LAB Class / Study Material :
Adv Dr Harsh Pathak
Session-1
1. Legal aspect of business and its importance:
Understanding the legal aspects of business is crucial for business administration students because it
ensures compliance with laws, prevents legal disputes, and protects the company’s interests.
Knowledge of contracts, employment law, intellectual property, and regulatory requirements helps
future managers make informed decisions, mitigate risks, and maintain ethical standards. This
foundation is essential for navigating the complex legal landscape of modern business and
achieving long-term success.
The Indian judicial system follows the common law system based on statutes and recorded
judicial precedents as inherited from the British colonial legacy. The court system of India
comprises the Supreme Court of India, the High Courts and subordinate courts at district, municipal
and village levels.India has a systematic legal system that governs business operations.
1. Key Business Laws:
- Companies Act, 2013:Regulates the creation, responsibilities, and dissolution of companies.
- Indian Contract Act, 1872: Outlines how contracts are made, enforced, and what happens if they
are broken.
- Goods and Services Tax (GST) Act Merges various taxes into a single tax.
- Foreign Exchange Management Act (FEMA), 1999. Manages foreign exchange transactions.
- Insolvency and Bankruptcy Code (IBC), 2016:Helps businesses resolve financial troubles in a
structured way.
- Labor Laws:Protect workers’ rights and ensure safe workplaces, like the Industrial Disputes Act
and Factories Act.
2. The Three ‘I’s of the Regulatory Environment
1. Infrastructure:
- This includes physical setups like Special Economic Zones (SEZs) and legal setups like courts
and arbitration centres that help businesses operate smoothly.
2. Institutions:
- These are the bodies that create, interpret, and enforce laws. Examples include the Ministry of
Corporate Affairs (MCA), Securities and Exchange Board of India (SEBI), and Reserve Bank of
India (RBI). The judiciary also plays a key role.
3. Implementation:
- Effective enforcement of laws is crucial. This involves government agencies like the
Enforcement Directorate (ED) and regular audits to ensure compliance with legal standards.
- Effective enforcement of laws is crucial. This involves government agencies like the
Enforcement Directorate (ED) and regular audits to ensure compliance with legal standards.
(Also we have instrument ( statues ) , Institution ( Regulatory Authority) and Individuals as 3I )
3. National vs. Private International Trade Laws
1. National Trade Laws:
- Govern trade within India. Key laws include:
- Customs Act, 1962:Regulates import and export of goods.
- Foreign Trade (Development and Regulation) Act, 1992: Manages foreign trade.
- Indian Patents Act, 1970: Protects intellectual property rights.
2. Private International Trade Laws:
- Govern trade between private entities across borders. Important conventions and laws include:
- United Nations Convention on Contracts for the International Sale of Goods (CISG).
- Arbitration and Conciliation Act, 1996: Facilitates resolving international disputes.
4. Applicable and Governing Laws:
Applicable Law:Refers to the set of legal rules that are relevant to a specific legal issue or dispute.
It encompasses all laws that may influence the outcome of a case.
Governing Law: Refers to the legal framework that parties agree will control their contractual
relationship and any disputes arising from it. It is often specified in a contract.
Example
Applicable Law Example:
In a business contract dispute, various laws might be applicable, such as:
- Indian Contract Act, 1872: Governing the formation and breach of contracts.
- Sale of Goods Act, 1930: Regulating the sale of goods.
- Specific Relief Act, 1963:Providing remedies for specific performance of contracts.
Governing Law Example:
A contract between an Indian company and a foreign entity may specify the governing law. For
instance:
- Governing Law Clause: “This agreement shall be governed by and construed in accordance with
the laws of India.”
- This clause means that any disputes arising from the contract will be resolved based on Indian law,
even if aspects of other countries' laws are applicable.
5. Civil and Criminal Laws.
1. Civil Laws:
- Deal with disputes between individuals or organizations. Key laws include:
- Civil Procedure Code (CPC), 1908: Provides procedures for civil litigation.
- Indian Contract Act, 1872: Governs contractual obligations.
- Transfer of Property Act, 1882: Deals with property transactions.
- Real Estate (Regulation and Development) Act, 2016: Ensures transparency in real estate.
2. Criminal Laws:
- Deal with offenses against the state or public. Key laws include:
- Indian Penal Code (IPC), 1860: Defines offenses and punishments.
- Code of Criminal Procedure (CrPC), 1973:Outlines procedures for criminal trials.
- Special laws:Like the Prevention of Corruption Act and Narcotic Drugs and Psychotropic
Substances Act.
(The three new criminal laws, the “Bharatiya Nyaya Sanhita,” the “Bharatiya Nagarik Suraksha
Sanhita,” and the “Bharatiya Sakshya Adhiniyam,” have replaced the Indian Penal Code (IPC),
the Code of Criminal Procedure (CrPC), and the Indian Evidence Act respectively, effective from
1 July 2024.)
Conclusive remarks :
Understanding India’s legal framework for business involves grasping various laws and regulations.
The three ‘I’s, form the foundation of the regulatory environment. Knowing the difference between
national and private international trade laws is crucial for businesses involved in cross-border trade.
Finally, familiarity with applicable civil and criminal laws ensures businesses operate legally,
minimizing risks and fostering growth.
Legal Case Summaries ( Session 1)
1. Liebeck v. McDonald’s (1994)
Case Background:
The Liebeck v. McDonald’s case, commonly known as the “McDonald’s coffee case,” is a landmark
product liability lawsuit filed in 1994. Stella Liebeck, a 79-year-old woman, spilled a cup of
McDonald’s hot coffee on her lap, causing third-degree burns.
Key Facts:
- Incident: Liebeck bought coffee at a McDonald’s drive-thru in Albuquerque, New Mexico. While
attempting to add cream and sugar, the coffee spilled, causing severe burns.
- Injuries: Liebeck suffered third-degree burns on her thighs, buttocks, and groin, requiring skin
grafts and an extended hospital stay.
- McDonald’s Knowledge: It was revealed that McDonald’s had received over 700 complaints about
the coffee being too hot, but continued to serve it at 180-190°F.
Legal Arguments:
- Plaintiff (Liebeck):Claimed McDonald’s served coffee at an unreasonably high temperature,
which was defectively designed and inherently dangerous.
- Defendant (McDonald’s): Argued that customers know coffee is hot and that the temperature was
consistent with industry standards.
Verdict and Impact:
- Jury Award:The jury awarded Liebeck $200,000 in compensatory damages (reduced to $160,000
due to comparative negligence) and $2.7 million in punitive damages (later reduced to $480,000).
- Legal Significance: The case highlighted the issue of product liability and the responsibilities of
companies to ensure consumer safety. It also sparked debates over tort reform and the extent of
damages awarded in personal injury cases.
2. Novartis AG v. Union of India (2013) 6 SCC 1
Case Background:
The Novartis v. Union of India case dealt with the patentability of the cancer drug Glivec (Imatinib
Mesylate) under Indian patent law. Novartis sought a patent for an improved version of the drug in
India, which was challenged based on Section 3(d) of the Indian Patents Act.
Key Facts:
- Section 3(d):Indian law prohibits the patenting of new forms of known substances unless they
result in a significant increase in efficacy.
- Novartis’ Claim:Novartis argued that the beta-crystalline form of Imatinib Mesylate was more
effective and thus patentable.
- Opposition:Indian generic drug manufacturers and health activists argued that the modification did
not meet the efficacy standard and that granting the patent would restrict access to affordable
medicine.
Legal Arguments:
- Plaintiff (Novartis):Claimed the new form of the drug was patentable due to improved efficacy.
- Defendant (Union of India and others):Argued the modification did not demonstrate a significant
improvement in efficacy as required by Section 3(d).
Verdict and Impact:
- Supreme Court Ruling: The Supreme Court of India ruled against Novartis, stating that the new
form of the drug did not meet the required efficacy standard under Section 3(d).
- Legal Significance: The decision reinforced India’s stringent patent standards, aimed at
preventing “evergreening” by pharmaceutical companies and ensuring access to affordable
generic medicines.
-
3. The 'Maggi Noodles' Case: Nestle India Ltd. v. Food Safety & Standards Authority of India
(2015, Mumbai HC)
Case Background:
The Maggi Noodles case involved allegations that Nestlé India’s Maggi noodles contained
excessive lead and monosodium glutamate (MSG), posing a health risk to consumers.
Key Facts:
- Initial Testing: The Uttar Pradesh Food Safety and Drug Administration tested Maggi noodles and
found high levels of lead and MSG.
- FSSAI Action: The Food Safety and Standards Authority of India (FSSAI) ordered a nationwide
recall of Maggi noodles and banned its production and sale.
Legal Arguments:
- Plaintiff (Nestlé India): Contested the testing methods and results, arguing that their products were
safe and complied with all regulatory standards.
- Defendant (FSSAI):Maintained that the tests were accurate and that the ban was necessary to
protect public health.
Verdict and Impact:
- Bombay High Court Ruling: The court lifted the ban, stating that proper procedure was not
followed by FSSAI. It ordered fresh testing of Maggi noodles in three accredited laboratories.
- Test Results:The new tests found Maggi noodles safe for consumption, allowing Nestlé India to
resume production and sales.
- Legal Significance: The case underscored the importance of regulatory compliance, transparency
in food safety testing, and the impact of regulatory actions on businesses. It also highlighted the
need for robust standards and procedures for food safety assessments.
Conclusion
These three cases—Liebeck v. McDonald’s, Novartis v. Union of India, and the Maggi Noodles
case—demonstrate the complexities and significant implications of legal disputes in product
liability, patent law, and food safety. Each case brought important changes and raised awareness
about consumer protection, access to medicines, and regulatory standards.
Adv Dr Harsh Pathak
• “Discover the Joy of Learning"
Legal Aspect of Business : Session -1
( Paradigms and points to ponder)
Understanding the legal aspects of business is crucial for business administration students because it
ensures compliance with laws, prevents legal disputes, and protects the company’s interests.
Knowledge of contracts, employment law, intellectual property, and regulatory requirements helps
future managers make informed decisions, mitigate risks, and maintain ethical standards. This
foundation is essential for navigating the complex legal landscape of modern business and
achieving long-term success.
Origin of the Word 'Legal' and 'Business'
Legal:
The term "legal" originates from the Latin word "legalis," which pertains to the law. "Legalis" is
derived from "lex," meaning law. The development of the concept of law and legality can be traced
back to ancient Roman civilization, where a structured legal system was established to govern the
actions of individuals and entities, setting the foundation for modern legal systems.
Business:
The word "business" comes from the Old English word "bisig," meaning "careful, anxious, busy,
occupied." Over time, it evolved to refer to the state of being busy or engaged in commercial
activities. By the Middle Ages, the term began to signify a person's occupation or trade, eventually
expanding to include the organized activities of buying and selling goods and services.
Business in Greek and Indian Mythology
Greek Mythology:
1. Hermes:
- Role: Hermes is the Greek god of commerce, trade, and communication. He is also known as
the messenger of the gods.
- Attributes: Hermes is often depicted with winged sandals and a caduceus (a staff entwined with
two snakes), symbolizing his role as a swift messenger and protector of merchants and travelers.
- Significance: As the god of commerce, Hermes was believed to oversee trade, ensure fair
dealings, and protect merchants and their interests.
2. Plutus:
- Role: Plutus is the god of wealth and abundance.
- Attributes: Often depicted as a blindfolded figure, indicating that wealth can come to anyone
regardless of merit.
- Significance: Plutus represents the prosperity that commerce and trade can bring, emphasizing
the importance of wealth in business activities.
Indian Mythology: ???
"For anyone to grow up complete, art is imperative."
Paintings Depicting Business…
“The Moneylender and His Wife" by Quentin Matsys (1514):
- Description: This painting depicts a moneylender sitting at a table,
weighing coins, while his wife reads a religious book. The detailed
objects around them highlight the material wealth and the daily life of a
businessperson during the Renaissance.
- Significance: The painting explores the intersection of wealth,
commerce, and morality. It reflects the social attitudes toward
moneylending and trade in 16th-century Europe, portraying the financial
activities of the time.
“The Counting House" by Pieter Bruegel the Younger:
- Description: This painting illustrates a bustling scene in a counting
house, with clerks busy at their ledgers, customers engaging in
transactions, and money being counted and recorded.
- Significance: It offers a glimpse into the administrative side of
commerce during the 17th century, emphasizing the importance of
record-keeping and accounting in business operations.
…… by Léon Augustin Lhermitte:
- Description: This painting portrays a market scene with vendors
selling produce and customers engaging in trade. The vibrant
marketplace setting highlights the dynamic nature of business
transactions.
- Significance: It captures the essence of commerce in everyday
life, showcasing the interactions between sellers and buyers and
the role of marketplaces in the economy. (find the name of this
painting)
Some Indian art to explore …….when ever one has time .
Conclusive remarks ….
The words "legal" and "business" have rich historical roots that reflect their significance in human
society. In Greek and Indian mythology, gods like Hermes, Plutus, symbolize the importance of
commerce, wealth, and prosperity. Paintings such as "The Moneylender and His Wife," and "The
Counting House," offer visual representations of business activities, illustrating the central role of
trade and commerce throughout history. These elements collectively underscore the enduring
impact of legal systems, mythology, and art on the understanding and practice of business.
Harsh Pathak
