1)Overview of Limited Liability Partnership LLP Act, 2008 passed by Lok Sabha on 12 th of December 2008 and the President gave assent to the Bill on 7 th January 2009. LLP Rules, 2009 Notified on 01st of April 2009. Constituent of LLP Act, 2008 81 Section 4 Schedules 29 Forms Out of 81 Sections, 75 Sections were so far Notified (Except provisions on Winding up and dissolution). Out of Four Schedules, Schedule 1 defines the Mutual Rights and Liabilities of the Partner, in the absence of any matter in LLP Agreement and other schedules prescribes provisions relating to conversion What is Limited Liability Partnership? Hybrid of Corporate & Partnership business Form. Limits liability of partners to the extent of their contribution. provides flexibility without imposing detailed (and costly) legal and procedural requirements. The organization and operations are on the basis of an mutual agreement. Features of LLP 1)Body corporate 2)Separate legal identity 3)Perpetual succession 4)Limited liability of partners 5)Only with profit motive 6)Non applicability of partnership act Benefits as Compared to Partnership Firm Ω Unlimited No. of Partners Ω Limited Liability of Partners Ω LLP is liable to the extent of assets. Ω No Liability of a partner for the wrongful act of other partner. Ω No exposure to the personal assets of partners except in case of fraud. Benefits as Compared to Corporate Form Ω Easy to Form, Run and manage. Ω Internal structure and governance through mutual agreement. Ω No Minimum Contribution Ω Less Government Intervention Ω Less requirement as to maintenance of statutory records Ω Less Compliances Ω Taxation (Income Tax) of LLP will be like general partnership. Ω No wealth Tax. LLP Act-New Features Mandatory imprisonment with penalty for false statement, fraud and non- compliance of order of Tribunal/CLB/Court [(Section-11(3),37,30,73)]. Un-limited Liability of Partners and LLP in event of business are carried out with intent of defraud its creditors or third parties (Sec-30). Waiver of penalties and protection against future vindictive action to whistle blowers (Sec-31). LLP is liable to third party to the extent of credit received by it or any financial benefit derived on falsely holding out of a person as partner of LLP (Sec-29).
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1)Overview of Limited Liability Partnership
LLP Act, 2008 passed by Lok Sabha on 12th of December 2008 and the President gave assent to the Bill
on 7th January 2009.
LLP Rules, 2009 Notified on 01st of April 2009.
Constituent of LLP Act, 2008
81 Section
4 Schedules
29 Forms
Out of 81 Sections, 75 Sections were so far Notified (Except provisions on Winding up and
dissolution).
Out of Four Schedules, Schedule 1 defines the Mutual Rights and Liabilities of the Partner, in the
absence of any matter in LLP Agreement and other schedules prescribes provisions relating to
conversion
What is Limited Liability Partnership?
Hybrid of Corporate & Partnership business Form.
Limits liability of partners to the extent of their contribution.
provides flexibility without imposing detailed (and costly) legal and procedural requirements.
The organization and operations are on the basis of an mutual agreement.
Features of LLP
1)Body corporate
2)Separate legal identity
3)Perpetual succession
4)Limited liability of partners
5)Only with profit motive
6)Non applicability of partnership act
Benefits as Compared to Partnership Firm Ω Unlimited No. of Partners
Ω Limited Liability of Partners
Ω LLP is liable to the extent of assets.
Ω No Liability of a partner for the wrongful act of other partner.
Ω No exposure to the personal assets of partners except in case of fraud.
Benefits as Compared to Corporate Form
Ω Easy to Form, Run and manage.
Ω Internal structure and governance through mutual agreement.
Ω No Minimum Contribution
Ω Less Government Intervention
Ω Less requirement as to maintenance of statutory records
Ω Less Compliances
Ω Taxation (Income Tax) of LLP will be like general partnership.
Ω No wealth Tax.
LLP Act-New Features
Mandatory imprisonment with penalty for false statement, fraud and non- compliance of order
of Tribunal/CLB/Court [(Section-11(3),37,30,73)].
Un-limited Liability of Partners and LLP in event of business are carried out with intent of
defraud its creditors or third parties (Sec-30).
Waiver of penalties and protection against future vindictive action to whistle blowers (Sec-31).
LLP is liable to third party to the extent of credit received by it or any financial benefit derived
on falsely holding out of a person as partner of LLP (Sec-29).
Central Govt. by Notification may apply/extend any provisions of Companies Act, 1956
(With or without modifications) to LLPs.
Partners & Designated Partners
Any Individual or/and body corporate may be partner. (A foreigner can be partner of a LLP in
India).
Body Corporate means company as defined under section 3 of the companies Act, 1956 and
includes
a)Limited liability partnership registered under LLP Act
b)Limited Liability Partnership incorporated outside India and
c)Company incorporated outside India
Designated partner : -
a) Every LLP shall have at least two designated partners who are individuals and at least one of them
shall be resident in India.
b) Responsible for managing the day to day affairs and ensuring the compliances of all applicable laws.
Requirements for Designated Partners : -
1) Designated Partner identification Number (DPIN)
2) Only Individual can be the Designated Partners.
3) At least One Designated partner should be resident of India.
4) In case of Body corporate their nominees can be the Designated Partners.
Contribution
Each partner shall bring contribution in LLP and nature & amount shall be disclosed in the
Accounts of LLP.
Contribution can be in tangible, movable, immovable or intangible Form.
In case of “tangible/Intangible (other than cash) Form of contribution” or “contribution by way
of service contract” it shall be valued by a practicing Chartered Accountant/Cost
Accountant/Approved Valuer.
Role /rights of partners
1)Right to participate in Management
2)For Business Purposes Agent of Limited Liability Partnership, not of other Partners.
3)Ethical duty to comply with all provisions of LLP Act and LLP Agreement
Limited to the Extent of their Contribution
Not Liable for the wrongful Acts /Omissions of other Partners
Not Liable for Obligation of LLP arising out of a contract
Unlimited Liability of Partners in case of Fraud
Formation of LLP
I - Deciding the Partners & Designated partners
II - Obtaining DPIN (Form-7) & Digital Signature
III - Reservation of Name for LLP (Form-1)
IV - Filing of Incorporation Document (Form-2)
V - Certificate of Incorporation
VI – Filing of LLP Agreement (Form-3)
VII – Filing of Consent of partners/Designated partners (Form-4)
I - Parameters for deciding the Partners and Designated Partners:
At least 2 Partners - Individuals or Body Corporate
Minimum Two Designated Partners out of total no. of Partners – Individuals or Nominee of
Body Corporate.
At least One Designated Partner to be Resident of India.
II - Obtaining DPIN (Form-7) & Digital Signature
DPIN – Designated Partner Identification Number
DPIN - 8 digit Numeric Number
DPIN vs DIN
Online application in Form 7 to Central Government
Submission of the physical application along with Identity and Address Proof of applicant.
III - Reservation of Name for LLP (Form-1)
The word ‘LLP’ or ‘Limited Liability partnership’ shall be the last word of name.
Not to be identical or too nearly resembles to any other partnership firm, LLP, Body Corporate
and trade mark. (Section-15)
Not to be Prohibited under Emblems ‘Emblems and Names (Prevention of Improper use) Act,
1950 and Rule-18.
If business includes banking, stock exchange, NBFCs activities, chit funds, micro finance
(offering small loans/contribution from public, collective investment scheme, a copy of in
principle approval of appropriate authority to be obtained.
e Form 1 to be filed with ROC.
IV - Filing of Incorporation Document (Form-2)
e Form 2 – Incorporation Document along with Subscription Sheet and proof of address of
registered office of LLP.
Total incorporation fees
V - Certificate of Incorporation
On Successful Compliances – Registrar Issues Certificate of Incorporation.
Conclusive Evidence of Registration of Limited Liability Partnership
VI – Filing of LLP Agreement (Form-3)
Execution of LLP Agreement is mandatory (Section-23).
In absence of Agreement as to any matter, Schedule 1 will be applicable.
Filing of details of LLP Agreement through e Form 3 – within 30 days of Incorporation.
Stamp duty on LLP agreement to be paid as per State Stamp Act.
Under Income Tax, interest paid and remuneration or commission paid to partners will be
allowed as deduction if payment is authorized by written LLP Agreement.
Features of schedule 1
1. All partners entitled to share equally in the Capital and Profits/losses.
2. Indemnity to the partners on personal liability in proper conduct of business.
3. Every Partner shall take part in management
4. No partner shall be entitled to remuneration.
5. No partner introduced without consent of all partners.
6. All decisions with majority of partners consent
7. Minutes to be recorded within 30 days
8. Render True Accounts
9. All Disputes will be referred to Arbitration Act
Regular Compliances of LLP
Maintenance of proper Books of Accounts on cash basis or on accrual basis and according to the
Double Entry System of Accounting.
Maintained at registered office and preserved for at least 8 years.
Audit of Accounts in accordance with the Rules prescribed.
Form-8 (Filing of Statements of Accounts & Solvency) – Within 30 days from the end of 6
months from the closure of Financial Year.
Form-11 (Filing of Annual Return) – within 60 Days of closure of Financial Year
Conversion of LLP Who can convert?
Partnership firm
Private company
Unlisted public company
Procedure of Conversion of Company/Firm to LLP
VII - Intimation of Conversion to ROC (Form 14)
VI - Certificate of Conversion into LLP (Form 19)
V - Filing of Conversion Application (Form 17/18)
IV- Filing of Incorporation Document (Form-2)
III – Reservation of Name for LLP (Form-1)
II - Obtaining DPIN & Digital Signature
I - Deciding the Partners & Designated Partners
Important Considerations for conversion LLP 1. Filing of Form with registrar of LLP:-
a. Form-7 & Form1 and
b. Form-17/18 & Form-2 (with mandatory attachments)
2. All the Members of the Company/partners of the firm shall be the Partners in LLP (and no one
else) with the same capital/contribution ratio.
3. Consent of all Members of the Company/partners of the firm shall be obtained.
4. No security interest on the assets shall be subsisting or in force on the date of application.
5. NOC from Unsecured creditors.
6. Statement of Assets and Liabilities certified by Auditor of not more than 30 days prior to the date
of the conversion application.
7. All due returns of ROC, Income Tax and other Tax authorities shall be filed.
8. NOC from other authority for conversion, if required.
9. After receiving Conversion Certificate the same to be filed within 15 days with the Registrar of
Companies in Form 14 .
Foreign LLP [LLP Incorporated Outside India (LIOI)]
Section 59 of LLP Act, 2008 contain provisions regarding establishment of the place of business by
Foreign Limited Liability Partnership within the India for carrying on their business.
Filing of Form-27 within 30 days from establishment of place of business in India.
Permission/approval of Reserve Bank of India (RBI) required for establishment of place of
business in India.
Filing fees for Form-27 - Rs.5000/-
Compliance of special Act, If the business is regulated by special Act.
Reservation/Renewal of Name by Foreign LLP/Foreign Company
Foreign LLP/Foreign Company can reserve its existing name by which it is registered in the
Foreign Country.
Form-25 is to be filed with the fees of Rs.10,000/-
Reservation of name valid for 3 years.
Renewal of name is possible by filing fresh From-25 on payment of fees Rs.5,000/-.
Compromise & Arrangement
Application is to be made to Tribunal by LLP or creditor or partners for compromise or
arrangements. In case of LLP is under winding up, the application can be made by the
liquidator.
Tribunal orders for meeting of creditors or partners for decision/resolution by 3/4th in value of
creditors or partners agreeing to any compromise or arrangement.
Tribunal may order sanctioning a compromise or an arrangement.
Till the time tribunal is constituted application will be made to High Court.
Winding up of LLP
Alike Companies, LLP may be wound up either Voluntary or by the Order of Tribunal.
The Rules for winding up is yet to be notified by C.G
Taxation LLP (as per the Finance Act, 2009)
Profit will be taxed in hand of the LLP and not in the hands of Partners w.e.f assessment year
2010-11.
Remuneration to partners will be taxed as their “income from business & profession”.
No Surcharge will be levied on income tax.
No Minimum Alternate Tax and dividend distribution tax
No Capital gain on conversion of partnership firm into LLP
Designated partners will liable to sign and file Income Tax return
Merits of LLP (as business model for SMEs and service providers) 1. Separate legal entity & body corporate.
2. Low compliance burden & cost.
3. Limited Liability of partners.
4. LLP is liable to the extent of its assets.
5. More flexibility than company.
6. Right of partners can be assigned to third party.
7. Availability of solvency position in public domain increases the credit worthiness.
8. Allows Multi-disciplinary professionals combination which provides level playing field against
their international professional firm.
9. Easy to exit/ winding up.
10. Venture capital funds can combined with knowledge and expertise.
11. Taxation benefits as compare to company.
2) Negotiable instrument ACT-
• The law relating to negotiable instruments is the law of commercial world which was enacted to
facilitate the activities in trade and commerce.
• In the absence of such instruments, the trade and commerce activities were adversely affected as
it was not practicable for the trading community to carry currency in bulk.
• The law in India relating to negotiable instruments is contained in the Negotiable Instruments
Act, 1881.
• It deals with Promissory notes, Bills of exchange and Cheques.
• The act applies to the whole of India and to all persons resident in India, whether foreigners or
Indians.
LLP
Creditors Partners
Negotiable instrument
Negotiable means “transferable by delivery”.
Instrument means “a written document by which a right is created in favour of some person”.
Thus negotiable instrument literally means “A written document transferable by delivery”.
Definition
According to Section 13 of the Negotiable Instruments Act 1881, “A negotiable instrument means a promissory note, bill of exchange or cheque payable either to order or
to bearer.”
Meaning A negotiable instrument is a written and signed document entitling a person to a sum of money specified
in it and transferable from one person to another person either by mere delivery or by endorsement and
delivery.
Characteristics of a Negotiable Instrument
1) Written instrument with signature
2) Easy negotiability
3) Transferee can sue in his own name without giving notice to the debtor
4) Better title to a bonafide transferee for value
5) Prompt payment
6) Presumptions
Presumptions of Negotiable Instrument
Sections 118 and 119 of the Negotiable Instrument Act lay down certain presumptions which the court
presumes in regard to negotiable instruments.
1) Consideration
2) Date
3) Time of acceptance
4) Time of transfer
5) Order of endorsement
6) Stamp
7) Holder in due course
8) Proof of protest
Conditions of negotiability
Although the Act mentions only three instruments (such as a promissory note, a bill of exchange and
cheque), it does not exclude the possibility of adding any other instrument which satisfies the following
two conditions of negotiability:
Documents like share warrants payable to bearer, debentures payable to bearer and
dividend warrants are negotiable instruments.
But the money orders and postal orders, deposit receipts, share certificates, bill of lading,
dock warrant, etc. are not negotiable instruments.
Although they are transferable by delivery and endorsements, yet they are not able to give better
title to the bonafide transferee for value than what the transferor has
Promissory Notes
According to section 4 of the Act,
1. The instrument should be freely transferable (by delivery or by endorsement and delivery) by the custom of trade.
2. The person who obtains it in good faith and for value should get it free from all defects, and be entitled to recover the money of the instrument in his own name.
“A promissory note is an instrument in writing (note being a bank-note or a currency note) containing an
unconditional undertaking, signed by the maker, to pay a certain sum of money to or to the order of a
certain person, or to the bearer of the instrument.”
The person who makes the promise is called the ‘maker’. The person to whom the payment is made is
called the ‘payee’.
Characteristics of a Promissory Note
1. It must be in writing
2. It must contain a promise or undertaking to pay
3. The promise to pay must be unconditional.
4. The amount promised must be certain and a definite sum of money
5. The instrument must be signed by the maker
6. The person to whom the promise is made must be a definite person
7. The amount payable must be in legal tender money of India.
Note: No person in India other than RBI or the Central Government can make or issue a promissory note
payable to the bearer of the instrument.
Bill of exchange
Section 5 of the Act defines,
“A bill of exchange is an instrument in writing containing an unconditional order, signed by the maker,
directing a certain person to pay a certain sum of money only to, or to the order of a certain person or to
the bearer of the instrument”.
A bill of exchange, therefore, is a written acknowledgement of the debt, written by the creditor and
accepted by the debtor. There are usually three parties to a bill of exchange drawer, acceptor or drawee
and payee. Drawer himself may be the payee.
Essentials of a bill of exchange
• It must be in writing.
• There must be an order to pay.
• It must be signed by the drawer.
• The drawer, drawee and payee must be certain.
• The sum payable must also be certain.
• It should be properly stamped.
• It must contain an express order to pay money and money alone.
Difference between Promissory note and Bill of Exchange
1. Number of parties: In a promissory note there are only two parties – the maker (debtor) and the payee
(creditor). In a bill of exchange, there are three parties; drawer, drawee and payee; although any two out
of the three may be filled by one and the same person.
2. Payment to the maker: A promissory note cannot be made payable to the maker himself, while in a
bill of exchange the drawer and payee may be same person.
3. Unconditional promise: A promissory note contains an unconditional promise by the maker to pay to
the payee or his order, whereas in a bill of exchange, there is an unconditional order to the drawee to pay
according to the direction of the drawer.
4. Prior acceptance: A note is presented for payment without any prior acceptance by the maker. A bill
of exchange is payable after sight must be accepted by the drawee or someone else on his behalf, before it
can be presented for payment.
5. Primary or absolute liability: The liability of the maker of a promissory note is primary and absolute,
but the liability of the drawer of a bill of exchange is secondary and conditional.
6. Relation: The maker of the promissory note stands in immediate relation with the payee, while the
maker or drawer of an accepted bill stands in immediate relations with the acceptor and not the payee.
7. Notice of dishonour: When a bill is dishonoured, due notice of dishonour is to be given by the holder
to the drawer and the intermediate indorsers, but no such notice need be given in the case of a note.
8. Payable to bearer: A promissory note cannot be drawn “payable to bearer” while bill of exchange can
be so drawn provided it is not drawn “payable to bearer on demand”.
Cheque
Section 6 of the Act defines “A cheque is a bill of exchange drawn on a specified banker, and not expressed to be payable otherwise
than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic
form”.
A cheque is a bill of exchange with two distinctive features namely:
(1) It is always drawn on a bank, and
(2) It is always payable on demand
Similarities between cheque and bill of exchange
1) Both are bills of exchange
2) Both have three parties, the drawer, drawee and the payee.
3) The drawer and the payee may be one and the same person in both the instruments.
4) Both must be written and signed.
5) Both must contain an unconditional order to pay a certain sum of money.
6) Both may be endorsed.
Difference between cheque and bill of exchange
A bill of exchange is usually drawn on some person or firm, while a cheque is always drawn on a
bank.
It is essential that a bill of exchange must be accepted before its payment can be claimed. A
cheque does not require any such acceptance.
A cheque can only be drawn payable on demand, a bill may be also drawn payable on demand, or
on the expiry of a certain period after date.
A grace of three days is allowed in the case of time bills while no grace is given in the case of a
cheque.
The drawer of the bill is discharged from his liability, if it is not presented for payment, but the
drawer of a cheque is discharged only if he suffers any damage by delay in presenting the cheque
for payment.
Notice of dishonour of a bill is necessary, but no such notice is necessary in the case of cheque.
A cheque may be crossed, but not needed in the case of bill.
A bill of exchange must be properly stamped, while a cheque does not require any stamp.
A cheque drawn to bearer payable on demand shall be valid but a bill payable on demand can
never be drawn to bearer.
Unlike cheques, the payment of a bill cannot be countermanded by the drawer.
Endorsement
The word ‘endorsement’ in its literal sense means, writing on the back of an instrument. But under the
Negotiable Instruments Act it means, the writing of one’s name on the back of the instrument or any
paper attached to it with the intention of transferring the rights therein.
Thus, endorsement is signing a negotiable instrument for the purpose of negotiation. The person who
effects an endorsement is called an ‘endorser’, and the person to whom negotiable instrument is
transferred by endorsement is called the ‘endorsee’.
Essentials of a valid endorsement 1. It must be on the instrument. The endorsement may be on the back or face of the instrument and if no
space is left on the instrument, it may be made on a separate paper attached to it called allonage. It should
usually be in ink.
2. It must be made by the maker or holder of the instrument. A stranger cannot endorse it.
3. It must be signed by the endorser. Full name is not essential. Initials may suffice. Thumb-impression
should be attested. Signature may be made on any part of the instrument. A rubber stamp is not accepted
but the designation of the holder can be done by a rubber stamp.
4. It may be made either by the endorser merely signing his name on the instrument (it is a blank
endorsement) or by any words showing an intention to endorse or transfer the instrument to a specified
person (it is an endorsement in full). No specific form of words is prescribed for an endorsement. But
intention to transfer must be present.
5. It must be completed by delivery of the instrument. The delivery must be made by the endorser himself
or by somebody on his behalf with the intention of passing property therein. Thus, where a person
endorses an instrument to another and keeps it in his papers where it is found after his death and then
delivered to the endorsee, the latter gets no right on the instrument.
6. It must be an endorsement of the entire bill. A partial endorsement i.e. which purports to transfer to the
endorse a part only of the amount payable does not operate as a valid endorsement.
Who may endorse? The payee of an instrument is the rightful person to make the first endorsement. Thereafter the instrument
may be endorsed by any person who has become the holder of the instrument. The maker or the drawer
cannot endorse the instrument but if any of them has become the holder thereof he may endorse the
instrument. (Sec. 51).
The maker or drawer cannot endorse or negotiate an instrument unless he is in lawful possession of
instrument or is the holder there of. A payee or endorsee cannot endorse or negotiate unless he is the
holder there of.
Classes of endorsement An endorsement may be:
(1) Blank or general
(2) Special or full
(3) Partial
(4) Restrictive
(5) Conditional
1. Blank or general endorsement (Sections 16 & 54)
It is an endorsement when the endorser merely signs on the instrument without mentioning the name of
the person in whose favour the endorsement is made. Endorsement in blank specifies no endorsee. It
simply consists of the signature of the endorser on the endorsement. A negotiable instrument even though
payable to order becomes a bearer instrument if endorsed in blank. Then it is transferable by mere
delivery.
2. Special or full endorsement (Section 16) When the endorsement contains not only the signature of the endorser but also the name of the person in
whose favour the endorsement is made, then it is an endorsement in full. Thus, when endorsement is
made by writing the words “Pay to A or A’s order,” followed by the signature of the endorser, it is an
endorsement in full. In such an endorsement, it is only the endorsee who can transfer the instrument.
3. Partial endorsement (Section 56)
A partial endorsement is one which purports to transfer to the endorsee a part only of the amount payable
on the instrument. Such an endorsement does not operate as a negotiation of the instrument.
Example: A is the holder of a bill for Rs.1000. He endorses it “pay to B or order Rs.500.” This is a
partial endorsement and invalid for the purpose of negotiation.
4. Restrictive endorsement (Section 50)
The endorsement of an instrument may contain terms making it restrictive. Restrictive endorsement is one
which either by express words restricts or prohibits the further negotiation of a bill or which expresses
that it is not a complete and unconditional transfer of the instrument but is a mere authority to the
endorsee to deal with bill as directed by such endorsement.
“Pay C,” “Pay C for my use,” “Pay C for the account of B” are instances of restrictive endorsement. The
endorsee under a restrictive endorsement acquires all the rights of the endorser except the right of
negotiation.
3) What is Limited Liability Partnership?
Limited liability Partnership (LLP) - Hybrid of Corporate & Partnership business Form.
Allows the benefits of limited liability with the flexibility of organizing the internal structure as a
partnership based on mutually agreed Agreement
Gateway for Multi Disciplinary Professionals LLP
Requirements of LLP
Contribution
Minimum 2 Partners
Minimum 2 Designated Partners
Designated Partner Identification Number
LLP Name
LLP Agreement
Registered Office
Management of LLP
Partners designated partners
Shareholders directors
Who can be partner?
1)Individual & or 2)Body corporate
“Body Corporate” Includes
Limited liability partnership registered under LLP Act
Limited liability partnership incorporated outside India and
Company incorporated outside India,
Even all the Foreigners can form a LLP in India. Since a partner need not to be resident in India except a
designated Partner who should be resident in India
Role of Partner
Right to participate in Management
For Business Purposes Agent of Limited Liability Partnership, not of other Partners
Ethical duty to comply with all provisions of LLP Act and LLP Agreement
Liability of Partners
Limited to the Extent of their Contribution
Not Liable for the wrongful Acts /Omissions of other Partners
Not Liable for Obligation of LLP arising out of a contract
Unlimited Liability of relevant Partners in case of Fraud.
Designated Partners “Designated partner” means any partner designated as such pursuant to Section 7 of Limited Liability
Partnership Act 2008 .
Responsible for managing the day to day affairs and ensuring the compliances of all applicable laws.
Requirement for Designated Partners
Designated Partner Identification Number
Only Individual can be the Designated Partners
At least One designated Partner should be resident in India
In case of Body Corporate their nominees can be the Designated Partners
Benefits as Compared to Corporate Form
Ω Easy to Form
Ω Easy to Run & Manage
Ω Low cost of Formation
Ω No Minimum Contribution
Ω No Stamp Duty as on date
Ω Less Government Intervention
Ω Less requirement as to maintenance of statutory records
Ω Less Compliances
Ω No Minimum Alternate Tax as on Date
Benefits as Compared to Partnership Form
Ω Unlimited No. of Partners
Ω Limited Liability of Partners
Ω No Liability for the wrongful act of other Partner.
Ω Less exposure to personal assets of the partners
Drawback of LLP
Any act of the Partner without the other may bind the LLP.
Under some cases, liability may extend to personal assets of Partners.
The Act does not provides any provision for raising of money from Public via public issue.
Lot of formalities on closure of Business.
Tax Liability of LLP
Indian Government, Ministry of Finance has not yet specified any regulatory framework for taxing LLPs.
Alike worldwide LLPs, an option may be there to tax the income either in the hands of the LLP or in the
hands of the Partners.
Regular Compliances of LLP
Filing of Statements of Accounts & Solvency – Within 6 months of closure of Financial Year.
Section34(2)
Filing of Annual Return – with in 60 Days of closure of Financial Year .Section 35(1)
Penalty for Non –Filing will be Rs. 100 per day - Rs. 3000 for a month where as in case of
Company with a capital of Rs. 1 lakh penalty will be only Rs. 200 for Non –Filing up to 30 days
.
The maximum time limit in which the Forms can be filed along with Penalty is 300 Days
thereafter prosecution will be initiated.
In case of Non Filing of Annul Return & Statement of Account & Solvency for Consecutive five
years the LLP may be wind up.
Foreign LLP Section 59 of LLP Act, 2008 contain provisions regarding Foreign Limited Liability Partnership but
Central Government has not specified any rules for Foreign Direct Investment in India through LLP.
Benefit For Foreigners 1. Invest in India without being present in India.
2. Brand Reservation.
3. Less No. of Compliances.
Winding up of LLP
Alike Companies, LLP may be wound up either Voluntary or by the Order of Tribunal.
4) Right to Information Act - 2005
Introduction
1)What is Right to information? – A Fundamental Right
How Does it help us?
It may not help you directly to get what you want e.g. gas,electricity connection; but it helps the
one who fights for good governance
2)To participate in governance for successful democracy such as: Election; Policy Decision; Law making;
Schemes; Projects.
To be a part of decision making in the Govt. or Govt. Bodies.
To make govt. transparent and public servants answerable?
Constitutional Base Article 14 : Right to Equality- Equal treatment before law
Article 19 : Right to Freedom-freedom of Speech and Expression
Article 21 : Protection of Life & Personal Liberty
RIGHT TO INFORMATION
PARADIGM SHIFT
An act which will be implemented by the people and acted upon by the government
Basic Tenets
Disclosure a rule and Secrecy an exception
Transparency means public interest
Public Interest overrides
It is a part of Global Process.
Governance will improve
Information means
Information includes records, documents, memos, e-mails, opinions, advises, press releases,
circulars, orders, log-books, contracts, reports, papers, samples, models, data held in electronic
form. Also includes information relating to any private body which can be accessed by a public
authority.
Right to Information
Is it possible to Customize our governance? Yes!!
If people actively participate in the democratic process .Can public participate?
1. It is possible only when people are aware of the process of decision making.
2. If Govt. makes information accessible to general public.
Right to information means
Inspection of work, documents, records
Taking notes, extracts, or certified copies of documents or records
Taking certified samples of material
Obtaining information in the form of diskettes, floppies, tapes, video cassettes or in any other
electronic mode or through printouts where such information is stored in a computer or in any
other device.
Right to information
Official Secrets Act 1923 had made disclosure of information punishable.
RTI Act fulfills the ambitions by disclosure of information mandatory. eg,.
a. Ensuring Free Education for children in Gujarat where Private Trust school was collecting fee not
permissible by law. RTI was used to detect and punish the guilty
b. Exposing of mass expenditure of W. Bengal Govt.
(I) Rs.18, 25, 600 for foreign trips of M.P.'s between 1987-2000
(II) Chief Minister spent Rs. 4, 60, 772 between 2001- 2005 for foreign trips.
How disclosure helps ?
Delhi based NGO under RIT has obtained that Public Works Dept. has cooked up a/c e.g.
1. In one contract 29 hand pumps were installed on paper; but actually only 14 pumps were installed.
2. Out of 253 gratings only 30 were installed. The Court has directed for investigation. Now the whole
contract is being investigated.
3. Barbers in Raj Bhavan
4. Security cost of P.M 360 Crores in 2008.
Right to information
What can be done?
o People holding ration cards can check the stocks and sales registers held by dealers and the food
dept. to make sure that they are getting their proper amount of rations and that rations are not
being siphoned off in their name;
o Parents may seek details of grants made to government-aided schools to ensure that funds are
being spent properly, or can check that admissions are not being bought through bribes or that
funds meant to education are not being diverted for other purposes;
o Owners of small businesses may find out the basis on which licenses and/or tax concession and
subsidies are granted by govt. is granting licenses/ concessions/ subsidies on the basis of properly
applied criteria;
o Unemployed people may ask about the criteria for giving government jobs or the status of their
application and position in the waitlist;
People can check on the progress of their applications for govt. services, eg. By checking the status of an
application for an electricity or water connection, including which officers have handled the file, over
what period of time and what action was taken.
Right to information
As a community-minded person, you may want to find out information about issues of public importance
and try to gent the government to address problems. For example, you can find out:
How many deaths have occurred in a govt. hospital and for what reasons or what the shortfall of
doctors and nurses in compared with sanctioned staff;
The daily attendance of teachers in govt. schools;
How many people are being housed in local jails compared with the sanctioned capacity of the
jail;
How often inspectors visit factories and other manufacturing units to check that they are not
illegally releasing hazardous materials into the environment;
How many contractors have been blacklisted by the municipal authorities and of the blacklisted
how many have been given contracts for executing public works.
Right to Information Act – 2005
1. When did it come into force? It comes into force on the 12th October, 2005 (120th day of its enactment on 15th June, 2005).
Some provisions have come into force with immediate effect viz.
- Obligations of public authorities [S.4( 1)],
- Designation of Public Information Officers and Assistant Public Information Officers[S.5(1)
- Constitution of Central information Commission (S.12 and 13), constitution of State Information
Commission (S.15 and 16),
- Non-applicability of the Act to Intelligence and Security Organizations (S.24)
- Power to make rules to carry out the provisions of the Act (S.27 and 28).
2. Who is covered? The Act extends to the whole of India except the State of Jammu and Kashmir. [S.(12)]
3. What does information mean? “Information means any material in any form including records, documents, memos, emails, opinions,
material held in any electronic form and information relating to any private body which can be accessed
by a public authority under any other law for the time being in force”. [S.2(t)].
4. What does Right to Information mean? It includes the right to -
I. inspect works, documents, records.
Ii. take notes, extracts or certified copies of documents or records.
iii. take certified samples of material.
iv. obtain information in form of printouts, diskettes, floppies, tapes, video cassettes or in any other
electronic mode or through printouts.[S.2G)]
Right to Information Act - 2005
1. What are the obligations of Public Authority? 4(1) b
It shall publish within one hundred and twenty days of the enactment:-
a. The particulars of its organization,.
b. The powers and duties .
c. The procedure followed in its decision making process.
d. The norms set by it for the discharge of its functions,
e. a statement of the categories of the documents held .
f. A directory of its officers and employees; - the monthly remuneration received by each of its officers
and employees, including the system of compensation as provided.
g. The budget allocated to each of its agency. Expenditures and reports on disbursements
h. manner of execution of subsidy programmes, including the amounts allocated and the details of the
information available to, or held by it.
i. The particulars of facilities available to citizens for obtaining information, including the working hours
of a library or reading room, if maintained for public use.
J. the names, designations and other particulars of the Public . Information Officers.[S.4(l )(b)]
2. What does a "public authority" mean? Any authority or body or institution of self government established or constituted: [S.2(h)]
-by or under the Constitution;
-by any other law made by Parliament;
-by any other law made by State Legislature;
-by notification issued or order made by the appropriate Govt. and includes any- body owned, controlled
or substantially financed non-Government organization substantially financed directly or indirectly by the
appropriate Government.
3. Who are Public Information Officers (PIOs)?
- PIOs are officers designated by the public authorities in all administrative units or offices under it to
provide information to the citizens requesting for information under the Act.
- Any officer, whose assistance has been sought by the PIO for the proper discharge of his or her duties,
shall render all assistance and for the purpose of contraventions of the provisions of this Act, such other
officer shall be treated as a PIO.
4. What are the duties of a PIO?
PIO shall deal with requests from persons seeking information and where the request cannot be made in
writing, to render reasonable assistance to the person to reduce the same in writing.
Right to Information Act - 2005
If the information requested for is held by another public authority, the PIO shall transfer, within
5 days, the request to that other public authority and inform the applicant immediately.
PIO may seek the assistance of any other officer for the proper discharge of his /her duties.
PIO, on receipt of a request, shall within 30 days of the receipt of the request, either provide the
information on payment of such fee as may be prescribed or reject the request for any of the
reasons specified in S.8 or S.9.
Where the information requested for concerns the life or liberty of a person, the same shall be
provided within forty-eight hours.
If the PIO fails to give decision on the request within the period specified, he shall be deemed to
have refused the request.
Where a request has been rejected, the PIO shall communicate to the requester - (i) the reasons
for such rejection, (ii) the period within which an appeal against such rejection may be preferred,
and (iii) the particulars of the Appellate Authority.
PIO shall provide information in the form in which it is sought unless it would disproportionately
divert the resources of the Public Authority or would be detrimental to the safety or preservation
of the record in question.
Right to information act 2005
Third Party Information
If information sought has been supplied by third party or is treated as confidential by that third
party, the PIO shall give a written notice to the third party within 5 days from the receipt of the
request and take its representation into consideration .
Third party must be given a chance to make a representation before the PIO within 10 days from
the date of receipt of such notice.
Right to Information Act – 2005
1. What is not open to disclosure? ( 8 categories) The following is exempt from disclosure [S.8)]
I. Information, which would prejudicially affect the sovereignty and integrity of India, the security,
strategic, scientific or economic interests of the State, relation with foreign State or lead to
incitement of an offence
II. Information expressly forbidden to be published by any court of law or tribunal or the disclosure
of which may constitute contempt of court;
III. Information which would cause a breach of privilege of Parliament or the State Legislature;
IV. Information including commercial confidence, trade secrets or intellectual property, the
disclosure of which would harm the competitive position of a third party, unless the competent
authority is satisfied that larger public interest warrants the disclosure of such information;
information available to a person in his fiduciary relationship~ unless the competent authority is
satisfied that the larger public interest warrants the disclosure of such information;
Obligations of Public Authorities
Every public authority shall maintain all its records duly catalogued and indexed in a manner and
form, which facilitates the right to information
Shall also publish the information of the organization regarding structure, functions and duties,
procedure followed, decision making process, directory of officers and employees, names and
designations of public information officers etc.,
Procedure for obtaining information :
Every person seeking the information shall request orally or in writing or through electronic
means paying the requisite fees at the following rates :
In respect of public authorities at the Village Level – No fee ;
In respect of public authorities at Mandal Level – Rs. 5/- per application ;
In respect of public authorities other than those covered above – Rs. 10/- per application ;
Right to Information Act – 2005
Procedure for Request of Information (Detailed)
1. What is the Application Procedure for requesting information? 1. Apply in writing or through electronic means in English or Hindi or in the official language of the area,
to the PIO, specifying the particulars of the information sought for.
2. Reason for seeking information are not required to be given;
3. Pay fees as may be prescribed (if not belonging to the below poverty line category).
2. What is the time limit to get the information? 1. 30 days from the date of application
2. 48 hours for information concerning the life or liberty of a person
3. 5 days shall be added to the above response time, in case the application for information is given to
Assistant Public Information Officer.
4. If the interests of a third party are involved then time limit will be 40 days (maximum period + time
given to the party to make representation).
5. Failure to provide information within the specified period is a deemed refusal.
3. What is the fee? Application fees to be prescribed which must be reasonable.
1. If further fees are required, then the same must be intimated in writing with calculation details of
how the figure was arrived at;
2. Applicant can seek review of the decision on fees charged by the PIa by applying to the
appropriate Appellate Authority;
3. No fees will be charged from people living below the poverty line
4. Applicant must be provided information free of cost if the PIO fails to comply with the
prescribed time limit.
4. What could be the ground for rejection? 1. If it is covered by exemption from disclosure. (S.8)
2. If it infringes copyright of any person other than the State. (S.9)
Right to Information Act - 2005
How is Central Information Commission constituted? 1. Central Information Commission to be constituted by the Central Government through a Gazette
Notification.
2. Commission includes I Chief Information Commissioner (CIC) and not more than 10 Information
Commissioners (IC) who will be appointed by the President of India.
3. Oath of Office will be administered by the President of India according to the
form set Out in the First Schedule.
4. Commission shall have its Headquarters in Delhi. Other offices may be established in other parts of the
country with the approval of the Central Government.
5. Commission will exercise its powers without being subjected to directions by any other authority.
(S.12)
The sale price of publications printed matter, text, maps, plans, floppies, CDs, samples, models or
material in any other form.
e) Other than priced material :
i) Material in printed or text form (in A4 or A3 size paper) Rs.2/- per each page per copy;
Material in printed or text form in larger than A4 or A3 size paper - actual cost thereof;
Maps and plans – actual cost thereof;
Information in Electronic format viz., Floppy, CD or DVD:
(a) Rupees fifty for Floppy of 1.44 MB;
(b) Rupees one hundred for CD of 700 MB; and
(c) Rupees two hundred for CD (DVD).
Samples and models – actual cost thereof;
vi) Inspection of records – no fee for the first hour; and a fee of rupees five for each fifteen
minutes (or fraction thereof) thereafter;
vii) Material to be sent by post – the actual postal charges in addition to the charge payable as per
the rules.
The applicant is not required to give any reason or any other personal details except those that
may be necessary for contacting him.
Disposal of Request :
The Central Public Information Officer or State Public Information Officer within 30 days either
provide information or reject with reasons and the period within which appeal can be preferred
and particulars of the appellate authority.
If the information sought for concerns the life and liberty of a person, the same shall be provided
within (48) hours of the receipt of request.
Disposal of Information of Third Party :
A Central Public Information Officer or State Public Information Officer intends to disclose any
information which relates to a third party and treated as confidential by that third party, he shall
be invited to know whether the information should be disclosed.
Except, in case of trade or commercial secrets protected by law, disclosure may be allowed if the
public interest in disclosure outweighs in importance any possible harm or injury to the interest of
such third party.
Penalties provided under the Act :
Require the public authority to compensate the complainant for any loss or other detriment
suffered.
Impose a penalty of Rs.250/- each day not exceeding Rs.25, 000/- till application is received or
information furnished.
Also recommend for disciplinary actions against Central Public Information Officer or State
Public Information Officer under Service Rules applicable to them.
The burden proving that he acted reasonably or diligently is on the Central Public Information
Officer or State Public Information Officer.
The Penal provisions are the real teeth of the Act, which if properly implemented will bring the
The Central Information Commission or State Information Commission as the case may be, shall
prepare a report on the implementation of the Act at the end of every year and forwarded it to the
appropriate Government.
The respective Government cause a copy of such report to be laid before each House of
Parliament and State Legislature as the case may be.
What information is not available?
V) Information, which would endanger the life or physical safety of any person or identify the source of
information or assistance given in confidence for law enforcement or security purposes;
VI) Information which would impede the process of investigation or apprehension or prosecution of
offenders;
VII)Cabinet papers including records of deliberations of the Council of Ministers, Secretaries and other
officers;
VIII)Information which relates to personal information the disclosure of which has no relationship to any
public activity or interest, or which would cause unwarranted invasion of the privacy of the individual;
Notwithstanding any of the exemptions listed above, a public authority may allow access to information,
if public interest in disclosure outweighs the harm to the protected interests.
Right to Information Act - 2005
2. Is partial disclosure allowed? Only that part of the record which does not contain any information which is exempt from disclosure and
which can reasonably be severed from any part that contains exempt information, may be provided. [S.10]
3. Who is excluded? Central Intelligence and Security agencies specified in the Second Schedule like IB, R&A W, Directorate
of Revenue Intelligence, Central Economic Intelligence Bureau,Directorate of Enforcement, Narcotics
Control Bureau, Aviation Research Centre,Special Frontier Force, BSF, CRPF, ITBP, CISF, NSG, Assam
Rifles, Special Service
Bureau, Special Branch (CID), Andaman and Nicobar, The Crime Branch-CID-CB,Dadra and Nagar
Haveli and Special Branch, Lakshadweep Police. Agencies specified by the State Governments through a
Notification will also be excluded. The exclusion, however, is not absolute and these organizations have
an obligation to provide information pertaining to allegations of corruption and human rights violations.
Further, information relating to allegations of human rights valuations could be given but only with the
approval of the Central or State Information Commission, as the case may be. [S.24)]
Right to Information Act – 2005
What are the powers and functions of Information Commissions? The Central Information Commission/State Information Commission has a duty to receive complaints
from any person -
a) who has not been able to submit an information request because a PIa has not been appointed;
b) who has been refused information that was requested;
c) who has received no response to his/her information request within the specified time limits ;
d) who thinks the fees charged are unreasonable;
1.Who thinks information given is incomplete or false or misleading ;and any other matter relating
to obtaining information under this law.
2. Power to order inquiry if there are reasonable grounds.
3. CIC/SCIC will have powers of Civil Court such as- a. summoning and enforcing attendance of persons, compelling them to give oral or written evidence on
oath and to produce documents or things;
b. requiring the discovery and inspection of documents; receiving evidence on affidavit;
c. requisitioning public records or copies from any court or office issuing summons for examination of
witnesses or documents any other matter which may be prescribed.
4. All records covered by this law (including those covered by exemptions) must be given to CIC/SCIC
during inquiry for examination.
5. Power to secure compliance of its decisions from the Public Authority includes-
a. providing access to information in a particular form;
b. directing the public authority to appoint a PIO/ APIO where none exists;
c. publishing information or categories of information;
d. making necessary changes to the practices relating to management, maintenance and destruction of
records ;
e. enhancing training provision for officials on RTI;
f. seeking an annual report from the public authority on compliance with this law; require it
to compensate for any loss or other detriment suffered by the applicant;
g. impose penalties under this law; or
h. reject the application. (S.18 and S.19)
5)Dishonour of negotiable instruments
A negotiable instrument may be dishonored by
1. Non-acceptance
2. Non-payment
As presentment for acceptance is required only in case of bills of exchange, it is only the bills of exchange
which may be dishonoured by non-acceptance.
Any type of negotiable instrument may be dishonoured by non-payment.
Dishonour by Non-acceptance A bill of exchange is said to be dishonoured by non-acceptance in the following cases:
1. If a bill is presented to the drawee for acceptance and he does not accept it within 48 hours from the
time of presentment for acceptance. When there are several drawees even if one of them makes a default
in acceptance, the bill is deemed to be dishonoured unless these several drawees are partners. Ordinarily
when there are a number of drawees all of them must accept the same, but when the drawees are partners
acceptance by one of them means acceptance by all.
2. When the drawee is a fictitious person or if he cannot be traced after reasonable search.
3. When the drawee is incompetent to contract, the bill is treated as dishonoured.
4. When a bill is accepted with a qualified acceptance, the holder may treat the bill of exchange having
been dishonoured.
5. When the drawee has either become insolvent or is dead.
6. When presentment for acceptance is excused and the bill is not accepted. Where a drawee in case of
need is named in a bill or in any endorsement thereon, the bill is not dishonoured until it has been
dishonoured by such drawee.
Noting and Protesting
When a negotiable instrument is dishonoured the holder may sue his prior parties i.e the drawer and the
indorsers after he has given a notice of dishonour to them. The holder may need an authentic evidence of
the fact that a negotiable instrument has been dishonoured.
When a cheque is dishonoured generally the bank who refuses payment returns back the cheque giving
reasons in writing for the dishonour of the cheque. Sections 99 and l00 provide convenient methods of
authenticating the fact of dishonour of a bill of exchange and a promissory note by means of ‘noting’ and
‘protest’.
Noting As soon as a bill of exchange or a promissory note is dishonoured, the holder can after giving the parties
due notice of dishonor, sue the parties liable thereon. Section 99 provides a mode of authenticating the
fact of the bill having been dishonoured. Such mode is by noting the instrument. Noting is a minute
recorded by a notary public on the dishonoured instrument or on a paper attached to such instrument.
When a bill is to be noted, the bill is taken to a notary public who represents it for acceptance or payment
as the case may be and if the drawee or acceptor still refuses to accept or pay the bill, the bill is noted as
stated above.
Noting should specify in the instrument,
(a) the fact of dishonour,
(b) the date of dishonour,
(c) the reason for such dishonour, if any
(d) the notary’s charges,
(e) a reference to the notary’s register and
(f) the notary’s initials.
Facts about noting
• Noting should be made by the notary within a reasonable time after dishonour.
• Cheques do not require noting and protesting. Noting by itself has no legal effect. Still it has
some advantages. If noting is done within a reasonable time protest may be drawn later on.
• Noting without protest is sufficient to allow a bill to be accepted for honour.
Protest
Protest is a formal certificate of the notary public attesting the dishonour of the bill by non-acceptance or
by non-payment. After noting, the next step for notary is to draw a certificate of protest, which is a formal
declaration on the bill or a copy thereof. The chief advantage of protest is that the court on proof of the
protest shall presume the fact of dishonour.
Besides the protest for non-acceptance and for non-payment the holder may protest the bill for better
security. When the acceptor of a bill becomes insolvent or suspends payment before the date of maturity,
or when he absconds the holder may protest it in order to obtain better security for the amount due. For
this purpose the holder may employ a notary public to make the demand on the acceptor and if refused,
protest may be made. Notice of protest may be given to prior parties. When promissory notes and bills of
exchange are required to be protested, notice of protest must be given instead of notice of dishonour. (Sec.
102)
Contents of protest
Section 101 of the Act lays down the contents of a regular and perfect protest which are as follows:
1. The instrument itself or a literal transcript of the instrument; and of everything written or printed
thereupon.
2. The name of the person for whom and against whom the instrument has been protested.
3. The fact of and reasons for dishonour i.e. a statement that payment or acceptance or better security, as
the case may be, has been demanded of such person by the notary public from the person concerned and
he refused to give it or did not answer or that he could not be found.
4. The time and place of demand and dishonour.
5. The signature of the notary public.
6. In the case of acceptance for honour or payment for honour the person by whom or for whom such
acceptance or payment was offered and effected.
6) The Indian Partnership Act-1932 -
What is Partnership?
Partnership is the relation between persons who have agreed to share the profits of a business carried on
by all or any one of them acting for all (Section 4).
It, therefore follows that a partnership consists of three essential elements:
(i) It must be a result of an agreement between two or more persons.
(ii) The agreement must be to share the profits of the business.
(iii)The business must be carried on by all or any of them acting for all.
All these essentials must coexist before a partnership can come into existence.
Essential Elements of Partnership
(1)Agreement: Partnership must be the result of an agreement between two or more persons. An
agreement from which relationship of Partnership arises may be express. It may also be implied from the
act done by partners and from a consistent course of conduct being followed, showing mutual
understanding between them. It may be oral or in writing.
(2) Sharing profits of the business: First, there must exist a business i.e. trade, occupation and
profession. The motive of the business is the acquisition of gains. Therefore there can be no partnership
where there is no intention to carry on the business and to share the profit thereof.
Secondly, there must be an agreement to share profits. The agreement to share losses is not an essential
element. However in the event of losses, unless agreed otherwise, these must be born in the profit sharing
ratio.
(3)Business carried on by all or any of them acting for all: Each partner carries on the business as a
principle as well as the agent on behalf of the other partners. This is the cardinal principle of the
partnership Law. Therefore, the true test of partnership is mutual agency rather than sharing of profits.
True test of Partnership
The sharing of profits or of gross returns accruing from property by persons holding joint or common
interest in the property would not by itself make such persons partners. Although the right to participate
in profits is a strong test of partnership, and there may be cases where, upon a simple participation in
profits, there is a partnership, yet whether the relation does or does not exist must depend upon the whole
contract between the parties.
But the task becomes difficult when either there is no specific agreement or the agreement is such as does
not specially speak of partnership. In such a case for testing the existence or otherwise of partnership
relation, Section 6 has to be referred. According to this Section, regard must be had to the real relation
between the parties as shown by all relevant facts taken together.
Distinction between partnership and firm-
Persons who have entered into partnership with one another are called individual “Partners” and
“collectively” and the name under which the business is carried on is called “firm name”.
Partnership is merely an abstract legal relation between the partners. A firm is a concrete thing signifying
the collective entity for all the partners. Partnership is thus that invisibility which binds the partners
together and firm is the visible form of those partners who are thus bound together
Partnership vs. Joint Stock Company-
1. Personality : A firm is not legal entity I.e., it has no legal personality distinct from the personalities of
its constituent members. On the other hand, a registered company is a judicial person distinct from its
members.
2. Agency: In a firm, every partner is an agent of the other partners, as well as that of the firm, but in the
case of the company a member is not an agent of the other members or of the company.
3. Distribution of profits: the profits of the firm must be distributed among the partners according to the
term of the partnership deed but there is no such compulsion in the case of company.
4. Extent of liability : In a firm,the liability of the partners is unlimited.while in the case of the company
the liability of the shareholder is limited to the amount, if any unpaid on his shares, in the case of the
company limited by shares; otherwise to the guaranteed amount.
5. Property: The firms property is that which is the joint state of all the partners as distinguished from the
separate state of any of them and it does not belong to a body distinct from its members. So in the case of
insolvency , the joint estate, after meeting the liability in respect of the joint debts devolves on the
partners.
6. Transfer of shares: In a firm,a share in the partnership cannot be transferred without the consent of all
the partners but in the public limited company it is freely transferable.
7. Management: In the absence of an express agreement to the contrary all the partners are entitled to
participate in the management of the firm but the members of the company are not entitled to participate
in the management unless they have been appointed as directors.
8. Number of membership: In the case of a firm carrying banking business the number of
members cannot exceed 10 but otherwise 20.A private company may have as many as 50 members but
not less than two and a public company may have any number of members but not less than seven.
Partnership vs. Club-
A club is an association of persons formed with the object not of earning profit, but of promoting some
beneficial purposes such as improvement of health or providing recreation for the members, etc. On the
other hand, partnership is also an association of persons but formed with the object of earning profit.
1. Unlike a partner, a member of a club is not the agent of other members nor is he liable to a creditor of
the club, except when he is responsible for the contract which gave rise to the liability.
2. A member of a club has no interest in the property of the club, as a partner has in the property of the
firm. Also, the change in the membership of a club does not affect its existence.
Partnership vs. Hindu Undivided Family-
1. Creation: The relation of partnership is created necessarily by an agreement, whereas the right in the
joint family is created by status. The creation of a right by status means its creation by birth in the family.
2. Death: Death of a partner ordinarily leads to the dissolution of partnership. But the death of a member
in the Hindu undivided family does not give rise to dissolution of the family business.
3. Management: The right of management of joint family business generally vests in the Karta, the
governing male member of the family. But in the case of a partnership, all the partners are equally entitled
to take part in the partnership business.
4. Authority to bind the firm: In the joint family, the Karta or the manager has the authority to contract for
the family business. In partnership, every partner can, by his act, bind the firm.
5. Liability: In a partnership, the liability of a partner is unlimited; but in a Hindu undivided family, only
the liability of the Karta is unlimited, and the other copartners are liable only to the extent of their share in
the profits of the family business, unless they take part in the act performed or transactions entered into by
the Karta.
6. Calling for accounts: On the separation of the joint family, a member is not entitled to ask for account
of the family business. But a partner can bring a suit against the firm for accounts, provided he also seeks
the dissolution of the firm.
7. Governing Law: A partnership is governed by the Partnership Act; a Joint Hindu family business is
governed by the Hindu Law.
8. Minor’s capacity: In a partnership, a minor cannot become a partner, though the can be admitted to the
benefits of partnership, only with the consent of all the partners. In Hindu undivided family business, a
minor becomes a member of the ancestral business by the incidence of birth. He does not have to wait for
attaining majority.
9. Continuity: A Joint Hindu Family has the continuity till it is divided. The status of Joint
Hindu Family is not thereby affected by the death of a member, but a firm subject to a contract between
the partners gets dissolved by death or insolvency of a partner.
Partnership vs. Co-Ownership-
1. Partnership always arises out of a contract, express or implied co-ownership may arise either from
agreement or by the operation of law, such as by inheritance.
2. In partnership, there is community of interest. It means that profits and losses must have to be shared
but co-ownership does not necessarily involve sharing of profits and losses.
3. In the case of partnership, a partner is the agent of the other partners, but in the case of a co ownership,
a co-owner is not the agent of other co owners.
4. A share in the partnership is transferred only by the consent of other partners. Co-ownership may be
dissolved at the will of co-owners; also a co owner may transfer his interest or rights in the property
without the consent of other co-owners.
Partnership vs. Association-
1. Partnership means and involves setting up relation between two or more persons who have entered into
a business for gains, with the intention of share the profits of such a business; but partnerships does not
exist between members of a charitable society or religious association or an improvement scheme or
building corporation etc
2. Partnership does not exist between members of a mutual insurance society.
3. In a trade combine or protection association, the relation between the members is not that of
partnership.
Types of Partners-
1. ‘Partner’ by holding out’ (Section 28)-A person may himself, by his words or conduct have induced
other to believe that he is a partner or he may have allowed others to represent him as a partner, though
actually he is not. He is liable like a partner in the firm to anyone who on the faith of such representation
has given credit to the firm. The result in both the cases is identical. Partnership by ‘holding out’ is also
known as partnership by estoppel.
2. Sub-partnership: A sub-partnership may arise when, consequent upon an agreement between a
partner in a firm and a stranger, the latter is vested with interest jointly with that partner so far as his share
in the firm is concerned. Such an agreement will not render the stranger a partner of the main firm. A sub-
partner can claim the agreed share from the actual partner, but he can have no right against the main firm
to take part in or to interfere with its business or to examine its account.
Minor’s Position in Partnership-
Though a minor cannot be a partner in a firm, he can nonetheless be admitted to the benefits of
partnership under Section 30 of the Act. In other words, he can be validly given a share in the partnership
profits. When this has been done and it can be done with the consent of all the partners then the rights and
liabilities of such a partner will be governed under Section 30 as follows:
Rights:
(i) A minor partner has a right to his agreed share of the profits of the firm.
(ii) He can have access to, inspect and copy the accounts of the firm.
(iii) He can sue the partners for accounts or for payment of his share but only when severing his
connection with the firm, and not otherwise.
(iv) On attaining majority he may within 6 months elect to become a partner or not to become a partner. If
he elects to become a partner, then he is entitled to the share to which he was entitled as a minor. If he
does not, then his share is not liable for any acts of the firm after the date of the public notice served to
that effect.
Liabilities: (i) The minor’s share is liable for the acts of the firm, but he is not personally liable for any
such act. (ii) Within 6 months of his attaining majority or on his obtaining knowledge that he had been
admitted to the benefits of partnership, whichever date is later, he may give public notice that he has
elected not to become partner and such notice shall determine his position as regards the firm.
If he fails to give such notice he shall become a partner in the firm on the expiry of the said six months. If
the minor becomes partner of his own willingness or by his failure to give the public notice within
specified time, the position will be as follows:
(i) He becomes personally liable to third parties for all acts of the firm done since he was admitted to the
benefits of partnership.
(ii) His share in the property and the profits of the firm remains the same to which he was entitled as a
minor.
Mutual Rights and Duties of Partners-
The contract may provide that a partner shall not carry on any business other than that of the firm while
he is a partner (Section 11). Subject to a contract between the partners the mutual rights and liabilities are
as follows:
Rights:
(1) Right to take part in the conduct of the Business: Every partner has the right to take part in the
business of the firm. This is because partnership business is a business of the partners and their
management powers are generally coextensive.
Now suppose this management power of the particular partners is interfered with and he has been
wrongfully precluded from participating therein. Can the Court interfere in these circumstances? The
answer is in the affirmative. The Court can, and will, by Injunction, restrain other partners from doing so.
The main point is that a partner who has been wrongfully deprived of the right of participation in the
management has also other remedies, e.g., a suit for dissolution, a suit for accounts without seeking
dissolution, etc. The above mentioned provisions of law will be applicable only if there is no contract to
the contrary between the partners.
2. Right to be consulted: Where any difference arises between the partners with regard to the business of
the firm, it shall be determined by the views of the majority of them, and every partner shall have the right
to express his opinion before the matter is decided. But no change in the nature of the business of the firm
can be made without the consent of all the partners [Section 12(c)].
3. Right to remuneration: No partner is entitled to receive any remuneration in addition to his share in
the profits of the firm for taking part in the business of the firm. But this rule can always be varied by an
express agreement, or by a course of dealings, in which event the partner will be entitled to remuneration.
4. Interest on Capital: The interest will be payable only out of profits. As a general rule, interest on
capital subscribed by partners is not allowed unless there is an agreement or usage to that effect. The
principle underlying this provision of law is that regards the capital brought by a partner in the business;
he is not a creditor of the firm but an adventure.
5. Interest on advances: The partner is entitled to claim interest thereon @6% per annum [Section
13(d)]. While interest in capital account ceases to run in dissolution, the interest on advances keep
running even often dissolution and up to the date of payment.
6. Right to share profits: partners are entitled to share equally in profits earned and so contribute equally
to the losses sustained by the firm (section 13(b))
7. Right to access the books of accounts: Every partner whether active or sleeping is entitled to have
access to any books of firm and to inspect and take out the copy thereof (Sec12 (d))
8 Right to be indemnified: Every partner has the right to be indemnified by the firm with respect of
payments made and liabilities incurred by him in the ordinary and proper conduct of the business as well
as in the performance of an act in an emergency for protecting the firm from any loss. (Section 13(e))
9. Right to stop admission of a new partner: Every partner has the right to stop the introduction of the
new partner without the consent of other partners.(section 31)
10. Right to retire: Every partner has the right to retire with the consent of other partners and in the case
of partnership at will, by giving notice to that effect to all other partners.(section 32(1))
11. Right not to be expelled: Every partner has got a right not to be expelled from the firm by the
majority of the partners.(Section33)
12. Right to dissolve the firm: Every partner has the right to dissolve the partnership with the consent of
other partners and in the case of partnership at will, by any partner giving notice to that effect to all other
partners.(section 40)
13. Right of outgoing partner to carry on competing business: An outgoing partner can
carrying on business competing with the firm and he may advertise such business, but without using the
firm name or representing himself as carrying on the business of the firm or soliciting the custom of
persons who were dealing with the firm before he ceased to be a partner (Section36(1)).
14. Right of outgoing partner to share subsequent profits: When any partner has died or ceased to be a
partner, and the surviving or continuing partners carry on the business of the firm with the property of the
firm without any final settlement of the accounts as between them and the outgoing partner, than at the
representative option, can either take them proportion of the profits attributable to the share of property or
interest at the rate of 6% per annum.
Duties:
1. Partners are bound to carry on business of the firm
a. to the greatest common advantage
b. To be just and faithful to each other
c. To render to any partner or his legal representative a true account and full information of all the things
affecting the firm(Section9)
2. Every partner is liable to indemnify the firm for any damage caused ti it by the reason of its fraud in the
conduct of his business of the firm (Section10)
3. Every partner is bound to attend diligently to his duties relating to the conduct of the firm’s business
(Section12 (b))
4. All the partners are liable to contribute equally to the loss sustained by the firm.
5. If a partner derives any profit for himself from any transaction of the firm or from the use of the
property or business connection of the firm or the firm’s name then he is bound to account for that profit
and refund it to the firm.(Section16(a)
6. A partner must identify the firm for any loss caused to it by the wilful neglect of the business of the
firm. (Section13 (f))
7. If a partner carries on business of the same nature as and competing with that of the firm, then he must
account for and pay to the firm all profits made by him in the business and the firm is not liable for any
loss(Section16(b))
Personal Profit Earned by Partners (Section 16)-
Where a partner derives any profit for himself from any transaction of the firm or firm the use of the
property or business connection of the firm name, he must account for that profit and pay it to the firm. A
deed of partnership may contain a clause that some or all the partners are not to carry any business other
than of the firm during the continuance of partnership [Section 11(2)].
A breach of such a provision may entitle the other partner to recover damages from the defaulting partner,
but it will not gives rise to any occasion for accounting to his co-partners for the profit earned unless the
business is shown to be in rivalry with the business of the firm.
Rights and Duties of Partners after a Change in the constitution of the firm (Section 17)
Change in the constitution can occur in one of the four ways, namely:
(i) Where a new partner or partners come in,
(ii) Where some partner or partners go out, i.e., by death or retirement,
(iii) Where the partnership concerned carries on business other that the business for which it was
originally formed,
(iv) Where the partnership business is carried on after the expiry of the term fixed for the purpose.
(a) Where the change occurs in the constitution because of the first three reasons then the mutual rights
and duties of the partners remains the same as before. (b) Where the partnership business is carried on
after the expiry of the term fixed for the purpose so far they are consistent with the incidents of
partnership at will.
Relation of Partners to Third Parties (Sec. 18-30)-
The principal distinction between him and a mere agent is that he has a community of interest with other
partners in the whole property and business and liabilities of partnership, whereas an agent as such has no
interest in either.
Partner is the agent of the firm for the purpose of the business of the firm, cannot be applied to all
transaction and dealings between the partners themselves. It is applicable only to the act done by partners
for the purpose of the business of the firm.
Implied Authority of a Partner of the firm-
If the act is “outside the usual course of the business of the firm” it will not bind the firm even if it is
prudent or has benefited the firm unless it is ratified and approved by all the partners. Power to do the
usual does not include power to do the unusual.
A partner has implied authority to bind the firm by all acts done by him in all matters connected with the
partnership business and which are done in the usual way and are not in their nature beyond the scope of
partnership.
Acts beyond Implied Authority (Section 19)
If there is no usage or custom of trade to the contrary, the implied authority of the partner does not
empower him to:
(a) Submit a dispute to the business of the firm to arbitration as it is not the ordinary business of
partnership firm to enter into a submission for arbitration:
(b) Open a bank account on behalf of the firm in his own name;
(c) Compromise or relinquish any claim or portion of a claim by the firm against a third party (i.e. an
outsider).
(d) Withdraw a suit or proceedings filed on behalf of the firm;
(e) Admit any liability in a suit or proceedings against the firm;
(f) Acquire immovable property on behalf of the firm;
(g) Transfer immovable property on belonging to the firm; and
(h) Enter into partnership on behalf of the firm.
Liability to Third Parties (Section 25 to 27)-
1. Contractual liability: Under Section 25, it is necessary that the act of the firm, in respect of which
liability is bought to be enforced against a party, must have been done while he was a partner.
2. Liability for tort or wrongful act: Section 26, the fact that the method employed by the partner in
doing it was unauthorised or wrongful would not affect the question. Furthermore, all the partners in a
firm are liable to a third party for loss or injury caused to him by the negligent act of a partner acting in
the ordinary course of the business.
3. Liability for misappropriation by a partner: Section 27 provides that (a) when a
partner, acting within his apparent authority, receives money or other property from a third person and
misapplies it or (b) where a firm, in the course of its business, received money or property from a third
person and the same is misapplied by a partner, while it is in the custody of the firm, is liable to make
good the loss.
Rights of Transferee of a Partner’s Share (Sec. 29)-
A share in a partnership is transferable like any other property but as the partnership relationship is based
on mutual confidence, the assignee of a partner’s interest by sale, mortgage or otherwise cannot enjoy the
same rights and privileges as the original partner. The Supreme Court has held the assignee will enjoy
only the rights to receive the share of the profits of the assignor and the account of profits agreed to by
other partners.
The rights of such a transferee are as follows:
(1) During the continuance of partnership, such transferee is not entitled (a) to interfere with the conduct
of the business, (b) to require accounts, or (c) to inspect books of the firm. He is only entitled to receive
the share of the share profits of the transferring partner and he is bound to accept the profits as agreed to
by the partners, i.e., he cannot challenge the accounts.
(2) On the dissolution of the firm or on the retirement of the transferring partner, the transferee will be
entitled, against the remaining partners: (a) to receive the share of the assets of the firm to which the
transferring partner was entitled, and (b) for the purpose of ascertaining the share, he is entitled to an
account as from the date of the dissolution.
Rights of Transferee of a Partner’s Share (Sec. 29)-
By virtue of Section 31, which we will discuss hereinafter, no person can be introduced as a partner in a
firm without the consent of all the partners. A partner cannot by transferring his own interest, make
anybody else a partner in his stead, unless the other partners agree to accept that person as a partner. At
the same time, a partner is not debarred from transferring his interest. A partner’s interest in the
partnership can be regarded as an existing interest and tangible property which can be assigned.
Legal Consequences of Partner Coming in and going out (Section 31-38)-
Introduction of new partner (Section 31):
As we have studied earlier, subject to a contract between partners and to the provisions regarding minors
in a firm, no new partners can be introduced into a firm without the consent of all the existing partners.
Introduction of the new partner: The liabilities of the new partner ordinarily commence from the date
when he is admitted as a partner, unless he agrees to be liable for obligations incurred by the firm prior to
the date. The new firm, including the new partner who joins it, may agree to assume liability for the
existing debts of the old firm, and creditors may agree to accept the new firm as their debtor and
discharge the old partners.
Retirement of a partner: A partner may retire:
(i) With the consent of all the other partners;
(ii) By virtue of an express agreement between the partners; or
(iii) In the case of a partnership at will, by giving notice in writing to all other partners of his intention to
retire.
Such a partner, however, continues to be liable to the third party for acts of the firm after his retirement
until public notice of his retirement has been given either by himself or by other partners. But the retired
partner will not be liable to any third party of the latter deals with the firm without knowing that the
former was partner [Sub-Section (3) and (4)].
Right of outgoing partners-
(i)However, the partner may agree with his partners that on his ceasing to be partner, he will not carry on
a business similar to that of the firm within a specified period or within specified local limits. Such an
agreement will not be in restraint of trade if the restraint is reasonable [Section 36(2)]. A similar rule
applies to such an agreement of sale of the firm’s goodwill [Section 53(3)].
(ii) (a) on the retirement of a partner, he has the right to receive his share of the property of the firm
including goodwill.
(b) An outgoing partner, where the continuing partners carry on business of the firm with the property of
the firm without any final settlement of accounts with him, is entitled to claim from the firm such share of
the profits made by the firm, since he ceased to a partner, as attributable to the use of his share of the
property of the firm.
In the alternative, he can claim interest at the rate of 6% per annum on the amount of his share in firm’s
property (Section 37).
(c) However, if by a contract between the partners, an option has been given to the surviving or
continuing partners to purchase the interest of the outgoing partner and the option if duly exercised, the
outgoing partner or his estate will not be entitled to any further share of the profits.
Liabilities of an outgoing partner: The retired partner will not be liable to any third party of the latter
deals with the firm without knowing that the former was partner [Section 32 (3)&(4)]. Expulsion of a
partner (Section 33): It is, thus, essential that: (i) the power of expulsion must have existed in a contract
between the partners; (ii) the power has been exercised by a majority of the partners; and (iii) it has been
exercised in good faith.
If all these conditions are not present, the expulsion is not deemed to be in bonafide interest of the
business of the firm. The test of good faith as required under Section 33(1) includes three things:
(a)That the expulsion must be in the interest of the partnership.
(b) That the partner to be expelled is served with a notice.
(c) That he is given an opportunity of being heard.
Insolvency of a partner (Section 34): When a partner in a firm is adjudicated an insolvent, he ceases to
be a partner on the date of the order of adjudication whether or not the firm is thereby dissolved. His
estate (which thereupon vests in the official assignee) ceases to be liable for any act of the firm done after
the date of the order, and the firm also is not liable for any act of such a partner after such date (whether
or not under a contract between the partners the firm is dissolved by such adjudication).
Death of a partner (Section 35): Where under the contract a firm is not dissolved by the death of
partner, the estate of the deceased partner is not liable for act of the firm after his death. Ordinarily, the
effect of the death of a partner is the dissolution of the partnership, but the rule in regard to the dissolution
of the partnership, by death of partner is subject to a contract between the parties and the partners
competent to agree that the death of one will not have the effect of dissolving the partnership as regards
the surviving partner sunless the firm Consists of only two partners. In order that the estate of the
deceased partner may be absolved from liability for the future obligations of the firm, it is not necessary
to give any notice either to the public or the persons having dealings with the firm.
In relation to Section 35, let us consider a concrete case. X was a partner in a firm. The firm ordered
goods in X’s lifetime; but the delivery of the goods was made after X’s death. In such a case, X’s estate
would not be liable for the debt; a creditor can have only a personal decree against the surviving partners
and a decree against the partnership assets in the hands of those partners.
A suit for goods sold and delivered would not lie against the representatives of the deceased partner. This
because there was no debt due in respect of the goods in X’s lifetime.
Revocation of continuing guarantee by change in the firm (Section 38): It provides that a continuing
guarantee given to a firm or to third party in respect of the transaction of a firm is, in the absence of an
agreement to the contrary, revoked as to future transaction from the date of any change in the constitution
of the firm.
7)COPRA-
The consumer Councils (Central Consumer Protection Council, State C P C, District CPCouncil) have to
ensure the following to the consumers
Jurisdiction (Pecuniary)-
District forum – upto 20 Lakhs + territorial jurisdiction
State Commission 20 lakhs to 1 crore + territorial jurisdiction
National Commision Above 1 crore
District forum has only pecuniary jurisdiction State Commission has Pecuniary, territorial,
Appellate and revisional jurisdiction
National commision has Pecuniary, territorial, Appellate ,revisional jurisdiction and review
jurisdiction
8) INFORMATION TECHNOLOGY ACT-
Connectivity via the Internet has greatly abridged geographical distances and made communication
even more rapid. While activities in this limitless new universe are increasing incessantly, the need
for laws to be formulated to govern all spheres of this new revolution was felt. In order to keep pace
with the changing generation the Indian Parliament passed Information Technology (IT) Act, 2000.
The IT Act has been conceptualized on the United Nations Commission on International Trade Law
(UNCITRAL) Model Law
Change in the Environment -
Technological Revolution.
Increase in Volumes & Complexities of transactions.
User wants the electronic records to be confidential & protected from tampering
User wants to trust the participants are who they claim to be
IT Act 2000
Became statute on 17th May 2000- 12
th nation in the world to have cyber laws
Also Amended: -
Indian Panel Code 1862
Indian Evidence Act 1872
The Bankers’ Book Evidence Act 1891
Reserve Bank of India Act 1934
The Act aims at providing legal recognition for transactions carried out by means of electronic
data interchange and other means of electronic communications commonly referred to as
"electronic commerce" which involve the use of alternative to paper based methods of
communication and storage of information and aims at facilitating electronic filing of documents
with the government agencies and e-payments.
Information Technology Act in a capsule
Called the Information Technology Act, 2000.
Came into force in June,2000
Extends to whole of India and also to people who contravene the provisions of the act outside
India.
Shall come into force as per notification by the Central govt.
The Act applies to the whole of India. It also applies to any offence committed outside India by
any person.
It does not apply to the following.
a negotiable instrument as defined in section 13 of the Negotiable Instruments Act, 1881;
a power-of-attorney as defined in section 1A of the Power-of-attorney Act, 1882;
a trust as defined in section 3 of the Indian Trusts Act, 1882;
a will as defined in section 2 (h) of the Indian Succession Act, 1925 (39 of 1925) including any
other testamentary disposition by whatever name called;
any contract for the sale or conveyance of immovable property or any interest in such property;
any such class of documents or transactions as may be notified by the Central Government in the
Official Gazette.
DIGITAL SIGNATURES: LEGITIMACY AND USE Section 3-
The Act has adopted the Public Key Infrastructure (PKI) for securing electronic transactions. A
digital signature means an authentication of any electronic record by a subscriber by means of an
electronic method or procedure in accordance with the other provisions of the Act.
Thus a subscriber can authenticate an electronic record by affixing his digital signature.
A private key is used to create a digital signature whereas a public key is used to verify the digital
signature and electronic record.
They both are unique for each subscriber and together form a functioning key pair.
Further, the Act provides that when any information or other matter needs to be authenticated by
the signature of a person, the same can be authenticated by means of the digital signature affixed
in a manner prescribed by the Central Government.
The Act also gives the Central Government powers:
a) to make rules prescribing the digital signature
b) the manner in which it shall be affixed
c) the procedure to identify the person affixing the signature
d) the maintenance of integrity, security and confidentiality of records or
e) payments and rules regarding any other appropriate matters
These signatures are to be authenticated by Certifying Authorities (CAs) appointed under the Act.
These authorities would inter alia, have the license to issue Digital Signature Certificates (DSCs).
The applicant must have a private key that can create a digital signature. This private key and the
public key listed on the DSC must form the functioning key pair.
Once the subscriber has accepted the DSC, he shall generate the key pair by applying the security
procedure. Every subscriber is under an obligation to exercise reasonable care and caution to
retain control of the private key corresponding to the public key listed in his DSC.
The subscriber must take all precautions not to disclose the private key to any third party. If
however, the private key is compromised, he must communicate the same to the Certifying
Authority (CA) without any delay.
DESPATCH & ACKNOWLEDGEMENT- ELECTRONIC RECORDS section 4-
All electronic records sent by an originator, his agent or an information system programmed by or
on his behalf are attributable to him
Where the originator has not agreed with the addressee that the acknowledgement of receipt of
electronic data shall be given in a manner, the acknowledgement may be given by
Any communication by the addressee, automated or otherwise; or
Any conduct of the addressee, sufficient to indicate to the originator that the electronic record has
been received
Where the originator had stipulated that it shall be binding only on receipt of acknowledgement,
then unless acknowledgement has been received, it shall mean that the electronic data was never
sent.
Where no such stipulation was made, then the originator may give a notice to the addressee
stating that no such acknowledgement has been received and specifying a time by which the
acknowledgement must be received by him, if still no acknowledgement is received, he may after
giving notice to the addressee treat the electronic data as never sent
Unless otherwise agreed the dispatch of an electronic record occurs when it enters a computer
resource outside the control of the originator
Unless otherwise agreed the time of receipt of electronic record shall be determined as follows:
if the addressee has designated a computer resource for the purpose of receiving electronic
records-
receipt occurs at the time when the electronic record enters the designated computer resource; or
if the electronic is sent to a resource that is not designated, receipt occurs when it is retrieved by
the addressee
Sections 5, 6 & 7 -
Legal recognition of Digital Signatures
Use of Electronic Records in Government & Its Agencies
Retention of Electronic Records
Section 11- Attribution of Electronic Records -
Shall be attributed to the originator if
Sent by originator
By a person having authority to act on behalf of originator
By an information system programmed by originator or his behalf to operate automatically.
Penalty for damage to computer, computer system etc.-
Sec 43 to 47- provides for penalties and adjudications
Sec 48 to 64- prescribes for establishment of Appellate tribunals etc and compounding of contraventions.
Sections 65-78 Offences
Tampering with computer source documents (sec 65)
Hacking with computer system (sec 66)
Publishing of information which is obscene (Sec 67)
The act to apply for offences or contraventions committed outside India. (sec 68)
“Damage" means to destroy, alter, delete, add, modify or rearrange any computer resource by any
means
Tampering with the computer source documents. Whoever knowingly or intentionally conceals,
destroys, or alters or causes another to do the same any computer source code used for a
computer, computer programme, computer system or computer network, shall be punishable with
imprisonment up to three years, or with fine upto Rs. 2 lakhs or with both.
Whoever commits hacking of the computer system shall be punished with imprisonment up to
three years, or with fine upto Rs. 2 lakhs or with both.
Whoever publishes or transmits or cause to be published any matter which is obscene, shall be
punished on first conviction with imprisonment may extend upped five years with a fine of upped
RS. 1,00,000 (for second and subsequent convictions, imprisonment of upped 10 years and a fine
of upped RS. 2,00,000)
The government may notify certain computer systems or networks as being "protected systems",
unauthorized access to which may be punishable with imprisonment upped 10 years in addition to
a fine.
Whoever makes a misrepresentation to, or suppresses any material fact from the Controller of
Certifying Authorities and whoever commits breach of confidentiality and privacy, having access
to electronic data under the Act shall be punished with imprisonment for a term which may
extend to two years, or with fine which may extend to RS. 1,00,000 or with both.
Penalties have also been prescribed for publishing false digital signature certificates or for use of
such certificates for fraudulent and unlawful purposes, which is imprisonment for a term which
may extend to two years, or with fine which may extend to Rs. 1,00,000 or with both
ADJUDICATION /COMPENSATION-
The Act provides the following:
a) Damages by way of compensation not exceeding Rs. 10 million may be imposed for unauthorized
access, unauthorized downloading or copying of data, introduction of computer viruses or
contaminants, disruption of systems, denial of access or tampering with or manipulating any
computer/network.
“Computer contaminant" means set of computer instructions designed:
- to modify, destroy, record, transmit data or programe residing within a computer, computer
system or computer network; or
- by any means to usurp the normal operation of the computer, computer system, or computer
network;
Computer data base" means a representation of information, knowledge, facts, concepts or
instructions in text, image, audio, video are prepared or being prepared or produced by a computer,
computer system or computer network and are intended for use in a 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;
b) The Act does provide that no penalty imposed under the Act shall prevent imposition of any other
punishments attracted under any other law for the time being in force.
OFFENCES OUTSIDE INDIA -
The provisions of the Act shall also apply to offences or contravention outside India, if such offences or
contravention involves a computer, computer system or computer network located in India.
CYBER REGULATIONS APPELLATE TRIBUNAL (CRAT)-
A Cyber Regulations Appellate Tribunal (CRAT) is to be set up for appeals from the order of any
adjudicating officer. It consists of one person only- the Presiding Officer.
No appeal shall lie from an order made by an adjudicating officer with the consent of the parties.
Every appeal must be filed within a period of forty-five days from the date on which the person
aggrieved receives a copy of the order made by the adjudicating officer
As per the Act a provision has been made to appeal from the decision of the CRAT to the High Court
within sixty days of the date of communication of the order or decision of the CRAT .
POWERS OF POLICE TO SEARCH, ARREST, ETC.
A police officer not below the rank of Deputy Superintendent of Police, or any other officer
authorised by the Central Government has the power to enter any public place and arrest any person
without a warrant if he believes that a cyber crime has been or is about to be committed.
Public place includes public conveyance, any hotel, any shop or any other place intended for use by,
or accessible to the public
NETWORK SERVICES PROVIDERS / ISP -
Section 79- provides for non liability of network service provider in certain cases 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
Network services providers shall not be liable under this Act for any third party information or data
made available, if they prove that the offence or contravention was committed without their
knowledge or that they had exercised all due diligence to prevent such offence.
Network service provider means an intermediary:
Third party information means any information dealt with by network service provider in his capacity
as intermediary
OFFENCES BY COMPANIES-
In respect of offences by companies, in addition to the company, every person, who at the time the
contravention was committed, was in charge of, and was responsible to the company for the conduct
of the business of the company, shall be guilty of the contravention, unless he proves that the
contravention took place without his knowledge or that he exercised all due diligence to prevent such