Introduction to Corporate Law

Corporate law (also "company" or "corporations" law) is

the law of the most dominant kind of business enterprise in
the modern world. Corporate law is the study of
how shareholders,directors, employees, creditors, and other
stakeholders such as consumers, the community and
the environment interact with one another under the internal
rules of the firm. A major contributor to company law in the
UK is the Companies Act 2006.
Corporate law is a part of a broader companies law (or law of
business associations). Other types of business associations
can include partnerships (in the UK governed by the
Partnership Act 1890), or trusts (like a pension fund) or
companies limited by guarantee (like some universities or
charities). Corporate law is about big business, which
has separate legal personality, with limited
liability or unlimited liability for its members or shareholders,
who buy and sell their stocks depending on the performance
of the board of directors. It deals with the firms that are
incorporated or registered under the corporate or company
law of a sovereign state or their subnational states. The four
defining characteristics of the modern corporation are

 Corporate law deals the formation and operations of

corporations and is related to commercial and contract
law.
 A corporation is a legal entity created through the laws
of its state of incorporation, treating a corporation as a
legal "person" that has standing to sue and be sued,
distinct from its stockholders. Corporations are taxable
entities that are taxed at a lower rate from individuals.
Until formally dissolved, a corporation has perpetual
life; deaths of officials or stockholders do not alter the
 corporation's structure. State laws regulate the
creation, organization and dissolution of corporations.
 Many states follow the Model Business Corporation Act.
States also have registration laws requiring
corporations that incorporate in other states to request
permission to do in-state business.
 Corporate law is a part of a broader company’s law (or
law of business associations). Other types of business
associations can include partnerships, or trusts, or
companies limited by guarantee (like some universities
or charities).
 Corporate law is about big business, which has separate
legal personality, with limited liability or unlimited
liability for its members or shareholders, who buy and
sell their stocks depending on the performance of
the board of directors. It deals with the firms that are
incorporated or registered under the corporate or
company law of a sovereign state or their sub national
states.
 For example, Congress passed the Securities Act of
1933, which regulates how corporate securities are
issued and sold. Corporations in certain industries are
subject to federal regulation and licensing, such as
communications and public transportation.

STRUCTURE OF CONSUMER PROTECTION ACT

The Act envisages a three- tier quasi-judicial machinery at the National, State
and District levels.

• National Consumer Disputes Redressal Commission - known as

"National Commission" deals with complaints involving costs and
compensation higher than Rs. One Crore.
• State Consumer Disputes Redressal Commissions - known as "State
Commission, deals with complaints involving costs and compensation higher
than Rs. Twenty Lakhs and less than Rs. One Crore.
• District Consumer Disputes Redressal Forums - known as "District Forum,
deals with complaints involving costs and compensation less than Rs. Twenty
Lakhs.
 THE CONSUMER PROTECTION ACT, 1986

One of the most important milestones in the consumer

movement in the country has been the enactment of the
Consumer Protection Act, 1986 to better protect the interest
of the consumers. The Consumer Protection Act 1986 is a
social welfare legislation which was enacted as a result of
widespread consumer protection movement. The main
object of the legislature in the enactment of this act is to
provide for the better protection of the interests of the
consumer and to make provisions for establishment of
consumer councils and other authorities for settlement of
consumer disputes and matter therewith connected.

The Consumer Protection Act, 1986, applies to all goods and

services, excluding goods for resale or for commercial
purpose and services rendered free of charge and under a
contract for personal service. The provisions of the Act are
compensatory in nature. It covers public, private, joint and
cooperative sectors

Aims and Objectives

• To provide certain important scheduled commodities to the ration card

holders at reasonable rates at prescribed quantum.
• To indirectly control open market prices of certain commodities.
• To protect the interests of consumers through enforcement of Weights
& Measures Act and rules thereunder.
• To implement Minimum Support Price Scheme of the Central
Government to safeguard farmer's interests
• Matters incidental and supplementary to the above objectives.
• To promote & protect the rights of consumers by theway of
implementation of Consumer Protection Act.

Functions of the Department

• To implement the Public Distribution System in the State

• To implement Minimum Support Price Scheme.
• To implement Maharashtra Rice (Levy on Rice millers) Order, 1989.
• To implement Mid Day Meal Scheme in association with school
education Department.
• To assist implement ''Annapurna'' Scheme of the Central Government.
• Creation and maintenance of storage facilities for PDS.
 • Implementation of Consumer Protection Act, 1986

WHAT IS CONSUMER COMPLAINT?

Under the Consumer Protection Act, a complaint means any

allegation in writing made by a complainant in regard to one
or more of the following:-

• Any unfair trade practice as defined in the Act or

restrictive trade practices like tie-up sales adopted by
any trader.
• One or more defects in goods. The goods hazardous to
life and safety, when used,are being offered for sale to
public in contravention of provisions of any law for the
time being in force.
• Deficiencies in services.
• A trader charging excess of price.
(i) Fixed by or under any law for the time being in force; or
(ii) Displayed on goods; or
(iii) Displayed on any packet containing such goods.
Procedures for filing complaints and seeking redressal are
simple. There is no fee for filing a complaint before the
District Forum, the State Commission or the National
Commission. ( A stamp paper is also not required). Three to
five copies of the complaint on plain paper depending on the
number of opposite parties, etc. are required to be filed.

Consumer: WHO IS CONSUMER?

All of us are consumers of goods and services. For the purpose of the
Consumer Protection Act, the word "Consumer" has been defined
separately for "goods" and "services".

(A) For the purpose of "goods", a consumer means a person belonging

to the following categories:
 • One who buys or agrees to buy any goods for a consideration
which has been paid or promised or partly paid and partly
promised or under any system of deferred payment;
• It includes any user of such goods other than the person who
actualy buys goods and such use is made with the approval of the
purchaser.

Note : A person is not a consumer if he purchases goods for

commercial or resale purposes. However, the word "commercial" does
not include use by consumer of goods bought and used by him
exclusively for the purpose of earning his livelihood, by means of self
employment.

(B) For the purpose of "services", a "consumer" means a person

belonging to the following categories:

• One who hires or avails of any service or services for a

consideration which has been paid or promised or partly paid and
partly promised or under any system of deferred payment.
• It includes any beneficiary of such service other than the one who
actually hires or avails of the service for consideration and such
services are availed with the approval of such person.

DEFINITIONS

(i)"goods" means goods as defined in the State of Goods Act, 1930 (3 of

1930).According to the Sale of Goods Act, 1930. "goods" means every kind of
movable property other than actionable claims and money, and includes stock
and shares, growing crops, grass, and this attached to or forming part of the land
which are agreed to be severed before sale or under the contract of sale.

(ii)"service" means service of nay description which is made available to

potential users and includes the provision of facilities in connection with banking,
financing, insurance, transport, processing, supply of electrical or other energy,
board or lodging or both, housing construction, entertainment, amusement or the
purveying of news or other information, but does not include the rendering of any
service free of charge or under a contract of personal service.

(iii)"restrictive trade practice" means any trade practice which requires a

consumer to buy, hire or avail of any goods or, as the case may be, services as a
condition precedent for buying, hiring or availing
of other goods or services.
(iv)"defect" means any fault, imperfection or
shortcoming in the quality, quantity, potency,
purity or standard which is required to be
maintained by or under any law for the time
being in force or under any contract express or
implied or as is claimed by the trader in any
manner whatsoever in relation to any goods..

(v)"unfair trade practice" the detailed definition is given in the Consumer

Protection Act, 1986 as amended by the Consumer Protection (Amendment) Act.
1993. It means a trade practice which, for the purpose of promoting the sale, use
or supply of any goods or for the provision of any service, adopts any unfair
method or unfair or deceptive practice including any of the following practices,
namely :-
(a) false or misleading representation,
(b) bargain price
(c) offering of gifts, prize, contest etc.
(d) non compliance of product safety standard.
(e) hoarding or destruction of goods.

Consumer right is defined as 'the right to be informed about

the quality, quantity, potency, purity, standard and price of
goods or services, as the case may be, so as to protect the
consumer against unfair trade practices'
In order to safeguard consumer interest, 6 consumer rights
were initially envisioned by consumer rights activists of the
West, namely:

• Right to Safety
• Right to Information
• Right to Choice
• Right to be Heard
• The Right to Redress
• The right to consumer education
 • Right to Safe Environment

Right to Safety
Consumer right to safety is as vast in its purview as the
market reach itself. It applies to all possible consumption
patterns and to all goods and services. In the context of the
new market economy and rapid technological advances
affecting the market, the right to safety has become a pre-
requisite quality in all products and services. For e.g. some
Indian products carry the ISI mark, which is a symbol of
satisfactory quality of a product. Similarly, the FPO and
AGMARK symbolise standard quality of food products. The
market has for long made consumers believe that by
consuming packaged food or mineral water, consumers can
safeguard their health. This notion has been proved wrong
time and again due to rampant food adulteration in market
products. Right to food safety is an important consumer right
since it directly affects the health and quality of life of
consumers.

Right to Information
Right to information means the right to be given the facts
needed to make an informed choice or decision about
factors like quality, quantity, potency, purity standards and
price of product or service. The right to information now
goes beyond avoiding deception and protection against
misleading advertising, improper labelling and other
practices. For e.g. when you buy a product or utilise a
service, you should be informed about a) how to consume a
product b) the adverse health effects of its consumption c)
Whether the ingredients used are environment- friendly or
not etc .Due to the ever increasing influence of the market
and the ever changing scene with price wars and hard-sell
techniques, the consumer's right to information becomes
even more important. The right to information means much
more than simple disclosure of the product's weight or price.
A consumer has the right to know how the product has been
prepared, whether it has been tested or animals or not, if
environmentally-sound techniques and resources have been
used in its production processes, what kinds of chemicals are
used into its manufacturing and what could be their impact
on consumer health. Clearly, a consumer has to consider a
lot of factors before s/he buys a product

Right to Choice
Different interests can interpret the right to choice in
different ways. For the developed world consumers, right to
choice translates into more and a variety of products to
choose from. The consumer has been made to believe that
more varieties of the same product on the market shelves
give him or her the right to choose what s/he wants. In
reality, more varieties of the same product just encourages
false advertising claims and give the consumer a false sense
of choice. Various kinds of shampoos, soaps, and other
cosmetics differ merely in colour, smell and brand image.
Each one of them claims one-upmanship over the other but
gives the consumer very little value for money or a better
quality product.

Right to be heard
The right to be heard means that consumers should be
allowed to voice their opinions and grievances at appropriate
fora. For e.g. if you have been cheated in the market place
or deprived of the right quality of service, your complaint
should be heard and given due attention by the authorities.
Consumers should also have a right to voice their opinion
when rules and regulations pertaining to them are being
formulated, like the recent amendments in the Consumer
Protection Act. The right to be heard holds special
significance in the Indian context because Indian consumers
are largely unaware of their rights and passively accept their
violation. Even when they have legal recourse, they prefer
not to use it for fear of getting embroiled in legal
complexities.
To allay consumer fears and to allow them to express their
views and grievances, consumer forums have been in
existence in India for a long time. Consumers have been
approaching these forums and consumer NGOs regarding
their problems and complaints.
Right to Redress
Competition is the by-product of the market economy.
Everyday, manufacturers are discovering newer ways of
cheating and duping consumers. Unscrupulous market
practices are finding their way into consumer homes,
violating consumer rights and jeopardising their safety. It is
to protect consumer interests that consumers have been
given the right to obtain redress. In India, we have a redress
machinery called Consumer Courts constituted under the
Consumer Protection Act (1986), functioning at national
state and district levels. But it has not been made complete
use of under due to lack of awareness of basic consumer
rights among consumers themselves.

Right to Consumer Education

Consumer education empowers consumers to exercise their
consumer rights. It is perhaps the single most powerful tool
that can take consumers from their present disadvantageous
position to one of strength in the marketplace. Consumer
education is dynamic, participatory and is mostly acquired
by hands-on and practical experience. For instance, a
woman who makes purchase decisions for the household
and does the actual buying in the marketplace would be
more educated about market conditions and ‘best buys' than
a person who educates himself about the market with the
help of newspapers or television. Also, today, it is not just
the market or products that a consumer needs to educate
himself about but s/he also needs to know about company
profile, government policies and introduction of new
technology.

Right to Safe Environment

For urban consumers, environment means parks, gardens,
and deteriorating air and water quality. Most urban areas are
bereft of any wildlife and people are unaware of the
biodiversity around them. On the other hand, rural
consumers rely on their environment for fulfillment of their
basic needs.
The need for environmental conservation is seen as a
necessary defence against deteriorating quality of life world-
wide. We are all victims of contaminated food and water
supply, pesticide-ridden food, adulterated milk and choking
exhaust fumes emitting from vehicles.

Redressal Machinery under the Consumer Protection

Act,1986

The Act provides for a separate three-tier quasi-judicial

consumer dispute redressal machinery, popularly known as
consumer courts, at the national, state and district levels to
provide simple, speedy and free redressal against
consumers’ complaints. Filing of a simple complaint on plain
paper with the details of the case with supporting documents
seeking relief or compensation is enough and it is not
obligatory to engage alawyer.

According to the objects and purposes of the Consumer

Protection Act, these quasi-judicial bodies observe the
principles of natural justice while adjudicating consumer
complaints against defective goods, deficient services and
restrictive and unfair trade practices through summary trials.
The Act applies to all goods and services and covers all
sectors, whether private, public or cooperative.
The CPA provides for a 3 tier approach in resolving
consumer disputes. The District Forum has jurisdiction
to entertain complaints where the value of goods /
services complained against and the compensation
claimed is less than Rs. 5 lakhs, the State Commission
for claims exceeding Rs. 5 lakhs but not exceeding Rs.
20 lakhs and the National Commission for claims
exceeding Rs. 20 lakhs.

District Forum

Under the CPA, the State Government has to set up a

district Forum in each district of the State. The
Government may establish more than one District
Forum in a district if it deems fit. Each District Forum
consists of :-
(a) a person who is, or who has been, or is qualified to
be, a District Judge who shall be its President
(b) two other members who shall be persons of ability,
integrity and standing and have adequate knowledge or
experience of or have shown capacity in dealing with
problems relating to economics, law, commerce,
accountancy, industry, public affairs or administration,
one of whom shall be a woman.
Appointments to the State Commission shall be made
by the State Government on the recommendation of a
Selection Committee consisting of the President of the
State Committee, the Secretary - Law Department of
the State and the secretary in charge of Consumer
Affairs
Every member of the District Forum holds office for 5
years or upto the age of 65 years, whichever is earlier
and is not eligible for re-appointment. A member may
resign by giving notice in writing to the State
Government whereupon the vacancy will be filled up by
the State Government.
The District Forum can entertain complaints where the
value of goods or services and the compensation, if
any, claimed is less than rupees five lakhs. However, in
addition to jurisdiction over consumer goods services
valued upto Rs. 5 lakhs, the District Forum also may
pass orders against traders indulging in unfair trade
practices, sale of defective goods or render deficient
services provided the turnover of goods or value of
services does not exceed rupees five lakhs.
State Commission

The Act provides for the establishment of the State

Consumer Disputes Redressal Commission by the State
Government in the State by notification. Each State
Commission shall consist of:-

(a) a person who is or has been a judge of a High Court

appointed by State Government (in consultation with
the Chief Justice of the High Court ) who shall be its
President;
(b) two other members who shall be persons of ability,
integrity, and standing and have adequate knowledge
or experience of, or have shown capacity in dealing
with, problems relating to economics, law, commerce,
accountancy, industry, public affairs or administration,
one of whom must be a woman.
Every appointment made under this hall be made by
the State Government on the recommendation of a
Selection Committee consisting of the President of the
State Commission, Secretary -Law Department of the
State and Secretary in charge of Consumer Affairs in
the State.
Every member of the District Forum holds office for 5
years or upto the age of 65 years, whichever is earlier
and is not eligilbe for re-appointment. A member may
resign by giving notice in writing to the State
Government whereupon the vacancy will be filled up by
the State Government.
The State Commission can entertain complaints where
the value of goods or services and the compensation, if
any claimed exceed Rs. 5 lakhs but does not exceed Rs.
20 lakhs;
The State Commission also has the jurisdiction to
entertain appeal against the orders of any District
Forum within the State
The State Commission also has the power to call for the
records and appropriate orders in any consumer
dispute which is pending before or has been decided by
any District Forum within the State if it appears that
such District Forum has exercised any power not vested
in it by law or has failed to exercise a power rightfully
vested in it by law or has acted illegally or with material
irregularity.
National Commission

The Central Government provides for the establishment

of the National Consumer Disputes Redressal
Commission The National Commission shall consist of :-

(a) a person who is or has been a judge of the Supreme

Court, to be appoint by the Central Government (in
consultation with the Chief Justice of India ) who be its
President;
(b) four other members who shall be persons of ability,
integrity and standing and have adequate knowledge or
experience of, or have shown capacity in dealing with,
problems relating to economics, law, commerce,
accountancy, industry, public affairs or administration,
one of whom shall be a woman
Appointments shall be by the Central Government on
the recommendation of a Selection Committee
consisting of a Judge of the Supreme Court to be
nominated by the Chief Justice of India, the Secretary in
the Department of Legal Affairs and the Secretary in
charge of Consumer Affairs in the Government of India.
Every member of the National Commission shall hold
office for a term of five years or upto seventy years of
age, whichever is earlier and shall not be eligible for
reappointment.
The National Commission shall have jurisdiction :-
a. to entertain complaints where the value of the goods
or services and the compensation, if any, claimed
exceeds rupees twenty lakhs:
b. to entertain appeals against the orders of any State
Commission; and
c. to call for the records and pass appropriate orders in
any consumer dispute which is pending before, or has
been decided by any State Commission where it
appears to the National Commission that such
Commission has exercised a jurisdiction not vested in it
by law, or has failed to exercise a jurisdiction so vested,
or has acted in the exercise of its jurisdiction illegally or
with material irregularity.