Unit 5
CONSUMER PROTECTION ACT
Introduction to Consumer Protection
A consumer is the one who assumes to be treated like a King as they bring business to the seller. Previously “consumer was requested to beware” but these days fingers have been pointed to seller “let seller be beware” as due to policies introduced, authorities’ laws, consumer protection, NGO and the increased competition in the market.
Consumer Protection is a term given to a exercise wherein we need to protect the consumer from the unfair practice, teaching them about their rights and responsibilities and also redressing their grievances.
In today’s world, the protection of the consumer is regarded to be of utmost importance. All around the world, mechanisms have been pondered upon in order to uphold the satisfaction of the consumer.
The main objectives of the Consumer Protection Act are:
(a) Providing better and all-round protection to consumer.
(b) Providing machinery for the speedy redressal of the grievances.
(c) Creating framework for customers to seek redressal.
(d) Providing rights to consumers.
(e) Safeguarding rights of Consumers.
(f) To ensure fair, competitive and responsible markets that work well for consumers and promote ethical business practices.
(g) To promote and protect economic interest of consumers.
(h)To improve access to information that consumers require, to make knowledgeable choices according to their individual needs.
(h) To protect buyer from hazards.
The enactment of Consumer Protection Act succeeded in bringing pressure on business firms as well as government to correct business conduct which may additionally be unfair and against the interests of consumers at large. The enactment of COPRA has led to the setting up of separate departments of Consumer Affairs in central and state governments to spread information about legal process which people can use. This information is spread through posters and advertisements on tv channels.
The Consumers were the worst affected out of a trade cycle procedure as they could be effortlessly duped by the sellers or producers of products. Before the enactment of this act the consumers were easy targets as victims of the producers in the following ways-
1.Non-awareness regarding the market price of a particular product: A consumer who's no longer used to the duping techniques of sellers could be easily fooled by means of some clever sellers making easy money through demanding higher price for the same exact being sold at a much cheaper rate somewhere else. The price of a commodity in a perfectly competitive market is bound to be the same everywhere, sellers demanding higher fees will lose customers. But people who are not aware of the prevailing market price of the commodity they want to buy might be fooled.
2.Quality of the product- The quality of the good is a very important fact affecting the price of the commodity. If the quality is not equivalent to the price asked for the good, then the buyer's interests will be toyed with towards which the government should be considerate towards.
3.Adulteration of goods: To protect the consumer's rights from being hampered severely stringent steps must be taken in order to protect the goods from being tampered with through adulteration. Adulteration might have an effect on health due to the harmful substances mixed to get the desired apparent appearance.
4.Forum for the redressal of the grievances of the consumers: The act also helped in establishing a permanent forum where the aggrieved consumers could lodge cases against sellers and goods sold.
Who is a Consumer? [Sec 2(1)(d)]
A "consumer" means any person who
1. Buys any goods for a consideration. Any user of such goods when 1 such use is made with the approval of a person who buys goods for consideration.
2. Hires or avails of any services for a consideration. Any beneficiary of such services when such services are availed of with the approval of the person who hires or avails of any services for a consideration.
3. But does not include a person who avails of such services for any commercial purpose. (Commercial purpose does not include purchase of goods or hiring of services for earning livelihood by means of self. Employment.)
Consideration has been paid or promised or partly paid and partly promised, or under any system of deferred payment. There has to be a sale transaction for consideration.
Who is not a Consumer?
A person is not a consumer if he -
1. Buys any goods without a consideration. Any user of such goods when such use is made without the approval of person who buys goods for consideration.
2. Hires or avails of any services without a consideration. Any beneficiary of such services for consideration when such services are availed of, without the approval of the person who hires such services for consideration.
3. Obtains the goods for resale or commercial purpose.
4. Obtains the service under a contract of personal service.
Who is a Person? [Sec. 2(1)(m)]
- A person includes -
- A firm whether registered or not
- A Hindu undivided family
- A Co-operative society
Every other association of persons whether registered under the Societies Registration Act, 1860 or not,
The definition of a "person" is inclusive. It includes both individual and legal person. Any company or association or body of individuals whether registered or not, means a "person".
What are Goods? [Sec. 2(1)(i)]
"Goods" means goods as defined in the Sale of Goods Act, 1930. The meaning of the word "goods" under the Consumer Protection Act is the same as defined under the Sale of Goods Act, 1930. Goods mean every kind of movable property other than actionable claims and money. It includes stock and shares, growing crops, grass and things attached to or forming part of the land, which are agreed to be severed before sale or under the contract of sale.
What is Service? [Sec. 2(1)(o)]
"Service" means service of any description which is made available to potential users and includes, but not limited to, the provisions of facilities In connection with banking, financing insurance, transport, processing supply of electricity or other energy, boarding or lodging or both, housing construction, entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service.
"Consumer dispute" means a dispute with the person against whom a complaint has been made, denies or disputes the allegation contained in the complaint.
In order to get a remedy on the Consumer Protection Act a person by himself has no locus standi under the Consumer Protection Act. A person has to be a consumer as per the definition of consumer given under the Act. There has to be a dispute between the consumer and the trader, many tax or service provider against whom he has a complaint and he seeks his relief provided under the Consumer Protection Act.
According to Section
2 (1) (b) complainant means-
- a consumer; or
- Any voluntary consumer association registered under the Companies Act or under any other law for the time being in force; or
- The Central Government or any State Government, who or which makes a complaint
- One or more consumers, where there are numerous consumers having the same interest.
Section 2(1)(r) "unfair trade practice" means a trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the provision of any service, adopts any unfair method or unfair or deceptive practice including any of the following practices, namely, -
(1) The practice of making any statement, whether orally or in writing or by visible representation which, -
(i) Falsely represents that the goods are of a particular standard, quality, quantity, grade, composition, style or model;
(ii) Falsely represents that the services are of a particular standard, quality or grade;
(iii) Falsely represents any re-built, second-hand, renovated, reconditioned or old goods as new goods;
(iv) Represents that the goods or services have sponsorship, approval, performance, characteristics, accessories, uses or benefits which such goods or services do not have;
(v) Represents that the seller or the supplier has a sponsorship or approval or affiliation which such seller or supplier does not have;
(vi) Makes a false or misleading representation concerning the need for, or the usefulness of, any goods or services;
(vii) Gives to the public any warranty or guarantee of the performance, efficacy or length of life of a product or of any goods that is not based on an adequate or proper test thereof: PROVIDED that where a defence is raised to the effect that such warranty or guarantee is based on adequate or proper test, the burden of proof of such defence shall lie on the person raising such defence;
(viii) Makes to the public a representation in a form that purports to be-
(i) a warranty or guarantee of a product or of any goods or services; or
(ii) a promise to replace, maintain or repair an article or any part thereof or to repeat or continue a service until it has achieved a specified result, if such purported warranty or guarantee or promise is materially misleading or if there is no reasonable prospect that such warranty, guarantee or promise will be carried out;
(ix) Materially misleads the public concerning the price at which a product or like products or goods or services, have been or are, ordinarily sold or provided, and, for this purpose, a representation as to price shall be deemed to refer to the price at which the product or goods or services has or have been sold by sellers or provided by suppliers generally in the relevant market unless it is clearly the price at which the product has been sold or services have been provided by the person by whom or on whose behalf the representation is made;
(x) Gives false or misleading facts disparaging the goods, services or trade of another person.
The Central Consumer Protection Council
(1) The Central Government may, by notification, establish with effect from such date as it may specify in such notification, a council to be known as the Central Consumer Protection Council (hereinafter referred to as the Central Council). (2) The Central Council shall consist of the following members, namely, -
(a) the Minister in charge of 1[consumer affairs] in the Central Government, who shall be its Chairman, and
(b) such number of other official or non-official members representing such interests as may be prescribed.
1) Procedure for meetings of the Central Council
(1) The Central Council shall meet as and when necessary, but 1[at least one meeting] of the council shall be held every year.
(2) The Central Council shall meet at such time and place as the Chairman may think fit and shall observe such procedure in regard to the transaction of its business as may be prescribed.
2) Objects of the Central Council The objects of the Central Council shall be to promote and protect the rights of the consumers such as-
(a) The right to be protected against the marketing of goods 2[and services] which are hazardous to life and property;
(b) The right to be informed about the quality, quantity, potency, purity, standard and price of goods 1[or services, as the case may be], so as to protect the consumer against unfair trade practices;
(c) The right to be assured, wherever possible, access to a variety of goods and services at competitive prices;
(d) The right to be heard and to be assured that consumers' interests will receive due consideration at appropriate forums;
(e) The right to seek redressal against unfair trade practices 1[or restrictive trade practices] or unscrupulous exploitation of consumers; and
(f) The right to consumer education.
The State Consumer Protection Councils
(1) The State Government may, by notification, establish with effect from such date as it may specify in such notification, a council to be known as the Consumer Protection Council (hereinafter referred to as the State Council).
(2) The State Council shall consist of the following members, namely, -
(a) the Minister in-charge of consumer affairs in the State Government who shall be its Chairman;
(b) such number of other official or non-official members representing such interests as may be prescribed by the State Government.
(3) The State Council shall meet as and when necessary but not less than two meetings shall be held every year.
(4) The State Council shall meet at such time and place as the Chairman may think fit and shall observe such procedure in regard to the transaction of its business as may be prescribed by the State Government.
- Objects of the State Council
The objects of every State Council shall be to promote and protect within the State the rights of the consumers laid down in clauses (a) to (f) of section 6.
The District Protection Council (Sec. 8A)
The State Government shall establish for every district a district consumer protection council. It shall consist of the following members namely:
(a) The collector of the district, who shall be its chairman, and
(b) Search number of other official and non-official members representing such interest as may be prescribed by the State Government.
The District Council shall meet as and when necessary but not less than two meetings shall be held every year. The District Council shall meet at such time and place within the district as the chairman may think fit and shall observe search procedure in regard to the transaction of its business as may be prescribed by the State Government.
Three Tier Consumer Grievances Machinery under the Consumer Protection Act!
1. District Forum:
District forum consists of a president and two other members. The president can be a retired or working judge of District Court. They are appointed by using state government. The complaints for goods or services worth Rs 20 lakhs or less can be filed in this agency. The agency sends the goods for testing in laboratory if required and gives decisions on the basis of facts and laboratory report. If the aggrieved party is not cosy by the jurisdiction of the district forum then they can file an appeal against the judgment in State Commission inside 30 days by depositing Rs 25000 or 50% of the penalty amount whichever is less.
2. State Commission:
It consists of a president and two other members. The president must be a retired or working decide of high court. They all are appointed by state government. The complaints for the goods really worth more than Rs 20 lakhs and less than Rs 1 crore can be filed in State Commission on receiving complaint the State commission contacts the party against whom the complaint is filed and sends the goods for testing in laboratory if required. In case the aggrieved party is not satisfied with the judgment then they can file an appeal in National Commission within 30 days by depositing Rs 3500 or 50% of penalty amount whichever is less.
3. National Commission:
The national commission consists of a president and four members one of whom shall be a woman. They are appointed by Central Government. The complaint can be filed in National Commission if the value of goods exceeds Rs 1 crore.
If aggrieved party is not satisfied with the judgment then they can file a grievance in Supreme Court within 30 days.
Basis | District Commission | State Commission | National Commission |
Composition | It consists of a president and two other members. | It consists of a president and two other members. | It consists of a president and four other members. |
Who can be a President | A working or retired judge of District Court. | A working or retired judge of High Court. | A working or retired judge of Supreme Court. |
Appointment of President | The president is appointed by the state government on the recommendation of the selection committee. | The president is appointed by the state government after consultation with the chief justice of the High Court. | The president is appointed by the central government after consultation with the chief justice of India, |
Jurisdiction | In 1986, it had jurisdiction to entertain complaints where the value of goods or services does not exceed Rs 5, 00,000 but now the limit is raised to 20 lakhs. | In 1986, it had jurisdiction to entertain complaints when the value of goods or services exceeds Rs 5,00,000 and does not exceed Rs 20,00,000 but now it is raised to more than Rs 20,00,000 and up to Rs1 crore. | In 1986, it had jurisdiction to entertain complaints where the value of goods or services exceeds Rs 20 lakhs but now the limit is raised and it entertains the complaints of goods or services where the value exceeds Rs 1 crore. |
Appeal against orders | Any person who is aggrieved by the order of District Forum can appeal against such order to State Commission within 30 days and by depositing Rs 25000 or 50% of the penalty amount whichever is less. | Any person who is aggrieved by the order of State Commission can appeal against such order to National Commission within 30 days and by depositing Rs 35000 or 50% of penalty amount whichever is less. | Any person who is aggrieved by the order of the National Commission can appeal against such order to Supreme Court within 30 days and by depositing 50% of penalty amount but only cases where value of goods or services exceeds Rs 1 crore can file appeal in Supreme Court. |
When we discuss about the forms a business organization can take, one of the most prominent ones is a partnership. In India mainly it's a really popular entity to hold out business allow us to take a glance at some important elements of a partnership and also some sorts of partners.
CONCEPT PARTNERSHIP
In India, we've a particular law that covers all factors and functioning of a partnership, The Indian Partnership Act 1932. The act also defines a partnership as “the relation between two or more persons who have agreed to share the profits from a business carried on by either all of them or any of them on behalf of/acting for all”
So, in such a case two or more (maximum numbers will differ consistent with the business being carried) persons close as a unit to realize some common objective. And therefore, the profits earned in pursuit of this objective are going to be shared amongst themselves.
The entity is collectively called a “Partnership Firm” and every one the person members are the “Partners”. So, allow us to check out some important features.
NATURE OF PARTNERSHIP ACT,1932
When two or more people join hands to set up an enterprise and share its gains and losses, they are said to be in partnership. Section 4 of the Indian Partnership Act 1932 states partnership as the ‘association between people who have consented to share the profits of an enterprise carried on by all or any of them acting for all’.
People who have entered into a partnership with one another are independently termed as ‘partners’ and comprehensively termed as ‘firm’. The name under which the trade is carried is called the ‘name of the firm’. A partnership enterprise has no distinct legal entity, apart from the partners comprising it. Hence, the vital features of the partnership are:
- Two or More Persons: In order to manifest a partnership, there should be at least two persons possessing a common goal. To put it in other words, the minimal number of partners in an enterprise can be 2. However, there is a constraint on their maximum number of people. By the uprightness of Section 464 of the Companies Act 2013, the Central Government is authorised to stipulate a maximum number of partners in an enterprise; however, the number of partners cannot exceed 100. The Central government has stipulated the maximum number of partners in an enterprise to be 50, under Rule 10 of the Companies (Miscellaneous) Rules, 2014. Hence, a partnership enterprise cannot have more than 50 people (partners)
- Agreement: It is the outcome of an accord between 2 or more people to regulate business and share its gains and losses. The agreement (accord) becomes the basis of the association between the partners. Such an agreement is in the written form. An oral agreement is even handedly legitimate. In order to avoid controversies, it is always good if the partners have a copy of the written agreement.
- Sharing of Profit: Another significant component of the partnership is, the accord between partners has to share gains and losses of a trading concern. However, the definition held in the Partnership Act elucidates – partnership as an association between people who have consented to share the gains of a business, the sharing of loss is implicit. Hence, sharing of gains and losses is vital.
CHARACTERISTICS OF A PARTNERSHIP
1] Formation/Contract
A partnership firm is not a separate legal entity. But consistent with the act, a firm must be fashioned via a legal agreement between all the partners. So a contract must be entered into to make a partnership firm.
Its commercial activity must be lawful, and therefore the motive has got to be one among profit. So two people forming an alliance to hold out charity and/or welfare work won't constitute a partnership. Similarly, a partnership contract to scoop illegal work, like smuggling, is void also.
2] Unlimited Liability
In a unique feature, all partners have unlimited liability within the business. The partners are all individually and jointly responsible for the firm and therefore the payment of all debts. This suggests that even personal assets of a partner are often liquidated to satisfy the debts of the firm.
If the cash is recovered from one partner, he can, in turn, sue the opposite partners for his or her share of the debt as per the contract of the partnership.
3] Continuity
A partnership cannot perform in perpetuity. The death or retirement or bankruptcy or insolvency or insanity of a partner will dissolve the partnership. The remaining partners may continue the partnership if they so choose, but a replacement contract must be involved. Also, the partnership of a father can't be inherited by his son. If all the opposite partners agree, he is often added on as a replacement partner.
4] Number of Members
As we all know that there should be a minimum of two individuals for a partnership. However, the utmost number will vary consistent with a couple of conditions. The Partnership Act itself is silent on this issue, but the businesses Act, 2013 provides clarity.
For a banking business, the amount of partners must not exceed ten. For a business of the other nature, the utmost number is twenty. If the amount of partners increases it'll become an illegal entity or association.
5] Mutual Agency
In a partnership, the business must be administered by all the partners together. Or alternatively, it are often administered by any of the partners (one or several) acting for all of them or on behalf of all of them. So this suggests every partner is an agent as properly because the principal of the partnership.
He represents the opposite partners in some cases so he's their agent. But in several circumstances, he's bound by the actions of any of the opposite partners asking him the principal also.
Key Takeaways:
- A partnership can be defined as “the relation between two or more persons who have agreed to share the profits from a business carried on by either all of them or any of them on behalf of/acting for all”.
- People who have entered into a partnership with one another are independently termed as ‘partners’ and comprehensively termed as ‘firm’.
Registration of Partnership Firm, Section 58, 59 of the Partnership Act provides Application for registration and Registration respectively. Section 96 of the said Act speaks about Effects of Non-Registration of Partnership Firm.
1) Application for registration -
According to section 58 of the Indian Partnership Act 1932 (1) Subject to the provisions of sub-section of sub-section (1A), the registration of a firm effected by sending by post or delivering to the Registrar of the area in which any place of business of the firm is situated or proposed to be situated, a statement in the prescribed form and accompanied by the prescribed fee and a true copy of the deed of partnership stating:
(a) the firm-name,
(aa) the nature of business of the firm;
(b) the place or principal place of business of the firm,
(c) the names of any other places where the firm carries on business,
(d) the date when each partner joined the firm,
(e) the names in full and permanent addresses of the partners, and
(f) the duration of the firm.
The statement shall be signed by all the partners, or by their agents specially authorized in this behalf.
(1A) The statement under sub-section (1) shall be sent or delivered to the Registrar within a period of one year from the date of constitution of the firm :
Provided that in the case of any firm carrying on business on or before the date of commencement of the Indian Partnership (Maharashtra Amendment) Act, 1984, such statement shall be sent or delivered to the Registrar within a period of one year firm such date.
(2) Each person signing the statement shall also verify it in the manner prescribed.
(3) A firm shall not have any of the names or emblems specified in the Schedule to the Emblems and Names (Prevention of Improper Use) Act, 1950, or any colorable imitation thereof, unless permitted so to do under that Act, or any name which is likely to be associated by the public with the name of any other firm on account of similarity, or any name which, in the opinion of the Registrar, for reasons to be recorded in writing, is undesirable:
Provided that nothing in this sub-section shall apply to any firm registered under any such name before the date of the commencement of the Indian Partnership (Maharashtra Amendment) Act, 1984.
(4) Any person aggrieved by an order of the Registrar under sub-section (3), may, within 30 days from the date of communication of such order, appeal to the officer not below the rank of Deputy Secretary to Government authorised by the State Government in this behalf, in such manner, and on payment of such fee, as may be prescribed. On receipt of any such appeal, the authorised officer shall, after giving an opportunity of being heard to the appellant, decide the appeal, and his decision shall be final.
2) Registration -
According to Section 59 of the said Act (1) When the Registrar is satisfied that the provisions of section 58 have been duly complied with, he shall record an entry of the statement in a register called the Register of Firms, and shall file the statement. On the date such entry is recorded and such a statement is filed, the firm shall be deemed to be registered.
(2) The firm, which is registered, shall use the brackets and word (Registered) immediately after its name.
3) Late registration on payment of a penalty -
As per Section 59A-I of the Partnership Act 1932 If the statement in respect of any firm is not sent or delivered to the Registrar within the time specified in sub-section (1A) of section 58, then the firm may be registered on payment, to the Registrar, of a penalty of one hundred rupees per year of delay or a part thereof.
4) Effect of Non-Registration -
According to Section 69 of the said Act (1) No suit to enforce a right arising from a contract or conferred by this Act shall be instituted in any Court by or on a behalf of any persons suing as a partner in a firm against the firm or any person alleged to be or to have been a partner in the firm unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm:
Provided that the requirement of registration of firm under this subsection shall not apply to the suits or proceedings instituted by the heirs or legal representatives of the deceased partner of a firm for accounts of the firm or to realize the property of the firm.
(2) No suit to enforce a right arising from a contract shall be instituted in any court by or on behalf of a firm against any third party unless the firm is registered and the persons suing are or have been shown in the Register of Firms as partners in the firm.
(2A) No suit to enforce any right for the dissolution of a firm or for accounts of a dissolved firm or any right or power to realize the property of a dissolved firm shall be instituted in any Court by or on behalf of any person suing as a partner in a firm against the firm or any person alleged to be or have been a partner in the firm unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm :
Provided that the requirement of registration of a firm under this subsection shall not apply to the suits or proceedings instituted by the heirs or legal representatives of the deceased partner of a firm for accounts of a dissolved firm or to realize the property of a dissolved firm.
(3) The provisions of sub-sections (1), (2) and (2A) shall apply also to a claim of set-off or other proceedings to enforce a right arising from a contract but shall not affect
(a) the firms constituted for a duration up to six months or with a capital up to two thousand rupees; or;
(b) the powers of an official assigned, receiver or Court under the Presidency Towns Insolvency Act, 1909, or the Provincial Insolvency Act, 1920, to realize the property of an insolvent partner.
Key takeaways:
- Registration of a partnership firm is not compulsory.
- But if a firm is registered, s firm get entitled to certain benefits.
- If a firm is not registered, the firm will not be able to proceed with legal proceedings in case of default.
Active Partner: Because the name suggests he takes active participation within the business of the firm. He contributes to the capital, features a share within the income and also participates within the daily activities of the firm. His liability within the company is going to be unlimited. And he often will act as an agent for the opposite partners.
Dormant Partner: Also referred to as a silent partner, he won't participate within the daily functioning of the business. But he will still need to make his share of contribution to the capital. In return, he will have a share within the profits. His liability will additionally be unlimited.
Secret Partner: Here the partner’s association with the firm isn't general knowledge. He won't signify the firm to outside agents or parties. Aside from this his participation with reference to capital, profits, management and liability are going to be an equivalent as all the opposite partners.
Nominal Partner: This partner is solely a partner in name only. He allows the firm to use the name of his firm, and therefore the connected goodwill. But he in no way contributes to the capital and hence has no share within the profits. He doesn't involve himself within the firm’s business. But his liability too is going to be unlimited.
Partner by Estoppel: If an individual makes it bent be, through their conduct or behaviour that they're partners during a firm and he doesn't correct them, then he becomes a partner by estoppel. However, this partner too will have unlimited liability.
TYPES OF PARTNERSHIPS
Various sorts of partnerships exist, including limited partnership, indebtedness partnership, joint liability, indebtedness, and joint ventures. The foremost important thing to know is that partnerships are agreements between two or more parties to realize a specific business goal. General partnerships are:
Equal agreements
Various responsibilities are often delegated among members
Partnerships force all parties to share sure risks and rewards during business endeavours.
For instance, a partner can handle the investment angle by pouring capital within the business, while another can act during a management capacity. Additionally, one partner can bind group partners into one legal obligation. Under partnerships, each party takes responsibility for individual obligations or debts.
- Limited Partnerships (LPs)
A limited partnership allows each partner to avoid personal liability to the quantity of his or her business investment. Such an appointment requires one individual to require the role of general status, opening his or herself up to potential personal liabilities, while the limited partner takes less of a risk. However, the accepted partner retains control of the business, and therefore the limited partner is usually not involved in management operations.
- Limited Liability Partnerships (LLP)
LLPs accompany tax advantages within the same manner as general partnerships combined with liability protections. For instance, individuals aren't liable for any debts or liabilities arising from the business. LLPs are usually found among law or accounting partnerships. Where taxation cares, the IRS recognizes such businesses as partnerships and approves members to file taxes individually on personal returns. GPs, LLPs, and LPs are taxed within the same manner, however partnerships don't pay taxes.
LLPs permit members to figure together while retaining a measure of independence when it involves liability. With that, not all parties are held equally responsible, and other members aren't held responsible for the actions of others. Before engaging in any sort of partnership, know the terms before agreeing or signing any document.
- Limited Liability Protection
If you're concerned about indebtedness protection, remember that general partnerships don't afford you any protective measures. During a general capacity, partners are often held liable for movements or decisions of other partners. General partnerships pose the very best risk to general partners, but they're the simplest to make LLCs became a well-liked alternative to general partnerships. LLCs are ideal for those that wish to take a position during a business, but don't want face exposure to any legal ramifications.
- Joint Ventures as Partnerships
According to the tiny Business Administration, a venture is another sort of partnership. Joint ventures occur when a variety of entities converge in pursuit of a group goal. For instance, businesses may forge a partnership to construct a building.
Qualified joint ventures are a special partnership that permits spouses to co-own a business but to file separate returns to avoid partnership returns.
- Joint Liabilities
A joint liability partnership holds all partners equally responsible for any financial and legal issues. Joint liability partnerships bind all parties into equal liability. Moreover, each party are often held responsible in pending lawsuits or other legal consequences. Joint liabilities are different than several liability principles within the respect that partnerships are persisted equal footing in the least times.
Several liability, on the opposite hand, is that the agreement to settle any legal disputes and is predicated on a partner’s standing or contribution to a partnership.
- Limited Liability Company
A Limited Liability company (LLC) offers each the foremost benefits and therefore the most protection for a business owner.
A Limited liability company allows members to forge one entity while taking benefits of liability protection. LLCs provide equivalent tax havens as partnerships, but with the brought liability benefits of an organization. Corporate law dictates that corporations are held responsible for start-up investments only. For instance , a $10 million business doesn't give others the proper to sue you for over $2 million if you started that business for less than $2 million.
The LLC provides for an equivalent tax protection as a partnership, but also gives the liability protection of an organization. Under corporate law, an organization is merely responsible for the entire start-up investment within the company. Also, certain states allow members to make what's recognized as knowledgeable LLC, which provides certain professionals like doctors or lawyers more limitations than regular businesses.
Key takeaways:
- There are different types of partner like active partner, dormant partner, sleeping partner, partner by estoppel, etc.
- Partnerships can be limited liability, general partnership, fixed partnership.
RIGHTS OF PARTNERS:
Broadly, the provisions of the Act regarding rights, responsibilities and powers of partners are as under:
(a) Every partner features a right to require part within the habits and management of business.
(b) Every partner features a right to be consulted and heard altogether matters affecting the business of the partnership.
(c) Every partner features a right of free access to all or any records, books and accounts of the business, and additionally to look at and replica them.
(d) Every partner is entitled to share the profits equally.
(e) A partner who has contributed quite the agreed share of capital is entitled to interest at the speed of 6 per cent once a year. But no interest is often claimed on capital.
(f) An associate is entitled to be indemnified by the firm for all acts done by him within the direction of the partnership business, for all payments made by him in respect of partnership debts or liabilities and for expenses and disbursements made in an emergency for shielding the firm from loss provided he acted as an individual of normal prudence would have acted in similar circumstances for his own personal matters.
(g) Every partner is, as a rule, joint owner of the partnership property. He's entitled to possess the partnership property used exclusively for the needs of the partnership.
(h) A partner has power to act in an emergency for shielding the firm from loss, but he must act reasonably.
(i) Every partner is entitled to stop the introduction of a replacement partner into the firm without his consent.
(J) Every partner features a right to retire consistent with the Deed or with the consent of the opposite partners. If the partnership is at will, he can retire by giving note to other partners.
(k) Every partner features a right to continue within the partnership.
(l) A retiring partner or the heirs of a deceased partner are entitled to possess a share within the profits earned with the help of the proportion of assets belonging to such outgoing partner or interest at six per cent once a year at the choice of the outgoing partner (or his representative) until the accounts are finally settled.
DUTIES OF PARTNERS:
(a) Every partner is sure to diligently raise on the business of the firm to the best common advantage. Unless the agreement provides, there's no salary.
(b) Every partner must be just and faithful to the opposite partners.
(c) A partner is sure to keep and render true, proper, and proper accounts of the partnership and must permit other partners to see out and replica such accounts.
(d) Every partner is sure to indemnify the firm for any loss prompted by his delinquency or fraud within the conduct of the business.
(e) A partner needs to not keep it up competing business, nor use the property of the firm for his private purposes. In each case, he must fork over to the firm any profit or gain made by him but he must himself suffer any loss which may have occurred.
(f) Every partner is sure to share the losses equally with the others.
(g) A partner is sure to act within the scope of his authority.
(h) No partner can assign or transfer his partnership interest to the other person so on make him a partner within the business.
Key takeaways:
- There are various rights and duties of partners which the partners are suppose to abide by and take advantage of.
Implied authority refers to an agent with the jurisdiction to perform acts that are reasonably necessary to accomplish the purpose of an organization. Under contract law, implied authority figures have the ability to make a legally binding contract on behalf of another person or company.
- Subject to the provisions of section 22, the act of a partner which is done to carry on, in the usual way, business of the kind carried on by the firm, binds the firm. The authority of a partner to bind the firm conferred by this section is called his implied authority.
- In the absence of any usage or custom of trade to the contrary, the implied authority of a partner does not empower him to-
- Submit a dispute relating to the business of the firm to arbitration,
- Open a banking account on behalf of the firm in his own name,
- Compromise or relinquish any claim or portion of a claim by the firm,
- Withdraw a suit or proceeding filed on behalf of the firm,
- Admit any liability in a suit or proceeding against the firm,
- Acquire immovable property on behalf of the firm,
- Transfer immovable property belonging to the firm, or
- Enter into partnership on behalf of the firm.
Key takeaways:
1. Implied authority refers to an agent with the jurisdiction to perform acts that are reasonably necessary to accomplish the purpose of an organization.
DISSOLUTION
When the partnership between all the partners of a firm is dissolved, then it's called dissolution of a firm. It's important to word that the connection between all partners should be dissolved for the firm to be dissolved. Allow us to check out the legal provisions for the dissolution of a firm.
The dissolution of a firm means discontinuance of its activities. When the working of a firm is stopped and therefore the assets are realized to pay a variety of liabilities it amounts to dissolution of the firm. The dissolution of a firm shouldn't be confused with the dissolution of partnership. When a partner agrees to continue the firm underneath an equivalent name, even after the retirement or death of a partner, it amounts to dissolution of partnership and not of firm.
The remaining partners may purchase the share of the outgoing or deceased partner and proceed the business under an equivalent name; it involves solely the dissolution of partnership. The dissolution of firm includes the dissolution of partnership too. The partners have a contractual relationship among themselves. When this relationship is terminated it's an end of the firm.
A firm could also be dissolved under the subsequent circumstances:
(a) Dissolution by Agreement (Section 40):
A partnership firm is often dissolved by an agreement among all the partners. Section 40 of Indian Partnership Act, 1932 approves the dissolution of a partnership firm if all the partners agree to dissolve it. Partnership concern is created by settlement and similarly it are often dissolved by agreement this sort of dissolution is understood as voluntary dissolution.
(b) Dissolution by way of Notice (Section 43):
If a partnership is at will, it are often dissolved by any partner giving a notice to other partners. The notice for dissolution must be in writing. The dissolution are going to be effective from the date of the notice, just in case no date is mentioned within the notice, then it'll be dissolved from the date of receipt of notice. A notice as soon as given can't be withdrawn without the consent of all the partners.
(c) Compulsory Dissolution (Section 41):
A firm could also be compulsorily dissolved beneath the subsequent situations:
(i) Insolvency of Partners:
When all the partners of a firm are declared insolvent or about one partner are insolvent, then the firm is compulsorily dissolved.
(ii) Illegal Business:
The activities of the firm may find yourself illegal under the changed circumstances. If government enforces prohibition policy, then all the firms dealing in liquor will need to close their business because it'll be an unlawful undertaking under the new law. Similarly, a firm could also be trading with the businessmen of the other country. The trading are going to be lawful under present conditions.
After a while a war erupts between the 2 countries, it'll become a trading with an alien enemy and further trading with an equivalent events are going to be illegal. Under new circumstances the firm will need to be dissolved. Just in case a firm carries on quite one sort of business, then illegality of 1 work won't amount to dissolution of the firm. The firm can continue with the activities which are lawful.
(d) Contingent Dissolution (Section 42):
In case there's no agreement among partners associated with certain contingencies, partnership firm are going to be dissolved on the happening of any of the situations:
(i) Death of a Partner:
A partnership firm is dissolved on the demise of any of the partner.
(ii) Expiry of the Term:
A partnership firm could also be for a hard and fast period. On the expiry of that period, the firm is going to be dissolved.
(iii) Completion of Work:
A partnership concern could also be formed to hold out a specified work. On the completion of that employment the corporate are going to be automatically dissolved. If a firm is made to construct a road, then the second the road is completed the firm are going to be dissolved.
(iv) Resignation by Partner:
If a partner doesn't want to continue within the firm, his resignation from the priority will dissolve the partnership.
(e) Dissolution via Court (Section 44):
A partner can apply to the court for dissolution of the firm on any of those grounds:
(i) Insanity of a Partner:
If a partner goes insane, the partnership firm are often dissolved on the petition of various partners. The firm isn't automatically dissolved on the insanity of a partner. The court will act only on the petition of a partner who himself isn't insane.
(ii) Misconduct by the Partner:
When a partner is guilty of misconduct, the opposite partners can move the court for dissolution of the firm. The misconduct of a partner brings bad name to the firm and it adversely affects the reputation of the priority. The misconduct is often in business or otherwise. If a partner is jailed for committing a theft, it'll also affect the great name of the firm though it's nothing to try to with the business.
(iii) Incapacity of a Partner:
If a partner aside from the suing partner becomes incapable of performing his duties, then partnership is often dissolved.
(iv) Breach of Agreement:
When a partner wilfully commits breach of agreement concerning business, it'll become a ground for getting the firm dissolved. Under such a situation it becomes hard to hold on the business smoothly.
(v) Transfer of Share:
If a partner sells his share to a 3rd party or transfers his share to a different person permanently, other partners can pass the court for dissolving the firm.
(vi) Regular Losses:
When the firm can't be carried on profitably, then the firm are often dissolved. Though there can also be losses in every sort of business but if the firm is incurring losses continuously and it's impossible to run it profitably, then the court can order the dissolution of the firm.
(vii) Disputes amongst Partners:
Partnership firm is predicated on mutual faith. If partners don't have faith one another, then it'll not be possible to run the business. When the partners quarrel with every other, then the very basis of partnership is lost and it'll be better to dissolve it.
Following are the ways during which dissolution of a partnership firm takes place:
1. Dissolution by Agreement
A firm could also be dissolved if all the partners comply with the dissolution. Also, if there exists a contract between the partners regarding the dissolution, the dissolution may happen in accordance with it.
2. Compulsory Dissolution
In the following cases the dissolution of a corporation takes place compulsorily:
• Insolvency of all the partners or about one partner as this makes them incompetent to enter into a contract.
• When the business of the firm becomes illegal thanks to some reason.
• When thanks to some event it turns into unlawful for the partnership firm to hold its business. For instance, a partnership firm features a companion who is of another country and India declares war against that country, then he becomes an enemy. Thus, the business becomes unlawful.
3. When certain contingencies happen
The dissolution of the association takes place subject to a contract among the partners, if:
• The firm is made for a hard and fast term, on the expiry of that term.
• The firm is made to hold out specific venture, on the completion of that venture.
• A partner dies.
• A partner becomes insolvent.
4. Dissolution by Notice
When the partnership is at will, the dissolution of a firm may happen if anybody of the partners gives a word in writing to the opposite partners stating his intention to dissolve the firm.
5. Dissolution by Court
When a partner files a suit within the court, the court may order the dissolution of the corporate on the idea of the subsequent grounds:
• In the case where a partner becomes insane
• In the case the place a partner becomes permanently incapable of performing his duties.
• When a partner will become guilty of misconduct and it affects the firm’s business adversely.
• When a partner continually commits a breach of the partnership agreement.
• In a case where a partner transfers the entire of his interest within the partnership company to a 3rd party.
• In a case where the business can't be carried on barring at a loss
• When the court regards the dissolution of the firm to be just and equitable on any ground.
Key takeaways:
- The dissolution of a firm means discontinuance of its activities. When the working of a firm is stopped and therefore the assets are realized to pay a variety of liabilities it amounts to dissolution of the firm.
- Dissolution can be compulsory dissolution by law, dissolution by partners at will, dissolution by notice, dissolution by court.
References-
- Business Law 1 Essentials by Mirande Valbrun.
- The Legal and Regulatory Environment of Business by O. Lee Reed.
Unit 5
CONSUMER PROTECTION ACT
Introduction to Consumer Protection
A consumer is the one who assumes to be treated like a King as they bring business to the seller. Previously “consumer was requested to beware” but these days fingers have been pointed to seller “let seller be beware” as due to policies introduced, authorities’ laws, consumer protection, NGO and the increased competition in the market.
Consumer Protection is a term given to a exercise wherein we need to protect the consumer from the unfair practice, teaching them about their rights and responsibilities and also redressing their grievances.
In today’s world, the protection of the consumer is regarded to be of utmost importance. All around the world, mechanisms have been pondered upon in order to uphold the satisfaction of the consumer.
The main objectives of the Consumer Protection Act are:
(a) Providing better and all-round protection to consumer.
(b) Providing machinery for the speedy redressal of the grievances.
(c) Creating framework for customers to seek redressal.
(d) Providing rights to consumers.
(e) Safeguarding rights of Consumers.
(f) To ensure fair, competitive and responsible markets that work well for consumers and promote ethical business practices.
(g) To promote and protect economic interest of consumers.
(h)To improve access to information that consumers require, to make knowledgeable choices according to their individual needs.
(h) To protect buyer from hazards.
The enactment of Consumer Protection Act succeeded in bringing pressure on business firms as well as government to correct business conduct which may additionally be unfair and against the interests of consumers at large. The enactment of COPRA has led to the setting up of separate departments of Consumer Affairs in central and state governments to spread information about legal process which people can use. This information is spread through posters and advertisements on tv channels.
The Consumers were the worst affected out of a trade cycle procedure as they could be effortlessly duped by the sellers or producers of products. Before the enactment of this act the consumers were easy targets as victims of the producers in the following ways-
1.Non-awareness regarding the market price of a particular product: A consumer who's no longer used to the duping techniques of sellers could be easily fooled by means of some clever sellers making easy money through demanding higher price for the same exact being sold at a much cheaper rate somewhere else. The price of a commodity in a perfectly competitive market is bound to be the same everywhere, sellers demanding higher fees will lose customers. But people who are not aware of the prevailing market price of the commodity they want to buy might be fooled.
2.Quality of the product- The quality of the good is a very important fact affecting the price of the commodity. If the quality is not equivalent to the price asked for the good, then the buyer's interests will be toyed with towards which the government should be considerate towards.
3.Adulteration of goods: To protect the consumer's rights from being hampered severely stringent steps must be taken in order to protect the goods from being tampered with through adulteration. Adulteration might have an effect on health due to the harmful substances mixed to get the desired apparent appearance.
4.Forum for the redressal of the grievances of the consumers: The act also helped in establishing a permanent forum where the aggrieved consumers could lodge cases against sellers and goods sold.
Who is a Consumer? [Sec 2(1)(d)]
A "consumer" means any person who
1. Buys any goods for a consideration. Any user of such goods when 1 such use is made with the approval of a person who buys goods for consideration.
2. Hires or avails of any services for a consideration. Any beneficiary of such services when such services are availed of with the approval of the person who hires or avails of any services for a consideration.
3. But does not include a person who avails of such services for any commercial purpose. (Commercial purpose does not include purchase of goods or hiring of services for earning livelihood by means of self. Employment.)
Consideration has been paid or promised or partly paid and partly promised, or under any system of deferred payment. There has to be a sale transaction for consideration.
Who is not a Consumer?
A person is not a consumer if he -
1. Buys any goods without a consideration. Any user of such goods when such use is made without the approval of person who buys goods for consideration.
2. Hires or avails of any services without a consideration. Any beneficiary of such services for consideration when such services are availed of, without the approval of the person who hires such services for consideration.
3. Obtains the goods for resale or commercial purpose.
4. Obtains the service under a contract of personal service.
Who is a Person? [Sec. 2(1)(m)]
- A person includes -
- A firm whether registered or not
- A Hindu undivided family
- A Co-operative society
Every other association of persons whether registered under the Societies Registration Act, 1860 or not,
The definition of a "person" is inclusive. It includes both individual and legal person. Any company or association or body of individuals whether registered or not, means a "person".
What are Goods? [Sec. 2(1)(i)]
"Goods" means goods as defined in the Sale of Goods Act, 1930. The meaning of the word "goods" under the Consumer Protection Act is the same as defined under the Sale of Goods Act, 1930. Goods mean every kind of movable property other than actionable claims and money. It includes stock and shares, growing crops, grass and things attached to or forming part of the land, which are agreed to be severed before sale or under the contract of sale.
What is Service? [Sec. 2(1)(o)]
"Service" means service of any description which is made available to potential users and includes, but not limited to, the provisions of facilities In connection with banking, financing insurance, transport, processing supply of electricity or other energy, boarding or lodging or both, housing construction, entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service.
"Consumer dispute" means a dispute with the person against whom a complaint has been made, denies or disputes the allegation contained in the complaint.
In order to get a remedy on the Consumer Protection Act a person by himself has no locus standi under the Consumer Protection Act. A person has to be a consumer as per the definition of consumer given under the Act. There has to be a dispute between the consumer and the trader, many tax or service provider against whom he has a complaint and he seeks his relief provided under the Consumer Protection Act.
According to Section
2 (1) (b) complainant means-
- a consumer; or
- Any voluntary consumer association registered under the Companies Act or under any other law for the time being in force; or
- The Central Government or any State Government, who or which makes a complaint
- One or more consumers, where there are numerous consumers having the same interest.
Section 2(1)(r) "unfair trade practice" means a trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the provision of any service, adopts any unfair method or unfair or deceptive practice including any of the following practices, namely, -
(1) The practice of making any statement, whether orally or in writing or by visible representation which, -
(i) Falsely represents that the goods are of a particular standard, quality, quantity, grade, composition, style or model;
(ii) Falsely represents that the services are of a particular standard, quality or grade;
(iii) Falsely represents any re-built, second-hand, renovated, reconditioned or old goods as new goods;
(iv) Represents that the goods or services have sponsorship, approval, performance, characteristics, accessories, uses or benefits which such goods or services do not have;
(v) Represents that the seller or the supplier has a sponsorship or approval or affiliation which such seller or supplier does not have;
(vi) Makes a false or misleading representation concerning the need for, or the usefulness of, any goods or services;
(vii) Gives to the public any warranty or guarantee of the performance, efficacy or length of life of a product or of any goods that is not based on an adequate or proper test thereof: PROVIDED that where a defence is raised to the effect that such warranty or guarantee is based on adequate or proper test, the burden of proof of such defence shall lie on the person raising such defence;
(viii) Makes to the public a representation in a form that purports to be-
(i) a warranty or guarantee of a product or of any goods or services; or
(ii) a promise to replace, maintain or repair an article or any part thereof or to repeat or continue a service until it has achieved a specified result, if such purported warranty or guarantee or promise is materially misleading or if there is no reasonable prospect that such warranty, guarantee or promise will be carried out;
(ix) Materially misleads the public concerning the price at which a product or like products or goods or services, have been or are, ordinarily sold or provided, and, for this purpose, a representation as to price shall be deemed to refer to the price at which the product or goods or services has or have been sold by sellers or provided by suppliers generally in the relevant market unless it is clearly the price at which the product has been sold or services have been provided by the person by whom or on whose behalf the representation is made;
(x) Gives false or misleading facts disparaging the goods, services or trade of another person.
The Central Consumer Protection Council
(1) The Central Government may, by notification, establish with effect from such date as it may specify in such notification, a council to be known as the Central Consumer Protection Council (hereinafter referred to as the Central Council). (2) The Central Council shall consist of the following members, namely, -
(a) the Minister in charge of 1[consumer affairs] in the Central Government, who shall be its Chairman, and
(b) such number of other official or non-official members representing such interests as may be prescribed.
1) Procedure for meetings of the Central Council
(1) The Central Council shall meet as and when necessary, but 1[at least one meeting] of the council shall be held every year.
(2) The Central Council shall meet at such time and place as the Chairman may think fit and shall observe such procedure in regard to the transaction of its business as may be prescribed.
2) Objects of the Central Council The objects of the Central Council shall be to promote and protect the rights of the consumers such as-
(a) The right to be protected against the marketing of goods 2[and services] which are hazardous to life and property;
(b) The right to be informed about the quality, quantity, potency, purity, standard and price of goods 1[or services, as the case may be], so as to protect the consumer against unfair trade practices;
(c) The right to be assured, wherever possible, access to a variety of goods and services at competitive prices;
(d) The right to be heard and to be assured that consumers' interests will receive due consideration at appropriate forums;
(e) The right to seek redressal against unfair trade practices 1[or restrictive trade practices] or unscrupulous exploitation of consumers; and
(f) The right to consumer education.
The State Consumer Protection Councils
(1) The State Government may, by notification, establish with effect from such date as it may specify in such notification, a council to be known as the Consumer Protection Council (hereinafter referred to as the State Council).
(2) The State Council shall consist of the following members, namely, -
(a) the Minister in-charge of consumer affairs in the State Government who shall be its Chairman;
(b) such number of other official or non-official members representing such interests as may be prescribed by the State Government.
(3) The State Council shall meet as and when necessary but not less than two meetings shall be held every year.
(4) The State Council shall meet at such time and place as the Chairman may think fit and shall observe such procedure in regard to the transaction of its business as may be prescribed by the State Government.
- Objects of the State Council
The objects of every State Council shall be to promote and protect within the State the rights of the consumers laid down in clauses (a) to (f) of section 6.
The District Protection Council (Sec. 8A)
The State Government shall establish for every district a district consumer protection council. It shall consist of the following members namely:
(a) The collector of the district, who shall be its chairman, and
(b) Search number of other official and non-official members representing such interest as may be prescribed by the State Government.
The District Council shall meet as and when necessary but not less than two meetings shall be held every year. The District Council shall meet at such time and place within the district as the chairman may think fit and shall observe search procedure in regard to the transaction of its business as may be prescribed by the State Government.
Three Tier Consumer Grievances Machinery under the Consumer Protection Act!
1. District Forum:
District forum consists of a president and two other members. The president can be a retired or working judge of District Court. They are appointed by using state government. The complaints for goods or services worth Rs 20 lakhs or less can be filed in this agency. The agency sends the goods for testing in laboratory if required and gives decisions on the basis of facts and laboratory report. If the aggrieved party is not cosy by the jurisdiction of the district forum then they can file an appeal against the judgment in State Commission inside 30 days by depositing Rs 25000 or 50% of the penalty amount whichever is less.
2. State Commission:
It consists of a president and two other members. The president must be a retired or working decide of high court. They all are appointed by state government. The complaints for the goods really worth more than Rs 20 lakhs and less than Rs 1 crore can be filed in State Commission on receiving complaint the State commission contacts the party against whom the complaint is filed and sends the goods for testing in laboratory if required. In case the aggrieved party is not satisfied with the judgment then they can file an appeal in National Commission within 30 days by depositing Rs 3500 or 50% of penalty amount whichever is less.
3. National Commission:
The national commission consists of a president and four members one of whom shall be a woman. They are appointed by Central Government. The complaint can be filed in National Commission if the value of goods exceeds Rs 1 crore.
If aggrieved party is not satisfied with the judgment then they can file a grievance in Supreme Court within 30 days.
Basis | District Commission | State Commission | National Commission |
Composition | It consists of a president and two other members. | It consists of a president and two other members. | It consists of a president and four other members. |
Who can be a President | A working or retired judge of District Court. | A working or retired judge of High Court. | A working or retired judge of Supreme Court. |
Appointment of President | The president is appointed by the state government on the recommendation of the selection committee. | The president is appointed by the state government after consultation with the chief justice of the High Court. | The president is appointed by the central government after consultation with the chief justice of India, |
Jurisdiction | In 1986, it had jurisdiction to entertain complaints where the value of goods or services does not exceed Rs 5, 00,000 but now the limit is raised to 20 lakhs. | In 1986, it had jurisdiction to entertain complaints when the value of goods or services exceeds Rs 5,00,000 and does not exceed Rs 20,00,000 but now it is raised to more than Rs 20,00,000 and up to Rs1 crore. | In 1986, it had jurisdiction to entertain complaints where the value of goods or services exceeds Rs 20 lakhs but now the limit is raised and it entertains the complaints of goods or services where the value exceeds Rs 1 crore. |
Appeal against orders | Any person who is aggrieved by the order of District Forum can appeal against such order to State Commission within 30 days and by depositing Rs 25000 or 50% of the penalty amount whichever is less. | Any person who is aggrieved by the order of State Commission can appeal against such order to National Commission within 30 days and by depositing Rs 35000 or 50% of penalty amount whichever is less. | Any person who is aggrieved by the order of the National Commission can appeal against such order to Supreme Court within 30 days and by depositing 50% of penalty amount but only cases where value of goods or services exceeds Rs 1 crore can file appeal in Supreme Court. |
When we discuss about the forms a business organization can take, one of the most prominent ones is a partnership. In India mainly it's a really popular entity to hold out business allow us to take a glance at some important elements of a partnership and also some sorts of partners.
CONCEPT PARTNERSHIP
In India, we've a particular law that covers all factors and functioning of a partnership, The Indian Partnership Act 1932. The act also defines a partnership as “the relation between two or more persons who have agreed to share the profits from a business carried on by either all of them or any of them on behalf of/acting for all”
So, in such a case two or more (maximum numbers will differ consistent with the business being carried) persons close as a unit to realize some common objective. And therefore, the profits earned in pursuit of this objective are going to be shared amongst themselves.
The entity is collectively called a “Partnership Firm” and every one the person members are the “Partners”. So, allow us to check out some important features.
NATURE OF PARTNERSHIP ACT,1932
When two or more people join hands to set up an enterprise and share its gains and losses, they are said to be in partnership. Section 4 of the Indian Partnership Act 1932 states partnership as the ‘association between people who have consented to share the profits of an enterprise carried on by all or any of them acting for all’.
People who have entered into a partnership with one another are independently termed as ‘partners’ and comprehensively termed as ‘firm’. The name under which the trade is carried is called the ‘name of the firm’. A partnership enterprise has no distinct legal entity, apart from the partners comprising it. Hence, the vital features of the partnership are:
- Two or More Persons: In order to manifest a partnership, there should be at least two persons possessing a common goal. To put it in other words, the minimal number of partners in an enterprise can be 2. However, there is a constraint on their maximum number of people. By the uprightness of Section 464 of the Companies Act 2013, the Central Government is authorised to stipulate a maximum number of partners in an enterprise; however, the number of partners cannot exceed 100. The Central government has stipulated the maximum number of partners in an enterprise to be 50, under Rule 10 of the Companies (Miscellaneous) Rules, 2014. Hence, a partnership enterprise cannot have more than 50 people (partners)
- Agreement: It is the outcome of an accord between 2 or more people to regulate business and share its gains and losses. The agreement (accord) becomes the basis of the association between the partners. Such an agreement is in the written form. An oral agreement is even handedly legitimate. In order to avoid controversies, it is always good if the partners have a copy of the written agreement.
- Sharing of Profit: Another significant component of the partnership is, the accord between partners has to share gains and losses of a trading concern. However, the definition held in the Partnership Act elucidates – partnership as an association between people who have consented to share the gains of a business, the sharing of loss is implicit. Hence, sharing of gains and losses is vital.
CHARACTERISTICS OF A PARTNERSHIP
1] Formation/Contract
A partnership firm is not a separate legal entity. But consistent with the act, a firm must be fashioned via a legal agreement between all the partners. So a contract must be entered into to make a partnership firm.
Its commercial activity must be lawful, and therefore the motive has got to be one among profit. So two people forming an alliance to hold out charity and/or welfare work won't constitute a partnership. Similarly, a partnership contract to scoop illegal work, like smuggling, is void also.
2] Unlimited Liability
In a unique feature, all partners have unlimited liability within the business. The partners are all individually and jointly responsible for the firm and therefore the payment of all debts. This suggests that even personal assets of a partner are often liquidated to satisfy the debts of the firm.
If the cash is recovered from one partner, he can, in turn, sue the opposite partners for his or her share of the debt as per the contract of the partnership.
3] Continuity
A partnership cannot perform in perpetuity. The death or retirement or bankruptcy or insolvency or insanity of a partner will dissolve the partnership. The remaining partners may continue the partnership if they so choose, but a replacement contract must be involved. Also, the partnership of a father can't be inherited by his son. If all the opposite partners agree, he is often added on as a replacement partner.
4] Number of Members
As we all know that there should be a minimum of two individuals for a partnership. However, the utmost number will vary consistent with a couple of conditions. The Partnership Act itself is silent on this issue, but the businesses Act, 2013 provides clarity.
For a banking business, the amount of partners must not exceed ten. For a business of the other nature, the utmost number is twenty. If the amount of partners increases it'll become an illegal entity or association.
5] Mutual Agency
In a partnership, the business must be administered by all the partners together. Or alternatively, it are often administered by any of the partners (one or several) acting for all of them or on behalf of all of them. So this suggests every partner is an agent as properly because the principal of the partnership.
He represents the opposite partners in some cases so he's their agent. But in several circumstances, he's bound by the actions of any of the opposite partners asking him the principal also.
Key Takeaways:
- A partnership can be defined as “the relation between two or more persons who have agreed to share the profits from a business carried on by either all of them or any of them on behalf of/acting for all”.
- People who have entered into a partnership with one another are independently termed as ‘partners’ and comprehensively termed as ‘firm’.
Registration of Partnership Firm, Section 58, 59 of the Partnership Act provides Application for registration and Registration respectively. Section 96 of the said Act speaks about Effects of Non-Registration of Partnership Firm.
1) Application for registration -
According to section 58 of the Indian Partnership Act 1932 (1) Subject to the provisions of sub-section of sub-section (1A), the registration of a firm effected by sending by post or delivering to the Registrar of the area in which any place of business of the firm is situated or proposed to be situated, a statement in the prescribed form and accompanied by the prescribed fee and a true copy of the deed of partnership stating:
(a) the firm-name,
(aa) the nature of business of the firm;
(b) the place or principal place of business of the firm,
(c) the names of any other places where the firm carries on business,
(d) the date when each partner joined the firm,
(e) the names in full and permanent addresses of the partners, and
(f) the duration of the firm.
The statement shall be signed by all the partners, or by their agents specially authorized in this behalf.
(1A) The statement under sub-section (1) shall be sent or delivered to the Registrar within a period of one year from the date of constitution of the firm :
Provided that in the case of any firm carrying on business on or before the date of commencement of the Indian Partnership (Maharashtra Amendment) Act, 1984, such statement shall be sent or delivered to the Registrar within a period of one year firm such date.
(2) Each person signing the statement shall also verify it in the manner prescribed.
(3) A firm shall not have any of the names or emblems specified in the Schedule to the Emblems and Names (Prevention of Improper Use) Act, 1950, or any colorable imitation thereof, unless permitted so to do under that Act, or any name which is likely to be associated by the public with the name of any other firm on account of similarity, or any name which, in the opinion of the Registrar, for reasons to be recorded in writing, is undesirable:
Provided that nothing in this sub-section shall apply to any firm registered under any such name before the date of the commencement of the Indian Partnership (Maharashtra Amendment) Act, 1984.
(4) Any person aggrieved by an order of the Registrar under sub-section (3), may, within 30 days from the date of communication of such order, appeal to the officer not below the rank of Deputy Secretary to Government authorised by the State Government in this behalf, in such manner, and on payment of such fee, as may be prescribed. On receipt of any such appeal, the authorised officer shall, after giving an opportunity of being heard to the appellant, decide the appeal, and his decision shall be final.
2) Registration -
According to Section 59 of the said Act (1) When the Registrar is satisfied that the provisions of section 58 have been duly complied with, he shall record an entry of the statement in a register called the Register of Firms, and shall file the statement. On the date such entry is recorded and such a statement is filed, the firm shall be deemed to be registered.
(2) The firm, which is registered, shall use the brackets and word (Registered) immediately after its name.
3) Late registration on payment of a penalty -
As per Section 59A-I of the Partnership Act 1932 If the statement in respect of any firm is not sent or delivered to the Registrar within the time specified in sub-section (1A) of section 58, then the firm may be registered on payment, to the Registrar, of a penalty of one hundred rupees per year of delay or a part thereof.
4) Effect of Non-Registration -
According to Section 69 of the said Act (1) No suit to enforce a right arising from a contract or conferred by this Act shall be instituted in any Court by or on a behalf of any persons suing as a partner in a firm against the firm or any person alleged to be or to have been a partner in the firm unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm:
Provided that the requirement of registration of firm under this subsection shall not apply to the suits or proceedings instituted by the heirs or legal representatives of the deceased partner of a firm for accounts of the firm or to realize the property of the firm.
(2) No suit to enforce a right arising from a contract shall be instituted in any court by or on behalf of a firm against any third party unless the firm is registered and the persons suing are or have been shown in the Register of Firms as partners in the firm.
(2A) No suit to enforce any right for the dissolution of a firm or for accounts of a dissolved firm or any right or power to realize the property of a dissolved firm shall be instituted in any Court by or on behalf of any person suing as a partner in a firm against the firm or any person alleged to be or have been a partner in the firm unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm :
Provided that the requirement of registration of a firm under this subsection shall not apply to the suits or proceedings instituted by the heirs or legal representatives of the deceased partner of a firm for accounts of a dissolved firm or to realize the property of a dissolved firm.
(3) The provisions of sub-sections (1), (2) and (2A) shall apply also to a claim of set-off or other proceedings to enforce a right arising from a contract but shall not affect
(a) the firms constituted for a duration up to six months or with a capital up to two thousand rupees; or;
(b) the powers of an official assigned, receiver or Court under the Presidency Towns Insolvency Act, 1909, or the Provincial Insolvency Act, 1920, to realize the property of an insolvent partner.
Key takeaways:
- Registration of a partnership firm is not compulsory.
- But if a firm is registered, s firm get entitled to certain benefits.
- If a firm is not registered, the firm will not be able to proceed with legal proceedings in case of default.
Active Partner: Because the name suggests he takes active participation within the business of the firm. He contributes to the capital, features a share within the income and also participates within the daily activities of the firm. His liability within the company is going to be unlimited. And he often will act as an agent for the opposite partners.
Dormant Partner: Also referred to as a silent partner, he won't participate within the daily functioning of the business. But he will still need to make his share of contribution to the capital. In return, he will have a share within the profits. His liability will additionally be unlimited.
Secret Partner: Here the partner’s association with the firm isn't general knowledge. He won't signify the firm to outside agents or parties. Aside from this his participation with reference to capital, profits, management and liability are going to be an equivalent as all the opposite partners.
Nominal Partner: This partner is solely a partner in name only. He allows the firm to use the name of his firm, and therefore the connected goodwill. But he in no way contributes to the capital and hence has no share within the profits. He doesn't involve himself within the firm’s business. But his liability too is going to be unlimited.
Partner by Estoppel: If an individual makes it bent be, through their conduct or behaviour that they're partners during a firm and he doesn't correct them, then he becomes a partner by estoppel. However, this partner too will have unlimited liability.
TYPES OF PARTNERSHIPS
Various sorts of partnerships exist, including limited partnership, indebtedness partnership, joint liability, indebtedness, and joint ventures. The foremost important thing to know is that partnerships are agreements between two or more parties to realize a specific business goal. General partnerships are:
Equal agreements
Various responsibilities are often delegated among members
Partnerships force all parties to share sure risks and rewards during business endeavours.
For instance, a partner can handle the investment angle by pouring capital within the business, while another can act during a management capacity. Additionally, one partner can bind group partners into one legal obligation. Under partnerships, each party takes responsibility for individual obligations or debts.
- Limited Partnerships (LPs)
A limited partnership allows each partner to avoid personal liability to the quantity of his or her business investment. Such an appointment requires one individual to require the role of general status, opening his or herself up to potential personal liabilities, while the limited partner takes less of a risk. However, the accepted partner retains control of the business, and therefore the limited partner is usually not involved in management operations.
- Limited Liability Partnerships (LLP)
LLPs accompany tax advantages within the same manner as general partnerships combined with liability protections. For instance, individuals aren't liable for any debts or liabilities arising from the business. LLPs are usually found among law or accounting partnerships. Where taxation cares, the IRS recognizes such businesses as partnerships and approves members to file taxes individually on personal returns. GPs, LLPs, and LPs are taxed within the same manner, however partnerships don't pay taxes.
LLPs permit members to figure together while retaining a measure of independence when it involves liability. With that, not all parties are held equally responsible, and other members aren't held responsible for the actions of others. Before engaging in any sort of partnership, know the terms before agreeing or signing any document.
- Limited Liability Protection
If you're concerned about indebtedness protection, remember that general partnerships don't afford you any protective measures. During a general capacity, partners are often held liable for movements or decisions of other partners. General partnerships pose the very best risk to general partners, but they're the simplest to make LLCs became a well-liked alternative to general partnerships. LLCs are ideal for those that wish to take a position during a business, but don't want face exposure to any legal ramifications.
- Joint Ventures as Partnerships
According to the tiny Business Administration, a venture is another sort of partnership. Joint ventures occur when a variety of entities converge in pursuit of a group goal. For instance, businesses may forge a partnership to construct a building.
Qualified joint ventures are a special partnership that permits spouses to co-own a business but to file separate returns to avoid partnership returns.
- Joint Liabilities
A joint liability partnership holds all partners equally responsible for any financial and legal issues. Joint liability partnerships bind all parties into equal liability. Moreover, each party are often held responsible in pending lawsuits or other legal consequences. Joint liabilities are different than several liability principles within the respect that partnerships are persisted equal footing in the least times.
Several liability, on the opposite hand, is that the agreement to settle any legal disputes and is predicated on a partner’s standing or contribution to a partnership.
- Limited Liability Company
A Limited Liability company (LLC) offers each the foremost benefits and therefore the most protection for a business owner.
A Limited liability company allows members to forge one entity while taking benefits of liability protection. LLCs provide equivalent tax havens as partnerships, but with the brought liability benefits of an organization. Corporate law dictates that corporations are held responsible for start-up investments only. For instance , a $10 million business doesn't give others the proper to sue you for over $2 million if you started that business for less than $2 million.
The LLC provides for an equivalent tax protection as a partnership, but also gives the liability protection of an organization. Under corporate law, an organization is merely responsible for the entire start-up investment within the company. Also, certain states allow members to make what's recognized as knowledgeable LLC, which provides certain professionals like doctors or lawyers more limitations than regular businesses.
Key takeaways:
- There are different types of partner like active partner, dormant partner, sleeping partner, partner by estoppel, etc.
- Partnerships can be limited liability, general partnership, fixed partnership.
RIGHTS OF PARTNERS:
Broadly, the provisions of the Act regarding rights, responsibilities and powers of partners are as under:
(a) Every partner features a right to require part within the habits and management of business.
(b) Every partner features a right to be consulted and heard altogether matters affecting the business of the partnership.
(c) Every partner features a right of free access to all or any records, books and accounts of the business, and additionally to look at and replica them.
(d) Every partner is entitled to share the profits equally.
(e) A partner who has contributed quite the agreed share of capital is entitled to interest at the speed of 6 per cent once a year. But no interest is often claimed on capital.
(f) An associate is entitled to be indemnified by the firm for all acts done by him within the direction of the partnership business, for all payments made by him in respect of partnership debts or liabilities and for expenses and disbursements made in an emergency for shielding the firm from loss provided he acted as an individual of normal prudence would have acted in similar circumstances for his own personal matters.
(g) Every partner is, as a rule, joint owner of the partnership property. He's entitled to possess the partnership property used exclusively for the needs of the partnership.
(h) A partner has power to act in an emergency for shielding the firm from loss, but he must act reasonably.
(i) Every partner is entitled to stop the introduction of a replacement partner into the firm without his consent.
(J) Every partner features a right to retire consistent with the Deed or with the consent of the opposite partners. If the partnership is at will, he can retire by giving note to other partners.
(k) Every partner features a right to continue within the partnership.
(l) A retiring partner or the heirs of a deceased partner are entitled to possess a share within the profits earned with the help of the proportion of assets belonging to such outgoing partner or interest at six per cent once a year at the choice of the outgoing partner (or his representative) until the accounts are finally settled.
DUTIES OF PARTNERS:
(a) Every partner is sure to diligently raise on the business of the firm to the best common advantage. Unless the agreement provides, there's no salary.
(b) Every partner must be just and faithful to the opposite partners.
(c) A partner is sure to keep and render true, proper, and proper accounts of the partnership and must permit other partners to see out and replica such accounts.
(d) Every partner is sure to indemnify the firm for any loss prompted by his delinquency or fraud within the conduct of the business.
(e) A partner needs to not keep it up competing business, nor use the property of the firm for his private purposes. In each case, he must fork over to the firm any profit or gain made by him but he must himself suffer any loss which may have occurred.
(f) Every partner is sure to share the losses equally with the others.
(g) A partner is sure to act within the scope of his authority.
(h) No partner can assign or transfer his partnership interest to the other person so on make him a partner within the business.
Key takeaways:
- There are various rights and duties of partners which the partners are suppose to abide by and take advantage of.
Implied authority refers to an agent with the jurisdiction to perform acts that are reasonably necessary to accomplish the purpose of an organization. Under contract law, implied authority figures have the ability to make a legally binding contract on behalf of another person or company.
- Subject to the provisions of section 22, the act of a partner which is done to carry on, in the usual way, business of the kind carried on by the firm, binds the firm. The authority of a partner to bind the firm conferred by this section is called his implied authority.
- In the absence of any usage or custom of trade to the contrary, the implied authority of a partner does not empower him to-
- Submit a dispute relating to the business of the firm to arbitration,
- Open a banking account on behalf of the firm in his own name,
- Compromise or relinquish any claim or portion of a claim by the firm,
- Withdraw a suit or proceeding filed on behalf of the firm,
- Admit any liability in a suit or proceeding against the firm,
- Acquire immovable property on behalf of the firm,
- Transfer immovable property belonging to the firm, or
- Enter into partnership on behalf of the firm.
Key takeaways:
1. Implied authority refers to an agent with the jurisdiction to perform acts that are reasonably necessary to accomplish the purpose of an organization.
DISSOLUTION
When the partnership between all the partners of a firm is dissolved, then it's called dissolution of a firm. It's important to word that the connection between all partners should be dissolved for the firm to be dissolved. Allow us to check out the legal provisions for the dissolution of a firm.
The dissolution of a firm means discontinuance of its activities. When the working of a firm is stopped and therefore the assets are realized to pay a variety of liabilities it amounts to dissolution of the firm. The dissolution of a firm shouldn't be confused with the dissolution of partnership. When a partner agrees to continue the firm underneath an equivalent name, even after the retirement or death of a partner, it amounts to dissolution of partnership and not of firm.
The remaining partners may purchase the share of the outgoing or deceased partner and proceed the business under an equivalent name; it involves solely the dissolution of partnership. The dissolution of firm includes the dissolution of partnership too. The partners have a contractual relationship among themselves. When this relationship is terminated it's an end of the firm.
A firm could also be dissolved under the subsequent circumstances:
(a) Dissolution by Agreement (Section 40):
A partnership firm is often dissolved by an agreement among all the partners. Section 40 of Indian Partnership Act, 1932 approves the dissolution of a partnership firm if all the partners agree to dissolve it. Partnership concern is created by settlement and similarly it are often dissolved by agreement this sort of dissolution is understood as voluntary dissolution.
(b) Dissolution by way of Notice (Section 43):
If a partnership is at will, it are often dissolved by any partner giving a notice to other partners. The notice for dissolution must be in writing. The dissolution are going to be effective from the date of the notice, just in case no date is mentioned within the notice, then it'll be dissolved from the date of receipt of notice. A notice as soon as given can't be withdrawn without the consent of all the partners.
(c) Compulsory Dissolution (Section 41):
A firm could also be compulsorily dissolved beneath the subsequent situations:
(i) Insolvency of Partners:
When all the partners of a firm are declared insolvent or about one partner are insolvent, then the firm is compulsorily dissolved.
(ii) Illegal Business:
The activities of the firm may find yourself illegal under the changed circumstances. If government enforces prohibition policy, then all the firms dealing in liquor will need to close their business because it'll be an unlawful undertaking under the new law. Similarly, a firm could also be trading with the businessmen of the other country. The trading are going to be lawful under present conditions.
After a while a war erupts between the 2 countries, it'll become a trading with an alien enemy and further trading with an equivalent events are going to be illegal. Under new circumstances the firm will need to be dissolved. Just in case a firm carries on quite one sort of business, then illegality of 1 work won't amount to dissolution of the firm. The firm can continue with the activities which are lawful.
(d) Contingent Dissolution (Section 42):
In case there's no agreement among partners associated with certain contingencies, partnership firm are going to be dissolved on the happening of any of the situations:
(i) Death of a Partner:
A partnership firm is dissolved on the demise of any of the partner.
(ii) Expiry of the Term:
A partnership firm could also be for a hard and fast period. On the expiry of that period, the firm is going to be dissolved.
(iii) Completion of Work:
A partnership concern could also be formed to hold out a specified work. On the completion of that employment the corporate are going to be automatically dissolved. If a firm is made to construct a road, then the second the road is completed the firm are going to be dissolved.
(iv) Resignation by Partner:
If a partner doesn't want to continue within the firm, his resignation from the priority will dissolve the partnership.
(e) Dissolution via Court (Section 44):
A partner can apply to the court for dissolution of the firm on any of those grounds:
(i) Insanity of a Partner:
If a partner goes insane, the partnership firm are often dissolved on the petition of various partners. The firm isn't automatically dissolved on the insanity of a partner. The court will act only on the petition of a partner who himself isn't insane.
(ii) Misconduct by the Partner:
When a partner is guilty of misconduct, the opposite partners can move the court for dissolution of the firm. The misconduct of a partner brings bad name to the firm and it adversely affects the reputation of the priority. The misconduct is often in business or otherwise. If a partner is jailed for committing a theft, it'll also affect the great name of the firm though it's nothing to try to with the business.
(iii) Incapacity of a Partner:
If a partner aside from the suing partner becomes incapable of performing his duties, then partnership is often dissolved.
(iv) Breach of Agreement:
When a partner wilfully commits breach of agreement concerning business, it'll become a ground for getting the firm dissolved. Under such a situation it becomes hard to hold on the business smoothly.
(v) Transfer of Share:
If a partner sells his share to a 3rd party or transfers his share to a different person permanently, other partners can pass the court for dissolving the firm.
(vi) Regular Losses:
When the firm can't be carried on profitably, then the firm are often dissolved. Though there can also be losses in every sort of business but if the firm is incurring losses continuously and it's impossible to run it profitably, then the court can order the dissolution of the firm.
(vii) Disputes amongst Partners:
Partnership firm is predicated on mutual faith. If partners don't have faith one another, then it'll not be possible to run the business. When the partners quarrel with every other, then the very basis of partnership is lost and it'll be better to dissolve it.
Following are the ways during which dissolution of a partnership firm takes place:
1. Dissolution by Agreement
A firm could also be dissolved if all the partners comply with the dissolution. Also, if there exists a contract between the partners regarding the dissolution, the dissolution may happen in accordance with it.
2. Compulsory Dissolution
In the following cases the dissolution of a corporation takes place compulsorily:
• Insolvency of all the partners or about one partner as this makes them incompetent to enter into a contract.
• When the business of the firm becomes illegal thanks to some reason.
• When thanks to some event it turns into unlawful for the partnership firm to hold its business. For instance, a partnership firm features a companion who is of another country and India declares war against that country, then he becomes an enemy. Thus, the business becomes unlawful.
3. When certain contingencies happen
The dissolution of the association takes place subject to a contract among the partners, if:
• The firm is made for a hard and fast term, on the expiry of that term.
• The firm is made to hold out specific venture, on the completion of that venture.
• A partner dies.
• A partner becomes insolvent.
4. Dissolution by Notice
When the partnership is at will, the dissolution of a firm may happen if anybody of the partners gives a word in writing to the opposite partners stating his intention to dissolve the firm.
5. Dissolution by Court
When a partner files a suit within the court, the court may order the dissolution of the corporate on the idea of the subsequent grounds:
• In the case where a partner becomes insane
• In the case the place a partner becomes permanently incapable of performing his duties.
• When a partner will become guilty of misconduct and it affects the firm’s business adversely.
• When a partner continually commits a breach of the partnership agreement.
• In a case where a partner transfers the entire of his interest within the partnership company to a 3rd party.
• In a case where the business can't be carried on barring at a loss
• When the court regards the dissolution of the firm to be just and equitable on any ground.
Key takeaways:
- The dissolution of a firm means discontinuance of its activities. When the working of a firm is stopped and therefore the assets are realized to pay a variety of liabilities it amounts to dissolution of the firm.
- Dissolution can be compulsory dissolution by law, dissolution by partners at will, dissolution by notice, dissolution by court.
References-
- Business Law 1 Essentials by Mirande Valbrun.
- The Legal and Regulatory Environment of Business by O. Lee Reed.
Unit 5
CONSUMER PROTECTION ACT
Introduction to Consumer Protection
A consumer is the one who assumes to be treated like a King as they bring business to the seller. Previously “consumer was requested to beware” but these days fingers have been pointed to seller “let seller be beware” as due to policies introduced, authorities’ laws, consumer protection, NGO and the increased competition in the market.
Consumer Protection is a term given to a exercise wherein we need to protect the consumer from the unfair practice, teaching them about their rights and responsibilities and also redressing their grievances.
In today’s world, the protection of the consumer is regarded to be of utmost importance. All around the world, mechanisms have been pondered upon in order to uphold the satisfaction of the consumer.
The main objectives of the Consumer Protection Act are:
(a) Providing better and all-round protection to consumer.
(b) Providing machinery for the speedy redressal of the grievances.
(c) Creating framework for customers to seek redressal.
(d) Providing rights to consumers.
(e) Safeguarding rights of Consumers.
(f) To ensure fair, competitive and responsible markets that work well for consumers and promote ethical business practices.
(g) To promote and protect economic interest of consumers.
(h)To improve access to information that consumers require, to make knowledgeable choices according to their individual needs.
(h) To protect buyer from hazards.
The enactment of Consumer Protection Act succeeded in bringing pressure on business firms as well as government to correct business conduct which may additionally be unfair and against the interests of consumers at large. The enactment of COPRA has led to the setting up of separate departments of Consumer Affairs in central and state governments to spread information about legal process which people can use. This information is spread through posters and advertisements on tv channels.
The Consumers were the worst affected out of a trade cycle procedure as they could be effortlessly duped by the sellers or producers of products. Before the enactment of this act the consumers were easy targets as victims of the producers in the following ways-
1.Non-awareness regarding the market price of a particular product: A consumer who's no longer used to the duping techniques of sellers could be easily fooled by means of some clever sellers making easy money through demanding higher price for the same exact being sold at a much cheaper rate somewhere else. The price of a commodity in a perfectly competitive market is bound to be the same everywhere, sellers demanding higher fees will lose customers. But people who are not aware of the prevailing market price of the commodity they want to buy might be fooled.
2.Quality of the product- The quality of the good is a very important fact affecting the price of the commodity. If the quality is not equivalent to the price asked for the good, then the buyer's interests will be toyed with towards which the government should be considerate towards.
3.Adulteration of goods: To protect the consumer's rights from being hampered severely stringent steps must be taken in order to protect the goods from being tampered with through adulteration. Adulteration might have an effect on health due to the harmful substances mixed to get the desired apparent appearance.
4.Forum for the redressal of the grievances of the consumers: The act also helped in establishing a permanent forum where the aggrieved consumers could lodge cases against sellers and goods sold.
Who is a Consumer? [Sec 2(1)(d)]
A "consumer" means any person who
1. Buys any goods for a consideration. Any user of such goods when 1 such use is made with the approval of a person who buys goods for consideration.
2. Hires or avails of any services for a consideration. Any beneficiary of such services when such services are availed of with the approval of the person who hires or avails of any services for a consideration.
3. But does not include a person who avails of such services for any commercial purpose. (Commercial purpose does not include purchase of goods or hiring of services for earning livelihood by means of self. Employment.)
Consideration has been paid or promised or partly paid and partly promised, or under any system of deferred payment. There has to be a sale transaction for consideration.
Who is not a Consumer?
A person is not a consumer if he -
1. Buys any goods without a consideration. Any user of such goods when such use is made without the approval of person who buys goods for consideration.
2. Hires or avails of any services without a consideration. Any beneficiary of such services for consideration when such services are availed of, without the approval of the person who hires such services for consideration.
3. Obtains the goods for resale or commercial purpose.
4. Obtains the service under a contract of personal service.
Who is a Person? [Sec. 2(1)(m)]
- A person includes -
- A firm whether registered or not
- A Hindu undivided family
- A Co-operative society
Every other association of persons whether registered under the Societies Registration Act, 1860 or not,
The definition of a "person" is inclusive. It includes both individual and legal person. Any company or association or body of individuals whether registered or not, means a "person".
What are Goods? [Sec. 2(1)(i)]
"Goods" means goods as defined in the Sale of Goods Act, 1930. The meaning of the word "goods" under the Consumer Protection Act is the same as defined under the Sale of Goods Act, 1930. Goods mean every kind of movable property other than actionable claims and money. It includes stock and shares, growing crops, grass and things attached to or forming part of the land, which are agreed to be severed before sale or under the contract of sale.
What is Service? [Sec. 2(1)(o)]
"Service" means service of any description which is made available to potential users and includes, but not limited to, the provisions of facilities In connection with banking, financing insurance, transport, processing supply of electricity or other energy, boarding or lodging or both, housing construction, entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service.
"Consumer dispute" means a dispute with the person against whom a complaint has been made, denies or disputes the allegation contained in the complaint.
In order to get a remedy on the Consumer Protection Act a person by himself has no locus standi under the Consumer Protection Act. A person has to be a consumer as per the definition of consumer given under the Act. There has to be a dispute between the consumer and the trader, many tax or service provider against whom he has a complaint and he seeks his relief provided under the Consumer Protection Act.
According to Section
2 (1) (b) complainant means-
- a consumer; or
- Any voluntary consumer association registered under the Companies Act or under any other law for the time being in force; or
- The Central Government or any State Government, who or which makes a complaint
- One or more consumers, where there are numerous consumers having the same interest.
Section 2(1)(r) "unfair trade practice" means a trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the provision of any service, adopts any unfair method or unfair or deceptive practice including any of the following practices, namely, -
(1) The practice of making any statement, whether orally or in writing or by visible representation which, -
(i) Falsely represents that the goods are of a particular standard, quality, quantity, grade, composition, style or model;
(ii) Falsely represents that the services are of a particular standard, quality or grade;
(iii) Falsely represents any re-built, second-hand, renovated, reconditioned or old goods as new goods;
(iv) Represents that the goods or services have sponsorship, approval, performance, characteristics, accessories, uses or benefits which such goods or services do not have;
(v) Represents that the seller or the supplier has a sponsorship or approval or affiliation which such seller or supplier does not have;
(vi) Makes a false or misleading representation concerning the need for, or the usefulness of, any goods or services;
(vii) Gives to the public any warranty or guarantee of the performance, efficacy or length of life of a product or of any goods that is not based on an adequate or proper test thereof: PROVIDED that where a defence is raised to the effect that such warranty or guarantee is based on adequate or proper test, the burden of proof of such defence shall lie on the person raising such defence;
(viii) Makes to the public a representation in a form that purports to be-
(i) a warranty or guarantee of a product or of any goods or services; or
(ii) a promise to replace, maintain or repair an article or any part thereof or to repeat or continue a service until it has achieved a specified result, if such purported warranty or guarantee or promise is materially misleading or if there is no reasonable prospect that such warranty, guarantee or promise will be carried out;
(ix) Materially misleads the public concerning the price at which a product or like products or goods or services, have been or are, ordinarily sold or provided, and, for this purpose, a representation as to price shall be deemed to refer to the price at which the product or goods or services has or have been sold by sellers or provided by suppliers generally in the relevant market unless it is clearly the price at which the product has been sold or services have been provided by the person by whom or on whose behalf the representation is made;
(x) Gives false or misleading facts disparaging the goods, services or trade of another person.
The Central Consumer Protection Council
(1) The Central Government may, by notification, establish with effect from such date as it may specify in such notification, a council to be known as the Central Consumer Protection Council (hereinafter referred to as the Central Council). (2) The Central Council shall consist of the following members, namely, -
(a) the Minister in charge of 1[consumer affairs] in the Central Government, who shall be its Chairman, and
(b) such number of other official or non-official members representing such interests as may be prescribed.
1) Procedure for meetings of the Central Council
(1) The Central Council shall meet as and when necessary, but 1[at least one meeting] of the council shall be held every year.
(2) The Central Council shall meet at such time and place as the Chairman may think fit and shall observe such procedure in regard to the transaction of its business as may be prescribed.
2) Objects of the Central Council The objects of the Central Council shall be to promote and protect the rights of the consumers such as-
(a) The right to be protected against the marketing of goods 2[and services] which are hazardous to life and property;
(b) The right to be informed about the quality, quantity, potency, purity, standard and price of goods 1[or services, as the case may be], so as to protect the consumer against unfair trade practices;
(c) The right to be assured, wherever possible, access to a variety of goods and services at competitive prices;
(d) The right to be heard and to be assured that consumers' interests will receive due consideration at appropriate forums;
(e) The right to seek redressal against unfair trade practices 1[or restrictive trade practices] or unscrupulous exploitation of consumers; and
(f) The right to consumer education.
The State Consumer Protection Councils
(1) The State Government may, by notification, establish with effect from such date as it may specify in such notification, a council to be known as the Consumer Protection Council (hereinafter referred to as the State Council).
(2) The State Council shall consist of the following members, namely, -
(a) the Minister in-charge of consumer affairs in the State Government who shall be its Chairman;
(b) such number of other official or non-official members representing such interests as may be prescribed by the State Government.
(3) The State Council shall meet as and when necessary but not less than two meetings shall be held every year.
(4) The State Council shall meet at such time and place as the Chairman may think fit and shall observe such procedure in regard to the transaction of its business as may be prescribed by the State Government.
- Objects of the State Council
The objects of every State Council shall be to promote and protect within the State the rights of the consumers laid down in clauses (a) to (f) of section 6.
The District Protection Council (Sec. 8A)
The State Government shall establish for every district a district consumer protection council. It shall consist of the following members namely:
(a) The collector of the district, who shall be its chairman, and
(b) Search number of other official and non-official members representing such interest as may be prescribed by the State Government.
The District Council shall meet as and when necessary but not less than two meetings shall be held every year. The District Council shall meet at such time and place within the district as the chairman may think fit and shall observe search procedure in regard to the transaction of its business as may be prescribed by the State Government.
Three Tier Consumer Grievances Machinery under the Consumer Protection Act!
1. District Forum:
District forum consists of a president and two other members. The president can be a retired or working judge of District Court. They are appointed by using state government. The complaints for goods or services worth Rs 20 lakhs or less can be filed in this agency. The agency sends the goods for testing in laboratory if required and gives decisions on the basis of facts and laboratory report. If the aggrieved party is not cosy by the jurisdiction of the district forum then they can file an appeal against the judgment in State Commission inside 30 days by depositing Rs 25000 or 50% of the penalty amount whichever is less.
2. State Commission:
It consists of a president and two other members. The president must be a retired or working decide of high court. They all are appointed by state government. The complaints for the goods really worth more than Rs 20 lakhs and less than Rs 1 crore can be filed in State Commission on receiving complaint the State commission contacts the party against whom the complaint is filed and sends the goods for testing in laboratory if required. In case the aggrieved party is not satisfied with the judgment then they can file an appeal in National Commission within 30 days by depositing Rs 3500 or 50% of penalty amount whichever is less.
3. National Commission:
The national commission consists of a president and four members one of whom shall be a woman. They are appointed by Central Government. The complaint can be filed in National Commission if the value of goods exceeds Rs 1 crore.
If aggrieved party is not satisfied with the judgment then they can file a grievance in Supreme Court within 30 days.
Basis | District Commission | State Commission | National Commission |
Composition | It consists of a president and two other members. | It consists of a president and two other members. | It consists of a president and four other members. |
Who can be a President | A working or retired judge of District Court. | A working or retired judge of High Court. | A working or retired judge of Supreme Court. |
Appointment of President | The president is appointed by the state government on the recommendation of the selection committee. | The president is appointed by the state government after consultation with the chief justice of the High Court. | The president is appointed by the central government after consultation with the chief justice of India, |
Jurisdiction | In 1986, it had jurisdiction to entertain complaints where the value of goods or services does not exceed Rs 5, 00,000 but now the limit is raised to 20 lakhs. | In 1986, it had jurisdiction to entertain complaints when the value of goods or services exceeds Rs 5,00,000 and does not exceed Rs 20,00,000 but now it is raised to more than Rs 20,00,000 and up to Rs1 crore. | In 1986, it had jurisdiction to entertain complaints where the value of goods or services exceeds Rs 20 lakhs but now the limit is raised and it entertains the complaints of goods or services where the value exceeds Rs 1 crore. |
Appeal against orders | Any person who is aggrieved by the order of District Forum can appeal against such order to State Commission within 30 days and by depositing Rs 25000 or 50% of the penalty amount whichever is less. | Any person who is aggrieved by the order of State Commission can appeal against such order to National Commission within 30 days and by depositing Rs 35000 or 50% of penalty amount whichever is less. | Any person who is aggrieved by the order of the National Commission can appeal against such order to Supreme Court within 30 days and by depositing 50% of penalty amount but only cases where value of goods or services exceeds Rs 1 crore can file appeal in Supreme Court. |
When we discuss about the forms a business organization can take, one of the most prominent ones is a partnership. In India mainly it's a really popular entity to hold out business allow us to take a glance at some important elements of a partnership and also some sorts of partners.
CONCEPT PARTNERSHIP
In India, we've a particular law that covers all factors and functioning of a partnership, The Indian Partnership Act 1932. The act also defines a partnership as “the relation between two or more persons who have agreed to share the profits from a business carried on by either all of them or any of them on behalf of/acting for all”
So, in such a case two or more (maximum numbers will differ consistent with the business being carried) persons close as a unit to realize some common objective. And therefore, the profits earned in pursuit of this objective are going to be shared amongst themselves.
The entity is collectively called a “Partnership Firm” and every one the person members are the “Partners”. So, allow us to check out some important features.
NATURE OF PARTNERSHIP ACT,1932
When two or more people join hands to set up an enterprise and share its gains and losses, they are said to be in partnership. Section 4 of the Indian Partnership Act 1932 states partnership as the ‘association between people who have consented to share the profits of an enterprise carried on by all or any of them acting for all’.
People who have entered into a partnership with one another are independently termed as ‘partners’ and comprehensively termed as ‘firm’. The name under which the trade is carried is called the ‘name of the firm’. A partnership enterprise has no distinct legal entity, apart from the partners comprising it. Hence, the vital features of the partnership are:
- Two or More Persons: In order to manifest a partnership, there should be at least two persons possessing a common goal. To put it in other words, the minimal number of partners in an enterprise can be 2. However, there is a constraint on their maximum number of people. By the uprightness of Section 464 of the Companies Act 2013, the Central Government is authorised to stipulate a maximum number of partners in an enterprise; however, the number of partners cannot exceed 100. The Central government has stipulated the maximum number of partners in an enterprise to be 50, under Rule 10 of the Companies (Miscellaneous) Rules, 2014. Hence, a partnership enterprise cannot have more than 50 people (partners)
- Agreement: It is the outcome of an accord between 2 or more people to regulate business and share its gains and losses. The agreement (accord) becomes the basis of the association between the partners. Such an agreement is in the written form. An oral agreement is even handedly legitimate. In order to avoid controversies, it is always good if the partners have a copy of the written agreement.
- Sharing of Profit: Another significant component of the partnership is, the accord between partners has to share gains and losses of a trading concern. However, the definition held in the Partnership Act elucidates – partnership as an association between people who have consented to share the gains of a business, the sharing of loss is implicit. Hence, sharing of gains and losses is vital.
CHARACTERISTICS OF A PARTNERSHIP
1] Formation/Contract
A partnership firm is not a separate legal entity. But consistent with the act, a firm must be fashioned via a legal agreement between all the partners. So a contract must be entered into to make a partnership firm.
Its commercial activity must be lawful, and therefore the motive has got to be one among profit. So two people forming an alliance to hold out charity and/or welfare work won't constitute a partnership. Similarly, a partnership contract to scoop illegal work, like smuggling, is void also.
2] Unlimited Liability
In a unique feature, all partners have unlimited liability within the business. The partners are all individually and jointly responsible for the firm and therefore the payment of all debts. This suggests that even personal assets of a partner are often liquidated to satisfy the debts of the firm.
If the cash is recovered from one partner, he can, in turn, sue the opposite partners for his or her share of the debt as per the contract of the partnership.
3] Continuity
A partnership cannot perform in perpetuity. The death or retirement or bankruptcy or insolvency or insanity of a partner will dissolve the partnership. The remaining partners may continue the partnership if they so choose, but a replacement contract must be involved. Also, the partnership of a father can't be inherited by his son. If all the opposite partners agree, he is often added on as a replacement partner.
4] Number of Members
As we all know that there should be a minimum of two individuals for a partnership. However, the utmost number will vary consistent with a couple of conditions. The Partnership Act itself is silent on this issue, but the businesses Act, 2013 provides clarity.
For a banking business, the amount of partners must not exceed ten. For a business of the other nature, the utmost number is twenty. If the amount of partners increases it'll become an illegal entity or association.
5] Mutual Agency
In a partnership, the business must be administered by all the partners together. Or alternatively, it are often administered by any of the partners (one or several) acting for all of them or on behalf of all of them. So this suggests every partner is an agent as properly because the principal of the partnership.
He represents the opposite partners in some cases so he's their agent. But in several circumstances, he's bound by the actions of any of the opposite partners asking him the principal also.
Key Takeaways:
- A partnership can be defined as “the relation between two or more persons who have agreed to share the profits from a business carried on by either all of them or any of them on behalf of/acting for all”.
- People who have entered into a partnership with one another are independently termed as ‘partners’ and comprehensively termed as ‘firm’.
Registration of Partnership Firm, Section 58, 59 of the Partnership Act provides Application for registration and Registration respectively. Section 96 of the said Act speaks about Effects of Non-Registration of Partnership Firm.
1) Application for registration -
According to section 58 of the Indian Partnership Act 1932 (1) Subject to the provisions of sub-section of sub-section (1A), the registration of a firm effected by sending by post or delivering to the Registrar of the area in which any place of business of the firm is situated or proposed to be situated, a statement in the prescribed form and accompanied by the prescribed fee and a true copy of the deed of partnership stating:
(a) the firm-name,
(aa) the nature of business of the firm;
(b) the place or principal place of business of the firm,
(c) the names of any other places where the firm carries on business,
(d) the date when each partner joined the firm,
(e) the names in full and permanent addresses of the partners, and
(f) the duration of the firm.
The statement shall be signed by all the partners, or by their agents specially authorized in this behalf.
(1A) The statement under sub-section (1) shall be sent or delivered to the Registrar within a period of one year from the date of constitution of the firm :
Provided that in the case of any firm carrying on business on or before the date of commencement of the Indian Partnership (Maharashtra Amendment) Act, 1984, such statement shall be sent or delivered to the Registrar within a period of one year firm such date.
(2) Each person signing the statement shall also verify it in the manner prescribed.
(3) A firm shall not have any of the names or emblems specified in the Schedule to the Emblems and Names (Prevention of Improper Use) Act, 1950, or any colorable imitation thereof, unless permitted so to do under that Act, or any name which is likely to be associated by the public with the name of any other firm on account of similarity, or any name which, in the opinion of the Registrar, for reasons to be recorded in writing, is undesirable:
Provided that nothing in this sub-section shall apply to any firm registered under any such name before the date of the commencement of the Indian Partnership (Maharashtra Amendment) Act, 1984.
(4) Any person aggrieved by an order of the Registrar under sub-section (3), may, within 30 days from the date of communication of such order, appeal to the officer not below the rank of Deputy Secretary to Government authorised by the State Government in this behalf, in such manner, and on payment of such fee, as may be prescribed. On receipt of any such appeal, the authorised officer shall, after giving an opportunity of being heard to the appellant, decide the appeal, and his decision shall be final.
2) Registration -
According to Section 59 of the said Act (1) When the Registrar is satisfied that the provisions of section 58 have been duly complied with, he shall record an entry of the statement in a register called the Register of Firms, and shall file the statement. On the date such entry is recorded and such a statement is filed, the firm shall be deemed to be registered.
(2) The firm, which is registered, shall use the brackets and word (Registered) immediately after its name.
3) Late registration on payment of a penalty -
As per Section 59A-I of the Partnership Act 1932 If the statement in respect of any firm is not sent or delivered to the Registrar within the time specified in sub-section (1A) of section 58, then the firm may be registered on payment, to the Registrar, of a penalty of one hundred rupees per year of delay or a part thereof.
4) Effect of Non-Registration -
According to Section 69 of the said Act (1) No suit to enforce a right arising from a contract or conferred by this Act shall be instituted in any Court by or on a behalf of any persons suing as a partner in a firm against the firm or any person alleged to be or to have been a partner in the firm unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm:
Provided that the requirement of registration of firm under this subsection shall not apply to the suits or proceedings instituted by the heirs or legal representatives of the deceased partner of a firm for accounts of the firm or to realize the property of the firm.
(2) No suit to enforce a right arising from a contract shall be instituted in any court by or on behalf of a firm against any third party unless the firm is registered and the persons suing are or have been shown in the Register of Firms as partners in the firm.
(2A) No suit to enforce any right for the dissolution of a firm or for accounts of a dissolved firm or any right or power to realize the property of a dissolved firm shall be instituted in any Court by or on behalf of any person suing as a partner in a firm against the firm or any person alleged to be or have been a partner in the firm unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm :
Provided that the requirement of registration of a firm under this subsection shall not apply to the suits or proceedings instituted by the heirs or legal representatives of the deceased partner of a firm for accounts of a dissolved firm or to realize the property of a dissolved firm.
(3) The provisions of sub-sections (1), (2) and (2A) shall apply also to a claim of set-off or other proceedings to enforce a right arising from a contract but shall not affect
(a) the firms constituted for a duration up to six months or with a capital up to two thousand rupees; or;
(b) the powers of an official assigned, receiver or Court under the Presidency Towns Insolvency Act, 1909, or the Provincial Insolvency Act, 1920, to realize the property of an insolvent partner.
Key takeaways:
- Registration of a partnership firm is not compulsory.
- But if a firm is registered, s firm get entitled to certain benefits.
- If a firm is not registered, the firm will not be able to proceed with legal proceedings in case of default.
Active Partner: Because the name suggests he takes active participation within the business of the firm. He contributes to the capital, features a share within the income and also participates within the daily activities of the firm. His liability within the company is going to be unlimited. And he often will act as an agent for the opposite partners.
Dormant Partner: Also referred to as a silent partner, he won't participate within the daily functioning of the business. But he will still need to make his share of contribution to the capital. In return, he will have a share within the profits. His liability will additionally be unlimited.
Secret Partner: Here the partner’s association with the firm isn't general knowledge. He won't signify the firm to outside agents or parties. Aside from this his participation with reference to capital, profits, management and liability are going to be an equivalent as all the opposite partners.
Nominal Partner: This partner is solely a partner in name only. He allows the firm to use the name of his firm, and therefore the connected goodwill. But he in no way contributes to the capital and hence has no share within the profits. He doesn't involve himself within the firm’s business. But his liability too is going to be unlimited.
Partner by Estoppel: If an individual makes it bent be, through their conduct or behaviour that they're partners during a firm and he doesn't correct them, then he becomes a partner by estoppel. However, this partner too will have unlimited liability.
TYPES OF PARTNERSHIPS
Various sorts of partnerships exist, including limited partnership, indebtedness partnership, joint liability, indebtedness, and joint ventures. The foremost important thing to know is that partnerships are agreements between two or more parties to realize a specific business goal. General partnerships are:
Equal agreements
Various responsibilities are often delegated among members
Partnerships force all parties to share sure risks and rewards during business endeavours.
For instance, a partner can handle the investment angle by pouring capital within the business, while another can act during a management capacity. Additionally, one partner can bind group partners into one legal obligation. Under partnerships, each party takes responsibility for individual obligations or debts.
- Limited Partnerships (LPs)
A limited partnership allows each partner to avoid personal liability to the quantity of his or her business investment. Such an appointment requires one individual to require the role of general status, opening his or herself up to potential personal liabilities, while the limited partner takes less of a risk. However, the accepted partner retains control of the business, and therefore the limited partner is usually not involved in management operations.
- Limited Liability Partnerships (LLP)
LLPs accompany tax advantages within the same manner as general partnerships combined with liability protections. For instance, individuals aren't liable for any debts or liabilities arising from the business. LLPs are usually found among law or accounting partnerships. Where taxation cares, the IRS recognizes such businesses as partnerships and approves members to file taxes individually on personal returns. GPs, LLPs, and LPs are taxed within the same manner, however partnerships don't pay taxes.
LLPs permit members to figure together while retaining a measure of independence when it involves liability. With that, not all parties are held equally responsible, and other members aren't held responsible for the actions of others. Before engaging in any sort of partnership, know the terms before agreeing or signing any document.
- Limited Liability Protection
If you're concerned about indebtedness protection, remember that general partnerships don't afford you any protective measures. During a general capacity, partners are often held liable for movements or decisions of other partners. General partnerships pose the very best risk to general partners, but they're the simplest to make LLCs became a well-liked alternative to general partnerships. LLCs are ideal for those that wish to take a position during a business, but don't want face exposure to any legal ramifications.
- Joint Ventures as Partnerships
According to the tiny Business Administration, a venture is another sort of partnership. Joint ventures occur when a variety of entities converge in pursuit of a group goal. For instance, businesses may forge a partnership to construct a building.
Qualified joint ventures are a special partnership that permits spouses to co-own a business but to file separate returns to avoid partnership returns.
- Joint Liabilities
A joint liability partnership holds all partners equally responsible for any financial and legal issues. Joint liability partnerships bind all parties into equal liability. Moreover, each party are often held responsible in pending lawsuits or other legal consequences. Joint liabilities are different than several liability principles within the respect that partnerships are persisted equal footing in the least times.
Several liability, on the opposite hand, is that the agreement to settle any legal disputes and is predicated on a partner’s standing or contribution to a partnership.
- Limited Liability Company
A Limited Liability company (LLC) offers each the foremost benefits and therefore the most protection for a business owner.
A Limited liability company allows members to forge one entity while taking benefits of liability protection. LLCs provide equivalent tax havens as partnerships, but with the brought liability benefits of an organization. Corporate law dictates that corporations are held responsible for start-up investments only. For instance , a $10 million business doesn't give others the proper to sue you for over $2 million if you started that business for less than $2 million.
The LLC provides for an equivalent tax protection as a partnership, but also gives the liability protection of an organization. Under corporate law, an organization is merely responsible for the entire start-up investment within the company. Also, certain states allow members to make what's recognized as knowledgeable LLC, which provides certain professionals like doctors or lawyers more limitations than regular businesses.
Key takeaways:
- There are different types of partner like active partner, dormant partner, sleeping partner, partner by estoppel, etc.
- Partnerships can be limited liability, general partnership, fixed partnership.
RIGHTS OF PARTNERS:
Broadly, the provisions of the Act regarding rights, responsibilities and powers of partners are as under:
(a) Every partner features a right to require part within the habits and management of business.
(b) Every partner features a right to be consulted and heard altogether matters affecting the business of the partnership.
(c) Every partner features a right of free access to all or any records, books and accounts of the business, and additionally to look at and replica them.
(d) Every partner is entitled to share the profits equally.
(e) A partner who has contributed quite the agreed share of capital is entitled to interest at the speed of 6 per cent once a year. But no interest is often claimed on capital.
(f) An associate is entitled to be indemnified by the firm for all acts done by him within the direction of the partnership business, for all payments made by him in respect of partnership debts or liabilities and for expenses and disbursements made in an emergency for shielding the firm from loss provided he acted as an individual of normal prudence would have acted in similar circumstances for his own personal matters.
(g) Every partner is, as a rule, joint owner of the partnership property. He's entitled to possess the partnership property used exclusively for the needs of the partnership.
(h) A partner has power to act in an emergency for shielding the firm from loss, but he must act reasonably.
(i) Every partner is entitled to stop the introduction of a replacement partner into the firm without his consent.
(J) Every partner features a right to retire consistent with the Deed or with the consent of the opposite partners. If the partnership is at will, he can retire by giving note to other partners.
(k) Every partner features a right to continue within the partnership.
(l) A retiring partner or the heirs of a deceased partner are entitled to possess a share within the profits earned with the help of the proportion of assets belonging to such outgoing partner or interest at six per cent once a year at the choice of the outgoing partner (or his representative) until the accounts are finally settled.
DUTIES OF PARTNERS:
(a) Every partner is sure to diligently raise on the business of the firm to the best common advantage. Unless the agreement provides, there's no salary.
(b) Every partner must be just and faithful to the opposite partners.
(c) A partner is sure to keep and render true, proper, and proper accounts of the partnership and must permit other partners to see out and replica such accounts.
(d) Every partner is sure to indemnify the firm for any loss prompted by his delinquency or fraud within the conduct of the business.
(e) A partner needs to not keep it up competing business, nor use the property of the firm for his private purposes. In each case, he must fork over to the firm any profit or gain made by him but he must himself suffer any loss which may have occurred.
(f) Every partner is sure to share the losses equally with the others.
(g) A partner is sure to act within the scope of his authority.
(h) No partner can assign or transfer his partnership interest to the other person so on make him a partner within the business.
Key takeaways:
- There are various rights and duties of partners which the partners are suppose to abide by and take advantage of.
Implied authority refers to an agent with the jurisdiction to perform acts that are reasonably necessary to accomplish the purpose of an organization. Under contract law, implied authority figures have the ability to make a legally binding contract on behalf of another person or company.
- Subject to the provisions of section 22, the act of a partner which is done to carry on, in the usual way, business of the kind carried on by the firm, binds the firm. The authority of a partner to bind the firm conferred by this section is called his implied authority.
- In the absence of any usage or custom of trade to the contrary, the implied authority of a partner does not empower him to-
- Submit a dispute relating to the business of the firm to arbitration,
- Open a banking account on behalf of the firm in his own name,
- Compromise or relinquish any claim or portion of a claim by the firm,
- Withdraw a suit or proceeding filed on behalf of the firm,
- Admit any liability in a suit or proceeding against the firm,
- Acquire immovable property on behalf of the firm,
- Transfer immovable property belonging to the firm, or
- Enter into partnership on behalf of the firm.
Key takeaways:
1. Implied authority refers to an agent with the jurisdiction to perform acts that are reasonably necessary to accomplish the purpose of an organization.
DISSOLUTION
When the partnership between all the partners of a firm is dissolved, then it's called dissolution of a firm. It's important to word that the connection between all partners should be dissolved for the firm to be dissolved. Allow us to check out the legal provisions for the dissolution of a firm.
The dissolution of a firm means discontinuance of its activities. When the working of a firm is stopped and therefore the assets are realized to pay a variety of liabilities it amounts to dissolution of the firm. The dissolution of a firm shouldn't be confused with the dissolution of partnership. When a partner agrees to continue the firm underneath an equivalent name, even after the retirement or death of a partner, it amounts to dissolution of partnership and not of firm.
The remaining partners may purchase the share of the outgoing or deceased partner and proceed the business under an equivalent name; it involves solely the dissolution of partnership. The dissolution of firm includes the dissolution of partnership too. The partners have a contractual relationship among themselves. When this relationship is terminated it's an end of the firm.
A firm could also be dissolved under the subsequent circumstances:
(a) Dissolution by Agreement (Section 40):
A partnership firm is often dissolved by an agreement among all the partners. Section 40 of Indian Partnership Act, 1932 approves the dissolution of a partnership firm if all the partners agree to dissolve it. Partnership concern is created by settlement and similarly it are often dissolved by agreement this sort of dissolution is understood as voluntary dissolution.
(b) Dissolution by way of Notice (Section 43):
If a partnership is at will, it are often dissolved by any partner giving a notice to other partners. The notice for dissolution must be in writing. The dissolution are going to be effective from the date of the notice, just in case no date is mentioned within the notice, then it'll be dissolved from the date of receipt of notice. A notice as soon as given can't be withdrawn without the consent of all the partners.
(c) Compulsory Dissolution (Section 41):
A firm could also be compulsorily dissolved beneath the subsequent situations:
(i) Insolvency of Partners:
When all the partners of a firm are declared insolvent or about one partner are insolvent, then the firm is compulsorily dissolved.
(ii) Illegal Business:
The activities of the firm may find yourself illegal under the changed circumstances. If government enforces prohibition policy, then all the firms dealing in liquor will need to close their business because it'll be an unlawful undertaking under the new law. Similarly, a firm could also be trading with the businessmen of the other country. The trading are going to be lawful under present conditions.
After a while a war erupts between the 2 countries, it'll become a trading with an alien enemy and further trading with an equivalent events are going to be illegal. Under new circumstances the firm will need to be dissolved. Just in case a firm carries on quite one sort of business, then illegality of 1 work won't amount to dissolution of the firm. The firm can continue with the activities which are lawful.
(d) Contingent Dissolution (Section 42):
In case there's no agreement among partners associated with certain contingencies, partnership firm are going to be dissolved on the happening of any of the situations:
(i) Death of a Partner:
A partnership firm is dissolved on the demise of any of the partner.
(ii) Expiry of the Term:
A partnership firm could also be for a hard and fast period. On the expiry of that period, the firm is going to be dissolved.
(iii) Completion of Work:
A partnership concern could also be formed to hold out a specified work. On the completion of that employment the corporate are going to be automatically dissolved. If a firm is made to construct a road, then the second the road is completed the firm are going to be dissolved.
(iv) Resignation by Partner:
If a partner doesn't want to continue within the firm, his resignation from the priority will dissolve the partnership.
(e) Dissolution via Court (Section 44):
A partner can apply to the court for dissolution of the firm on any of those grounds:
(i) Insanity of a Partner:
If a partner goes insane, the partnership firm are often dissolved on the petition of various partners. The firm isn't automatically dissolved on the insanity of a partner. The court will act only on the petition of a partner who himself isn't insane.
(ii) Misconduct by the Partner:
When a partner is guilty of misconduct, the opposite partners can move the court for dissolution of the firm. The misconduct of a partner brings bad name to the firm and it adversely affects the reputation of the priority. The misconduct is often in business or otherwise. If a partner is jailed for committing a theft, it'll also affect the great name of the firm though it's nothing to try to with the business.
(iii) Incapacity of a Partner:
If a partner aside from the suing partner becomes incapable of performing his duties, then partnership is often dissolved.
(iv) Breach of Agreement:
When a partner wilfully commits breach of agreement concerning business, it'll become a ground for getting the firm dissolved. Under such a situation it becomes hard to hold on the business smoothly.
(v) Transfer of Share:
If a partner sells his share to a 3rd party or transfers his share to a different person permanently, other partners can pass the court for dissolving the firm.
(vi) Regular Losses:
When the firm can't be carried on profitably, then the firm are often dissolved. Though there can also be losses in every sort of business but if the firm is incurring losses continuously and it's impossible to run it profitably, then the court can order the dissolution of the firm.
(vii) Disputes amongst Partners:
Partnership firm is predicated on mutual faith. If partners don't have faith one another, then it'll not be possible to run the business. When the partners quarrel with every other, then the very basis of partnership is lost and it'll be better to dissolve it.
Following are the ways during which dissolution of a partnership firm takes place:
1. Dissolution by Agreement
A firm could also be dissolved if all the partners comply with the dissolution. Also, if there exists a contract between the partners regarding the dissolution, the dissolution may happen in accordance with it.
2. Compulsory Dissolution
In the following cases the dissolution of a corporation takes place compulsorily:
• Insolvency of all the partners or about one partner as this makes them incompetent to enter into a contract.
• When the business of the firm becomes illegal thanks to some reason.
• When thanks to some event it turns into unlawful for the partnership firm to hold its business. For instance, a partnership firm features a companion who is of another country and India declares war against that country, then he becomes an enemy. Thus, the business becomes unlawful.
3. When certain contingencies happen
The dissolution of the association takes place subject to a contract among the partners, if:
• The firm is made for a hard and fast term, on the expiry of that term.
• The firm is made to hold out specific venture, on the completion of that venture.
• A partner dies.
• A partner becomes insolvent.
4. Dissolution by Notice
When the partnership is at will, the dissolution of a firm may happen if anybody of the partners gives a word in writing to the opposite partners stating his intention to dissolve the firm.
5. Dissolution by Court
When a partner files a suit within the court, the court may order the dissolution of the corporate on the idea of the subsequent grounds:
• In the case where a partner becomes insane
• In the case the place a partner becomes permanently incapable of performing his duties.
• When a partner will become guilty of misconduct and it affects the firm’s business adversely.
• When a partner continually commits a breach of the partnership agreement.
• In a case where a partner transfers the entire of his interest within the partnership company to a 3rd party.
• In a case where the business can't be carried on barring at a loss
• When the court regards the dissolution of the firm to be just and equitable on any ground.
Key takeaways:
- The dissolution of a firm means discontinuance of its activities. When the working of a firm is stopped and therefore the assets are realized to pay a variety of liabilities it amounts to dissolution of the firm.
- Dissolution can be compulsory dissolution by law, dissolution by partners at will, dissolution by notice, dissolution by court.
References-
- Business Law 1 Essentials by Mirande Valbrun.
- The Legal and Regulatory Environment of Business by O. Lee Reed.