LEGAL ASPECTS OF BUSINESS

END TERM
Answer 1:

1.

Rajat is not bound to inform Raj. Section 17(5)(d) of the Indian Contract Act,1872 says that
Silence on facts likely to influence a person's desire to engage into a contract is not fraud
unless the circumstances of the case are such that the person keeping silence has a
responsibility to speak or unless his silence is equivalent to speaking in and of itself.

Shanker Mahadevan is the original producer of the tune that he has licensed to YRF films for
using in his forthcoming film. YRF has granted the license to JIO which is directly a breach
of the Copyright act, 1957. Before transferring the license to JIO, Shanker Mahadevan should
be informed about this. Now, he can go to the court and sue YRF Films for this.

4.

According to the definition, an individual cannot be treated as a member of the company until
his name is included into the company's Register of Members. The term 'member' is not
synonymous with the term 'shareholder.' A shareholder can become a shareholder by
purchasing shares, but he will not be a member until his name is registered in the company's
Register of Members.

So, in this case, if the person does not provide written confirmation that he agrees to be
registered as a member of the company under the Companies Act 2013, He will not be
regarded as a member. Since then, Vijay has only verbally accepted to become a member and
has never given anything in writing. As a result, the company's contention is false.

5.

No, Anron Pvt. Ltd. is not a subsidiary of Ericsson Pvt. Ltd. In relation to any other company
(that is, the holding company), a subsidiary company is:

 one in which the Board of Directors is controlled by the holding company.

  More than half of the total share capital entire voting power is exercised or handled by
the company, either alone or through one or more of its subsidiary businesses.

In this case, Ericsson Pvt. Ltd. is a subsidiary of Anron Pvt. Ltd. because Anron Pvt. Ltd.
has equity shares of Rs. 3,00,000 and Ericsson Pvt. Ltd. along with its subsidiary has a
total of 1,60,000 equity shares (more than 50% of the equity shares of Anron Pvt. Ltd.).
This makes Ericsson a subsidiary of Anron Pvt. Ltd as it holds more than 50% of the
stock in Anron Pvt. Ltd.

Answer 2:

1:

Since an artificial person is not capable of doing anything illegal, the notion of corporate
personality has to be put aside to find the actual guilty members this is known as the lifting of
the corporate veil.

A: Common Law Exceptions- When a firm acts as an agent for its shareholders and they are
held accountable for the company's actions, the concept of vicarious liability is applied.

1. Determination of Character- A company is not a natural person, but it can take on an

enemy identity if the people in charge of its affairs are citizens of an enemy country or are
functioning under the guidance and control of enemies. In times of war, the court will lift the
veil to see whether a company is controlled by enemy aliens.

2. Where Company is a Sham- When the company is only a cloak or sham, that is when the
method of incorporation is utilised for some illegal purpose, the court will lift the veil.

3. Prevention of fraud or improper conduct- The court may dismiss the company's distinct
existence if it appears that it was created to avoid contractual and statutory duties.

B: Statutory Exceptions-This section discusses the liability of the “officers in default” i.e.,
those persons who are the part of wrong or illegal activities are accountable in regard of the
crimes committed by them.

Such cases are:

1. Mis-description of company’s name

2. Misstatements in the prospectus

3. Failure of refund application money

4. Fraudulent of Conduct

5. Liability for ultra vires Act

2:

Illegal agreements are those agreements, object, or consideration of which is not enforceable
by law and is punishable by the law. Hence, illegal agreements are void. On the contrary, the
void agreements are not enforceable by the law and there is no legal recourse. However, the
performance of the agreement can be done as it is not strictly forbidden. Hence, this means
that all illegal agreements are void in nature, but it is not necessary that all void agreements
are illegal.

1. A void agreement has a broader scope than an illegal arrangement. 'All illegal
agreements are null and invalid, but not all void agreements are illegal.' An
agreement's goal or consideration may not be illegal, yet it may nonetheless be void.
A contract with a juvenile, for example, is void in his favour but not illegal.
2. In terms of collateral transactions, an illegal agreement has a broader consequence
than a void contract. Other agreements that are incidental or collateral to an illegal
contract are similarly tainted with illegality, and hence void if the third parties are
aware of the unlawful or unethical design of the original transaction.

4:

Cartels are contracts between businesses that restrict them from competing on pricing,
product, or customers. The cartel's goal is to raise prices above the competitive limit, causing
harm to customers and the economy.

Consumers face higher costs, fewer options, and lower quality goods and services as a result
of cartelization. A cartel is described as two or more businesses agreeing, either directly or
indirectly, to regulate prices, manage production and supply, and distribute market share.  A
crucial feature of a cartel's definition is that it requires competing enterprises to agree not to
compete or to decrease competitiveness.

6:

Corporate social responsibility is defined as actions that enable an organisation to not only
meet its legal obligations but also to move forward and invest in the environment, human
capital, and other areas, whereas corporate governance is defined as the system that manages
and controls the relationship between stakeholders, the board of directors, and shareholders.

Corporate governance and corporate social responsibility (CSR) both play an essential role in
establishing the objective function and constraints that businesses encounter. The overlap
between the two sectors gets increasingly large and noticeable when both increase at a quick
pace. The research linking corporate governance and CSR have gotten a lot of attention
recently. The interactions between them are complicated and subtle, necessitating rigorous
research design, extensive data, and cautious interpretation. The relationship between CSR
and corporate governance has been extensively studied in order to identify concerns including
conflicts between diverse stakeholders' interests. At the same time, CSR policies aid not only
the company's corporate governance procedures but also the new regulatory criteria. The
company's management is tasked with prudently applying CSR concepts in the workplace.

Answer 3:

(a)

Mr Kabir sent a proposal to Mr Ali on November 01, 2021, in which he showed his
willingness to buy the bike. In return, Mr Ali made a specific offer by specifying the price of
the motorcycle.

In this case, acceptance was completed when Mr Ali accepted the proposal and made a
specific offer to Mr Kabir. Then Mr Ali replied to Mr Kabir on November 15, 2021, by
stating the minimum price of the bike, then Mr Kabir responded to the letter on 20th Nov and
the letter reached Mr Ali on November 25, 2021. In this case, acceptance is completed since
Mr Kabir accepted the price of the motorcycle.

(b)
Yes, the correspondence between Mr Kabir and Mr Ali resulted in contract formation as the
essentials of a valid contract are fulfilled in this case. The essentials are:

1. There is an offer and acceptance among both the parties: Here Mr Ali made an offer
after the proposal of Mr Kabir then Mr Kabir accepted in accord with the law.
2. Certainty is about the terms. To ensure that a contract is valid the terms of it must be
certain. In this, Mr Ali agrees to sell the bike at Rs. 30,000. Since, in this case, the
selling price of the bike is mentioned is 30,000.
3. Both parties must be aware of the legal consequences of the contract being made.
4. Parties must have the legal capacity to enter into the contract: The contract act
prescribes certain qualifications to enter into the contract.
 They must have a sound mind
 They are not alien enemies, insolvents etc.
Here both parties are legally capable to enter into the contract.

(c)

Kabir cannot sue Ali for selling his bike on 24 November 2021 to another party as the
communication of acceptance was not made at the time when Ali received the letter on 25
November 2021. On 24 November 2021, Ali was not legally bound by the contract as the
agreement was still in process and not yet completed.

Answer 4:

1 (a)

In some circumstances, mediation is not an appropriate approach for resolving disputes.

Mediation, which involves both parties' agreement, is unlikely to be acceptable when
deliberate, bad faith counterfeiting, or piracy is involved. Similarly, where a party is certain
that it has a strong case, or where the parties or one of them wants a neutral view on a
genuine point of difference, to set a precedent, or to be publicly justified on an issue in
dispute, mediation may not be the best option. Neighbour disputes, building disputes, debt
collection, divorce, financial settlements, and child custody problems, as well as
disagreements with professionals such as lawyers or accountants and civil contract disputes,
can all benefit from mediation.
1(b)

If mediation fails and the case moves to court, neither party is authorised to utilise the content
of the mediation proceedings as proof in court. The discussions at mediation are kept private,
and the information will not be shared with the parties' lawyers.

2 (a)

Yes, the parties can seek an arbitration location outside of India.  The Supreme Court found
that two Indian parties are free to choose a foreign site for arbitration and that neither the
Indian Contract Act nor the Arbitration Act restricts them from doing so. The Supreme Court
held that two Indian parties to a contract with a foreign seat could choose foreign substantive
law to monitor and manage their rights and duties.

Conclusion: Yes, the two parties can select an arbitration seat outside of India to avoid having
to deal with Indian law. However, if the arbitration takes place outside of India, the award
will be treated as a foreign award, and its enforcement in India will be controlled by the
foreign territory, as implemented in Indian law.

2(b)

An Arbitration Award is the final decision of the Arbitrators issued to the parties in any
controversy or lawsuit. An arbitration award is equivalent to a court's decision in that it is
compulsory on the parties and is crucial in that it aids in the settlement of the conflict. The
most important factor in deciding whether or not to challenge an arbitration award is whether
or not the arbitration decision is binding. Any party or parties may appeal the award without a
strong basis if the arbitration is ineffectual and non-binding. If the Arbitration is binding,
however, the party or parties must have a good reason to challenge the judgment in court.

Answer 7:

(a)

Step 1:

In the very first step, the person's name is being selected under section 149 of the
companies act 2012

Step 2:
It covers the application for the digital signature certificate. This certificate act as a kind
of proof of identity of a person for a particular purpose.

Step 3:

It addresses the application for a DIN (Director Identification Number). It’s a kind of one-
of-a-kind identification number given to the company's present director or the one who is
meant to be the company's director. Only after the DIN is being approved the further
steps could be taken.

 Identity proof
 Proof of address
 Passport-sized photograph
 Occupation
 Education qualifications
 Contact number
 Email address.

Step 4:

Filing a Request for Approval of a Proposed Company Name with the Registrar of
Companies

With such forms, an individual can submit an application to submit the name of the firm
to be registered.

Step 5: Memorandum of Association (MoA) drafting

The Memorandum of Association is the company's constitution, and it must include all of
the company's essential information.

The Memorandum of Agreement (MoA) establishes the Company's relationship with its
shareholders. As a result, it's critical to thoroughly construct the MoA, including properly
including Clauses.

Step 6: Articles of Association (AoA) drafting

 The Articles of Association (AoA) is a crucial document that outlines the company's
operations, the reason for its establishment, and information about the process of
choosing directors and keeping track of the company's finances.

Step 7: Application for Company Incorporation

According to Section 7 of the Companies Act, 2013, A company's registered office must
be lodged with the registrar in the area where the registered office is to be located.

Step 8: The Start of Business

A company with a share capital may not establish a business or borrow money unless the
director files a declaration in Form No. In the manner permitted, declaring that each
subscriber to the memorandum has paid the value of the shares agreed to be accepted by
him.

(b)

Yes, if it was made by passing a special resolution by holding a general meeting of its
members and filing a verified copy of the resolution with the central government, it can be
considered genuine. The corporation is unable to change the object clause on its own. After
that, the central government receives the planned amendment application. Before the
government approves the change, the application will be evaluated.

Within three months of the order's date, the corporation must file a certified copy of the
central government's order with the RoC, along with a printed copy of the updated
memorandum. The registrar must register such documents and attest the registration under his
hand within one month of the date of filing.

If the change has been made in this manner, it will be considered genuine.

(c)

No, the Registrar cannot delete the company from the register because the company’s
existence is not affected by the death of its shareholders. An incorporated company cannot
come to an end by the registrar until it is liquidated. Company has:

1. Separate Legal Entity: It means that the company has its real existence.
2. Perpetual Succession: It means the company will continue to operate until it is legally
dissolved. A company's existence is unaffected by the death of any of its members
because it is a separate legal entity. Its existence is unaffected by the death or
bankruptcy of shareholders or directors. Members may come and go, but the company
continues to exist forever.