Unit I-Business Law

Meaning of Business: The term business also refers to the organized efforts and activities of
individuals to produce and sell goods and services for profit.

Meaning of Law: Law is a word that means different things at different times. Black’s Law
Dictionary says that law is “a body of rules of action or conduct prescribed by controlling
authority, and having binding legal force. That which must be obeyed and followed by citizens
subject to sanctions or legal consequence is a law. LAW Is a body of principles recognized and
applied by the state in administration of justice. The law is a system of rules that a society or
government develops in order to deal with crime, business agreements, and social relationships.
Law is not static. “Ignorance of law is not an excuse”

DEFINITION OF LAW

In the words of Salmond,” Law is the body of principles recognized and applied by the state in
the administration of justice.”

Woodrow Wilson has defined law as “that portion of the established habit and thought of
mankind which has gained distinct and formal recognition in the shape of uniform rules backed
by the authority and power of the government.”

• Law is not static

• laws are changed to fit the requirements of the society.

• Law prevailing in a society at any point of time must be in conformity with – -the general
sentiments - customs and -aspirations of its people.

• It is a real phenomenon having a real existence in relation to the facts of human affairs

Importance of Business Law

A business runs on a prescribed format and follows a set of rules to regulate its working. There
are matters which get resolved on the grounds of law. The assistance of law makes legal terms
easier to resolve. Business law is the backbone of business practice regulation in any nation
around the globe. There are certain points that make it clear how many business laws are
important for a nation to develop and prosper.

 Framing of Business entities: Business Laws are the set of rules, section, and codes which
guide businesspersons to organize their business in a proper format. They facilitate the smooth,
hassle-free management and operation of a business firm within the frame of legal formalities. A
business firm must fulfill the requirements of law. It will help business entities to get assistance
from the law further.
 Compensation Matters: While regulating a business organization, a business owner deals with
lots of matters and conflicts in day to day working. Business laws handle the compensational
issues concerning the matters of conflicts or losses incurred. A professional business attorney can
help firms to deal with compensation and salary management issues.

 Safeguarding the rights: Rights and claims are always part of business and law as well. In case
of any violation of law by business or consumer, both are subjected to protection of rights and
claims. Unwanted defaming of business subjected to claim, exploitation, also can be claimed.
Internal management of business firms also protects the rights of employees, females,
shareholders, and business owners as well.

Sources of Business Law

It refers to those legal rules which govern and regulate business transactions (trade, commerce
and industry). It deals with contractual situations and right and obligations arising out of
mercantile transactions between mercantile persons. Business laws establish the rules that all
businesses should follow.

Indian mercantile law is based largely upon the English mercantile law.

1) English mercantile law

a) Common law

b) Equity

c) Statute law

d) Case Law

e) Merchant law

2) Customs and usages

3) Statute law

4) Case laws

1. English Mercantile Law

The English law is the most important source of Indian mercantile law. Many rules of English
law have been incorporated into Indian law through statutes and judicial decisions. The sources
of English law are:

A. Common Law
This law is known as judge made law. It is based upon customs and practices handed down from
generation to generation. It is the oldest unwritten law. The English Courts developed these over
centuries.

B. Equity

Equity is also unwritten law. It is based upon concepts of justice developed by the judges whose
decisions become precedents. It grew as a system of law supplementary to the common law and
covered the deficiencies of the common law. Its rules were applied in cases where the rules of
common law were considered harsh and oppressive.

C. Statute Law

Statute law is one, which is laid down in the Acts of Parliament. Hence, it acts as the most
superior and powerful source of law. It overrides any rule of common law or Equity.

D. Case Law

This is also an important source of the English mercantile law. It is built upon the decisions of
the Judges. It is based on the principle that what has been decided in earlier case is binding in
similar future case also unless that there is a change in the circumstances of the case.

E. Law Merchant

It is also one of the important sources of English mercantile law. It was that branch of law which
was based on customs and usages prevalent amongst merchants and traders. It developed during
fourteenth and fifteenth centuries and was recognized.

2. Statute Law

The Indian Contract Act, 1872, the Sale of Goods Act, 1930, the Companies Act, 1956 are some
of the examples of the statute law. The law making power in India is vested in Parliament and
the state legislature.

3. Judicial Decisions

Judicial decisions are also called as case laws. This is a source of law based upon previous
judicial decisions which have to be followed in similar future cases. The Courts in deciding cases
involving similar points of law also follow them.

4. Customs and Usage

Customs and usage plays an important role in regulating business transactions. Most of the
business customs and usage have been already codified and given legal sanctions in India. Some
of them have been ratified by the decisions of the competent Courts of law. When a custom is
accepted by a court and is incorporated in a judicial decision, it becomes a legally recognized
custom.

Types/Classification of Business Law

There are several types of business law that are recognised and followed by countries the world
over. Some of these include the types of business law sections that follow.
1. Contract Law
A contract is any document that creates a sort of legal obligation between the parties that
sign it. Contracts refer to those employee contracts, sale of goods contracts, lease
contracts, etc.
2. Employment Law
Employment law is where it is imperative for business and law to meet. These laws
enforce the rules and regulations that govern employee-employer relationships. These
cover when, how and for how much and how long employees should work.
3. Labour Law
Labour law also indicates the appropriate relationship between employee and employer,
and also pay grades and the like. However, an additional element to labour laws is the
relationship of the union with the employer and employee.
4. Intellectual Property Law
Intellectual property refers to the intangible products of the working of the human mind
or intellect, which are under the sole ownership of a single entity, such as an individual or
company. The validation of this ownership is provided by intellectual property law,
which incorporates trademarks, patents, trade secrets, and copyrights.
5. Securities Law
Securities refer to assets like shares in the stock market and other sources of capital
growth and accumulation. Securities law prohibits businesspersons from conducting
fraudulent activities taking place in the securities market. This is the business law section
that penalizes securities fraud, such as insider trading. It is, thus, also called Capital
Markets Law.
6. Tax Law
In terms of business law, taxation refers to taxes charged upon companies in the
commercial sector. It is the obligation of all companies (except a few tax-exempt small-
time companies) to pay their taxes on time, failure to follow through which will be a
violation of corporate tax laws.

BASICS OF THE INDIAN LEGAL SYSTEM

India has one of the oldest legal systems in the world with its laws and jurisprudence dating back
centuries and evolving like a living way of life with the people of India adapting to the changing
times. It is a misconception that the Indian legal system gained a systematic shape and
development only during British rule rather we have a traditional mindset of following laws and
regulations and doing our duties for the society which can be inferred from the verses of Manu
smriti that Dharma i.e., Rule of Law is the supreme power in the state and the King is also
subject to Law to realize the goal of Dharma.
The Indian legal system is a complex framework of laws, regulations, and institutions that
govern the country. Here are the basics of the Indian legal System:

1. Constitution: the constitution of India is the supreme law of the country. It was adopted
in 1950 and provides the framework for the functioning of the government, fundamental
rights of citizens, distribution of powers between the central and state governments, and
the structure of the judiciary.
2. Rule of Law: The Indian legal system follows the principle of the rule of Law, which
means that all individuals and institutions Are subject to and must abide by the law. No
one, including the government, is above the law.
3. Legal Framework: The Indian legal system is based on the English common law system,
inherited from the colonial period. It consists of various laws, including statutes (acts of
parliament and state legislatures), case laws (precedents set by higher courts), and
customary laws.
4. Federal Structure: India is a federal country with a dual system of government. The
legal system reflects this federal structure, with powers and responsibilities divided
between the central governments and the state governments. Both the central and state
governments can enact laws within their respective jurisdictions.
5. Three-tier Judiciary: The Indian judiciary is independent of the executive and
legislative branches of government. It consists of three levels: the Supreme Court of
India, the High Court is the highest judicial authority in the country and has the power of
judicial review.
6. Fundamental Rights: The Indian constitution guarantees fundamental rights to all
citizens: including the right to equality, freedom of speech, and expression. Freedom of
religion, and protection against discrimination. Citizens can approach the courts to
enforce their fundamental rights through writ petitions.
7. Criminal and Civil Laws: Indian law is broadly categorized into criminal law and civil
law. Criminal law deals with offenses against the state, such as murder, theft, and fraud,
and is governed by the Indian penal code and other specialized statutes. Civil law deals
with disputes between individuals, such as contracts, property, and family matters, and is
governed by various laws, including the induna contract act, the Indian Evidence Act, and
the Code of civil procedure.
8. Legal Profession: the legal profession in India consists of advocates and lawyers.
Advocates are licensed legal professionals who can appear in court and represents clients.
The bar council of India regulates the legal professions and sets standards for legal
education.

9. Alternative Dispute Resolution: in addition to the court system, India has alternative
dispute resolution mechanisms, such as arbitration, mediation, and conciliation, to
provide quick and cost-effective resolution of disputes.
10. Legal Reforms: The Indian legal system is continuously evolving, with ongoing efforts
to reform and improve its efficiency. Various legal reforms have been undertaken to
enhance access to justice, streamline court procedures, and address emerging challenges.

It is important to note that this is a brief overview of the Indian legal system, and there are many
more intricates and details within each aspect.
Court structure Judiciary - Indian Polity Notes

Indian Judiciary – Structure

India has a single integrated judicial system. The judiciary in India has a pyramidal structure
with the Supreme Court (SC) at the top. High Courts are below the SC, and below them are the
district and subordinate courts. The lower courts function under the direct superintendence of the
higher courts.

The diagram below gives the structure and organisation of the judicial system in the country.
Apart from the above structure, there are also two branches of the legal system, which are:

1. Criminal Law: These deal with the committing of a crime by any citizen/entity. A
criminal case starts when the local police file a crime report. The court finally decides on
the matter.
2. Civil Law: These deal with disputes over the violation of the Fundamental Rights of a
citizen.

Supreme Court
The Supreme Court of India is the country’s highest judicial court. It is the final court of appeal
in the country.

Supreme Court of India – Functions

 It takes up appeals against the verdicts of the High Courts, other courts and tribunals.
 It settles disputes between various government authorities, between state governments,
and between the centre and any state government.
 It also hears matters which the President refers to it, in its advisory role.
 The SC can also take up cases suo moto (on its own).
 The law that SC declares is binding on all the courts in India and on the Union as well as
the state governments.
The seat of Supreme Court

As per the Constitution of India, Delhi is declared as the seat of the Supreme Court of India.
However, the Chief Justice of India has the power to assign another place (s) as the seat of the
Supreme Court. This is only an optional provision and not mandatory.

SC Judge Eligibility

As per Article 124, an Indian citizen who is below 65 years of age is eligible to be recommended
for appointment as a judge of the SC if:

1. he/she has been a judge of one or more High Courts, for at least 5 years, or
2. he/she has been an advocate in one or more High Courts for at least 10 years, or
3. he/she is in the opinion of the President, a distinguished jurist.

Supreme Court has three types of jurisdictions. They are original, appellate and advisory.
Original Jurisdiction of the SC in India

Original jurisdiction of a court refers to a matter for which the particular court is approached
first. In the case of the Supreme Court in India, its original jurisdiction is covered under Article
131. It involves the following cases:

1. Any dispute between the Indian Government and one or more States.
2. Any dispute between the Indian Government and one or more States on one side and one
or more States on the other side.
3. Any dispute between two or more States.
4. Article 32 of the Constitution provides original jurisdiction to the SC for matters
regarding the enforcement of Fundamental Rights.
5. The SC can issue writs, directions, or orders including writs in the nature of mandamus,
habeas corpus, quo warranto, prohibition and certiorari.
6. The SC also has the power to direct the transfer of a criminal or civil case from the High
Court in one State to the High Court in another State.
7. It can also transfer cases from one subordinate court to another State High Court
8. If the SC deems that cases involving the same questions of law are pending before it and
one or more High Courts, and that these are significant questions of law, it can withdraw
the cases before the High Court or Courts and dispose off all these cases itself.
9. The Arbitration and Conciliation Act, 1996 gives SC the authority to initiate international
commercial arbitration.

Appellate Jurisdiction

Under this, the Supreme Court can hear cases only when they are appealed against a High Court
order.

Advisory Jurisdiction

Under this, the President can request the Supreme Court to offer its opinion on any issue of law
or fact.

Indian Judiciary – Civil Courts

Civil courts deal with civil cases. Civil law is referred to in almost all cases other than criminal
cases. Criminal law applies when a crime such as a robbery, murder, arson, etc. is perpetrated.

 Civil law is applied in disputes when one person sues another person or entity. Examples
of civil cases include divorce, eviction, consumer problems, debt or bankruptcy, etc.
 Judges in civil courts and criminal courts have different powers. While a judge in a
criminal court can punish the convicted person by sending him/her to jail, a judge in a
civil court can make the guilty pay fines, etc.
 District Judges sitting in District Courts and Magistrates of Second Class and Civil Judge
(Junior Division) are at the bottom of the judicial hierarchy in India.

 The court of the district judges is the highest civil court in a district.
 It has both administrative and judicial powers.
 The court of the District Judge is in the district HQ.
 It can try criminal and civil cases and hence, the judge is called District and Sessions
Judge.
 Under the district courts, there are courts of the Sub-Judge, Additional Sub-Judge and
Munsif Courts.
  Most civil cases are filed in the Munsif’s court.
Civil courts have four types of jurisdiction:

 Subject Matter Jurisdiction: It can try cases of a particular type and relate to a
particular subject.
 Territorial Jurisdiction: It can try cases within its geographical limit, and not beyond
the territory.
 Pecuniary Jurisdiction: Cases related to money matters, suits of monetary value.
 Appellate Jurisdiction: This is the authority of a court to hear appeals or review a case
that has already been decided by a lower court. The Supreme Court and the High Courts
have appellate jurisdiction to hear cases that were decided by a lower court.

High Court

Powers and Functions of the High Court

The High Court is the highest court in a state in India. Articles 214 to 231 in the Indian
Constitution talk about the High Courts, their organisation and powers. The Parliament can also
provide for the establishment of one High Court for two or more states.

For instance, Haryana, Punjab and the Union Territory of Chandigarh have a common High
Court. The northeastern states also have one common High Court. In addition, Tamil Nadu
shares a High Court with Puducherry.

Currently, there are 25 High Courts in India. For a list of High Courts in India, check the linked
article.

The High Courts of Calcutta, Madras and Bombay were established by the Indian High Courts
Act 1861.

What are the functions of the High Court?

The functions of the High Court are described in the below section under subsections such as its
jurisdiction, powers, role, etc.

High Court Jurisdiction

The various kinds of the jurisdiction of the High Court are briefly given below:
Original Jurisdiction

 The High Courts of Calcutta, Bombay and Madras have original jurisdiction in criminal
and civil cases arising within these cities.
 An exclusive right enjoyed by these High Courts is that they are entitled to hear civil
cases which involve property worth over Rs.20000.
 Regarding Fundamental Rights: They are empowered to issue writs in order to enforce
fundamental rights.
 With respect to other cases: All High Courts have original jurisdiction in cases that are
related to will, divorce, contempt of court and admiralty.
 Election petitions can be heard by the High Courts.

Appellate Jurisdiction

 In civil cases: an appeal can be made to the High Court against a district court’s decision.
 An appeal can also be made from the subordinate court directly if the dispute involves a
value higher than Rs. 5000/- or on a question of fact or law.
 In criminal cases: it extends to cases decided by Sessions and Additional Sessions
Judges.

 If the sessions judge has awarded imprisonment for 7 years or more.

 If the sessions judge has awarded capital punishment.
The jurisdiction of the High Court extends to all cases under the State or federal laws.
In constitutional cases: if the High Court certifies that a case involves a substantial
question of law.

High Court Powers

Apart from the above, the High Courts have several functions and powers which are described
below.

As a Court of Record

 High Courts are also Courts of Record (like the Supreme Court).
 The records of the judgments of the High Courts can be used by subordinate courts for
deciding cases.
 All High Courts have the power to punish all cases of contempt by any person or
institution.
Administrative Powers

1. It superintends and controls all the subordinate courts.

2. It can ask for details of proceedings from subordinate courts.
3. It issues rules regarding the working of the subordinate courts.
4. It can transfer any case from one court to another and can also transfer the case to itself
and decide the same.
5. It can enquire into the records or other connected documents of any subordinate court.
6. It can appoint its administration staff and determine their salaries and allowances, and
conditions of service.

High Court Autonomy

The independence of the High Courts can be corroborated by the points given below:

1. Appointment of Judges: The appointment of judges of the High Courts lies within the
judiciary itself and is not connected to the legislature or the executive.
2. Tenure of the Judges: High Court judges enjoy the security of tenure till the age of
retirement, which is 62 years. A High Court cannot be removed except by an address of
the President.
3. Salaries and allowances: The High Court judges enjoy good salaries, perks and
allowances and these cannot be changed to their disadvantage except in case of a
financial emergency. The expenses of the High Court are charged on the Consolidated
Fund of the State, which is not subject to vote in the state legislature.
4. Powers: The Parliament and the state legislature cannot cut the powers and jurisdiction
of the High Court as guaranteed by the Constitution.
5. Conduct of judges: Unless a motion of impeachment has been moved, the conduct of the
High Court judges cannot be discussed in the Parliament.
6. Retirement: After retirement, High Court judges cannot hold an office of emolument
under the Government of India or that of a state. There is an exception to this clause,
however, when, with the consent of the Chief Justice of India, retired judges can be
nominated to a temporary office, and in the situation of emergencies.

Supreme Court of India - Indian Polity Notes