque only for the payee. If he wrongly credits the
amount of the cheque to another account, he will be held responsible for the
same.
4. Not
negotiable crossing: When the words ‘not negotiable’ is added in generally
or specially crossed cheques, it is called not negotiable crossing. A cheque
bearing not negotiable crossing cannot be transferred. If a cheque bearing ‘Not
negotiable crossing’ is transferred, care must be taken regarding the ownership
of title of both the transferor and transferee.
Or
Discuss the
obligations of public authorities under the Right to Information Act, 2005. 10
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