HAND-BOOK OF

JURISPRUDENCE,
INTERPRETATION AND GENERAL
LAWS
GROUP 1 – PAPER 1
CS EXECUTIVE
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 INDEX
Sr. No. Topic Pg no
1 Sources of law 1.1
2 Constitution of India 2.1
3 Interpretation of statutes 3.1
4 Administrative laws 4.1
5 Law relating to torts 5.1
6 Law relating to Civil Procedure 6.1
7 Law relating to Crime and its Procedure 7.1
8 Law relating to Evidence 8.1
9 Law relating to Specific Relief 9.1
10 Law relating to Limitation 10.1
11 Law relating to Arbitration, Mediation and 11.1
Conciliation
12 Indian Stamp Law 12.1
13 Law relating to Registration of Documents 13.1
14 Right to Information Law 14.1
15 Information technology act, 2000 15.1
16 Contract Law 16.1
17 Law relating to Sale of Goods 17.1
18 Law Relating to Negotiable Instruments 18.1
 CHAPTER 1 – SOURCES OF LAW
MEANING OF LAW
The nature and meaning of law have been described by various jurists. However, there is no
unanimity of opinion regarding the true nature and meaning of law. The reason for lack of
unanimity is that the subject has been viewed and dealt with by different jurists at different
times and from different point of views, that is to say, from the point of view of nature, source,
function and purpose of law, to meet the needs of some given period of legal development.
In broader sense law refers to the whole process, or legal system which is applied by the
government personnel and bodies in society so as to establish and maintain peaceful and
orderly relation between people.
Under the Constitution of India, the inclusive definition of the term “Law” and “Laws in force”
has been provided under Article 13(3), Which says:
a. “Law” includes any Ordinance, order, bye-law, rule, regulation, notification, custom or
usage having in the territory of India the force of law;
b. “Laws in force” includes laws passed or made by a Legislature or other competent
authority in the territory of India before the commencement of the Constitution and not
previously repealed.
JURISPRUDENCE & LEGAL THEORY
JURISPRUDENCE
The word “Jurisprudence” is derived from the word ‘juris’ meaning law and ‘prudence’ meaning
knowledge. Jurisprudence is the study of the science of law. The study of law in jurisprudence is
not about any particular statute or a rule but of law in general, its concepts, its principles and
the philosophies underpinning it.
Howsoever, the term jurisprudence is defined; it remains a study relating to law. The word ‘law’
itself is used to refer more than one thing. Hence one of the first tasks of jurisprudence is to
attempt to throw light on the nature of law.
LEGAL THEORY
a. Legal theory is a field of intellectual enterprise within jurisprudence that involves the
development and analysis of the foundations of law. Two most prominent legal theories
are the normative legal theory and the positive legal theory.
b. Positive legal theory seeks to explain what the law is and why it is that way, and how
laws affect the world, whereas normative legal theories tell us what the law ought to be.
JEREMY BENTHAM
1. According to him ‘a law’ may be defined as a collection of signs, declarative of will,
conceived or adopted by a sovereign in a state, concerning the conduct to be observed

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 in a certain case by a certain person or a class of persons, who in the case in question
are subject to his power.
2. He claimed that nature has placed man under the command of two sovereigns- pain and
pleasure. Where pleasure means rewards for those who obey the law and pain signifies
punishments in the event of violation of law.
3. The function of laws should be to bring about the maximum happiness of each
individual for the happiness of each will result in the happiness of all.
4. The justification for having laws is that they are an important means of ensuring
happiness of the members of community generally. Hence, the sovereign power of
making laws should be used, not to guarantee the selfish desires of individuals, but
consciously to secure the common good.
Bentham said that every law may be considered in eight different respects:
1. Source: The source of a law is the will of the sovereign, who may conceive laws which he
personally issues, or adopt laws previously issued by sovereigns or subordinate
authorities, or he may adopt laws to be issued in future by subordinate authorities.
Sovereign according to Bentham is any person to whose will a whole political
community is supposed to be in a disposition to pay obedience.
2. Subjects: These may be persons or things on which a law applies.
3. Objects: The goals of a given law are its objects.
4. Extent: Direct extent means that a law covers a portion of land on which it applies;
indirect extent refers to the relation of a person to a thing.
5. Aspects: Every law has ‘directive’ and a ‘sanctional’ part. The former concerns the
sovereign’s will towards an act or situation and the latter concerns the force of a law.
6. Force: The motivation to obey a law is generated by the force behind the law.
7. Remedial appendage: These are a set of subsidiary laws addressed to the judges
through which the judges cure the evil (compensation), stop the evil or prevent future
evil.
8. Expression: A law, in the ultimate, is an expression of a sovereign’s will.
CRITICISM OF BENTHAM’S THEORY OF LAW
1. As per Bentham all laws have to be either command or permission, it does not take
proper account of laws conferring power like the power to make contracts etc.
2. He did not give a fair treatment to custom as a source of law. He said customs could
never be ‘complete’.
3. His theory did not allow for judge made laws and hoped that such laws would be
gradually eliminated by having ‘complete laws’.
4. To judge an action according to the pleasure- pain criterion is to judge it subjectively.
The theory did not provide how a subjective criterion of pain and pleasure can be
converted into an objective one.

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 5. It is not always true that an increase in the happiness of a certain segment of society will
lead to an increase in the overall happiness level because it might be associated with a
diminution in the happiness of some other rival section of the society.
JOHN AUSTIN
John Austin a noted English legal theorist was the first occupant of the chair of Jurisprudence at
the University of London. Austin is known for the Command Theory of law. Austin was a
positivist, meaning that he concerned himself on what the law was instead of going into its
justness or fairness.
According to Austin, law is the command of sovereign that is backed by sanction. Austin has
propagated that law is a command which imposes a duty and the failure to fulfil the duty is met
with sanctions (punishment).
Thus, Law has three main features:
1. It is a command.
2. It is given by a sovereign.
3. It has a sanction behind it.
In order to properly appreciate Austin’s theory of law, we need to understand his
conception of command, sovereign and sanction.
Command
It is an expression of wish of an intelligent person, directing another person to do or to forbear
from doing some act, and the violation of this wish will be followed by evil consequences.
Command requires the presence of two parties- the commander (political superior) and the
commanded (political inferior).
Sovereign
Sovereign is politically and legally superior. He is independent, He has defined sovereign as an
authority that receives habitual obedience from the people but itself does not obey some other
authority habitually. According to Austin, the sovereign is the source of all laws.
Sanction
It is the evil consequence that follows on the violation of a command. To identify a law, the
magnitude of the sanction is not relevant but the absence of sanction disentitles an expression
of the sovereign from being a law in Austinian sense. Sanction should not also be confused with
a reward that might be on offer if a given conduct is followed or refrained from. Reward confers
a positive right whereas a sanction is a negative consequence.
CRITICISM OF AUSTIN’S COMMAND THEORY OF LAW
1. Welfare states pass a number of social legislations that do not command the people but
confer rights and benefits upon them. Such laws are not covered under the command
theory.
2. According to Austin the sovereign does not have to obey anyone but the modern states
have their powers limited by national and international laws. For example, the

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 Government of India cannot make laws that are violative of the provisions of the
Constitution of India.
3. Austin does not provide for judges made laws. He said that judges work under the strict
command of the sovereign but in reality, judges make positive laws as well.
4. Since the presence of sovereign is a pre-requisite for a proposition to be called law,
Austin did not recognize international laws as such because they are not backed by any
sovereign.
JOHN WILLIAM SALMOND
1. John William Salmond was a law professor in New Zealand, Salmond claimed that the
purpose of law was the deliverance of justice to the people and in this sense, he differed
from Bentham and Austin who went into the analysis of law as it stood without going
into its purpose. But Salmond also necessitated the presence of the state for
implementation of laws just like Bentham and Austin.
2. According to Salmond law is the body of principles which are recognized and applied by
the state in the administration of justice. His other definition said that law consists of a
set of rules recognized and acted on in courts of justice.
3. Since law was defined by a reference to the administration of justice, it needs to be
understood as well. Salmond says that human experience has made it clear that some
form of compulsion is required to maintain justice and men cannot be left to do what
they believe is right in their own eyes.
4. Therefore, if a just society is to be maintained, it is necessary to add compulsion so as to
complement to walk on the desired path. Hence, there exists various regulative systems,
the purpose of which is the upholding and enforcement of right and justice.
5. The administration of justice may therefore be defined as the maintenance of right
within a political community by means of physical force of the state. Another is the
control exercised over men by the opinion of the society in which they live. Censure,
ridicule, contempt are the sanctions by which society (as opposed to the state) enforces
the rules of morality.
6. He argued that the administration of justice was the primary task of a state and the laws
were made to achieve that objective.
7. Salmond further said that the administration of justice is perfectly possible without laws
though such a system is not desirable. A court with an unfettered discretion in the
absence of laws is capable of delivering justice if guided by equity and good conscience,
however the same is prone to abuse of power as well.
CRITICISM OF SALMOND’S THEORY
1. Salmond’s assertion that justice is the end and law is only a medium to realize it does
not always hold true because there are a number of laws that can be called ‘unjust’.

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 2. The pursuit of justice is not the only purpose of law, the law of any period serves many
ends and these ends themselves change with the passage of time.
3. There is a contradiction when Salmond says that the purpose of law is the
administration of justice but limits ‘jurisprudence’ to the study of the ‘first principles’ of
civil law of a national legal system because justice is a universal concept, the
jurisprudential analysis of law should not be constrained by national boundaries.

ROSCOE POUND
1. Roscoe Pound a distinguished American legal scholar was a leading jurist of 20th century
and was one of the biggest proponents of sociological jurisprudence which emphasized
taking into account of social facts in making, interpretation and application of laws.
2. Roscoe Pound drew a similarity between the task of a lawyer and an engineer and gave
his theory of social engineering.
3. The goal of this theory was to build such a structure of society where the satisfaction of
wants of maximum was achieved with the minimum of friction and waste. Such a
society according to Roscoe Pound would be an ‘efficient’ society.
4. Realisation of such a social structure would require balancing of competing interests.
Roscoe Pound defined interests as claims or wants or desires which men assert and
about which law must do something, if organised societies are to be developed.
5. For any legal order to be successful in structuring an efficient society, there has to be:
i. A recognition of certain interests- individual, public and social.
ii. A definition of the limits within which such interest will be legally recognized and
given effect to.
iii. Securing of those interests within the limits as defined.
According to Roscoe Pound, for determining the scope and the subject matter of the legal
system, following five things are required to be done:
1. Preparation of an inventory of interests and their classification.
2. Selection of the interests which should be legally recognized.
3. Demarcation of the limits of securing the interest so selected.
4. Consideration of the means whereby laws might secure the interests, and
5. Evolution of the principles of valuation of interests.
Roscoe Pound’s classification of interests are as follows:
1. Individual interest: These are claims or demands determined from the standpoint of
individual’s life and concern. They are:
i. Interest of personality: This includes physical integrity, freedom of will, honour and
reputation.
ii. Interest in domestic relations: This includes relationships of parents-children,
husband-wife.

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 iii. Interest of substance: This includes interests of property, freedom of association.
2. Public interest: These interests are asserted by individual from the standpoint of
political life. They are:
i. Interests of the state as a juristic person
ii. Interests of the state as guardian of social interest.
3. Social interests: These are claims or demands thought of in terms of social life and
generalized as claims of the social group. It is from the point of view of protecting the
general interest of all members of the society. Social interests include
i. Social interest in the general security: This includes general safety, peace and order.
ii. Social interest in the security of social institutions.
iii. Social interest in general morals like laws dealing with prostitution, gambling,
bigamy, drunkenness.
iv. Social interest in the conservation of social resources like the natural and human
resources.
v. Social interest in general progress.
CRITICISM OF ROSCOE POUND’S THEORY OF LAW
1. Pound said that interest pre-exist laws and the function of legal system should be to
achieve a balance between competing interests but we see that a lot of interests today
are a creation of laws.
2. The theory does not provide any criteria for the evaluation of interest. It is not interests
as such, but the yardstick with reference to which they are measured that matter.
3. Pound’s theory of balancing interests can be effectuated most effectively by judges
because the judges get to translate the activity, thus his theory gives more importance
to judiciary in comparison to the legislature.
4. Pound’s distinction between Public and Social interests is doubtful and even the
distinction between Individual and Social Interest is of minor significance.
5. The recognition of a new interest is a matter of policy. The mere presence of a list of
interests is, therefore, of limited assistance in helping to decide a given dispute.
PROF. HLA HART
He was a British Legal Philosopher who listed many meanings associated with the term
‘positivism’ as follows:
1. Laws are commands.
2. The analysis of legal concepts is
a. worth pursuing,
b. distinct from sociological and historical enquiries into law, and
c. distinct from critical evaluation

1.6
 3. Decisions can be deduced logically from predetermined rules without recourse to social
aims, policy or morality.
4. Moral judgments cannot be established or defended by rational argument, evidence or
proof.
5. The law as it is laid down should be kept separate from the law that ought to be.
Positivism is most commonly understood as the fifth description above. Natural law
theory claims that a proposition is ‘law’ not merely because it satisfies some formal
requirement, but by virtue of an additional minimum moral content. According to it, an
immoral rule cannot be ‘law’ even if it satisfies all the formal requirements.
HANS KELSEN
1. Hans Kelsen was an Austrian philosopher and jurist who is known for his ‘Pure Theory of
Law’. Kelsen believed that the contemporary study and theories of law were impure as
they were drawn upon from various other fields like religion and morality to explain
legal concepts. Kelsen, like Austin was a positivist, in that he focused his attention on
what the law was and divested moral, ideal or ethical elements from law. He discarded
the notion of justice as an essential element of law because many laws, though not just,
may still continue as law.
2. He considered sanction as an essential element of law but he preferred to call it ‘norm’.
According to Kelsen, ‘law is a primary norm which stipulates sanction’.
3. According to Kelsen, ‘norm (sanction) is rules forbidding or prescribing a certain
behaviour’. He saw legal order as the hierarchy of norms having sanction, and
jurisprudence was the study of these norms which comprise legal order. Kelsen
distinguished moral norm with legal norm and said that though moral norms are ‘ought’
prepositions, a violation of it does not have any penal fallout.
4. Kelsen’s pure theory of law is based on pyramidical structure of hierarchy of norms
which derive their validity from the basic norm. Grundnorm or basic norm determines
the content and gives validity to other norms derived from it. Under Kelsen’s pure
theory, the Grundnorm does not derive its validity from any other norm and its validity
must be presupposed. In his view the basic norm is the result of social, economic,
political and other conditions and it is supposed to be valid by itself.
5. For example, in India a statue or law is valid because it derives its legal authority from
being duly passed by the Parliament and receiving the accent of the President, the
Parliament and the President, derive their authority from a norm i.e., the Constitution.
As to the question from where does the Constitution derive its validity there is no
answer and, therefore, it is the Grundnorm.
6. Grundnorms are generally followed by the Superior Norms. Superior norms are laws
which govern the subordinate laws. They are inferior to Grundnorm but superior to

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 subordinate laws. Whereas Subordinate Norm are derived or made to assist the
superior norm. These norms derive their justification from superior norm.

GrundNorm ( fundamental law/supreme law/law of land).

Example: Constitution of India

Supreme Law(justified and controlled by grund norm).

Example: Indian Penal Code,The Code of Criminal
Procedure,1908,etc.

Subordinate Norm(derives justification and are controlled

by superior norms).Example:Regulations under SEBI
Act,1992 and Rules under the Companies Act,2013,etc.

CRITICISM OF KELSEN’S PURE THEORY

1. It is difficult to trace ‘grundnorm’ in every legal system. Also, there is no rule or yardstick
to measure the effectiveness of grundnorm.
2. The Pure Theory also did not give the timeframe for which the effectiveness should hold
for the requirement of validity to be satisfied. Validity is a matter to be determined in
the context of a given point of time and depends on what judges are prepared to accept
at that moment as imparting law quality.
3. Kelsen’s theory ceases to be ‘pure’ the moment one tries to analyse the grundnorm
because then one will have to draw upon subjects other than law like sociology, history
and morality.
4. International law does not sit well with Kelsen’s Pure theory.
SCHOOLS OF LAW
NATURAL SCHOOL OF LAW
Natural law says that certain rights are inherent by virtue of human nature and can be
understood universally through human reason. The law of nature, divine law, or the law that
exists in all of nature is how the natural school of law is typically understood.
This school of law is divided into four theories:
1. Ancient Theory
2. Medieval Theory
3. Renaissance Theory
4. Modern theory
1. Ancient Theory
There were two groups of philosophers.
a. Roman philosopher
Ulpine defined Law as “the art or science of what is equitable and good.”
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 Cicero said that Law is “the highest reason implanted in nature.”
Justinian’s Digest defines Law as “the standard of what is just and unjust.
In all these definitions, propounded by Romans, “justice” is the main and guiding
element of law.
b. Greek philosopher
Heraclitus – He was one of the first Greek philosopher who identified three main
features of law of nature- destiny, reason and order. He stated that all these three
elements are interconnected and interrelated.
Plato - natural law was characterized by two main aspects – wisdom and reason.
2. Medieval Theory
Medieval Theory is based on the theological idea i.e., the God. This stage provides a
divine based law i.e., law of nature is then law of God. And the law of God is actually the
true Dharma connecting law with that of God. Thus, ‘law’ is a part of “Dharma”.
3. Renaissance Theory
This theory is marked by rationalism. It has two distinct features –
a. More secular, political and was founded on human reasons
b. It advocates natural rights of a man and the state
4. Modern Theory
This modern theory rejects then older theories and conceptions. This modern theory
rejects then older theories and conceptions
ANALYTICAL SCHOOL OF LAW
This school of jurisprudence is also known as the positivist school of law. John Austin, “Law is
the aggregate of rules set by man as politically superior, or sovereign, to men as political
subject.” In other words, law is the “command of the sovereign”. It obliges a certain course of
conduct or imposes a duty and is backed by a sanction. Thus, the command, duty and sanction
are the three elements of law.
Hans Kelsen gave a ‘pure theory of law’. The science of law to Kelsen is the knowledge of
hierarchy of normative relations. All norms derive their power from the ultimate norm called
‘Grundnorm’.

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 Grundnorm

Superior Norm

Subordinate Norms

HISTORICAL SCHOOL OF LAW

The law originates from long drawn process of customs, ongoing conventions, social habits,
traditions.
Von Savigny’s theory of law can be summarised as follows:
1. That law is a matter of unconscious and organic growth. Therefore, law is found and not
made.
2. Law is not universal in its nature. Like language, it varies with people and age.
3. Custom not only precedes legislation but it is superior to it. Law should always conform
to the popular consciousness.
4. Law has its source in the common consciousness (Volkgeist) of the people.
5. Legislation is the last stage of law making, and, therefore, the lawyer or the jurist is
more important than the legislator.
PHILOSOPHICAL/ETHICAL SCHOOL
The exponents of this school believe that law and ethical values are co-related. The law, in
order to command respect in society must have an element of ethical value and ethical
purpose. It considers law as a means to achieve its end by which individual will is to harmonize
with the general will.
SOCIOLOGICAL SCHOOL OF LAW
This school focuses on the effect of law and society on none another. This school treats law as a
social phenomenon. It is a synthesis of philosophy, psychology, history, social science etc with
law.
Duguit defines law as “essentially and exclusively a social fact.”
REALIST SCHOOL OF LAW
Realists define law in terms of judicial process. According to Holmes, “Law is a statement of the
circumstances in which public force will be brought to bear upon through courts.”
According to Cardozo, “A principle or rule of conduct so established as to justify a prediction
with reasonable certainty that it will be enforced by the courts if its authority is challenged, is a
principle or rule of law.”

1.10
Laws are made effective:

By requiring
By requiring one, in some
By
damages to be instances,to
By preventing administrating
paid for an complete an
disobedience some form of
injury due to obligation he
punishment
disobiendence has failed to
perform

The modern Indian law as administered in courts is derived from various sources and these
sources fall under the following two heads:
a. Primary sources of Indian Laws.
b. Secondary sources of Indian Laws.
PRIMARY SOURCES OF INDIAN LAW

Customs or customary law

Judicial decisions or
precedents

Statutes or legislations

Personal law eg. Hindu and

Mohammedan law. etc.

CUSTOMS OR CUSTOMARY LAW

Custom is the most ancient of all the sources of law and has held the most important place in
the past, though its importance is now diminishing with the growth of legislation and
precedent.
A study of the ancient law shows that in primitive society, the lives of the people were
regulated by customs which developed spontaneously according to circumstances. It was felt
that a particular way of doing things was more convenient than others. When the same thing
was done again and again in a particular way, it assumed the form of custom. Customs have
played an important role in moulding the ancient Hindu Law. Most of the law given in Smritis
and the commentaries had its origin in customs. The Smritis have strongly recommended that

1.11
the customs should be followed and recognised. Customs worked as a reorienting force in
Indian Law.
Classification of Customs
Customs may be divided into two classes:
a. Customs without sanction.
b. Customs having sanction.
Customs without sanction are those customs which are non-obligatory and are observed due to
the pressure of public opinion. These are called as “positive morality”. Customs having sanction
are those customs which are enforced by the State. It is with these customs that we are
concerned here.
These may be divided into two classes:
i. Legal, and
ii. Conventional.
Legal Customs: These customs operate as a binding rule of law. They have been recognised and
enforced by the courts and therefore, they have become a part of the law of land. Legal
customs are again of two kinds:
a. Local Customs: Local custom is the custom which prevails in some definite locality and
constitutes a source of law for that place only. But there are certain sects or
communities which take their customs with them wherever they go. They are also local
customs.
Thus, local customs may be divided into two classes:
i. Geographical Local Customs
ii. Personal Local Customs
These customs are law only for a particular locality, section or community
b. General Customs: A general custom is that which prevails throughout the country and
constitutes one of the sources of law of the land. The Common Law in England is
equated with the general customs of the realm.
Conventional Customs: These are also known as “usages”. These customs are binding due to an
agreement between the parties, and not due to any legal authority independently possessed by
them. Before a Court treats the conventional custom as incorporated in a contract, following
conditions must be satisfied:
a. It must be shown that the convention is clearly established and it is fully known to the
contracting parties.
b. Convention cannot alter the general law of the land.
c. It must be reasonable.
REQUISITES OF A VALID CUSTOM
1. Immemorial (Antiquity): A custom to be valid must be proved to be immemorial; it
must be ancient. According to Blackstone, “A custom, in order that it may be legal and

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 binding must have been used so long that the memory of man runs not to the contrary,
so that, if anyone can show the beginning of it, it is no good custom”.
2. Certainty: The custom must be certain and definite, and must not be vague and
ambiguous.
3. Reasonableness: A custom must be reasonable. It must be useful and convenient to the
society. A custom is unreasonable if it is opposed to the principles of justice, equity and
good conscience.
4. Compulsory Observance: A custom to be valid must have been continuously observed
without any interruption from times immemorial.
5. Conformity with Law and Public Morality: A custom must not be opposed to morality
or public policy nor must it conflict with statute law. If a custom is expressly forbidden
by legislation and abrogated by a statute, it is inapplicable.
6. Unanimity of Opinion: The custom must be general or universal. If practice is left to
individual choice, it cannot be termed as custom.
7. Peaceable Enjoyment: The custom must have been enjoyed peaceably without any
dispute in a law court or otherwise.
8. Consistency: There must be consistency among the customs. Custom must not come
into conflict with the other established customs.
JUDICIAL DECISION OR PRECEDENTS
In general use, the term “precedent” means some set pattern guiding the future conduct. In the
judicial field, it means the guidance or authority of past decisions of the courts for future cases.
Only such decisions which lay down some new rule or principle are called judicial precedents.
Judicial precedents are an important source of law. They have enjoyed high authority at all
times and in all countries. The principles of law expressed for the first time in court decisions
become precedents to be followed as law in deciding problems and cases identical with them in
future. The rule that a court decision becomes a precedent to be followed in similar cases is
known as doctrine of stare decisis.
HIGH COURTS
1. The decisions of High Court are binding on all the subordinate courts and tribunals
within its jurisdiction. The decisions of one High Court have only a persuasive value in a
court which is within the jurisdiction of another High Court. But if such decision is in
conflict with any decision of the High Court within whose jurisdiction that court is
situated, it has no value and the decision of that High Court is binding on the court. In
case of any conflict between the two decisions of co-equal Benches, generally the later
decision is to be followed.
2. In a High Court, a single judge constitutes the smallest Bench. A Bench of two judges is
known as Division Bench. Three or more judges constitute a Full Bench. A decision of
such a Bench is binding on a Smaller Bench. Thus, a decision by a Bench of the High

1.13
 Court should be followed by other Benches unless they have reason to differ from it, in
which case the proper course is to refer the question for decision by a Full Bench.
3. The Supreme Court is the highest court and its decisions are binding on all courts and
other judicial tribunals of the country. Article 141 of the Constitution makes it clear that
the law declared by the Supreme Court shall be binding on all courts within the territory
of India. Only the statement of ratio of the judgement is having the binding force.

SUPREME COURT
The expression ‘all courts’ used in Article 141 refers only to courts other than the Supreme
Court. Thus, the Supreme Court is not bound by its own decisions. However, in practice, the
Supreme Court has observed that the earlier decisions of the Court cannot be departed from
unless there are extraordinary or special reasons to do so. If the earlier decision is found
erroneous and is thus detrimental to the general welfare of the public, the Supreme Court will
not hesitate in departing from it.
Precedents may be classified as:

Declaratory and Orginal Precedents

Persuasive Precedents

Absolutely Authorative Precedents

Conditionally Authoritative Precedents

1. Declaratory and Original Precedents: According to Salmond, a declaratory precedent is

one which is merely the application of an already existing rule of law. An original
precedent is one which creates and applies a new rule of law. In the case of an original
precedent, it is law for the future because it is now applied
Example: “Vishaka Guidelines” were stipulated by the Supreme Court of India, in
Vishaka and others v. State of Rajasthan case in 1997, regarding prevention of
sexual harassment at workplace. They acted as precedent for many cases during
1997 to 2013.
2. Persuasive Precedents: A persuasive precedent is one which the judges are not obliged
to follow but which they will take into consideration and to which they will attach great
weight as it seems to them to deserve. Thus, in India, the decisions of one High Court
are only persuasive precedents in the other High Courts.

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 3. Absolutely Authoritative Precedents: An authoritative precedent is one which judge
must follow whether they approve of it or not. Its binding force is absolute and the
judge’s discretion is altogether excluded as he must follow it. Such a decision has a legal
claim to implicit obedience, even if the judge considers it wrong. Unlike a persuasive
precedent which is merely historical, an authoritative precedent is a legal source of law.
Example: The decisions of Higher Court are authoritatively binding on the lower courts.
4. Conditionally Authoritative Precedents: A conditionally authoritative precedent is one
which, though ordinarily binding on the court before which it is cited, is liable to be
disregarded in certain circumstances. The court is entitled to disregard a decision if it is
a wrong one, i.e., contrary to law and reason.
Example: In India, for instance, the decision of a single Judge of the High Court is absolutely
authoritative so far as subordinate judiciary is concerned, but it is only conditionally
authoritative when cited before a Division Bench of the same High Court
DOCTRINE OF STARE DECISIS
1. The doctrine of stare decisis means “adhere to the decision and do not unsettle things
which are established”. It originated from Latin term which means “to abide by things
decided” It is a useful doctrine intended to bring about certainty and uniformity in the
law.
2. Under the stare decisis doctrine, a principle of law which has become settled by a series
of decisions generally is binding on the courts and should be followed in similar cases. In
simple words, the principle means that like cases should be decided alike. This rule is
based on public policy.
3. Although doctrine should be strictly adhered to by the courts, it is not universally
applicable.
4. The doctrine should not be regarded as a rigid and inevitable doctrine which must be
applied at the cost of justice. It is a legal doctrine that obligates courts to follow
historical cases (precedents) while making ruling in similar cases.
RATIO DECIDENDI
1. The underlying principle of a judicial decision, which is only authoritative, is termed as
ratio decidendi. The proposition of law which is necessary for the decision or could be
extracted from the decision constitutes the ratio. The concrete decision is binding
between the parties to it. The abstract ratio decidendi alone has the force of law as
regards the world at large.
2. In other words, the authority of a decision as a precedent lies in its ratio decidendi. Prof.
Goodhart says that ratio decidendi is nothing more than the decision based on the
material facts of the case.
3. Where an issue requires to be answered on principles, the principles which are deduced
by way of abstraction of the material facts of the case eliminating the immaterial

1.15
 elements is known as ratio decidendi and such principle is not only applicable to that
case but to other cases also, which are of similar nature.
4. However, the determination or separation of ratio decidendi from obiter dictum is not
so easy. It is for the judge to determine the ratio decidendi and to apply it on case to be
decided.
OBITER DICTA
1. The literal meaning of this Latin expression is “said by the way”. The expression is used
specially to denote those judicial utterances in the course of delivering a judgement
which taken by themselves, were not strictly necessary for the decision of the particular
issue raised.
2. These statements thus go beyond the requirement of a particular case and have the
force of persuasive precedents only. The judges are not bound to follow them although
they can take advantage of them. They sometimes help the cause of the reform of law.
3. It is quite often too difficult for lawyers and courts to see whether an expression is the
ratio of judgement or just a casual opinion by the judge. It is open, no doubt, to other
judges to give a decision contrary to such obiter dicta.
STATUTES OR LEGISLATION
1. Legislation is that source of law which consists in the declaration of legal rules by an
authority duly empowered by the Constitution in that behalf. It is sometimes called jus
scriptum (written law) as contrasted with the customary law or jus non-scriptum
(unwritten law).
2. Supreme Legislation is that which proceeds from the sovereign power in the State or
which derives its power directly from the Constitution. It cannot be repealed, annulled
or controlled by any other legislative authority.
3. Subordinate Legislation is that which proceeds from any authority other than the
sovereign power. It is dependent for its continued existence and validity on some
superior authority.
4. In our legal system, Acts of Parliament and the Ordinances and other laws made by the
President and Governors in so far as they are authorised to do so under the Constitution
are supreme legislation while the legislation made by various authorities like
Corporations, Municipalities, etc. under the authority of the supreme legislation are
subordinate legislation.
PERSONAL LAWS
In many cases, the courts are required to apply the personal law of the parties where the point
at issue is not covered by any statutory law or custom. In the case of Hindus, for instance, their
personal law is to be found in:
i. The Shruti which includes four Vedas.

1.16
 ii. The ‘Smritis’ which are recollections handed down by the Rishis or ancient teachings
and precepts of God, the commentaries written by various ancient authors on these
Smritis. There are three main Smritis; the Codes of Manu, Yajnavalkya and Narada.
iii. Hindus are governed by their personal law as modified by statute law and custom in
all matters relating to inheritance, succession, marriage, adoption, coparcenary,
partition of joint family property, pious obligations of sons to pay their father’s
debts, guardianship, maintenance and religious and charitable endowments.
The personal law of Mohammedans is to be found in: –
1. The holy Quran.
2. The actions, percept and sayings of the Prophet Mohammed which though not written
during his life time were preserved by tradition and handed down by authorised
persons. These are known as Hadis.
3. Ijmas, i.e., a concurrence of opinion of the companions of the Prophet and his disciples.
4. Kiyas or reasoning by analogy. These are analogical deductions derived from a
comparison of the Koran, Hadis and Ijmas when none of these apply to a particular case.
5. Digests and Commentaries on Mohammedan law
Mohammedans are governed by their personal law
SECONDARY SOURCES OF INDIAN LAW

Secondary Sources of
Indian Law

Justice,Equity &
Source of English Law
Good Conscience

i. Common Law
ii. Law Merchant
iii. Principle of Equity
iv. Statue Law

1. JUSTICE, EQUITY AND GOOD CONSCIENCE

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i. The concept of “justice, equity and good conscience” was introduced by Impey’s
Regulations of 1781. In personal law disputes, the courts are required to apply the
personal law of the defendant if the point at issue is not covered by any statute or
custom.
ii. In the absence of any rule of a statutory law or custom or personal law, the Indian
courts apply to the decision of a case what is known as “justice, equity and good
conscience”, which may mean the rules of English Law in so far as they are
applicable to Indian society and circumstances.
iii. In its modern version, justice, equity and good conscience as a source of law, owes
its origin to the beginning of the British administration of justice in India. The
Charters of the several High Courts established by the British Government directed
that when the law was silent on a matter, they should decide the cases in
accordance with justice, equity and good conscience.
iv. The Supreme Court has stated that it is now well established that in the absence of
any rule of Hindu Law, the courts have authority to decide cases on the principles of
justice, equity and good conscience unless in doing so the decision would be
repugnant to, or inconsistent with, any doctrine or theory of Hindu Law.
2. SOURCES OF ENGLISH LAW/ MERCANTILE LAW
The chief sources of English law are
a. Common Law
b. Law Merchant
c. Principle of Equity
d. Statute Law
1. Common Law: Principles of law evolved by the judges in making decisions on cases that
are brought before them. These principles have been built up over many years so as to
form a complete statement of the law in particular areas. Thus, Common Law denotes
that body of legal rules, the primary sources of which were the general immemorial
customs, judicial decisions and text books on Jurisprudence. Common Law is unwritten
law of England which is common to the whole of the realm.
2. Law Merchant: The Law Merchant is the most important source of the Mercantile Law.
Law Merchant means those customs and usages which are binding on traders in their
dealings with each other.
3. Principle of Equity: Equity is a body of rules, the primary source of which was neither
custom nor written law, but the imperative dictates of conscience and which had been
set forth and developed in the Courts of Chancery. In some cases, there was no remedy
or inadequate remedy at Common Law. The King was considered as the fountain head
of justice; when people were dissatisfied or aggrieved with the decision of the Common
Law Court, they could always file a mercy petition with the King-in-Council. The King

1.18
 would refer these petitions to his Chancellor. The Chancellor, who was usually a Bishop,
would dispose of these petitions not according to the rigid letter of the law but
according to his own dictates of commonsense, natural justice and good conscience.
The law so administered by the Chancellor came to be known as ‘Equity’ and such courts
as ‘Equity Courts’.
These ‘Equity Courts’ acted on number of maxims, meaning of few is as under:
“He who seeks equity must do equity”,
“He who comes to equity must come with clean hands”. Some of the important
principles and remedies developed by Equity Courts are recognition of the right of
beneficiary to trust property, remedy of specific performance of contracts, equity of
redemption in case of mortgages etc.
4. Statute Law: Statute law is that portion of law which is derived from the legislation or
enactment of Parliament or the subordinate and delegated legislative bodies. It is now a
very important source of Law.
MERCANTILE OR COMMERCIAL LAW
Branches of Mercantile Law
There are many branches of law; viz
1. Constitutional Law
2. Administrative Law
3. Criminal Law
4. Mercantile of Commercial Law
SOURCES OF INDIAN MERCANTILE LAW
The main sources of Indian Mercantile Law are:

• English Mercantile Law

• Acts enacted by Indian Legislature

• Judicial Decisions

• Customs and Trade Usages

1. English Mercantile Law: The Indian Mercantile Law is mainly an adaptation of English
Mercantile Law. Now in the absence of provisions relating to any matter in the Indian
Law, recourse is to be had to the English Mercantile Law.
2. Acts enacted by Indian Legislature or Statute Law:
i. The Indian Contract Act, 1872

1.19
ii. The Sale of Goods Act, 1930
iii. The Indian Partnership Act, 1932
iv. The Negotiable Instruments Act, 1881
v. The Arbitration and Conciliation Act, 1996
vi. The Insurance Act, 1938.
3. Judicial Decisions: Judges interpret and explain the statutes. Whenever the law is silent
on a point, the judge has to decide the case according to the principles of justice, equity
and good conscience.
4. Customs and Trade Usages

1.20
 CONSTITUTION OF INDIA
INTRODUCTION
The constituent assembly under the chairmanship of Dr B.R. Ambedkar took almost 3years to draft
the constitution. The Constitution of India came into force on January 26, 1950.

it deals with the structure of Government, makes detailed provisions for the rights of citizens. It is
considered all supreme and has overriding effect over all the laws. All the laws have their origin in
the Constitution, so it is known as mother of all laws. All public authorities- legislative,
administrative and judicial derive their power directly or indirectly from it and the Constitution
derives its authority from the people.

CONSTITUTION OF INDIA

Constitution is a document which provides a basic legal framework which regulates the
country. Containing 448 Articles (divided into 25 Parts) and 12 Schedules.

(Before there were 395 article and 22 parts)

• Adopted by the constituent assembly on 26th November 1949.

• The constitution of India came into force on 26th January, 1950 and contains rights,
rules and regulations accepted by one and all living on the land.

It deals with the structure of Government, delegation of power to All public authority-

✓ Legislative
✓ Administrative and
✓ Judicial

It is the Supreme Authority or in other words the supreme law of land. i.e. above all
laws/people/government/judiciary/public department.)

• Union and states have to follow the constitutional provisions.

• Constitution must be followed and obeyed while enacting any laws.

3 PILLARS OF OUR CONSTITUTION

2.1
 3 pillars of our
constitution

legislature(law making executive(law judiciary(dispute

body) executing body) resolving body)

legislative body Executive Body Courts in India

union legislature state legislature central govt Courts on Civil Side Courts on Criminal Side

Supreme Court, High

Court, Session Court,
Supreme Court, High
Chief Judicial
Rajya Sabha Vidhan Sabha state govt Court, District Court,
Magistrate, Magistrate
Lower Court
of 1st Class, Magistrate
of 2nd Class

Lok Sabha Vidhan Parishad

DISTRIBUTION OF POWERS

UNION LIST STATE LIST CONCURRENT LIST

(97 MATTERS) (66 MATTERS) (47 MATTERS)

ONLY PARLIAMENT HAS ONLY STATE BOTH PARLIAMENT

POWER TO MAKE LAW LEGISLATURE HAS AND STATE HAS
ON MATTER SPECIFIED POWER TO MAKE LAW POWER TO MAKE
UNDER UNION LIST ON MATTER SPECIFIED LAW ON MATTER
UNDER STATE LIST SPECIFIED UNDER
LAW MADE UNDER CONCURRENT LIST
UNION LIST SAME FOR LAW MADE UNDER
ALL STATES STATE LIST DIFFER FOR
STATE TO STATE
2.2
PREAMBLE
WE THE PEOPLE OF INDIA SOLEMNLY RESOLVED TO CONSTITUTE INDIA IN TO A Sovereign, Socialist,
Secular, Democratic, Republic

And secures to all its citizens

Justice social economic and political

Liberty of thought, expression, belief, faith and worship

Equality of status and of opportunity and to promote among them all

Fraternity assuring the dignity of the individual and unity and integrity of nation.

IN OUR CONSTITUENT ASSEMBLY this twenty sixth day of November 1949, do HEREBY ADOPT,
ENACT AND GIVE TO OURSELVES THIS CONSTITUTION.

CONSTITUTION-STRUCTURE
Constitution of India is basically federal but with certain unitary features.

A. The essential features of a Federal System are

Dual Government
Distribution of powers
Supremacy of the Constitution
Independence of Judiciary
Written Constitution
Rigid procedure to amend Constitution

B. The essential features of a unitary System are

1. State legislatures have the exclusive powers to make laws with respect to the subjects
included in the state List and Parliament has no power to encroach upon them. However,
our Constitution makes a few exception to this general rule by authorising Parliaments to
make law even on the subjects enumerated in the State List.

Following are the exceptions which the Constitution so recognises:

In the National Interest

During a proclamation of emergency
Breakdown of Constitutional Machinery in a State
On the request of two or more States
Legislation for enforcing international agreements

2. In case of inconsistency between laws passed by both (union as well as state) on a

particular matter under Concurrent list, the law passed by union will prevail over the state
law.
3. In India there exist single citizenship concept unlike dual citizenship concept of USA.

2.3
 4. Residuary legislative power (i.e. On any new subject, only parliament can make a law) is
vested in the Union.
So it can be said that the Constitution of India is neither purely federal nor purely unitary. It
is a combination of both. (QUASI FEDERAL)

PECULIAR FEATURES OF INDIAN FEDERALISM

Indian Constitution differs from the federal systems of the world in certain fundamental aspects,
which are as follows.

1. The Mode of Formation: A federal Union, as in the American system, is formed by an agreement
between number of sovereign and independent States, surrendering a defined part of their
sovereignty or autonomy to a new central organisation. But there is an alternative mode of
federation, as in the Canadian system where the provinces of a Unitary State may be
transformed into a federal union to make themselves autonomous. India had a thoroughly
Centralised Unitary Constitution until the Government of India Act, 1935 which for the first time
set up a federal system in the manner as in Canada viz., by creation of autonomous units and
combining them into a federation by one and the same Act

2. Position of the States in the Federation: In a federal system, number of safeguards are provided
for the protection of State’s rights as they are independent before the formation of federation.
In India, as the States were not previously sovereign entities, the rights were exercised mainly by
Union, e.g., residuary powers.

3. Citizenship etc: The framers of the American Constitution made a logical division of everything
essential to sovereignty and created a dual polity with dual citizenship, a double set of officials
and a double system of the courts. There is, however, single citizenship in India, with no division
of public services or of the judiciary.

4. Residuary Power: Residuary power is vested in the Union. In other words, the Constitution of
India is neither purely federal nor purely unitary. It is a combination of both and is based upon
the principle that “In spite of federalism the national interest ought to be paramount as against
autocracy stepped with the establishment of supremacy of law”.

FUNDAMENTAL RIGHTS

The man by birth have certain rights which are Universal and he could not be deprived of them.
These rights are known as Fundamental Rights.

Indian Constitution has given six categories of fundamental rights

1. Right to Equality- Articles 14 to 18;

2. Right to Freedom- Articles 19 to 22
3. Right against Exploitation – Articles 23 and 24

2.4
4. Right to Freedom of Religion – Articles 25 to 28
5. Cultural and Educational Rights- Articles 29 and 30
6. Right to Constitutional Remedies- Articles 32

(a) Articles 15,16,19 and 30 are guaranteed only to citizens of India.

(b) Articles 14,20,21,22,23,25,27 and 28 are available to any person on the soil of India – Indian
citizen or foreigner.

ARTICLE-12 DEFINITION OF STATE

DEFINITION OF STATE ARTICLE -12

Under Article 12, unless the context otherwise requires,

“the State” includes

The Government The Government All local or other

and Parliament of and Legislature of authorities:
India; each of the States

Other authorities’ will include all The expression ‘local authorities’

authorities created by the refers to authorities like Municipalties,
Constitution or statute, eg: District Boards, Panchayats, Port
Electricity Board, university, etc. Trusts, Mining settlement boards, etc.

The words “under the control of the Within the territory of India; or
Government of India” bring, into the under the control of the
definition of state, not only every Government of India.
authority within the territory of India,
but also those functioning outside,
provided such authorities are under the
control of the Government of India. For
e.g. Indian Embassy’s situated abroad.

2.5
CASE LAWS

S.NO CASE NAME PROVISONS

1 Electricity Board, Rajasthan The Supreme Court has held that ‘other authorities’ will
v. Mohanlal include all authorities created by the Constitution or statute
on whom powers are conferred by law and it is not necessary
that the authority should engage in performing government
functions.
2 Haroobhai v. State of The Gujarat High Court has held that the President is “State”
Gujarat when making an order under Article 359 of the Constitution
3 A.R Antualay v.R.S Nayak in it, it was held that a Court can be considered as state
under Article-12 only, if it exercises non-judicial functions
4 R.D.Shetty v. International The Supreme Court has pointed out that corporations acting
Airports Authority & in Ajay as instrumentality or agency of government would become
Hasia v. Khalid Mujib ‘State’
Under Article 12 if
• If the entire share capital of the Corporation is held
by the Government.
• The financial assistance of the State is so much as to
meet almost the entire expenditure of the
corporation it would afford some indication of the
corporation being impregnated with government
character.
• The corporation enjoys a monopoly status which is
conferred or protected by the State.
• The state exercises deep and pervasive control in
corporations.
• The functions of the corporation are of public
importance and closely related to government
functions,
• If a department of government is transferred to
corporation,
5 Zee telefilms Ltd v. UOI BCCI is not considered a State

ARTICLE-13 AMENDIBILITY OF FUNDAMENTAL RIGHTS

Article 13 provides that any law (pre/post constitution) will be invalid if the law is against the
fundamental rights. It provides that, state shall not make any law which takes away, amend or
abridges the fundamental rights.

The issue came up before the Supreme Court as to whether a Constitutional Amendment by which a
fundamental right is taken away or abridged is also a law within the meaning of Article 13. The Court
in the famous Golaknath case took the view that it includes such an amendment and, therefore,
even a Constitutional amendment would be void to the extent it takes away or abridges any of the
fundamental rights.

Finally, in Keshavanand Bharti v. State of Kerala Supreme Court had held that the fundamental
rights can be affected by Constitutional Amendment provided basic structure of Constitution is not
amended.

2.6
 Also, 42nd Amendment Act, 1976 stated the same as stated in Keshavanand Bharti Case.

IN A NUMBER OF CASES, THE COURTS HAVE EVOLVED FOLLOWING DOCTRINES FOR

INTERPRETING THE PROVISIONS OF ARTICE 13:-

Doctrine Of Severability Doctrine Of Eclipse Doctrine Of Waiver Of

Rights
Doctrine provides that all Though an existing law
laws in force in India before inconsistent with a The doctrine of waiver
the commencement of fundamental right becomes of rights is based on the
constitution shall be void in in-operative from the date premise that a person is
so far they are inconsistent of the commencement of his best judge and that
with the provisions of the the Constitution, yet it is he has the liberty to
constitution. However it not dead altogether. A law waive the enjoyment of
further provides that only made before the such rights as are
that part of the law will be commencement of the conferred on him by the
declared invalid which is Constitution remains State. However, the
inconsistent with the FRs and eclipsed or dormant to the person must have the
the rest of the law will be extent it comes under the knowledge of his rights
valid. Courts had held that shadow of the fundamental and that the waiver
invalid. Courts had held that rights, i.e. is inconsistent should be voluntary
invalid part of the law shall with it, but the eclipsed or
be severed and declared dormant parts become
invalid if really it is severable. active and effective again if
the prohibition brought
about by the fundamental
rights is removed by the
amendment of the
Constitution.

RIGHT TO EQUALITY ARTICLE 14-18

ARTICLE 14: EQUALITY BEFORE THE LAW AND EQUAL PROTECTION OF THE LAW

Article 14 of the Constitution says that “the State shall not deny to any person equality before the
law or the equal protection of the laws within the territory of India”.

Article 14 guarantees to every person the right to equality before the law or the equal protection of
the laws.

2.7
The expression ‘equality before the law’ which is borrowed from English Common Law is a
declaration of equality of all persons within the territory of India, implying thereby the absence of
any special privilege in favour of any individual. The second expression “the equal protection of the
laws” implies equal treatment in equal circumstances. In other words right to equal treatment in
similar circumstances make sense. Thus, if there is reasonable basis of classification the legislature
would be entitled to treat different classes differently.

Article 14 applies to all persons and is not limited to citizens. A corporation, which is a juristic
person, is also entitled to the benefit of this Article

RIGHT TO EQUALITY

EQUALITY BEFORE THE LAW EQUAL PROTECTION OF THE

LAWS

NEGATIVE CONCEPT POSITIVE CONCEPT

The expression ‘equality The equal protection of the laws”

before the law’ is a declaration Implies equal treatment in equal
of equality of all persons circumstances. In other words same
within the territory of India, law shall be applicable to equal and
implying thereby the absence shall not be applicable to unequal. In
of any special privilege in other words right to equal treatment
favour of any individual. in similar circumstances make sense.
Thus, if there is reasonable basis of
classification, the legislature would
be entitled to treat different classes
differently.

LEGISLATIVE CLASSIFICATION

Equals are to be governed by the same laws. But as regards unequal’s the same laws are not
complemented.

Legislative classification or distinction is made carefully between persons who are and who are not
similarly situated. Article 14 does not forbid classification or differentiation which rests upon
reasonable grounds of distinction.

The rules with respect to permissible classification as evolved in the various decisions have been
summarised by the Supreme Court in Ram Kishan Dalmiya v. Justice Tendulkar, as follows:

2.8
Article 14 forbids class legislation, but does not forbid classification

Permissible classification must satisfy two conditions, namely:-

(a) it must be founded on an intelligible differentia which distinguishes persons

(b) the differentia must have a relation to the object sought to be achieved by the statute in
question

• The classification may be founded on different basis, namely geographical, or according to

objects or occupations or the like.

• Even a single individual may be treated a class by himself on account of some special
circumstances or reasons applicable to him and not applicable to others; a law may be
constitutional even though it relates to a single individual who is in a class by himself.

• There is always a presumption in favour of the constitutionality of an enactment and the burden
is upon him who attacks it to show that there has been a clear transgression of the
constitutional principles.

ARTICLE 15: PROHIBITION OF DISCRIMINATION ON GROUNDS OF RELIGION ETC.

Article 15(1) prohibits the State from discriminating against any citizen on grounds only of:

1. Religion
2. Race
3. Castle
4. Sex
5. Place of birth or
6. Any of them

• access to shops, public restaurants, hotels and places of public entertainment; or

• the use of wells, tanks, bathing ghats, roads and places of public resort, maintained wholly or
partially out of State funds or dedicated to the use of the general public.

Article 15(3) and 15(4) create certain exceptions to the right :-

• Under Article 15(3) the State can make special provision for women and children.
• Article 15(4) permits the State to make special provision for the advancement of –
(a) Socially and educationally backward classes of citizens;
(b) Scheduled casts; and
(c) Scheduled tribes.

ARTICLE 16: EQUALITY OF OPPORTUNITY IN MATTERS OF PUBLIC EMPLOYMENT

Article 16 guarantees to all citizens’ equality of opportunity in matters relating to employment or

appointment of public office under the State.

However, there are certain exceptions provided in Article. These are as under:-

2.9
 • Parliament can make a law requiring residential qualifications within that State or Union
Territory prior to such employment or appointment. for e.g.-domicile requirements

• A provision can be made for the reservation of appointments or posts in favour of any
backward class of citizens which in the opinion of the State is not adequately represented in
the services under the State.
• law shall not be invalid if it provides that the incumbent of an office in connection with the
affair of any religious or denominational institution or any member of the governing body
thereof shall be a person professing a particular religion or belonging to a particular
denomination.
• Reservation of appointments or posts in favour of Economic Weaker Sections of the citizens
other than Backward Classes but subject to maximum of 10% of reservation in each category.

ARTICLE 17: ABOLITION OF UNTOUCHBILITY

“Untouchability” is abolished and its practice in any form is forbidden. The enforcement of
any disability arising out of “Untouchability” shall be an offence punishable in accordance
with law.

ARTICLE 18: ABOLITION OF TITLES

Article 18 abolish all the titles conferred on various Indian citizens by British government and the use
of those title is prohibited as it results in creating superior and inferior classes of citizens.

No title, not being a military or academic distinction, shall be conferred by the State.

No citizen of India shall accept any title from any foreign State without consent of the President of
India.

RIGHTS TO FREEDOM ARTICLES 19-22

Articles 19-22 guarantee certain fundamental freedoms.

Article 19(1), of the Constitution, guarantees to the citizens of India six freedoms,
namely:-

➢ Freedom of speech and expression;

➢ Assemble peaceably and without arms;
➢ From associations or unions
➢ Move freely, throughout the territory of India;
➢ Reside and settle in any part of the territory of India;
➢ Practise any profession, or to carry on any occupation, trade or business.

None of these freedoms is absolute but subject to reasonable restrictions specified under clauses
(2) to (6) of the Article 19. The Constitution under Articles 19(2) to 19(6) permits the imposition of
restrictions on these freedoms subject to the following conditions:-

• The restriction can be imposed by law and not by a purely executive order issued under a
statute;

2.10
 • The restriction must be reasonable;
• The restriction must be imposed for achieving one or more of the objects specified in the
respective clauses of Article 19

FREEDOM OF SPEECH AND EXPRESSION

The freedom of speech and expression under Article 19(1)(a) means the right to express one’s
convictions and opinions freely by word of mouth, writing, printing, pictures or any other mode.

❖ This freedom includes the freedom of press and Imposition of pre-censorship on publication
is violative of freedom of speech and expression (Maneka Gandhi v. Union of India)
❖ The right to know, ‘receive and impart information’ has been recognized within the right to
freedom of speech and expression
❖ The Court had held that the freedom of speech and expression under Article 19(1)(a) the
right to remain silent. (Bijoe Emmanuel v. State of Kerala)
❖ SC held that censorship of films including pre-censorship is justified but with reasonable
restrictions. (K.A Abbas v. UOI)

PERMISSIBLE RESTRICTIONS

• Sovereignty and integrity of India

• Security of the State
• Public Order
• Contempt of court
• Incitement to an offence
• Decency of morality

The Supreme Court, initially expressed the view that a Corporation is not a citizen within the
meaning of Article 19 and, therefore, cannot invoke this Article, but If the State action impaired the
rights of the shareholders as well as of the company, the Court will not deny itself jurisdiction to
grant relief.

FREEDOM OF ASSEMBLY

The next right is the right of citizens to assemble peacefully and without arms Article 19(1)(b).

This right is also, however, subject to reasonable restrictions which the state may impose in the
interests of :-

• the sovereignty and integrity of India, or

• public order.

RIGHT TO FORM AN ASSOCIATION

Right to form associations for unions is also guaranteed so that people are free to have the members
entertaining similar views Article19(1)(c). This right is also, however, subject to reasonable
restrictions which the State may impose in the interests of:-

• the sovereignty and integrity of India, or

2.11
 • public order, or
• Morality

❖ Right to form association also “implies a right not to form an association, this right
necessarily implies a right not to be a member of an association. (Sitharamachary v. Sr. Dv.
Inspector of Schools)

FREEDOM OF MOVEMENT

Right to move freely throughout the territory of India is another right guaranteed under Article
19(1)(d). It is also subject to the reasonable restrictions which the State may impose:-

• in the interests of the general public,

• For the protection of the interests of any scheduled tribe.

FREEDOM OF RESIDENCE

Article 19(1)(e) guarantees to a citizens the right to reside and settle in any part of the territory of
India. This freedom is also subject to reasonable restrictions:-

• In the interests of general public or

• for the protection of the interests of any Scheduled Tribe under Article 19(5).

FREEDOM TO TRADE AND OCCUPATIONS

Article 19(1)(g) of the Constitution guarantees that all citizens have the right to practice any
profession or to carry on any occupation or trade or business. This freedom is also subject to
reasonable restrictions:-

• in the interests of the general public;

• For prescribes professional or technical qualifications necessary for carrying on any
profession, trade or business;
• Which enables the State to carry on any trade or business which may leads to the exclusion
of private citizens, wholly or partially. (creation of State monopoly)

MONOPOLY

The Supreme Court’s decision in Chintamana Rao v. State of M.P., AIR 1951 S.C. 118; is a leading
case on the point where the constitutionality of Madhya Pradesh Act was challenged. The State law
prohibited the manufacture of bidis in the villages during the agricultural season. No person residing
in the village could employ any other person nor engage himself, in the manufacture of bidis during
the agricultural season. The object of the provision was to ensure adequate supply of labour for
agricultural purposes. The bidi manufacturer could not even import labour from outside, and so, had
to suspend manufacture of bidis during the agricultural season. Even villagers incapable of engaging
in agriculture, like old people, women and children, etc., who supplemented their income by
engaging themselves manufacturing bidis were prohibited without any reason. The prohibition was
held to be unreasonable.

2.12
 However, after the Constitutional (Amendment) Act, 1951, the State can create a monopoly in
favour of itself and can compete with private traders. It has been held in Assn. of Registration Plates
v. Union of India, (2004) SCC 476 that the State is free to create monopoly in favour of itself.
However, the entire benefit arising therefrom must ensure to the benefit of the State and should not
be used as a clock for conferring private benefit upon a limited class of persons.

ARTICLE 20 PROTECTION IN RESPECT OF CONVICTION FOR OFFENCES

Article 20 guarantees to all persons – whether citizens or non-citizens- three rights:-

PROTECTION AGAINST EX-POST PROTECTION AGAINST PROTECTION AGAINST

FACTO LAWS DOUBLE JEOPARDY SELF-INCRIMINATION

Ex-post facto laws are laws Double jeopardy means A person accused of any
which punished what had been punishment for more than offence cannot be
lawful when done. If a particular once for the same offence. compelled to be a witness
act was not an offence according No person can be against himself. In other
to the law of the land at the time prosecuted and punished words, an accused cannot
when the person did that act, for the same offence more be compelled to state
then he cannot be convicted than once. It is, however, to anything which goes
under a law which with be noted that the against him.
retrospective declares that act as conjunction “and” is used
an offence. between the words
prosecuted and punished,
This protection is not available and therefore, if a person
with respect to procedural law. has been let off after
Thus, no one has a vested right prosecution without being
in procedure. punished, he can be
prosecuted again

ARTICLE 21 PROTECTION OF LIFE AND PERSONAL LIBERTY

Article 21 confers on every person the fundamental right to life and personal liberty. It says that:-
“No person shall be deprived of his life or personal liberty except according to procedure
established by law.”

CASE LAWS

S.NO CASE NAME PROVISIONS

1 Philips Alfred Malvin The right to life includes those things which make life
v. Y.J. Gonsalvis meaningful. For example, the right of a couple to adopt a son is
a constitutional right guaranteed under Article 21 of the
Constitution
2 A.K. Gopalan’s That the expression ‘personal liberty means only liberty relating
to or concerning the person or body of the individual, has not

2.13
 been accepted by the Supreme Court in subsequent cases.
3 Kharak Singh v. State In that case the question raised was of the validity of the police
of U.P regulations authorising the police to conduct what are called as
domiciliary visits against bad characters and to have surveillance
over them. The court held that such visits were an invasion, on
the part of the police, of the sanctity of a man’s home and an
intrusion into his personal security and his right to sleep, and
therefore violative of the personal liberty of the individual,
unless authorised by a valid law.

The expression ‘personal liberty’ is an inclusive concept and it includes various rights like, right to
information, right to get free legal aid, right to have clean environment etc.

Procedure established by law:- The expression ‘procedure established by law’ means procedure laid
down by statute or procedure prescribed by the law of the State.

ARTICLE 21A RIGHT TO EDUCATION

This was introduced by the Constitution (Eighty sixth Amendment) Act, 2002. According to this, the
State shall provide free and compulsory education to all children of the age of six to fourteen years
in such manner as the State may, by law, determine.

ARTICLE 22 PROTECTION AGAINST ARBITRARY ARREST AND DETENTION

Article 22 provides the following safeguards against arbitrary arrest and detention :-

(i) A person who is arrested cannot be detained in custody unless he has been informed, as
soon as he may be, of the grounds for such arrest.
(ii) Such person shall have the right to consult and to be defended by a legal practitioner of his
choice.
(iii) A person who is arrested and detained must be produced before the nearest magistrate
within a period of twenty-four hours of such arrest, excluding the time of journey. And
such a person shall not be detained in custody beyond twenty-four hours without the
authority of magistrate.

However, Article 22 does not apply to following persons:-

• alien enemies,
• person arrested or detained under preventive detention law

PREVENTIVE DETENTION

Preventive detention means detention of a person without trial. The object of preventive detention
is not to punish a person for having done something but to prevent him from doing it.

Safeguards against Preventive Detention

Article 22 contains following safeguards against preventive detention:

2.14
such a person cannot be detained for a longer period than three months unless an Advisory Board
constituted of persons who are or have been or are qualified to be High Court judges has reported,
before the expiration of the said period of three months that there is, in its opinion sufficient cause
for such detention.

The authority ordering the detention of a person under the preventive detention law shall
communicate to him, as soon as may be, the grounds on which the order for his detention has been
made, and afford him the earliest opportunity of making the representation against the order.

It may, however, be noted that while the grounds for making the order are to be supplied, the
authority making such order is not bound to disclose those facts which it considers to be against the
public interest.

RIGHT AGAINST EXPLOTATION ARTICLE 23 AND 24

ARTICLE 23 PROHIBITION OF TRAFFIC IN HUMAN BEINGS AND FORCED LABOUR

Article 23 imposes a complete ban on traffic in human beings, beggar and other similar forms of
forced labour. The contravention of these provisions is declared punishable by law.

‘Traffic’ in human beings means to deal in men and women like goods, such as to sell or let or
otherwise dispose them of. ‘Beggar’ means involuntary work without payment.

State can impose compulsory service for public purposes such as conscription for defence or social
service etc.

ARTICLE 24 PROHIBITION OF EMPLOYMENT OF CHILDREN

Article 24 prohibits the employment of children below the age of fourteen in any factory or mine.

ARTICLE 25 RIGHT TO FREEDOM OF RELIGION

Article 25 gives to every person the:

Freedom of conscience, and

The right freely to profess, practice and propagate religion.

But this freedom is subject to restrictions imposed by the State on the grounds of public order,
morality and health.

ARTICLE 26 FREEDOM TO MANAGE RELIGIOUS AFFAIRS

It grants to every religious denomination or any sect thereof the right –

To establish and maintain institutions of religious and charitable purposes;

To manage its own affairs in matters of religion
To own and acquire movable and immovable property; and
To administer such property in accordance with law.

2.15
All these rights are subject to public order, morality

ARTICLE 27 FREEDOM AS TO PAYMENT OF TAX FOR THE PROMOTION OF ANY PARTICULAR

RELIGION

According to Article 27, no person can be compelled to pay any taxes, the proceeds of which are
specially appropriated in payment of expenses for the promotion or maintenance of any particular
religion or religious denomination.

ARTICLE 28 FREEDOM AS TO ATTENDANCE AT RELIGIOUS INSTITUTION OR RELIGIOUS

WORSHIP IN EDUCATIONAL INSTITUTIONS

Article 28 states that no religious instruction can be provided in any educational institution wholly
maintained out of State funds. However, this prohibition does not extend to an educational
institution which is administered by the State but has been established under any endowment or
trust which requires that religious instruction shall be imparted in such institution.

ARTICLES 29 AND 30 CULTURAL AND EDUCATIONAL RIGHT

MINORITY

The word ‘minority’ has not been defined in the Constitution. The Supreme Court in D.A.V. College,
Jullundur v. State of Punjab seems to have stated the law on the point. It said that minority should
be determined in relation to a particular impugned legislation. The determination of minority should
be based on the area of operation of a particular piece of legislation. If it is a State law, the
population of the State should be kept in mind and if it is a Central Law the population of the whole
of India should be taken into account.

Article 29 guarantees two rights:-

Any section of the citizens residing in the territory of Indian or any part thereof having a distinct
language, script or culture of its own has the right of conserve the same.

No citizen can be denied admission into any educational institution maintained by the State or
receiving aid out of State funds on grounds only of religion, race, caste, language, or any of them.

An exception is made to this right to the effect that if a special provision is made for the admission
of persons belonging to educationally or/and socially backward classes or scheduled castes or
scheduled tribes it shall be valid.

ARTICLE 30 RIGHT OF MINORITIES TO ESTABLISH AND ADMINISTER EDUCATIONAL

INSTITUTIONS

All minorities, whether based on religion or on language, shall have the right to establish and
administer educational institutions of their choice.

The State cannot, in granting aid to educational institutions, discriminate against any educational
institution on the ground that it is under the management of a minority, whether based on religion
or language.

2.16
CASE LAWS

S.NO CASE NAME PROVISIONS

1 DAV College v. State of It was held that any community – religious or linguistic, which is
Punjab, numerically less than 50 percent of the population of that State,
is a minority within the meaning of Article 30. The expression
minority in Article 30(1) is used as distinct from ‘Any sections of
citizens’ in Article 29(1) which lends support to the view that
Article 30(1) deals with national minorities or minorities
recognised in the context of the entire nation
2 Delhi High Court in Article 30(1) of the Constitution does not permit, minorities to
Delhi Abibhavak indulge in commercialisation of education in the garb of
Mahasangh v. U.O.I. constitutional protection. For the application of this right
minority institutions are divided into three classes: (i) institution
which neither seek aid nor recognition from the State; (ii)
institution that seek aid from the State; and (iii) institutions
which seek recognition but not aid. While the institutions of
class (i) cannot be subjected to any regulations except those
emanating from the general law of the land such as labour,
contract or tax laws, the institutions in classes (ii) and (iii) can be
subjected to regulations pertaining to the academic standards
and to the better administration of the institution, in the
interest of that institution itself.
3 T.M.A. Pai Foundation While interpreting Article 30, the Supreme Court held that
v. State of Karnataka minority includes both linguistic and religious minorities and for
determination of minority status, the unit would be the State
and not whole of India. Further, the right of minorities to
establish and administer educational institutions (including
professional education) was not absolute and regulatory
measures could be imposed for ensuring educational standards
and maintaining excellence thereof. Right of minorities included
right to determine the procedure and method of admission and
selection of students, which should be fair and transparent and
based on merit

ARTICLE 300A reads – “No person shall be deprived of his property save by authority of law”.

ARTICLE 32 RIGHT TO CONSTITUTIONAL REMEDIES

Article 32 guarantees the enforcement of Fundamental Rights.

Article 32 makes it a fundamental right that a person whose fundamental right is violated has the
right to move the Supreme Court by appropriate proceedings for the enforcement of this
fundamental right.

A person need not first exhaust the other remedies and then go to the Supreme Court. On the other
hand, he can directly raise the matter before highest Court of the land and the Supreme Court is
empowered to issue directions or order or writ.

2.17
The right guaranteed by Article 32 shall not be suspended except as provided in the Constitution.
Constitution does not contemplate such suspension except by way of President’s order under Article
359 when a proclamation of Emergency is in force.

WRITS

Anyone whose rights are affected is empowered to seek writs from Supreme Court under Article 32
and from High Court under Article 226. However under Article 32 Supreme Court can issue Writs
only in the case of violations of fundamental Rights.

Remedies under writ is provided only if:-

i. There is no remedy available under the ordinary law, or

ii. The remedy available is inadequate.

TYPES OF WRITS WRIT OF CERTIORARI

WRIT OF HABEAS CORPUS It is a writ issued by the Supreme Court and

High Court to an inferior court forbidding the
The words ‘Habeas Corpus’ literally mean “to have the body”.
later to continue proceedings in excess of its
The writ of Habeas corpus is in the nature of an order calling jurisdiction.
upon the person who has detained another, to produce the
All Courts can issue the writ of certiorari
latter before the court in order to let the court know the
throughout their territorial jurisdiction when
ground of his detention and to set him free if there is no legal
the subordinate judicial authority acts:-
justification. The writ of Habeas corpus is a remedy available to
a person who is confined without legal justification. (i) Without or in excess of jurisdiction
or in
(ii) Contravention of the rules of
natural justice or
WRIT OF MANDAMUS
(iii) Commits an error apparent on the
The word ‘Mandamus’ literally means we command. The face of the record.
writ of mandamus is, a command issued to direct any
Although the object of both the writs of
person, corporation, inferior court, or Government
prohibition and of certiorari is the same,
requiring him or it do a particular thing specified therein
prohibition is available at an earlier stage
which pertains to his or its office and is further in the
whereas certiorari is available at a later stage
nature of a public duty.
i.e. Certiorari is issued after authority has
Mandamus can be issued against any public authority. exercised its powers.
The writ is used for securing judicial enforcement of
public duties.
WRIT OF QUO WARRANTO

Under this the holder of the office has to show

WRIT OF PROHIBITION
to the court under what authority he holds the
A writ of prohibition is issued to an Inferior Court office. It is issued when:
preventing the latter from usurping jurisdiction which is
• he office is of public and of a
not legally vested in it. When a tribunal acts without or in
substantive nature, or is
excess of jurisdiction, or in violation of rules or law, a writ
of prohibition can be asked for. It is generally issued • Created by statute or by the
before the trial of the case. Constitution itself, and
• The respondent has asserted his claim
It is available only against judicial or quasi judicial 2.18 even
to the office. It can be issued
authorities and is not available against a public officer though he has not assumed the charge
who is not vested with judicial functions. of the office.
Case law: PHR Invent Educational Society v. UCO Bank and Others

SC decided that HC will not entertain the petition under Article 226 of the constitution if an effective
alternative remedy is available to the aggrieved person subject to certain exceptions.

Exceptions:

1. Where the statutory authority has not acted in accordance with the provision of the
enactment in question.
2. It has acted in defiance of the fundamental principles of judicial procedure
3. It has resorted to invoke the provisions which are repealed
4. When an order has been passed in total violation of the principles of natural justice.

ARTICLE 33 authorises the Parliament to restrict the application of Fundamental Rights in relation
to members of armed forces, military forces, police forces and such other analogous forces.

DIRECTIVE PRINCIPLES OF STATE POLICY ARTICLES 36 TO 51

The Articles included in Part IV of the Constitution (Articles 36 to 51) contain certain Directives which
are the guidelines for the Government to lead the country.

SOME OF THE IMPORTANT DIRECTIVE PRINCIPLES ARE ENUMERATED BELOW:-

• State to secure a social order for the promotion of welfare of the people
• The State must strive to promote the welfare of the people
• The State must take steps to organise the Village Panchayats
• State must make effective provision for securing the right to work, to education and to public
assistance in case of unemployment, old age, etc.
• The State must endeavour to provide a uniform civil code for all Indian citizens
• Provision for free and compulsory education for all children upto the age of fourteen years
• The State must promote the educational and economic interests of Scheduled Castes, Scheduled
Tribes and other weaker sections
• The State shall endeavour to protect and improve the environment and to safeguard the forests
and wild life of the country
• The State must separate executive from judiciary in the public services of the State
• In international matters the State must endeavour to promote peace and security, maintain just
and honourable relations in respect of international law between nations.

CONFLICT BETWEEN FUNDAMENTAL RIGHT AND A DIRECTIVE PRINCIPLE

What will be the legal position if a law enacted to enforce a Directive Principle violates a
Fundamental Right?

Initially, the Courts, adopted a strict view in this respect and ruled that a Directive Principle could not
override a Fundamental Right, and in case of conflict between the two, a Fundamental Right would
prevail over the Directive Principle.

2.19
When the matter came before the Supreme Court in State of Madras v. Champakram Dorairajan,
AIR 1951 S.C. 226, where the validity of a Government order alleged to be made to give effect to a
Directive Principle was challenged as being violative of a Fundamental Right, the Supreme Court
made the observation that :-

The Directive Principles of State Policy have to conform to and run as subsidiary to the chapter of
Fundamental Rights.

However, insertion of Article 31-C led to a different legal situation as it provides that if any law is
passed to give effect to any Directive Principles, it cannot be challenged even if it violates
Fundamental Rights under Article 14 or 19.

ARTICLE 51A: FUNDAMENTAL DUTIES

Article 51A imposing the fundamental duties on every citizen of India. Following are some of the
fundamental duties:-

a) To abide by the constitution and respect its ideals and institutions, the National Flag and the
National Anthem
b) To uphold and protect the sovereignty, unity and integrity of India
c) To defend the country and render national service when called upon to do so
d) To promote harmony and the spirit of common brotherhood amongst all the people of India
transcending religious, linguistic and regional or sectional diversities; to renounce practices
derogatory to the dignity of women
e) To value and preserve the rich heritage of our composite culture
f) To protect and improve the natural environment including forests, lakes, rivers and wild life,
and to have compassion for living creatures
g) To safeguard public property.

Since the duties are imposed upon the citizens and not upon the States, legislation is necessary for
their implementation.

DELEGATED LEGISLATION

Delegated legislation means legislation by authorities other than the legislature, where the former
acting on the express delegated authority and power from the latter (legislature)

Parliament and state legislature have the exclusive legislative powers which can be exercised by
them.

The increasing complexity of modern administration have made it necessary for the legislatures to
delegate its powers.

The three relevant justifications for delegated legislation are:

a) the limits of the time of the legislature;

b) the limits of the amplitude of the legislature,
c) the need of some weapon for coping with situations created by emergency.

2.20
CLASSIFICATION OF SUBORDINATE LEGISLATION
Executive Legislation

The tendency of modern legislation has been in the direction of placing in the body of an Act only
few general rules or statements and relegating details to statutory rules. This system empowers the
executive to make rules and orders which do not require express confirmation by the legislature.
Thus, the rules framed by the Government under the various Municipal Acts fall under the category.

Judicial Legislation

Under various statues, the High Courts are authorised to frame rules for regulating the procedure to
be followed in courts. Such rules have been framed by the High Courts under the Guardians of
Wards Act, Insolvency Act, Succession Act and Companies Act, etc.

Municipal Legislation

Municipal authorities are entrusted with limited and sub-ordinate powers of establishing special
laws applicable to the whole or any part of the area under their administration known as bye-laws.

Autonomous Legislation

Under this head fall the regulations which autonomous bodies such as Universities make in respect
of matters which concern themselves.

Colonial Legislation

The laws made by colonies under the control of some other nation, which are subject to supreme
legislation of the country under whose control they are.

2.21
 ORDINANCE- MAKING POWER

OF PRESIDENT ARTICLE 123 OF GOVERNOR ARTICLE 213

This independent power of the president The Governor’s power to make Ordinances as
to legislate by Ordinance has the following given under Article 213 is similar to the
peculiarities/conditions:- Ordinance making power of the President and
have the force of an Act of the State
• It may relate to any subject in respect Legislature.
of which parliament has the right to
legislate and is subject to the same This independent power of Governor to
constitutional limitations as legislation legislate by Ordinance has the following
by parliament. peculiarities/conditions:-
• He must be satisfied that circumstances
• He can make Ordinance only when the
exist which render it necessary to take
State Legislature or either of the two
immediate action.
Houses is not in session.
• President can do it only if Parliament is
• He must be satisfied that circumstances
not functioning
exist which render it necessary to take
• This power is to be exercised by the
immediate action.
President on the advice of his Council
• While exercising this power Governor
of Ministers.
must act with the aid and advise of the
• The Ordinance must be laid before
Council of Ministers.
Parliament when it re-assembles, and
• The Ordinance must be laid before the
shall automatically cease to have effect
state legislature (when it re-assembles)
at the expiration of 6 weeks from the
and shall automatically cease to have
date of re-assembly or before
effect at the expiration of six weeks from
resolutions have been passed
the date of the re-assembly unless
disapproving the Ordinance.
disapproved earlier by that legislature.

Law includes an “ordinance”. But an ordinance shall be of temporary duration.

LEGISLATIVE POWER OF THE UNION AND THE STATES

Constitution provides for two Sets of Government – Central and State. There is distribution of
powers between Central and State Governments.

Article 246 provides for the following lists:-

List 1-Union List

List 2- State List and

2.22
List 3- Concurrent List

Each list contains a number of entries in which the subjects of legislation have been separately and
distinctly mentioned. The number of entries in the respective lists is 97 , 66 and 47.

With respect to the subject enumerated in the Union i.e., List 1, the Union parliament has the
exclusive power to make laws.

With respect to the subject enumerated in the State list, i.e., List 2, the legislature of a state has
exclusive power to make laws. Therefore Parliament cannot make any law on any of these subjects,
whether the state makes or does not make any law.

With respect to the subject enumerated in the Concurrent list i.e., List 3, Parliament and the state
legislatures both have powers to make laws. Thus, both of them can make a law even with respect to
the same subject and both the laws shall be valid in so far as they are not repugnant to each other.
However, in case of conflict between such laws then the law made by Parliament shall prevail over
the law made by the State Legislature.

State legislatures have the exclusive powers to make laws with respect to the subject included in the
State List and Parliament has no power to encroach upon them. However, our Constitution makes a
few exceptions to this general rule by authorising Parliament to make law even on the subjects
enumerated in the State List.

Following are the exceptions which the Constitution so recognises:-

a) In the National Interest

b) During a proclamation of emergency
c) Breakdown of Constitutional Machinery in a State
d) On the request of two or more states
e) Legislation for enforcing international agreements

PITH AND SUBSTANCE RULE

The term ‘pith and substance’ is used in law to ascertain the essential part of the law which the
legislature mean the most important in framing the few. While making any law on any matter
contained in union, state or concurrent list, the legislature may slightly encroach other list. If
challenged, the court by applying the pith and substance rule may determine the validity of law.

COLOURABLE LEGISLATION

Sometimes a legislature may pass a law in such a way that it a colour of constitutionality while, in
reality, that law aims at achieving something which the legislature could not do. Such legislation is
called colourable piece of legislation and is invalid.

In Kameshwar Singh v. State of Bihar, the Bihar Land Reforms Act,1950 Provided that the unpaid
rents of the tenants shall be collected by the state and one half of them shall be paid back by the
State to the landlord as compensation for acquisition. According to the provision in the State List
under which the above law was passed, no property should be acquired without payment of
compensation.

2.23
The Supreme Court found that aforesaid Act passed by the State legislature was a colourable
legislation, because “the taking of the whole and returning a half does not amount to compensation.

FREEDOM OF TRADE, COMMERCE AND INTERCOURSE ARTICLES 301 TO 305

This heading has been given to Part XIII of the Constitution. This part originally consisted of seven
articles – Articles 301 to 305.

Article 301 in real sense, creates an overall comprehensive limitation on all legislative powers of the
Union and the State which affect the freedom of trade, commerce and intercourse.

The freedom guaranteed by Article 301 is not made absolute and is to be read subject to the
following exceptions as provided in Articles 302-305.

PARLIAMENT TO IMPOSE RESTRICTION IN THE PUBLIC INTEREST

According to Article 302 Parliament may, by law, impose such restrictions on the freedom of trade,
commerce and intercourse as may be required in the public interest.

PARLIAMENT TO MAKE PREFERENCE OR DISCRIMINATION

Parliament cannot by making any law give preference to one State over the other or make
discrimination between the States except when it is declared by that law that it is necessary to do so
for the purpose of dealing with a situation arising from scarcity of goods in any part of the territory
of India [Article 303 (1) and (2)].

POWER OF THE STATE LEGISLATURE TO IMPOSE TAX

The Legislature of a State may by law impose on goods imported from other States or the Union
territories any tax to which similar goods manufactured or produced in that State are subject to such
taxes. (Article 304)

The law which was already in force at the commencement of the constitution shall not be affected
by the provision of Article 301 except in so far as the President may by order otherwise direct.
(Article 305)

BILL

2.24
 types

depending upon depending on depending on

finance bill
initiation content wise procedure
money bills and constitution category A - can
original bills ordinary bills
financial bills ordinance amendment bill only be introduced category B - can be
by minister-
replacing bills in lok sabha on introduced in
government bill amending bills requiring simple
recommendation either houses
majority
of president
consolidating to replace
by private bills ordinance passed requiring special
expiring law expense from
members- by president majority i.e not
(continuance) consolidated
private members under article 123 less than 2/3rd
bills fund of India
bill
repealing and
amending bill matters specified
to continue - bill requiring special in article 110
validating acts has to be passed majoring for
by the houses ratification by
within 6weeks of legislation
bills to replace
ordinances reassembly by
parliament
money bills

financial bills

constitution
amendment bill

LAW MAKING PROCESS (HOW A BILL BECOMES AN ACT)

A bill is the draft of a legislative proposal which has to pass through various stages before it becomes
an Act of the Parliament.

1. First Reading:

Bill is introduced in either house of Parliament – Lok Sabha or Rajya Sabha.

If bill introduced by minister, it is known as Government Bill.

If bill introduced by private Member, it is known as Private Member’s Bill.

member in charge ask for permission to introduce bill

permission granted permission not granted

speaker gives opportunity to the member in charge and

bill is introduced also to the person opposing to present their explanatory
statements

then it is put to vote in the house

2. Publication in Gazette

3. Reference of bill to Standing Committee for examination and make report thereon which is to be
submitted to the house. This report is considered as advice given by the committee.

2.25
4. Second Reading

First stage – consists of general discussion on the Bill as a whole when the principle underlying the
Bill is discussed.

Second Stage – consists of clause-by-clause consideration of the Bill.

5. Third reading – member in charge can move that the bill be passed. At this stage, the debate is
confined to arguments either in support or rejection of the Bill. In passing an ordinary bill, a simple
majority of members present and voting is necessary. But in case of a Bill to amend the Constitution,
a majority of total membership of the house and a majority of not less than two-thirds of the
members present and voting is required in each House of Parliament.

6. Bill in the other House

After the bill is passed by one House, it is sent to the other House for concurrence with a message to
that effect and there also it goes through the staegs described above, except the introduction stage.

7. Consideration of the Bill at a Joint Sitting

If a bill passed by one House is rejected by the other house or the Houses have finally disagreed as to
the amendments to be made in the Bill, or more than Six months have elapse from the date of
receipt of the Bill by the other house without the bill being passed by it, the President may call for
the joint sitting of the two houses to resolve the deadlock and decision taken by majority of the total
members of both the houses.

There cannot be a joint sitting of both Houses on a Constitution Amendment Bill.

8. Assent of the President

The bill becomes an Act only after the President has given assent to it.

TYPES OF PARLIAMENTARY COMMITTEE

Parliamentary Committee plays a vital role. They are a vibrant link between the Parliament,
Executive and the general public.

Standing Committee and Ad-hoc Committees

Ad-hoc Committees are appointed for specific purpose and they cease to exist when they finish the
task assigned to them and submit a report. Examples: Select and Joint committee on bills, railway
convention committee, the committee on draft five year plans etc.

Standing committees are appointed for a continuous period. Examples: Business advisory
committee, committee on petition etc.

Other Committees act as Parliament’s Watch Dog over the executive. These are the committees on
subordinate legislations, committee on estimates, committee on public accounts etc .

2.26
 INTERPRETATION OF STATUES
INTRODUCTION
 A statute is thus a written “will” of the legislature expressed according to the form
necessary to constitute it as a law of the State, and rendered authentic by certain prescribed
forms and solemnities.
 “Statute” is generally applied to laws and regulations of every sort law which ordains,
permits or prohibits anything which is designated as a statute, without considering from
what source it arises”.
 Law is defined so as to include any ordinance, order, bye-law, rule, regulation, notification
etc.
 According to Salmond, interpretation or construction is the process by which the Courts
seek to ascertain the meaning of the legislature through the medium of the authoritative
forms in which it is expressed.

MEANING OF STATUTE:
Statute” generally means the laws and regulation of every sort without considering from which they
emanate. Normally, the term denotes an act enacted by the legislative authority. Statute” is defined
as the written will of the legislature solemnly expressed according to the forms necessary to
constitute it the law of the state.

MEANING OF LAW:
Law is defined as including any Ordinance, Order, Bye-law, Rule, Regulation, Notification and the like.
Statute” signifies written law as opposed to unwritten law.

MEANING OF INTERPRETATION
‘Interpretation’ is the process by which the real meaning of an Act (or a document) and the
intention of the legislature in enacting it (or of the parties executing the document) is ascertained.
‘Interpretation’ signifies expounding the meaning of abstruse works, writings etc, making out of their
meaning, explaining, and understanding them in a specified manner. Interpretation helps a person in
arguing, contesting and interpreting the proper significance of a Section, a proviso, explanation or
schedule to an Act or any document; deed or instrument.

NEED FOR INTERPRETATION / CONSTRUCTION

1. The enacted Laws are drafted by legal experts, but they are expressed in language. No
language is so perfect as to leave no ambiguities.
2. A statue is an edict of the legislature. The intent of the legislature has to be gathered not only
from the language but also from the surrounding circumstances that prevailed at the time
when that particular law was enacted.

3. If any provision of the statute is open to two interpretations, the Court has to choose that
interpretation which represents the true intention of the legislature.

3.1
 4. Is not within human power to foresee the manifold set of facts which may arise in the future
and even if it were so it is not possible to provide for them in terms free from all ambiguity.

PRESUMPTION IN THE INTERPRETATION OF STATUTE

Where the meaning of the statute is clear, there is no need for presumptions But, if the intention of
the legislature is not clear, there are number of presumptions. These are:-

a) That the words in a statute are used in literal sense unless otherwise defined.
b) Liability attaches only where there is mens rea.
c) That the state and govt. Institutions are deemed to be exempted unless expressely mentioned.
d) That the legislature does not make mistake.
e) That statue has been made with a view to exercise the powers given through it fairly.
f) That the legislature knows the state of law.
g) That the law compels no man to do that which is fruitless.
h) That the legislature knows the practice of executive and judiciary.
i) That the legislature does not make any alteration in the existing law unless by express
enactment.

CASUS OMISSUS RULE

Casus Omissus rule is a situation omitted from or not provided for bu statute or regulation and
therefore governed by common law.

There are two basic rule of interpretation:

1. Every word in a statute be given meaning.

2. The court cannot read anything into a statute or rewrite a provision which is unambiguous.

A court generally interprets the law against rewriting.

DIFFERENT CLASSES OF THE STATUTE

Codifying When they codify the unwritten law on a subject.

Declaratory When they do not profess to make any alteration in the existing law, but merely
declare or explain what it is.
Remedial When they alter the common law or the judge made (non-statutory) law.
Amending When they alter the statute law.
Consolidating When they consolidate several previous status relating to the same subject
matter, with or without alternations of substance.
Enabling When they remove a restriction or disability.
Disabling or When they restrain the alienation of property.
restraining

3.2
Penal When they impose a penalty or forfeiture.

GENERAL PRINCIPLES OF INTERPRETATION

Primary Rules
Primary/Golden According to this rule, the words, phrases and sentences of a statute are
Rule of ordinarily to be understood in their natural, ordinary or popular and
Interpretation/Rule grammatical meaning unless such a construction leads to an absurdity or the
of Literal content or object of the statute suggests a different meaning. Interpretation
Construction should not be given which would make other provisions redundant.
The adjective natural, ordinary and power are used interchangeably. They
mean the grammatical or literal meaning, except when the words are
technical because technical words have technical meanings.
In simple words, this rule means to give simple straightforward and fair
meaning to the provision of law. It is also known as golden or primary rule of
interpretation.

“Don’t add or subtract anything from the law”

Nothing should be added to or taken out from the statute unless there are
adequate grounds to justify the inference that Legislature intended something
which it omitted to express.

Thus, a court
(a) Cannot infer that something has been left out from the statute and
(b) Therefore, it cannot add some words or explanation etc. To the
existing provision of law.
Furthermore, every word given in a statute is relevant and has been
inserted therein to serve some useful purpose.
Lastly, the main part of the Section/Article in a Statute must not be
interpreted in such a way as to render a proviso thereto to be redundant.
Rule of Reasonable “Ut Res Magis Valeat Quam Pareat”
Construction Normally, the words used in a statute have to be construed in their ordinary
meaning, but in many cases, judicial approach finds that the simple device of
adopting the ordinary meaning of words, does not meet the ends as a fair and
a reasonable construction. Exclusive reliance on the bare dictionary meaning
of words’ may not necessarily assist a proper construction of the statutory
provision in which the words occur. Often enough interpreting the provision,
it becomes necessary to have regard to the subject matter of the statute and
the object which it is intended to achieve.

When any interpretation of the words defeats the intention of the law
makers, and suppress the mischief, the court can go beyond for practical and
true interpretation of the statue.

According to this rule, It is the duty of a Court in constructing a statute to give

effect to the intention of the legislature. So, the Court can depart from the
dictionary meaning which will advance the remedy and suppress the mischief.

3.3
Mischief Rule or When the material words are capable of bearing two or more constructions,
Heydon’s Rule or the most firmly established rule for construction of such words is the rule laid
Purposive Rule down in Heydon’s case which has “now attained the status of a classic”. The
rule directs that the Courts must adopt that construction which “shall
suppress the mischief and advance the remedy”. But this does not mean that
a construction should be adopted which ignores the plain natural meaning of
the words or disregard the context and the collection in which they occur.

The Supreme Court has expressed the view that the rule in Heydon’s case is
applicable only when the words in question are ambiguous and are
reasonably capable of more than one meaning. [CIT v. Sodra Devi]

This rule has been applied for the first time in Heydon’s Case and thus it is
also popularly known as Heydon’s Rule.
In interpretation of all statutes in general four things are to be considered:
1. What was the common law before the making of the Act.
2. What was the mischief and defect for which the common law did not
provide.
3. What remedy the parliament had resolved and appointed to cure the
disease of the common law and
4. The true reason of the remedy.
Rule of Where in an enactment, there are two provisions which cannot be reconciled
Harmonious with each other, they should be so interpreted that, if possible, effect may be
Construction given to both. This is what is known as the “rule of harmonious construction”.

A statute must be read as a whole and one provision of the Act should be
construed with reference to other provisions in the same Act so as to make a
consistent enactment of the whole statute. Such a construction has the merit
of avoiding any inconsistency or repugnancy either within a section or
between a section and other parts of the statute. It is the duty of the Courts
to avoid “a head on clash” between two sections of the same Act and,
“whenever it is possible to do so, to construct provisions which appear to
conflict so that they harmonise” (Raj Krishna v. Pinod Kanungo)
The Supreme Court applied this rule in resolving a conflict between Articles
25(2)(b) and 26(b) of the Constitution and it was held that the right of every
religious denomination or any section thereof to manage its own affairs in
matters of religion [Article 26(b)] is subject to a law made by a State providing
for social welfare and reform or throwing open of Hindu religious institutions
of a public character to all classes and sections of Hindus [Article 25(2)(b)].
(Venkataramana Devaru v. State of Mysore)

3.4
 Rule of Ejusdem Ejusdem Generis, literally means “of the same kind or species”.
Generis
The rule of ejusdem generis provides that, where there are general words
following particular and specific words, the general words following particular
and specific words must be confined to things of the same kind as those
specific words must be confined to things of the same kind as those specified,
unless there is a clear manifestation of a contrary purpose.

To apply the rule the following conditions must exist:

a) The statute contains an enumeration by specific word
b) The members of the enumeration constitute a class,
c) The class is not exhausted by the enumeration,
d) A general term follows the enumeration
e) There is a distinct genus which comprises more than one species, and
f) There is no clearly manifested intent that the general term be given a
broader meaning that the doctrine requires.

Secondary rules/Other Rules of Interpretation

Expressio Unis Est The literal meaning of the maxim is that the express mention of one thing or
Exclusio Alterius person is the exclusion of other or others.
Thus, if in a statute, one or more thing of a particular class are mentioned,
then this may mean all other members of the class are to be excluded. It
cannot be applied when the language of the Statute is plain with clear
meaning.
Contemporanea Read the law as it would have read when it was made.
Expositio Est Where the words used in a statute have undergone alteration in meaning in
Optima Et course of time, the words will be construed to bear the same meaning as
Fortissima in Lege they had when the statute was passed on the principle expressed in the
maxim.
Court may remove the ambiguity or delete the absurdity present or
prevailing in the law.
Noscitur a Sociis The ‘Noscitur a Sociis’ i.e. “It is known by its associates”. In other words,
meaning of a word should be known from its accompanying or associating
words. A word in a statutory provision is to be read in collocation with its
companion words.

But this rule will not apply:

a) when the context excluded that principle.
b) sufficient reason can be assigned, it is proper to construe a word in
one part of an Act in a different sense from that which it bears in
another part of the Act.
c) where it would cause injustice or absurdity.
d) where different circumstances are being dealt with
e) here the words are used in a different context

Strict and Liberal By ‘strict construction’ it is meant is that “Acts, are not to be regarded as
Construction including anything which is not within their letter as well as their spirit, which
is not clearly and intelligibly described in the very words of the statute, as
well as manifestly intended”,

3.5
 while by ‘liberal construction’ is meant that “everything is to be done in
advancement of the remedy that can be done consistently with any
construction of the statute”. Beneficial construction to suppress the mischief
and advance the remedy is generally preferred.

INTERNAL AND EXTERNAL AIDS IN INTERPRETATION

Internal Aids
Title The long title sets out at the head of the statute and gives a fairly full description
of the general purpose, object and scope of the act. It is now settled that the long
title of an Act is the part of the Act and it is legitimate to use it for the purpose of
interpreting the Act as a whole
Preamble A preamble may afford useful light as to what a statute intends to reach and
another that, if an enactment is itself clear and unambiguous, no preamble can
qualify or cut down the enactment”.

Heading and The heading and title of a chapter may be referred to by the court to resolved any
Title of a doubt as to ambiguous words used therein. However, they cannot be resorted to
Chapter restrict the plain or ordinary meaning of the words in the Chapter.

Marginal Notes Marginal notes are often found printed at the side of the sections in an Act. They
purport to summarise the effect of the sections and have sometimes be used as
an aid to interpretation.

Interpretation It is common to find in statutes “definitions” of certain words and expressions

Clauses used elsewhere in the body of the statute. The object of such a definition is to
avoid the necessity of frequent repetitions in describing all the subject-matter to
which the word or expression so defined is intended to apply. When a word has
been defined in the interpretation clause, prima facie that definition governs
whenever that word is used in the body of the statute.
Proviso The proper function of a proviso is to except and to deal with a case which would
otherwise fall within the general language of the main enactment, and its effect is
confined to the case

Illustrations Illustrations attached to sections are part of the statute and they are useful so far
as they help to furnish same indication of the presumable intention of the
legislature.

Explanation An explanation is at times appended to a section to explain the meaning of words

contained in the section. It becomes a part and parcel of the enactment.

Schedules The schedules form a part of the statute and must be read together with it for all
purposes of construction. Schedules are added in any statue giving details of
certain things which a section refers. This avoids making a section unnecessary
lengthy. But if there is any conflict between the enactment / provisions and
schedule, the enactment shall prevail.
[Ramchand Textile v. Sales Tax Officer]
statement of The fact that the Parliament has passed the provisions of the statement of objects
objects and and reasons gives sanction to them and thus they are a valid aid in the
reasons interpretation of provisions.

3.6
External Aids in Interpretation
Parliamentary Court is entitled to take into account “such external or historical facts as may be
History necessary to understand the subject-matter of the statute”, or to have regard to
“the surrounding circumstances” which existed at the time of passing of the
statute.

Historical facts It has already been established that the court is entitled to take into account such
and external or historical facts as may be necessary to understand the subject matter
Circumstances of the statute.

Reference to The report of a Select Committee or other Committee on whose report an

Reports of enactment is based, can be looked into “so as to see the background against
Committees which the legislation was enacted

Reference to It has already been stated that a statute must be read as a whole as words are to
other Statutes be understood in their context. Extension of this rule of context, permits
reference to other statutes in pari materia, i.e. statutes dealing with the same
subject matter or forming part of the same system.
pari materia: means dealing with same matter. Statutes are in pari material when
the subject matter of the statutes are same or similar. It is not that the two statue
should be identical before considering one to be pari materia with others.
Dictionaries When a word is not defined in the Act itself, it is permissible to refer to
dictionaries to find out the general sense in which that word is understood in
common parlance.

Use of Foreign Use of foreign decisions of countries following the same system of jurisprudence
Decisions as ours and rendered on statutes in pari-materia has been permitted by practice
in Indian Courts.

Public policy The statues are intended to accord with the established principles of public policy
Therefore, if legislation lends itself to double interpretation, the interpretation
that achieves this objective should be preferred.

INTERPRETATION OF THE IMPORTANT TERMS

INTERPRETATION OF THE IMPORTANT TERMS

NOTWITHSTANDING

A provision containing the words ‘notwithstanding’ is generally termed as ‘non obstane clause’.
The provision containing the word ‘notwithstanding’ has an over-riding effect on the other
provision, i.e. such provision shall prevail over the other provision, in other word, it there is any
inconsistency or departure between the non obstane clause and onother provision, it is the non
obstane clause which will prevail.

SUBJECT TO
3.7
A provision containing the word ‘subject to’ gives an overriding effect to the other provision,
i.e., other provision shall prevail over such provision in case of any inconsistency. Thus, the
effect of a provision containing the word ‘notwithstanding’ is opposite to a provision containing
WITHOUT PREJUDICE

An expression containing the word’ without prejudice to the generality of indicates that
anything contained in the provision following such words is not intended to cut down the
generality of the meaning of the preceding provision.

3.8
 ADMINISTRATIVE LAW
INTRODUCTION
Administrative law is that branch of law that deals with powers, functions and responsibilities of
various organs of the state. It controls the executive branch and makes sure that it deals fairly with
public.

There is no single universal definition of ‘administrative law’ because it means different

things to different theorists.

According to Albert Venn Dicey, the great Ivor Jennings defined administrative law
British constitutional scholar, administrative as the law relating to administration. It
law relates to that portion of a nation’s legal determines the organization, powers
system which determines the legal status and duties of administrative authorities.
and liabilities of all state officials, which This formulation is too broad and general
defines the rights and liabilities of private as it does not differentiate between
individuals in their dealings with public administrative and constitutional law. It
officials, and which specifies the procedure excludes the manner of exercise of
by which those rights and liabilities are powers and duties.
enforced

Need for Administrative Law

The modern state typically has three organs- legislative, executive and judiciary. Traditionally, the
legislature was tasked with the making of laws, the executive with the implementation of the laws
and judiciary with the administration of justice and settlement of disputes.

However, this traditional demarcation of role has been found wanting in meeting the challenges of
present era. The legislature is unable to come up with the required quality and quantity of
legislations because of limitations of time, the technical nature of legislation and the rigidity of their
enactments. The traditional administration of justice through judiciary is technical, expensive and
dilatory. The states have empowered their executive (administrative) branch to fill in the gaps of
legislature and judiciary. This has led to all pervasive presence of administration in the life of a
modern citizen. In such a context, a study of administrative law assumes great significance.

The ambit of administration is wide and embraces following elements within its ambit:-

1. It makes policies,

2. It executes, administers and adjudicates the law

3. It exercises legislative powers and issues rules, bye- laws and orders of a general nature.4.1
SOURCES OF ADMINISTRATIVE LAW
There are four principal sources of administrative law in India. They are:

Constitution of India

Act/ Statues

Ordinances, administrative directions, notifications and circulars

Judicial decisions

Sources of Administrative Law

Constitution of India: It is the primary source of administrative law. Article 73 of the

Constitution provides that the executive power of the Union shall extend to matters with
respect to which the Parliament has power to make laws. Similar powers are provided to
States under Article 62. Indian Constitution has not recognized the doctrine of separation
of powers in its absolute rigidity. The Constitution also envisages tribunals, public sector
and government liability which are important aspects of administrative law.

Acts/ Statutes: Acts passed by the central and state governments for the maintenance of
peace and order, tax collection, economic and social growth empower the administrative
organs to carry on various tasks necessary for it. These Acts list the responsibilities of the
administration, limit their power in certain respects and provide for grievance redressal
mechanism for the people affected by the administrative action.

Ordinances, Administrative directions, Notifications and Circulars: Ordinances are

issued when there are unforeseen developments and the legislature is not in session and
therefore cannot make laws. Ordinances allow the administration to take necessary steps
to deal with such developments. Administrative directions, notifications and circulars are
issued by the executive in the exercise of power granted under various Acts.

Judicial decisions: Judiciary is the final arbitrator in case of any dispute between various
wings of government or between the citizen and the administration. In India, we have
the supremacy of Constitution and the Supreme Court is vested with the authority to
interpret it. The courts through their various decisions on the exercise of power by the
administration, the liability of the government in case of breach of contract or tortuous
acts of Governments servants lay down administrative laws which guide their future
conduct.

ADMINISTRATIVE DISCRETION
4.2
It means the freedom of an administrative authority to choose from amongst various alternatives
but with reference to rules of reason and justice and not according to personal whims. The exercise
of discretion should not be arbitrary, vague and fanciful, but legal and regular.

The government cannot function without the exercise of some discretion to its officials. It is
necessary because it is humanly impossible to lay down a rule for every conceivable eventuality that
may arise in day-to-day affairs of the government.

It is, however, equally true that discretion is prone to abuse. Therefore, there needs to be a system
in place to ensure that administrative discretion is exercised in the right manner

JUDICIAL CONTROL OVER ADMINISTRATIVE ACTIONS

The object of judicial control is to ensure that the authority does not abuse/misuse its powers and
the individual receives just and fair treatment. Any country which claims to have a rule of law
cannot have a government authority which has no checks on its power. Administrative organs have
wide powers and their exercise of discretion can be vitiated by number of factors. Therefore, the
government must also provide for proper redressal mechanism. For India, it is of special significance
because of the proclaimed objectives of Indian polity to build a socialistic pattern of society that has
led to huge proliferation of administrative agencies and processes.

In India the modes of judicial control of administrative action can be conveniently grouped
into three heads:

A. Constitutional
B. Statutory
C. Equitable/ Ordinary

(A) Constitutional
The Constitution of India is Supreme and all the organs of the state derive their existence from
it. Indian Constitution expressly provides for judicial review. If judiciary finds out that any law
violates the constitutional requirement, the court has to declare it unconstitutional and
therefore void.

Judicial Review
The biggest check over administrative action is the power of judicial review. Judicial review is
the authority of Courts to declare void the acts of the legislature and executive, if they are
found in violation of provisions of the Constitution. Judicial Review is the power of the highest
Court of a jurisdiction to invalidate on Constitutional grounds, the acts of other Government
agency within that jurisdiction.
It is the power of both SC and HC to determine the validity of the legislature and executive
actions of the government.
Constitution is considered as Supreme law and all other laws follows from it. Public authorities
are bound by supreme law i.e constitution and are bound to act in good faith.

4.3
CASE LAWS
S.NO CASE NAME PROVISIONS
1 Mansukhlal Vithaldas while exercising the power of judicial review it does sit as
Chauhan v State of a court of appeal but merely reviews the manner in which
Gujarat, AIR 1997 the decision was made, particularly as the court lacks the
expertise to correct the administrative decision and if a
review of the administrative decision is permitted, it will
be substituting its own decision which itself may be
fallible. The court is to confine itself to the question of
legality.

Concerns during Judicial Review:

• whether a decision-making authority exceeding its
power?
• committed an error of law?
• committed a breach of rules of natural justice?
• reached a decision which no reasonable tribunal
would have reached?
• abused its power?

Airport authority of India vs. Centre for Aviation Policy, Safety and Research and Ors.
In this case SC observed that the Court has erred in interfering with the administration/ policy
decision of the tender making authority in exercise of powers under Article 226 of the
constitution of India even deciding it on merits. The Court observed that:
“As per the settled position of law, setting of terms and conditions of invitation to tender are
within the ambit of the policy decision of the tender making authority and as such are not open
to judicial scrutiny unless they are arbitrary, discriminatory or malafide. In the matter of
formulating conditions of a tender document and awarding a contract, greater latitude is
required to be conceded to the State authorities unless the action of the tendering authority is
found to be malicious and a misuse of its statutory powers, interference by courts is not
warranted.”

JUDICIAL REVIEW IS EXCERCISED AT TWO STAGES

At the stages of delegation of At the stage of exercise of

discretion administrative discretion

1. Judicial review at the stage of delegation of discretion

The courts exercise control over delegation of discretionary powers to the administration
by adjudicating upon the constitutionality of the law under which such powers are
delegated with reference to the fundamental rights enunciated in Part III of the Indian
Constitution. Therefore, if the law confers vague and wide discretionary power on any
administrative authority, it may be declared ultra vires Article 14, Article 19 and other
provisions of the Constitution.

4.4
Administrative Discretion and Article 14
Article14 of the Constitution of India provides for equality before law. It prevents arbitrary
discretion being vested in the executive. Article 14 strikes at arbitrariness in state action
and ensures fairness and equality of treatment. Right to equality affords protection not only
against discretionary laws passed by legislature but also prevents arbitrary discretion being
vested in the executive. Often executive or administrative officer of government is given
wide discretionary power.

In number of cases, the statute has been challenged on the ground that it conferred on an
administrative authority wide discretionary powers of selecting persons or objects
discriminately and therefore, it violated Article 14.

The Court in determining the question of validity of such statute examines whether the
statute has laid down any principle or policy for the guidance of the exercise of discretion
by the government in the matter of selection or classification. The Court will not tolerate
the delegation of uncontrolled power in the hands of executive to such an extent as to
enable it to discriminate.

CASE LAW
S.NO CASE NAME PROVISIONS
1 State of West Bengal v. it was held that in so far as the Act empowered the
Anwar Ali, Government to have cases or class of offences tried
by special courts, it violated Article 14 of the
Constitution. The court further held the Act invalid
as it laid down “no yardstick or measure for the
grouping either of persons or of cases or of
offences” so as to distinguish them from others
outside the purview of the Act. Moreover, the
necessity of “speedier trial” was held to be too
vague, uncertain and indefinite criterion to form
the basis of a valid and reasonable classification.

Administrative Discretion and Article 19

Article 19 guarantees certain freedoms to the citizens of India, but they are not absolute.
Reasonable restrictions can be imposed on these freedoms under the authority of law. The
reasonableness of the restrictions is open to judicial review. These freedoms can also be
afflicted by administrative discretion.

A number of cases have come up involving the question of validity of law conferring
discretion on the executive to restrict the right under Article19(1)(b) and 19(1)(e) (the right
to assemble peacefully and without arms and the right to reside and settle in any part of
the territory of India). The government has conferred powers on the executive through a
number of laws to extern a person from a particular area in the interest of peace and
safety.

4.5
 2. Judicial review at the stage of exercise of discretion

No law can clothe administrative action with a complete finality even if the law says
so, for the courts always examine the ambit and even the mode of its exercise to
check its conformity with fundamental rights. The courts in India have developed
various formulations to control the exercise of administrative discretion, which can
be grouped under two broad heads, as under:
a) Authority has not exercised its discretion properly- ‘abuse of discretion’.
b) Authority is deemed not to have exercised its discretion at all- ‘non-application
of mind.

a) ABUSE OF DISCRETION

Mala fides: If the discretionary power is exercised by the authority with bad faith
or dishonest intention, the action is quashed by the court. Malafide exercise of
discretionary power is always bad and taken as abuse of discretion. Malafide
(bad faith) may be taken to mean dishonest intention or corrupt motive. In
relation to the exercise of statutory powers it may be said to comprise dishonesty
(or fraud) and malice. A power is exercised fraudulently if its repository intends to
achieve an object other than that for which he believes the power to have been
conferred. The intention may be to promote another public interest or private
interest.
Tata Cellular v. Union of India
the SC has held that the right to refuse the lowest or any other tender is always
available to the government but the principles laid down in Article 14 of the
Constitution has to be kept in view while accepting or refusing a tender. There
can be no question of infringement of Article 14 if the government tries to get the
best person or best quotation. The right to choose cannot be considered to be an
arbitrary power. Of course, if the said power is exercised for any collateral
purpose the exercise of that power will be struck down.
• Irrelevant considerations: If a statute confers power for one purpose, its use
for a different purpose is not regarded as a valid exercise of power and is likely
to be quashed by the courts. If the administrative authority takes into account
factors, circumstances or events wholly irrelevant or extraneous to the purpose
mentioned in the statute, then the administrative action is vitiated.
• Leaving out relevant considerations: The administrative authority exercising
the discretionary power is required to take into account all the relevant facts. If it
leaves out relevant consideration, its action will be invalid.
• Arbitrary orders: The order made should be based on facts and cogent
reasoning and not on the whims and fancies of the adjudicatory authority.
• Improper purpose: The discretionary power is required to be used for the
purpose for which it has been given. If it is given for one purpose and used for
another purpose it will amount to abuse of power.
• Colourable exercise of power: Where the discretionary power is exercised by
the authority on which it has been conferred ostensibly for the purpose for which

4.6
 it has been given but in reality for some other purpose, it is taken as colourable
exercise of the discretionary power and it is declared invalid.
• Non-compliance with procedural requirements and principles of natural
justice: If the procedural requirement laid down in the statute is mandatory and
it is not complied, the exercise of power will be bad. Whether the procedural
requirement is mandatory or directory is decided by the court. Principles of
natural justice are also required to be observed.
• Exceeding jurisdiction: The authority is required to exercise the power within
the limits of the statute. Consequently, if the authority exceeds this limit, its
action will be held to be ultra vires and, therefore, void.

b) NON-APPLICATION OF MIND

• Acting under dictation: Where the authority exercises its discretionary power
under the instructions or dictation from superior authority it is taken as non-
exercise of power by the authority and its decision or action is bad. In such
condition the authority purports to act on its own but in substance the power is
not exercised by it but by the other authority. The authority entrusted with the
powers does not take action on its own judgment and does not apply its mind.
• Self restriction: If the authority imposes fetters on its discretion by announcing
rules of policy to be applied by it rigidly to all cases coming before it for decision,
its action or decision will be bad. The authority entrusted with the discretionary
power is required to exercise it after considering the individual cases and the
authority should not imposes fetters on its discretion by adopting fixed rule of
policy to be applied rigidly to all cases coming before it.
• Acting mechanically and without due care: Non-application of mind to an
issue that requires an exercise of discretion on the part of the authority will
render the decision bad in law.

(A) STATUTORY

The method of statutory review can be divided into two parts

Statutory appeal: There are some Acts, Reference to the High Court or statement of case: There are
which provide for an appeal from several statutes, which provide for a reference or statement of
statutory tribunal to the High Court on case by an administrative tribunal to the High Court. Under
point of law. e.g. Section 30 of Workmen’s Section 256 of the Income-tax Act, 1961 where an application is
Compensation Act, 1923. made to the Tribunal by the assessee and the Tribunal refuses
to state the case the assessee may apply to the High Court and
if the High Court is not satisfied about the correctness of the
decision of the Tribunal, it can require the Tribunal to state the
case and refer it to the Court.

4.7
 (B) ORDINARY OR EQUITABLE
Apart from the remedies as discuss above there are certain ordinary remedies, which are available
to person against the administration. These remedies are also called equitable remedies and include:

1. Injunction
An injunction is a preventive remedy. It is a judicial process by which one who has invaded
or is threatening to invade the rights of another is restrained from continuing or
commencing such wrongful act. In India, the law with regard to injunctions has been laid
down in the Specific Relief Act, 1963.

INJUCTION MAY BE PROHIBITORY OR MANDATORY.

Prohibitory Injunction: Mandatory injunction: When to prevent the breach of an

obligation it is necessary to compel the performance of
Prohibitory injunction forbids the defendant
certain acts which the court is capable of enforcing, the court
to do a wrongful act, which would infringe the
may in its discretion grant an injunction to prevent the
right of the plaintiff. A prohibitory injunction
breach complained of and also to compel performance of the
may be interlocutory or temporary injunction
requisite acts. The mandatory injunction may be taken as a
or perpetual injunction.
command to do a particular act to restore things to their
former condition or to undo, that which has been done. It
prohibits the defendant from continuing with a wrongful act
and also imposes duty on him to do a positive act.

Interlocutory or temporary injunction: Perpetual injunction: A perpetual injunction

Temporary injunctions are such as to continue is granted at the conclusion of the
until a specified time or until the further order proceedings and is definitive of the rights of
of the court. (Section 37 for the Specific Relief the parties, but it need not be expressed to
Act). It is granted as an interim measure to have perpetual effect, it may be awarded
preserve status quo until the case is heard and for a fixed period or for a fixed period with
decided. leave to apply for an extension or for an
indefinite period terminable when
Interlocutory or temporary injunction:
conditions imposed on the defendant have
Temporary injunctions are such as to continue been complied with; or its operation may be
until a specified time or until the further order suspended for a period during which the
of the court. (Section 37 for the Specific Relief defendant is given the opportunity to
Act). It is granted as an interim measure to comply with the conditions imposed on him,
preserve status quo until the case is heard and the plaintiff being given leave to reply at the
decided. end of that time

4.8
2. Declaratory Action
In some cases where wrong has been done to a person by an administrative act, declaratory
judgments may be the appropriate remedy. Declaration may be taken as a judicial order issued
by the court declaring rights of the parties without giving any further relief. Thus a declaratory
decree declares the rights of the parties. In such a decree there is no sanction, which an ordinary
judgment prescribes against the defendant. By declaring the rights of the parties it removes the
existing doubts about the rights and secures enjoyment of the rights. It is an equitable remedy. It
is a discretionary remedy and cannot be claimed as a matter of right.

3. Action for damages

If any injury is caused to an individual by wrongful or negligent acts of the Government servant,
the aggrieved person can file suit for the recovery of damages from the Government concerned.

PRINCIPLES OF NATURAL JUSTICE

One of the most important principles in the administration of justice is that justice must not only
be done but also seen to be done. This is necessary to inspire confidence in the people in the
judicial system.

In India, the principles of natural justice are derived from Article 14 and 21 of the Constitution.
The courts have always insisted that the administrative agencies must follow a minimum of fair
procedure, i.e. principles of natural justice. The concept of natural justice has undergone a
tremendous change over a period of time.

In the past, it was thought that it included just two rules: rule against bias and rule of fair
hearing. In the course of time many sub-rules were added.

1. Rule against bias (nemo judex in causa sua): According to this rule no person should be
made a judge in his own cause. Bias means an operative prejudice whether conscious or
unconscious in relation to a party or issue. It is a presumption that a person cannot take an
objective decision in a case in which he has an interest.

4.9
 BIAS CAN BE OF THE FOLLOWING THREE TYPES:

Pecuniary bias: The judicial approach is unanimous on the point that any financial interest of
the adjudicatory authority in the matter, howsoever small, would vitiate the adjudication.
Thus, a pecuniary interest, howsoever insufficient, will disqualify a person from acting as a
Judge.

Personal bias: There are number of situations which may create a personal bias in the
Judge’s mind against one party in dispute before him. He may be friend of the party, or
related to him through family, professional or business ties. The judge might also be hostile
to one of the parties to a case. All these situations create bias either in favour of or against
the party and will operate as a disqualification for a person to act as a Judge.

Subject matter bias: A judge may have a bias in the subject matter, which means that he
himself is a party, or has some direct connection with the litigation. To disqualify on the
ground of bias there must be intimate and direct connection between adjudicator and the
issues in dispute. To vitiate the decision on the ground of bias as for the subject matter
there must be real likelihood of bias.

Such bias can be classified into four categories.

1) Partiality or connection to the issue

2) Departmental bias
3) Prior utterances and pre-judgment of issues
4) Acting under dictation

2. Rule of fair hearing (audi alteram partem): The second principle of natural justice is that no
one should be condemned unheard. It requires that both sides should be heard before passing
the order. This rule implies that a person against whom an order to his prejudice is passed
should be given information as to the charges against him and should be given opportunity to
submit his explanation thereto.

FOLLOWING ARE THE INGREDIENTS OF THE RULE OF FAIR HEARING:

a) Right to notice: Hearing starts with the notice by the authority concerned to the affected
person. Consequently, notice may be taken as the starting point of hearing. Unless a person
knows the case against him, he cannot defend himself. Therefore, before the proceedings start,
the authority concerned is required to give to the affected person the notice of the case against
him. The proceedings started without giving notice to the affected party, would violate the
principles of natural justice.

b) Right to present case and evidence: The party against whom proceedings have been initiated
must be given full opportunity to present his or her case and the evidence in support of it. The
reply is usually in the written form and the party is also given an opportunity to present the case
orally though it is not mandatory.

4.10
c) Right to rebut adverse evidence: For the hearing to be fair the adjudicating authority is not only
required to disclose to the person concerned the evidence or material to be taken against him
but also to provide an opportunity to rebut the evidence or material.

1. Cross-examination: Examination of a witness by the adverse party is called cross-examination.

The main aim of cross-examination is the detection of falsehood in the testimony of the
witness. The rules of natural justice say that evidence may not be read against a party
unless the same has been subjected to cross-examination or at least an opportunity has
been given for cross-examination.

2. Legal Representation: Ordinarily the representation through a lawyer in the administrative

adjudication is not considered as an indispensable part of the fair hearing.

d) Disclosure of evidence: A party must be given full opportunity to explain every material that is
sought to be relied upon against him. Unless all the material (e.g. reports, statements,
documents, evidence) on which the proceeding is based is disclosed to the party, he cannot
defend himself properly.

e) Speaking orders: Reasoned decision may be taken to mean a decision which contains reason in
its support. When the adjudicatory bodies give reasons in support of their decisions, the
decisions are treated as reasoned decision. It is also called speaking order. In such condition the
order speaks for itself or it tells its own story. Reasoned decision introduces a check on the
administrative powers because the decisions need to be based on cogent reasons.

In Sunil Batra v. Delhi Administration AIR 1980 SC 1579, the Supreme Court while interpreting
section 56 of the Prisons Act, 1894, observed that there is an implied duty on the jail
superintendent to give reasons for putting bar fetters on a prisoner to avoid invalidity of that
provision under Article 21 of the Constitution. Thus the Supreme Court laid the foundation of a
sound administrative process requiring the adjudicatory authorities to substantiate their order
with reasons.

EXCEPTION TO NATURAL JUSTICE

Though the normal rule is that a person who is affected by administrative action is entitled to
claim natural justice, that requirement may be excluded under certain exceptional
circumstances.

1. Statutory Exclusion: The principle of natural justice may be excluded by the statutory
provision. Where the statute expressly provides for the observance of the principles of
natural justice, the provision is treated as mandatory and the authority is bound by it. Where
the statute is silent as to the observance of the principle of natural justice, such silence is
taken to imply the observance thereto. However, the principles of natural justice are not
incapable of exclusion. The statute may exclude them. When the statute expressly or by
necessary implication excludes the application of the principles of natural justice the courts
do not ignore the statutory mandate

2. Emergency: In exceptional cases of urgency or emergency where prompt and preventive

action is required the principles of natural justice need not be observed.

4.11
 In Maneka Gandhi v. Union of India AIR 1978 SC 597 the Supreme Court observed that a
passport may be impounded in public interest without compliance with the principles of
natural justice but as soon as the order impounding the passport has been made, an
opportunity of post decisional hearing, remedial in aim, should be given to the person
concerned. In the case, it has also been held that “public interest” is a justiciable issue and
the determination of administrative authority on it is not final.

3. Interim disciplinary action: The rules of natural justice are not attracted in the case of
interim disciplinary action. For example, the order of suspension of an employee pending an
inquiry against him is not final but interim order and the application of the rules of natural
justice is not attracted in the case of such order

In Abhay Kumar v. K. Srinivasan AIR 1981 Delhi 381 an order was passed by the college
authority debarring the student from entering the premises of the college and attending the
class till the pendency of a criminal case against him for stabbing a student. The Court held
that the order was interim and not final. It was preventive in nature. It was passed with the
object to maintain peace in the campus. The rules of natural justice were not applicable in
such case.

4. Academic evaluation: Where a student is removed from an educational institution on the

grounds of unsatisfactory academic performance, the rule of natural justice can be ignored.

5. Impracticability: Where the authority deals with a large number of person it is not
practicable to give all of them opportunity of being heard and therefore in such condition
the court does not insist on the observance of the rules of natural justice. In P. Radhakrishna
v. Osmania University, AIR 1974 AP 283, the entire M.B.A. entrance examination was
cancelled on the ground of mass copying. The court held that it was not possible to give all
the examinees the opportunity of being heard before the cancellation of the examination.

EFFECT OF FAILURE OF NATURAL JUSTICE

When an authority required to observe natural justice in making an order fails to do so, should the
order made by it be regarded as void or voidable?

Generally speaking, a voidable order means that the order was legally valid at its inception, and it
remains valid until it is set aside or quashed by the courts, that is, it has legal effect up to the time it
is quashed.

On the other hand, a void order is no order at all from its inception; it is a nullity and void ab initio. In
most cases a person affected by such an order cannot be sure whether the order is really valid or not
until the court decided the matter.

Therefore, the affected person cannot just ignore the order treating it as a nullity. He has to go to a
court for an authoritative determination as to the nature of the order is void. For example, an order
challenged as a nullity for failure of natural justice gives rise to the following crucial question: Was
the authority required to follow natural justice?

Usually, a violable order cannot be challenged in collateral proceedings. It has to be set aside by the
court in separate proceedings for the purpose. Suppose, a person is prosecuted criminally for
infringing an order. He cannot then plead that the order is voidable. He can raise such a plea if the

4.12
order is void. In India, by and large, the judicial thinking has been that a quasi-judicial order made
without following natural justice is void and nullity.

CASE LAWS

S.NO CASE NAME PROVISIONS

1 Nawabkhan v. Section 56 of the Bombay Police Act, 1951 empowers the Police
Gujarat Commissioner to extern any undesirable person on certain grounds
set out therein. An order passed by the Commissioner on the
petitioner was disobeyed by him and he was prosecuted for this in a
criminal court. During the pendency of his case, on a writ petition
filed by the petitioner, the High Court quashed the internment order
on the ground of failure of natural justice. The trial court then
acquitted the appellant. The government appealed against the
acquittal and the High Court convicted him for disobeying the order.
The High Court took the position that the order in question was not
void ab initio; the appellant had disobeyed the order much earlier
than date it was infringed by him; the High Court’s own decision
invalidating the order in question was not retroactive and did not
render it a nullity from its inception but it was invalidate only from
the date the court declared it to be so by its judgment.
However, the matter came in appeal before the Supreme Court,
which approached the matter from a different angle. The order of
internment affected a fundamental right (Article 19) of the appellant
in a manner which was not reasonable. The order was thus illegal and
unconstitutional and hence void. The court ruled definitively that an
order infringing a constitutionally guaranteed right made without
hearing the party affected, where hearing was required, would be
void ab initio and ineffectual to bind the parties from the very
beginning and a person cannot be convicted for non observance of
such an order. The Supreme Court held that where hearing is
obligated by statute which affects the fundamental right of a citizen,
the duty to give the hearing sound in constitutional requirement and
failure to comply with such a duty is fatal.

LIABILITY OF GOVERNMENT
The liability of the government can either be contractual or tortious.

LIABILITY OF STATE OR GOVERNMENT IN CONTRACT

The Constitution of India allows the central and the state governments to enter into contracts.
According to its provisions a contract with the Government of the Union or state will be valid and
binding only if the following conditions are followed:

1. The contract with the Government must be made in the name of the President or the
Governor, as the case may be.
2. The contract must be executed on behalf of the President or the Governor of the State as
the case may be. The word executed indicates that a contract with the Government will be
valid only when it is in writing.
3. A person duly authorized by the President or the Governor of the State, as the case may

4.13
 be, must execute the contract
4. Article 299 (2) of the Constitution makes it clear that neither the President nor the
Governor shall be personally liable in respect of any contract or assurance made or
executed for the purposes of the Constitution or for the purposes of any enactment
relating to the Government of India. Subject to the provisions of Article 299 (1), the other
provisions of the general law of contract apply even to the Government contract.
5. The Supreme Court has made it clear that the provisions of Article 299 (1) are mandatory
and therefore the contract made in contravention thereof is void and therefore cannot be
ratified and cannot be enforced even by invoking the doctrine of estoppel.

QUASI CONTRACTUAL LIABILITY

According to section 70 of the Indian Contracts Act, 1872, where a person lawfully does anything for
another person or delivers anything to him such other person enjoys the benefit thereof, the latter is
bound to make compensation to the former in respect of or to restore, the thing so done or
delivered. If the requirements of section 70 of the Indian Contract Act are fulfilled, even the
Government will be liable to pay compensation for the work actually done or services rendered by
the State.
SUIT AGAINST STATE IN TORTS

A tort is a civil wrong arising out of breach of a civil duty or breach of non-contractual obligation and
the only remedy for which is damages.

DAMAGES- Compensation is more important for the aggrieved party than punishment, so the state
is vicariously liable for wrong act of servant.

LIABLITY OF PUBLIC SERVANT

If public servant acted beyond its official power and illegal then the government will not be
vicariously liable for such act of servant in this situation servant will be personally liable.

LIABILITY OF PUBLIC CORPORATION

Corporation made under any special act of Parliament or State Legislative assembly is public
corporation.
It has a separate legal existence.
It is independent from government and its employee also not considered as government
employee, so government will not be labile for any act done by employee of public corporation.

RULE OF LAW
Rule of law was developed by British Jurist A.V. Dicey. He derived this term from French principle ‘La
principle de legalite’ which means the principle of legality. It states that the government should be
governed by rule of law instead of rule of individual. Any dictator or one particular person should not
govern the functioning of any nation. Each country should follow legality of law.

THREE MAJOR PRINCIPLES

1. SUPREMACY OF LAW: it means that ordinary or regular laws shall remain supreme. Supremacy
here means absolute and pre-dominance of regular laws as against arbitrary or wide discretionary
powers.

4.14
2. EQUALITY BEFORE THE LAW: equal must be treated equally. it states that there should be
equality between the people. All classes must be treated equally subject to ordinary law of land as
administered by the ordinary law courts. It provides that all are equal before the law and everyone
will be subjected to same law.
3. THE PREDOMINANCE OF LEGAL SPIRIT: Legal spirit refers to the judicial precedents upon any
disputes raised by any individual. The judgement given in any case will be legal spirit of that
particular case. It basically refers to the law as set by the precedents that have evolved over time.

RULE OF LAW IN INDIA

Rule of law is embedded in constitution in multiple parts. Important aspects are as under:

i. Preamble – it upholds the basic structure of the constitution. It talks about the justice, equality,
liberty and dignity to all individuals.
ii. Part III - fundamental rights – these implies a duty on the state towards ensuring the welfare of
the citizens. It helps to keep a check on the actions of administrative authorities and legislature.
iii. Part iv - directive principles of state policy – these are the basic guidelines to be followed by all
especially the government of India.

4.15
 LAW RELATING TO TORTS
INTRODUCTION
• It is unwritten law not made by the parliament of India
• This law is more popular in England rather than in India

The word ‘tort’ is a French equivalent of English word ‘wrong’. The word tort is derived from Latin
language from the word Tortum. Thus, simply stated ‘tort’ means wrong. But every wrong or wrongful
act is not a tort. Tort is really a kind of civil wrong as opposed to criminal wrong. Wrongs, in law, are
either public or private.

TWO KINDS OF WRONG

CIVIL WRONG CRIMINAL WRONG

PRIVATE WRONG PUBLIC WRONG

Section 2(m) of the Limitation Act, 1963, states: “Tort means a civil wrong which is not exclusively a
breach of contract or breach of trust.”

Thus, two important elements which can be derived from the above discussion are:-

1. A tort is a species of civil injury of wrong as opposed to a criminal wrong,

2. Every civil wrong is not a tort. Such a wrong should result in legal damage.

For e.g., Glasgow vs. Taylor, the corporation failed to put a proper fence in a public park to keep
away the children from poisonous trees. A child plucked a fruit from one such tree, ate it and died.
The corporation was held liable for such omission.

kinds of tortious
liability

liability against
strict or absolute vicarious liability
civil wrong (in vicarious liability
liability of the state
general)

5.1
LIABILITY AGAINST CIVIL WRONG (IN GENERAL)

wrongs

moral wrongs - not actionable legal wrongs - actionable

civil wrong criminal wrong

tort

breach of contract

breach of trust

breach of equitable obligations

General conditions of liability for a tort

In general, a tort consists of some Act OR Omission done by the defendant whereby he has without
just cause or excuse caused some harm to plaintiff. To constitute a tort, these must be:-

❖ A wrongful Act or Omission of the defendant

❖ The wrongful act must result in causing legal damage to another and,
❖ The wrongful act must be of such a nature a nature as to give rise to a legal remedy.

Wrongful act + Legal damage + Legal Remedy = TORT

Wrongful Act:

The act complained of, should under the circumstances, be legally wrongful as regards the party
complaining.

LEGAL DAMAGES

It means a damage which the law recognizes as such there should be injury to the party.

CONCEPT OF DEMNUM SINE INJURIA AND INJURIA SINE DAMNUM

• DAMNUM MEANS = Damage, Loss or Harm In Respect Of Money, Comfort, Health Etc
• SINE MEANS = WITHOUT
• INJURIA MEANS = Infringement of a Right Conferred By Law on the Plaintiff

TWO MAXIMS NAMELY

5.2
 A. DAMNUM SINE INJURIA
The maxim means that in a given case, a man may have suffered damage and yet have no
action in tort, because the damage is not to an interest protected by the law of torts.
Therefore, causing damage, however substantial to another person is not actionable in law
unless there is also a violation of a legal right of the plaintiff. (Gloucester Grammar School
Case)

Thus, if I own a shop and you open a shop in the neighbourhood, as a result of which I lose
some customers and my profits fall off, I cannot sue you for the loss in profits, because you
are exercising your legal right.

B. INJURIA SINE DAMNUM

It means injury without damage, i.e., where there is no damage resulted yet it is an injury or
wrong in tort, i.e. where there is infringement of a legal right not resulting in harm but
plaintiff can still sue in tort. Thus the act of trespassing upon another’s land is actionable
even though it has not caused the plaintiff even the slightest harm. (Ashby v. White Case)

LEGAL REMEDY

This means that to constitute a tort, the wrongful act must come under the law i.e., there should be
remedies to the sufferer against the tortfeaser (defendant). There are two types of remedies i.e.,
Judicial remedies and extra judicial remedies.

remedies in tort

judicial remedies extra- judicial remedies

injunction self- defence

damages / compensation prevention of trespass

specific restitution of
re-entry on land
property

abatement of nuisance

recaption

Judicial remedies
Damages – when the plaintiff’s right is violated by the defendant, the court will grant the plaintiff
damages, which are compensation for such infringement of the right for the loss they have suffered.
Only those damages can be recovered which are directly the result of act of defendant. It is based on
legal maxim In Jure Non Remota Causa Sed Proxima Spectator which means law considers the direct
or immediate cause and not the remote one.

5.3
Injunction – it is an order of the Court redirecting the commission, omission or amendments to an
Act. It orders a person to do an act, to not to do an act or correct his wrongful act. It is done entirely
upon the discretion of the Court.

Specific Restitution of Property – restitution is the process of returning property to its rightful
owner. A person is entitled to the restitution of his property when it has been unfairly taken away
from him.

Extra judicial remedies

Self-defence – person can use reasonable force to protect himself or against any person who uses
force unlawfully.

Prevention of trespass- authorize person may use reasonable force to prevent trespass entering or to
eject them.

Re-entry on land – person who wrongfully disposed of the land may retake possession of land if he
can do so in peaceful and reasonable manner.

Recaption of goods - person is entitled to take goods peacefully or by use of reasonable force against
the person who has wrongfully taken or detained it.

Distress Damage Feasant- An occupier may lawfully sieze anything which are unlawfully on his land
doing damage there and detain them until compensation is paid for the damage. The right is known
as that of distress damage feasant – to distrain things which are doing damage.

Abatement of nuisance- occupier of land may lawfully abate(terminate)any lawful nuisance

injuriously affecting it. Thus, he may cut overhanging branches as spreading roots from his neighbour’s
trees but:

a. Upon giving notice

b. By choosing the least mischievous method
c. Avoiding unnecessary damages

These remedies could be self-defence. For e.g., if “A” finds a drunken stranger in his room who has
no business to be there in it, and is thus a trespass, he (A) is entitled to get rid of him, if possible
without force but if that be not possible with such force as the circumstances of the case may warrant.

Mens Rea
How far a guilty mind of persons is required for liability for tort?

The General principle lies in the maxim “actus non facit reum nisi mens sit res” i.e. the act itself
creates no guilt in the absence of a guilty mind. It does not mean that for the law or Torts, the act
must be done with an evil motive, but simply means that mind must concur in the Act, the act must
be done either with wrongful intention or negligence.

KINDS OF TORTIOUS LIABILITY

5.4
Strict or Absolute Liability

In some torts, the defendant is liable even though the harm to the plaintiff occurred without intention
or negligence on the defendant’s part. i.e., the defendant is held liable without harm.

PRINCIPLES OF ABSOLUTE LIABILITY

It is the fundamental principle of law that

SIC UTERE TUO UT ALIENUM NON LEADAS MEANS:

(ENJOY YOUR OWN PROPERTY IN SUCH A MANNER AS NOT TO INJURE ANOTHER PERSONS)

But there are certain occasions and activities, by which there are chances of causing harm or injury to
the useful people.

TYPES OF LIABILITIES

STRICT LIABILITY ABSOLUTE LIABILITY

RYLAND V. FLETCHER OLEUM GAS LEAK CASE

IN ENGLAND IN INDIA

STRICT LIABILITY RULE IN RYLAND V. FLETCHER

The person who, for his own purpose, brings on his land and collects and keeps there anything likely
to do mischief if it escapes, must keep it in at his peril; and if he does not to do so is prima facie
answerable for all the damage which is the natural consequence of its escape.”

The Liability under this rule is strict and it is no defence that the thing escape without that persons
wilful act, default or negligence or that he had no knowledge of its existence.

CASE FACTS

The defendant was a mill owner, and he employed some independent contractors who were
apparently competent, to construct a reservoir on his land to provide water for his mill. In the course
of work the contractors came upon some old shafts and passages on the defendant’s land. They
communicated with the mines of the plaintiff, a neighbour of the defendant , although no one
suspected this, for the shafts appeared to be filled with earth. The contractors did not block them up,
and when the reservoir was filled the water from it burst through the old shafts and flooded the
plaintiff’s mines. It was found as a fact that the defendant had not been negligent, although the
contractors had been. But the House of Lords held the defendant liable.

5.5
On the basis of liability in this case rule propounded by the house of lord.

For the application of the rule therefore the following three essentials should be there:

(1) Some dangerous thing must have been brought by a person on his land.
(2) The thing thus brought or kept by a person on his land must escape.
(3) It must be non-natural use of land.

EXCEPTIONS TO THE RULE

The following exceptions to the rule have been recognized by RYLANDS V FLETCHER

• Default of the claimant

• Act of God
• Statutory Authority
• Consent of the claimant / plaintiff
• Act of third party.
• Damage due to natural use of land - example : building a swimming pool or water storage
tanks for domestic use

ABSOLUTE LIABILITY (NO EXCEPTION FROM ABSOLUTE LIABLITY)

This Rule laid down by Supreme Court of India in the OLEUM GAS LEAK CASE

Where an enterprise is engaged in a hazardous or inherently dangerous activity, the enterprise is

strictly and absolutely liable to compensate all those who are affected by the accident and such liability
is not subject to any exceptions.

The enterprise cannot escape liability by showing, it had taken all reasonable care and there was no
negligence on its part.

This principle, however, has been rarely applied since it was formulated.

CASE FACTS:

Shriram food and Fertilizers Industry a subsidiary of Delhi Cloth Mills Limited was producing caustic
and chlorine.

On December 4th and 6th 1985, a major leakage of oleum gas took place from one of the units of
Shriram Food and Fertilizers Limited in the heart of the capital city of Delhi which resulted in the death
of several persons that one advocate practicing in the Tis Hazari Courts died.

The leakage was caused by a series of mechanical and human errors. This leakage resulted from the
bursting of the tank containing oleum gas as a result of the collapse of the structure on which it was
mounted and it created a scare amongst the people residing in that area.

Hardly had the people got out of the shock of this disaster when, within two days, another leakage,
though this time a minor one took place as a result of escape of oleum gas from the joints of a pipe.

5.6
On 6th December, 1985 by the District Magistrate, Delhi under Section 133(1) of Cr.P.C, directed
Shriram that within two days Shriram should cease carrying on the occupation of manufacturing and
processing hazardous and lethal chemicals and gases including chlorine, oleum , super-chlorine,
phosphate, etc at their establishment in Delhi and within 7 days to remove such chemicals and gases
from Delhi.

At this juncture M.C.Mehta moved to the Supreme Court to claim compensation by filing a PIL for the
losses caused and pleaded that the closed establishment should not be allowed to restart.

VICARIOUS LIABILITY :-

Normally, the tortfeasor is liable for his tort. But in some cases, a person may be held liable for the
tort committed by another. This is known as vicarious liability in tort.

Principle of liability:

A person may be liable in respect of wrongful acts or omissions of another in ways as given under:

1. by ratification- having ratified through particular law, act or statute

2. by relation – through standing of one person to another by the relation they share

3. by abetment – having abetted any tortious act committed by others.

The common examples are:

1. Principal and Agent

Qui facit per alium facit per se – he who acts through another is acting himself, so that the act of the
agent is the act of the principal. (Lloyd v. Grace Smith and Co.)

2. Partners

For a tort committed by a partner in the ordinary course of the business of the firm, all the other
partners are liable. (Hamlyn v. Housten Case)

3. Master and Servant

A master is liable for the tort committed by his servant while acting in the course of his employment.
The servant, of course, is also liable; their liability is joint and several.

4. Employer and independent contractor

An employer is not liable for the torts of those who are his independents contractors. However, the
employer is liable only if he himself is deemed to have committed a tort. This may happen in three
ways:

• Negligence of independent contractor

• When employer authorizes him to commit a tort.
• In torts of strict liability

5.7
VACARIOUS LIABILITY OF THE STATE

The Position in England

At Common Law the Crown could not be sued in tort, either for wrongs actually authorized by it or
committed by its servants, in the course of their employment. With the passing of the Crown
Proceeding Act, 1947, the Crown is liable for the torts committed by its servants just like a private
individual.
The Position in India
When a case of Government liability in tort comes before the courts, the question is whether the
particular Government activity, which gave rise to the tort, was the sovereign function or non-
sovereign function. It is a sovereign function it could claim immunity from the tortuous liability,
otherwise not.

Torts to personal safety and freedom

Battery
Any direct application of force to the person of another individual without his consent or lawful
justification is a
wrong of battery. Even though the force used is very trivial and does not cause any harm, the wrong
is committed. Thus, even to touch a person in anger or without any lawful justification is battery.

Assault
Assault is any act of the defendant which directly causes the plaintiff immediately to apprehend a
contact with his person.
To point a loaded gun at the plaintiff, or to shake first under his nose, or to curse him in a
threatening manner, or to aim a blow at him which is intercepted, or to surround him with a display
of force is to assault him clearly if the defendant by his act intends to commit a battery and the
plaintiff apprehends it, is an assault.

False Imprisonment/ wrong confinement

It means imposition of local restraint for some period, however short upon liberty of another
without sufficient lawful justification . It means unauthorized restraint on a person’s body .If a man
is restrained, by a threat of force from leaving his own house or an open field there is false
imprisonment.

Malicious prosecution
It means instigating Judicial proceedings against another, maliciously and without reasonable and
probable cause, which terminate in favour of that other and which results in damage to his
reputation personal freedom or property.
For applicability of this tort, following condition must exist:
There must have been a prosecution of the plaintiff by the defendant.
There must have been want of reasonable cause for that prosecution.
The defendant must have acted maliciously.
The plaintiff must have suffered damages as a result of prosecution.
The prosecution must have been terminated in favour of plaintiff.

Nervous shock

5.8
 Under this, relief may be provided when a person gets some nervous shock through what he has
probable cause, which terminate in favour of that other and which results in damage to his
reputation personal freedom or property.

Bodily harm
A wilful act or statement of defendant, calculated to cause physical harm to the person causing
physical harm to him is a tort.

Negligence
It means carelessness. It refers to the situation when a person might be innocent but has failed to
act in a reasonable manner. Negligence as a tort is breach of legal duty to take care which results
in damage, undesired by the defendant, to the plaintiff. The Consumer protection Act also provides
for the unliquidated damages in cases of Negligence.

Indian Medical Association v. V.P Shantha and Ors

Services rendered by Medical Practitioners could be liable for deficiency of services.

Poonam Verma vs. Ashwin Patel and Ors

The court was of the opinion that Respondent No.1 having practiced in allopathy, without being
qualified in that system, was guilty of Negligence per se and therefore, the appeal against him has to
be allowed in consonance with the maxim Sic Utere tuo ut alienum non loedas ( a person is held liable
at law for the consequences of his negligence.

The court also observed that if a person practices medicine without possessing either the requisite
qualification or enrolment under the Act on any State medical register, he becomes liable to be
punished with imprisonment or fine or both.

CONEPT OF DEFAMATION
DEFAMATION

Defamation is the publication of a statement which tends to lower a person in the estimation of
right thinking members of society generally, it affects the reputation of a person. Actually it is attack
on the reputation of person. It may be classified into two heads.

LIBEL SLANDER

Libel is a representation made in Slander is the publication of a defamatory

some permanent from. E.g., statement in a transient form ; statement
written words , pictures, cinema of temporary nature such as spoken words
films, recorded words etc. or gestures.

Defamation is tort as well as crime in India.

5.9
Both are criminal acts under BNS, 2023.

Condition:

Statement must be defamatory.

Statement must be false.

Statement must be for plaintiff.

CONSUMER PROTECTION ACT AND LIABILITIES OF TORTS

1. Branch Manager, indigo airlines and another vs. Kalpana Rani Debarrma and Ors

The complainants/ Respondents were the family members and were returning from Kolkata to
Agartala through Indigo airlines. Boarding passes were issued to the complainants. The Airlines left
all the complainants at Kolkata airport without informing them despite all the complainants being at
the airport premises.

A written complaint was lodged at Indigo office at Kolkata airport but the office staff as well as the
airport staff at their counter did not accept the complaint application and forcibly snatched away
their boarding passes and further did not pay heed to their request for making alternate
arrangements for their flight to Agartala.

The complainant approached the District Forum and was awarded with the compensation. State
Forum also enhanced the compensation. Aggrieved by the decision, the Indigo Airlines filed this
revision petition contended that the airport manager has stated that there were many
announcements at regular intervals and that the Indigo airlines is not responsible if the passengers
did not report at the gate on time.

They held that Indigo airlines not only forcibly taking the boarding passes from the complainants, no
effort was made by the Airline to compensate them by arranging for their travel in the next schedule
flight to Agartala.

It is not in dispute that the complainants were put to lot of mental agony and inconvenience as they
had to stay in a hotel for two days. Revision petition was dismissed with cost of 20000Rs to be paid
to complainants.

2. In Bolitho v. City and Hackney Health authority, the factors which have to be assessed in medical
negligence are:

Whether the medical practitioner acted as per a practice accepted by a competent medical
practitioner.

If no, the deviation from the norm can be justified as being reasonable.

It must be noted that the liability of the medical practitioner is three fold: liablility under consumer
protection act, 1986 for payment of damages, civil liability for tort of negligence where the
provisions of Consumer Protection Act, 1986 do not apply, or criminal proceedings under IPC, 1860.

5.10
On analysis of the cases and object of consumer protection act, it can be said that the complaints
under the consumer protection are in the nature that may be covered under Law of Torts in absence
of law relating to consumer protections.

5.11
 THE CODE OF CIVIL PROCEDURE, 1908
INTRODUCTION
The code came into force as on 1st January, 1909.

It extends to the whole of India except the state of Jammu and Kashmir

two types of law

substantive law procedural law

provides rules and procedures for

determines the rights and obligations
the enforcement of rights and
of citizens
obligation of parties

THE CODE CONSISTS OF 2 DIVISIONS:-

Substantive law

This First division contains 158 sections which is fundamental body of the code and which
determines the rights and obligations of citizens. It can only be amended by legislature.

Procedural law

This second division contains of 51 orders in schedule 1 which are rules of procedures for the
enforcement of rights and obligations of parties, it can be amended by High court.

SCHEME OF THE CODE

two types
of Laws

158
51 orders
Sections

CONCEPT OF DECREE

“Decree” is defined in Section 2(2) of the Code as :- the formal expression of an adjudication which
conclusively determines the rights of the parties with regard to all or any of the matters in
controversy; in the suit and may be either preliminary or final.
But decree does not include:
a. Any adjudication from which an appeal lies as an appeal from an Order or
b. Any order of dismissal for default

6.1
 Two Types of Decree

PRELIMINARY : A decree is preliminary

FINAL : A decree is final when No Further
when further proceedings have to be
proceedings have to be taken before the
taken before the suit can be completely
suit can be completely disposed of
disposed of.

Essentials of a decree are:

1.There must be formal expression of adjudication.

2.There must be a conclusive determination of the rights of parties

3.The determination must be with regard to matters in controversy.

4.The adjudication should have been given in the suit.

DECREE HOLDER - Decree Holder means any person in whose favour a decree has been passed or
an order capable of execution has been passed. Thus, a person who is not a party to the suit but in
whose favour an order capable of execution is passed is a decree-holder.

JUDGEMENT DEBTOR – judgement debtor means any person against whom a decree has been
passed or an order capable of execution has been made.

ORDER

“Order” as defined in section 2(14) of the Code means the formal expression of any decision of a
Civil Court which is not a decree.

Generally, no appeal lies from an order unless it is provided in law

DIFFERENCE BETWEEN DECREE AND ORDER

Basis Decree Order

Conclusiveness Decrees adjudicates and conclusively Order does not determine any
determines the rights of parties rights.

Appeals A decree is always appealable unless Order is not appealable. (In

prohibited by law some cases ,it is allowed)
Second Appeals Second appeal is sometimes allowed No second appeal is allowed in
by the court any case.
Finality Decree may be preliminary or final Order is always final

6.2
INTERLOCUTORY ORDERS

The court may, on the application of any party to a suit, order the sale. In such manner and on such
terms as it thinks fit, of any movable property, being the subject-matter of such suit, or attached
before judgement in such suit, which is subject to speedy and natural decay, or which for any other
just and sufficient cause it may be desirable to be sold at once.

JUDGEMENT

“Judgement” as define in Section 2(9) of the Civil Procedure code means the statement given by the
judge on the grounds of a decree or order. Thus, a judgement set out the grounds and reasons for
the Judge to have arrived at the decision.

The decree is the operative part of a judgement. So, the judgement is always followed by the decree.

CAUSE OF ACTION

“Cause of action” means every fact that it would be necessary for the plaintiff to prove in order to
support his right to the judgement of the Court. Under Order 2, Rule 2, of the Civil procedure Code it
means all the essential facts constituting the rights and its infringement. It means every fact which
will be necessary for the plaintiff to prove, if traversed in order to support his right to the
judgement.

PLACE OF SUING/FILING OF SUIT

➢ Every suit shall be instituted in the Court of the lowest grade to try it. (Section 15)
➢ Suits relating to immovable property shall be instituted in the Court within the local limits of
whose jurisdiction the property is situated. (Section 16)
➢ Where immovable property is situated within the jurisdiction of different Court, the suit
may be instituted in any Court within the local limits of whose jurisdiction the property is
situated. (Section 17)
➢ Where jurisdiction of Court where immovable property is situated are uncertain, then any
of the said Courts may proceed to entertain the suit. (Section 18)
➢ Suit for compensation for wrong done to the person or to movable property, may be
instituted in any of the Court within whose jurisdiction the defendant resides, or carries on
business, or personally work for gain or where wrong was committed. (Section 19)
➢ Other suits (where Sections 15, 16, 18 and 19 doesn’t apply) may be instituted in any of the
Court within whose jurisdiction the defendant resides, or cause of action has arisen.(Section
20)
➢ In the case of body corporate or company suit may be instituted in any of the courts within
whose jurisdiction;-
It ’s principal office is situated, or
Cause of action has arisen, provided it has a subordinate office (branch office) at such place.
(Section 20)
➢ Where there might be two or more competent court entertain a suit and if the parties to the
contract agreed to vest jurisdiction in one such court to try the dispute. Such an agreement
would be valid (Angile Insulation v.Davy Ashmore India Ltd.)

6.3
 DOCTRINE OF RES SUB JUDICE/ STAY OF SUIT [Section 10 of CPC]
Section 10 provides that no Court shall proceed with the trial of any suit in which the matter in issue
is also directly and substantially in issue in a previously instituted suit between the same parties
where such suit is pending in the same or any other Court (in India) having jurisdiction to grant the
relief claimed,

However, the pendency of a suit in a foreign court does not preclude the Courts in India from trying
a suit founded on the same cause of action.

Essential conditions for stay of suits:

1. The must be two suits instituted at different times;

2. The matter in issue in the latter suit should be directly and substantially in issue in the earlier
suit;
3. Such suit should be between the same parties;
4. Such earlier suit is still pending either in the same Court or in any other competent Court.
5. The court in which previous suit is pending has the jurisdiction to try such suit.

Section 10 is enacted to prevent the Courts of Concurrent jurisdiction from simultaneously trying
two parallel suits in respect of same matter in issue.

[M/s. Wings Pharmaceuticals A suit was instituted by the plaintiff company alleging infringement by
(p) Ltd. And another v. M/s. the defendant company by using trade name of medicine and selling
Swan Pharmaceuticals and the same in wrapper and carton of identical design with same colour
others] combination etc. As that of plaintiff company. A subsequent suit was
instituted in different Court by the defendant company against the
plaintiff company with same allegation. The court held that subsequent
suit should be stayed as simultaneous trial of the suit in different
Courts might result in conflicting decisions as issue involved in two
suits was totally identical.

DOCTRINE OF RES JUDICATA [Section 11]

Section 11 of the Civil Procedure Code deals with the doctrine of Res
Meaning Judicata. Which imposes, bar of restraint on repetition of litigation of
the same issue. In prevents two different decrees on the same
subject. The doctrine underlines the general principle that one shall
not be twice vexed for the same cause. Section11 says that once a res
judicata, it shall not be adjudged again.

6.4
 This doctrine is based on the following grounds of public policy:-
(a) There should be an end to litigation;
(b) The parties to a suit should not be harassed to agitate the
same issues or matters already decided
(c) The time of Court should not be wasted over the matters that
ought to have been and should have been decided in former
suit between the parties.
(d) It is a rule of convenience and not a rule of absolute justice.

For the applicability of the principle of res Judicata the following

conditions are required to be satisfied:-
(a) The matter must be directly and substantially in issue in two
suits;
(b) The prior suit should be between the same parties or persons
claiming under them
(c) The parties should have litigated under the same title
(d) The court which determines the earlier suit must be
competent to try the later suit;
(e) The same question is directly and substantially in issue in the
later suit.

The doctrine which provides that any matter which might or ought to
have been made a ground of defence in such former suit shall be
Construction of Res Judicata deemed to have been a matter directly or substantially in issue in such
(former) suit. Hence as per doctrine of constructive Res judicata also.
Subsequent suit will be barred

Section 12 of Civil Procedure Code provides that abatement of suit or

Bar of further suit [Section 12] its dismissal, for not bringing the legal representative on record bars a
further suit.

CASE LAWS

S.NO. CASE NAME PROVISONS

1 See Prafulla Chandra v.Surat Roit However, no res judicata operates when the
points could not have been raised in earlier
suit.
Mukunda jana v.Kanta Mandal But when a suit has been decided on merits ,
and the appeal is dismissed on a preliminary
point, it amounts to the appeal being heard
and finally decided and the decision operates
as res judicata

DISTINGUISH BETWEEN RES SUBJUDICE AND RES JUDICATA

6.5
RES SUB-JUDICE RES-JUDICATA
It restricts trial of Suit. It restricts trial of decided suit
It restricts the court to accept similar matters It restricts the court to accept similar matters
during the pendency of suit filled between the which has already been decided between the
same parties for same claim. same parties for same claim.

DIFFERENT STAGES OF A SUIT

• INSTITUTION OF SUIT - filing of plaint in the Civil Court by the plaintiff based on certain
cause of action for claiming rights.

• ISSUE AND SERVICE OF SUMMONS – the Civil Court issues summons to the Defendant

• WRITTEN STATEMENT – after receiving the Summons, the defendant has the opportunity to
file a reply in the Court

• DISCOVERY AND INSPECTION – the Civil Court starts the cross examination and review the
evidence

• APPEARANCE OF PARTIES – the parties should appear on the day fixed by summons

• HEARING OF THE SUIT – generally, plaintiff starts with the allegations.

• JUDGMENT AND DECREE - the court passes the decree and the judgement

• EXECUTION.

PROVISIONS REGARDING SUMMONS

1. When the suit has been duly instituted, the Court issue an order (known as summons) to the
defendant to appear and answer the claim and to file the written statement of his defence if any
within a period of 30 days from the date of service of summons.

2. No summons are to be issued when the defendant has appeared at the presentation of plaint
and admitted the plaintiffs claim.

3. If the defendant fails to file the written statement within the prescribed period of 30 days, he is
allowed to file the same on such other days as specified by the Court for reason to be recorded
in writing but not later than ninety days from the date of service of summons (Order 8, RI).
Provision though negatively worded is procedural.

4. The defendant may appear in person or by a duly instructed pleader or by a pleader

accompanied by some person to be able to answer all material questions relating to the suit.

6.6
 5. Every summons must be signed by the judge or an authorised officer of the Court and sealed
with the seal of the Court and be accompanied by a copy of the plaint. (Order 5)

6. If the requirement of personal appearance of the defendant or plaintiff is felt by the Court, then
it has to make an order for such appearance. The summons must contain a direction that it is for
the settlement of issues only or for the final disposal of the suit.
7. Every summons must be accompanied by a copy of the plaint. Where no date is fixed for the
appearance of the defendant, the Court has no power to dismiss the suit in default.

8. In the case of defendant who is a public officer, servant of railways or local authority, the Court
may, if more convenient, send the summons to the head of the office in which he is employed.
In the case of a suit being instituted against a corporation, the summons may be served (a) on
the secretary or on may director, or other principal officer of the corporation or (b) by leaving it
or sending it by post addressed to the corporation at the registered office or if there is no
registered office, then at the place where the corporation carries on business.

APPEARANCE OF PARTIES AND CONSEQUENCE OF NON-APPEARANCE

1. If both the parties do not appear when the suit is called on for hearing, the Court may make
an order that the suit be dismissed (O.9, R. 3 and 4).
2. If the defendant is absent in spite of service of summons and the plaintiff appears, the
Court may proceed ex-parte
3. In case the defendant is not served with summons, the Court shall order a second summon
to be issued. If the summons is served on the defendant without sufficient time to appear,
the Court may postpone the hearing to a further date.

4. If the summon was not served on the defendant in sufficient time due to the plaintiff’s
default, the Court shall order the plaintiff to pay costs of adjournment. Where the hearing of
the suit is adjourned ex-parte and the defendant appears at or before such hearing and
assigns a good cause for his previous nonappearance, the defendant may be heard in answer
to the suit on such terms as to costs or otherwise.

5. If the plaintiff is absent and the defendant is present at the hearing of the suit, the Court
shall make an order for the dismissal of the suit, unless the defendant admits the claim of
the plaintiff or a part thereof in which case the Court shall pass a decree in favour of the
plaintiff in accordance with the admission of the defendant and shall dismiss the suit to the
extent of the remainder (O.9, R.8).
6. In any case in which a decree is passed ex-parte against a defendant he may apply for setting
aside the decree on the ground that the summons was not duly served on him or that he
was prevented by any sufficient cause from appearing when the suit was called on for
hearing and the Court shall set aside the decree on such terms as to costs payment into
Court or otherwise as it deems proper and shall appoint a day for proceeding with the suit
(O.9, R.13).

6.7
A defendant has four remedies available if an ex-parte decree is passed against him

• He may file an appeal against the ex-parte decree under Section 96 of the C.P.C.
• He may file an application for review of judgement.
• He may apply for setting aside the ex-parte decree.
• A suit can also be filed to set aside an ex-parte decree obtained by fraud but no suit shall lie
for non-service of summons.

SET-OFF (order 8 rule 6)

Order 8, deals with set-off which is a reciprocal acquittal of debts between the plaintiff and
defendant. It has the effect of extinguishing the plaintiff’s claim to the extent of the amount claimed
by the defendant as a counter claim.

Where in a suit for recovery of money the defendant claims to set off against the plaintiff’s demand
any ascertained sum of money legally recoverable by him from the plaintiff, the defendant may,
present a written statement containing the particulars of the debt sought to be set-off.

COUNTER-CLAIM (order 8 rule 6A)

A defendant in a suit may, in addition to his right of pleading a set-off, set up by way of
counterclaim against the claim of the plaintiff, any right or claim in respect of a cause of action
accruing to the defendant against the plaintiff either before or after the filing of the suit but before
the defendant has delivered his defence or before the time limited for delivering his defence has
expired, whether such counter-claim is in the nature of claim for damages or not.

Counter-claim means something claimed by other party against the set-off made by the first party. A
defendant in a suit may, in addition to his right of pleading a set-off, set up by way of counter-claim
against the claim of the plaintiff.

EQUITABLE SET-OFF
In this case the defendant is permitted to claim set-off in respect of an unascertained sum of money
where the claim arises out of the same transaction or transaction which can be considered as one, or
where there is knowledge on both sides of an existing debt due to one party and a credit by the
other party found on and trusting to such debt as a means of discharging it.

TEMPORARY INJUNCTIONS
A temporary injunction is a provisional remedy invoked to preserve the subject matter in its existing
condition. Temporary injunctions are such as are to continue until a specified time or until the
further order of the Court and they may be granted at any stage of a suit.

The court may grant temporary injunction to restrain any such act or make such other order for the
purpose of staying and preventing the wasting, damaging, alienation or sale of removal or
disposition of the property or dispossession of the plaintiff or otherwise causing injury to the
plaintiff in relation to any property in dispute in the suit; where it is proved by affidavit or otherwise.

6.8
It would be necessary for plaintiff to satisfy the Court that substantial and irreparable harm or injury
would be suffered by him if such temporary injunction is not granted and that such loss or damage
or harm cannot be compensated by damages.

APPEALS
Appeal is an application by which a party request an appellate court to set aside or modify the
decision of the subordinate court. A right to appeal is not an inherent right of a person. It must be
given by a statute or by some authority equivalent to a statute. Part vii of the code deals with the
following four kinds of appeals:-

types of appeals
according to CPC

appeal from appeal from appeals to

second appeal
original decree orders Supreme Court

APPEAL FROM ORIGINAL DECREE

According to Section 96 to 99 of Code of Civil Procedure, 1908, Appeals from Original Decree may be
preferred from every decree passed by any court exercising original jurisdiction to the court
authorized to hear appeals from the decision of such court on the point of law as well as on facts. In
this case there is always a right to appeal until and unless there is a specific prohibition to such a
right.

SECOND APPEAL

According to Section 100 to 103 of Code of Civil Procedure,1908, Second Appeal lies to the High
Court from every decree passed in appeal by any court subordinate to the High Court, if the High
Court is satisfied that the case involves the question of Law. An appeal may lie from an appellate
decree passed ex-parte.

APPEAL FROM ORDERS

In general, appeal against the order are not allowed. According to section 104 to 106 the code of
civil procedure, 1908 provides that appeals from order from the following grounds of defect or
irregularity of law:

a) An order refusing leave to institute a Suit under Section 91(public nuisances and other
wrongful acts affecting the public) or Section 92(alleged breach of trust created for public
purposes of a charitable or religious nature).
b) Appealable order as set out in Order 43 Rule 1.
c) An order under Section 95 i.e compensation for obtaining arrests , attachment or injunction
on insufficient ground.

6.9
 d) An order under the code imposing a fine or directing the detention or arrest of any person
except in execution of decree.

APPEAL TO SUPREME COURT

An appeal can be filed to the Supreme Court in respect of those decrees which have been passed by
High Court in their original jurisdiction. Appeal to Supreme court lies in following cases:

• From any decree or order of Civil Court when the case is certified by the court deciding it to
be fit for appeal to the Supreme Court or when the Special Leave is granted by the Supreme
Court itself.
• From any judgement, decree or final order passed on appeal by a High Court or any other
court of final appellate jurisdiction.
• From any judgement, decree or final order passed by a High Court in exercise of original civil
jurisdiction.

SPECIAL POINT

1. In appeals, as a general rule, the parties to an appeal are not entitled to produce
additional evidence, whether oral or documentary
2. But the Appellate Court has discretion to allow additional evidence in the following
circumstances by recording its reasons for admission of additional evidence:
a) When the lower court has refused to admit evidence which ought to have been admitted

b) When the party seeking to produce additional evidence establishes that he could not
produce it in its trial Court for no fault of his
c) The Appellate Court requires any document to be produced or any witness to be examined
to enable it to pronounce judgement
d) For any other substantial cause

The essential features to be stated in appellate judgement are:

1. Point of determination
2. The decision thereon
3. The reason for such decision
4. Where the decree appealed from is reversed or varied.

REFERENCE (Section 113 of CPC)

Reference to High Court Subject to such conditions as may be prescribed, at any time before
judgement a court in which a suit has been instituted may state a case and refer the same for
opinion of the High court and the high Court may make such order thereon as it thinks fit.

REVIEW (Section 114 of CPC)

6.10
Any person considering himself aggrieved by a decree or order may apply for a review of judgement
to the court which passed the decree or made the order and the Court may take such order thereon
as it thinks fit.

Any person may apply for a review of judgement to the court in the following situation:

1. In case of a decree or order from which an appeal is not allowed.

2. In case of a decree or order from which an appeal is allowed but from which no appeal has
been preferred.

REVISION (Section 115 of CPC)

The High Court may call for the record of any case which has been decided by any Court subordinate
to such High Court and in which no appeal lies thereto, and when a subordinate Court appears-

1. To have exercised a jurisdiction not vested in it by law, or

2. To have failed to exercise a jurisdiction so vested, or
3. To have acted in the exercise of its jurisdiction illegally or with material irregularity.

A petition for revision can be made to the High Court and High Court may make such order as it
thinks fit.

DISTINGUISH BETWEEN THE FOLLOWING:

S.NO REVISION APPEAL

1 Application for revision can be made only to Appeal can be preferred to any court
the high court superior to one from whose decree or
order appeal is sought to be preferred.
That superior court need not necessarily
to a high court.
2 Revision cannot be applied for as a right Right of appeal is substantive, given by
law.
3 The power of the high court to exercise The court to which an appeal has been
revisional jurisdiction either of its own preferred is bound to consider it
motion or on the request of a party is according to the procedure prescribed.
discretionary.
4 Revision can be applied for only on grounds In an appeal the appellate court has
of jurisdiction and not on the question of law power to consider both the question of
or fact. law and fact.

REPLY / WRITTEN STATEMENT – MEANING

When the defendant appears and files a written pleading by way of defence, his pleading should
conform to all the general rules of pleading as are applicable to application or petition.

A subsequent pleading field by the plaintiff, either in reply to a defendant’s claim of set off, or with
leave of the court, in answer to defendant’s pleas in decree, is also called a “written statement” (also
called Replication or Rejoinder). All the rules relating to defendant’s written statement apply,
mutatis mutandis to such written statement of the plaintiff also.

6.11
 FORMS OF DEFENCE

1. Traverse or Denials
Where a defendant totally and categorically denies the allegations of the plaintiff

2. Special Defence
Where the defendant admits the allegations but seeks to destroy their effect
by alleging affirmatively certain facts of his own.

3. Objection in point of law or Demurrer

Where the defendant pleads that the plaint allegations do not disclose a cause
of action, or that the special damages claimed are too remote.

4. Dilatory Plead

Where the defendants plead go to the root of the case.

555
5. Set off
In has the effect of extinguishing the plaintiff’s claims to the amount
claimed by the defendant.

IMPORTANT RULES REGARDING WRITTEN STATEMENT

1. In case, allegation contained in any para of the plaint are not denied specifically. It is
presumed to have been admitted by the other party. However, general allegation in the
plaint cannot be said to admitted because of general denial in written statement.
2. If the plaint has raised a point /issue which is otherwise not admitted by the opposite party
in the correspondence exchanged, it is generally advisable to deny such point/issue and let
onus to prove that point be upon the complainant.
3. Attach relevant correspondence, invoice, challan, document, extracts drafted to a particular
para of the plaint.
4. The reply to each of the paras of the plaint be drafted and given in such a manner that no
para of the plaint is left unattended.

6.12
 5. After reply, the same is to be signed by the constituted attorney of the opposite party.
6. In every pleading, one must state specifically the relief which the party is claiming from the
court or tribunal.

REJOINDER/REPLICATION
1. Rejoinder or replication means a written statement/reply of the plaintiff/petitioner by way
of defence to pleas’ raised in the counter affidavit/written statement from the
defendant/respondent.
2. Such statement are subsequent pleading as contemplated in order viii Rule 9 of the Civil
Procedure Code. Under Rule 9, leave of the court is essential before any party can present a
further pleading after the written statement has been filed.
3. The only subsequent pleading that may be filed without the leave of the court is the written
statement filed by way of defence to a set-off or a counter-claim.
4. While filing a rejoinder/replication, a party cannot be allowed to fill up gaps or lacuna in his
pleadings. Nor again can a party introduce new material facts or different cause of action
except in a case where subsequent to filing of the petition/suit, the petitioner/plaintiff
discovers new matters and accordingly seeks leave of the Court to submit such further
particulars in his pleadings.

REPRESENTATIVE SUIT

Representative suits are the suits in which parties represent

a) Others; or
b) Themselves and also other suits by executors, trustees, etc.

Representative suits are an exception to the general principle that all person interested in a suit
shall be parties thereto.

Examples

a) Suit by or against the Karta of a Joint Hindu family

b) Suit by members of public in respect of a public charity

ESSENTIALS OF REPRESENTATIVE SUIT

The following essential conditions must be fulfilled in a representative suit:

a) The parties must be numerous

b) The parties mostly have same interest in the suit
c) The suit must be brought or prosecuted with the permission or under the direction of the
Court
d) Notice must be given to the parties to be represented in the suit.

INTERLOCUTORY APPLICATION

6.13
 1. Interlocutory means not that decided the cause but which only settles some intervening
matter relating to the cause. After the suit is instituted by the plaintiff and before it is finally
disposed off, the court may make interlocutory orders as may appear to the court to br just
and convenient.
2. The power to grant interlocutory orders can be traced to Section 94 of C.P.C. Section 94
summarises general powers of a civil court in regard to different types of Interlocutory
orders. The details procedure has been set out in the Schedule 1 of the C.P.C which deals
with Orders and Rules.
3. Interlocutory order may take various shapes depending upon the requirement of the
respective parties during the pendency of the suit. Applications for appointment of
Commissioner, Temporary Injunctions, Receivers, payment into court, security for cause etc.

EXECUTION OF DECREE
Application for execution of a decree shall be made by a holder of a decree who desire to execute it
to the appropriate court which passed it or to the officer appointed in this behalf. In case the decree
has been sent to another court than the application shall be made to such court or the proper officer
thereof. Application for execution of a decree may be either (1) Oral; or (2) written

APPLICATION FOR EXECUTION OF A DECREE MAY BE EITHER ORAL OR WRITTEN.

Oral Application: 2 application:

Written
Where a decree is for payment of money the court Every application for the execution of a decree
may on the oral application of the decree holder at shall be in writing signed and verified by the
the time of the passing of the decree, order
applicant. Contents of applications
immediate execution thereof by the arrest of the
judgement debtor, prior to the preparation of a
warrant if he is within precincts of the court. 1. The No of the suit
2. The name of the parties
3. The date of the decree
4. Whether any appeal has been preferred
from the decree
5. The amount of costs (if any) awarded
6. The name of the person against whom
execution of the decree

6.14
AFFIDAVIT
S.NO PARTICULAR PROVISIONS
1 Meaning 1. An affidavit is a statement or a declaration on oath reduce
to writing and sworn before that person who has the
authority to administer such an oath.
2. The person executing an affidavit an affidavit is called the
deponent. Since the statement is being given on oath is an
affidavit, the affidavit must contain correct and accurate
particulars. The consequences of false affidavit may be
disastrous and embarrassing.
3. The court have been given the power under Order XIX, Civil
Procedure Code,1908 by directing any person to prove a
particular fact by an affidavit.
4. An affidavit must be verified and specified as to which of its
contents are true on the basis of personal knowledge and as
to which of its contents are believed to be true on the basis
of information received by the deponent.
2 Contents Every affidavit must clearly and separately indicate the statement
which are true to the
(a) Knowledge of the deponent
(b) Information received by the deponent;
(c) Belief of the deponent and
(d) Information based on legal advice.
3 Point to be kept in A. The deponent must be described in all particulars like:
mind while drafting I................ S/o............aged..........,resident of...............
affidavit B. The affidavit must contain oath or affirmation by the
deponent on the Following words: I do hereby solemnly
affirm and declare as under:
C. It should always be drawn in the first person.
D. The allegations, if any, in the affidavit should not be vague. It
must be clear and specific.
E. Affidavit should be divided into paragraphs and numbered
consecutively.
F. Any place or person referred to in the affidavit must be
specified with all particulars.
G. Affidavit must not relate to any fact which is within the
personal knowledge of some other person.
H. It must be executed on a non-judicial stamp paper,
I. Affidavits are chargeable with stamp duty under India Stamp
Act, 1899. However, no stamp duty is chargeable for the
affidavits filed in the Courts. Such affidavits are liable to
payment of prescribed Court fees.
4 Counter affidavit Counter affidavit means pleadings filed by a defendant/respondent
meaning in answer to the claims set out by the plaintiff/petitioner, in the
form of an affidavit and/ or supported by an affidavit.

It is generally used while filing pleading on behalf of a

defendant/respondent before the High Court and/or certain other
Tribunals and Commissions etc. The rules of pleading which are
applicable to a written statement, apply to a counter affidavit

6.15
 equally.

Filing of a counter affidavit is obligatory when the defendant

/respondent is so required by the Court. Failure of the defendant
/respondent to file a counter affidavit on the day fixed by, the Court,
will not entitle him, as of right , thereafter to file it . it does not
mean that the defendant /respondent will be shut out once for all.
He may be permitted by the Court to file it on a leter date on
sufficient grounds shown for not filing the same in time.
5 An affidavit can be • The Court may at any time of its own motion or on application
used in the following of any party order that any fact may be proved by affidavits
cases: (Section 30)
• The Court may at any time order that the affidavit of any
witness may be read at the hearing unless either party bona-
fide desires to cross-examine him and be can be produced
• Upon application by a party , evidence of a witness may be
given on affidavit, but the court may at the instance of either
party, order the deponent to attend the court for cross-
examination unless he is exempted from personal appearance.
Affidavits are confined to such facts as the deponent is able of
his own knowledge to prove except on interlocutory
applications.
6 Rule of adverse It is incumbent upon a party in possession of best evidence on the
inference issue involved, to produce such evidence and if such party fails to
produce the same, an adverse inference is liable to be drawn against
such party. The Court will be justified in drawing an adverse
inference against that party.
Ms. Shefali Bhargava v. Indraprastha Appollo Hospital It is equally
incumbent upon a party to produce evidence of some expert where
the issue involved is a complex or difficult one as for instance, issues
pertaining to engineering, medical, technology or science etc.

DETENTION, PRESERVATION, INSPECTION ETC. OF SUBJECT-MATTER OF SUIT

The Court may, on application of any party to a suit , and on such terms as it thinks fit

a) Make an order for the detention , preservation or inspection of any property which is the
subject matter of such suit or as to which any question may arise therein;
b) For all or any of the purpose as in (a) above, authorise any person to enter upon or into any
land or building in the possession of any other party to such suit; and
c) For all or any of the purpose as in (a) above authorise any sample to be taken, or any
observation to be made or experiment to be tried, which may seem necessary or expedient
for the purpose of obtaining full information or evidence. (Rule 7)

Application for such order to be after notice

1. An application by the plaintiff for an order under Rule 6 or Rule 7 may be made at any time
after institution of the suit.
2. An application by the defendant for such an order may be made at any time after

6.16
 appearance.
3. Before making an order under Rule 6 or Rule 7 on an application made for the purpose, the
Court shall, except where it appears that the object of making such order would be defeated
by the delay, direct notice thereof to be given to the opposite party.

SUITS BY OR AGAINST A CORPORATION

Signature or verification of pleading

In suits by or against a Corporation, any pleading may be signed and verified on behalf of the
corporation, by the secretary or by any director or other principal officer of the corporation who is
able to depose to the facts of the case(0.29 , R.1)

Service of summons

Subject to any provision regulating service of process, where the suit it against a corporation, the
summons may be served

• On the secretary or any director or other principal officer of the corporation, or

• by leaving it or sending it by post addressed to the corporation at the registered office or if
there is no registered office then at the place where the corporation carries on
business((0.29 , R.2)

Power of the Court to require personal attendance

The Court may at any stage of the suit, require the personal appearance of the secretary or any
director, on other principal officer of the corporation who may be able to answer material questions
relating to the suit.(O.29,R.3)

SUITS BY OR AGAINST MINORS

• Every suit by a minor shall be instituted in his name by a person who in such suit shall be
called the next friend of the minor. The next friend should be a person who is of sound mind
and has attained majority.
• Where the defendant is a minor, the Court shall appoint a proper person to be guardian for
the suit for such minor.
• When the minor plaintiff attains majority, he may elect to proceed with the suit or
application or elect to abandon it. If he elects the former course, he shall apply for an order
discharging the next friend and for leave to proceed in his own name and the title of the suit
will be corrected. If he elects to abandon the suit or application, he shall, apply for an order
to dismiss the suit on repayment of the costs incurred by the defendant or opposite party
etc.

SUMMARY PROCEDURE (ORDER 37)

• The object of summary procedure is to prevent unreasonable obstruction by a defendant.
The defendant is not entitled to defend the suit unless he enters an appearance within 10

6.17
 days from the service of summons. Such leave to defend may be granted unconditional or
upon such term as the Court or the Judge may think fit.

However, such leave shall not be granted where:

• The Court is satisfied that the facts disclosed by the defendant do not indicate that he has a
substantial defence or that the defences are frivolous and
• The part of the amount claimed by the plaintiff and admitted by the defendant to be due
from him is not deposited by him in the Court.

The court is satisfied that the facts disclosed by

defence or that the defences are frivolous the
defendant do not indicate that he has a
substantial

However, such leave shall not be granted

•
where The part of the amount claimed by the
plaintiff and admitted by the defendant to be
due from him is not deposited by him in the
Court.

• A procedure by way of summary suit applies to suits upon bill of exchange, hundies or
promissory notes, or where the plaintiff seeks to recover only debt or liquidated demand in
money payable by the defendant, with or without interest arising:
i. On a written contract or
ii. On an enactment, where the sum sought to be recovered is a fixed sum of money or in the
nature of a debt other than the penalty or
iii. On a guarantee, where the claim against the principal is in respect of a debt or liquidate
demand only.

The summary suit must be brought within one year from the date on which the debt becomes due
and payable, whereas the period of limitation for suits for ordinary cases under negotiable
instrument is three years.

The object is to prevent unreasonable obstruction by the defendant.

Such suits may be instituted by presenting a plaint containing the following essentials:

1. a specific averment to the effect that the suit is filed under this order

2. that no relief which does not fall within the ambit of this rule has been claimed.

JURISDICTION OF CIVIL COURTS

Jurisdiction over the subject matter – the jurisdiction to try certain matters by certain Court is
limited by Statute; Example: a small cause court can try suits for money due under a promissory note
or a suit for price of work done.

6.18
Place of suing or territorial jurisdiction- A territorial limit of jurisdiction for each court is fixed by the
Government. Thus, it can try matters falling within the territorial limits of its jurisdiction.

Jurisdiction over persons – All person of whatever nationality are subject to the jurisdiction of the
Civil Courts of the Country except a foreign state, its ruler or its representative except with the
consent of central government.

Pecuniary jurisdiction depending on pecuniary value of the suit.

It may be further classified into following categories depending upon their powers:

Original jurisdiction – A court tries and decides suits filed before it

Appellate jurisdiction – A court hear appeals against decisions or decrees passed by sub-ordinate
courts.

Criminal and Appellate Jurisdiction – the SC, HC and district Court have both original and appellate
jurisdiction in various matters.

COMMERCIAL COURT ACT, 2015

INTRODUCTION
The government of India introduced the ‘the Commercial courts, commercial division and
commercial appellate division of High Court Act, 2015’ to reduce the burden on judiciary with
respect to commercial disputes.

Its main emphasis is on commercial disputes which are special in nature since they affect the
economy of a nation, directly or indirectly.

It enables speedy redressal of cases holding large economic value.

COMMERCIAL COURTS
The state government may with the consultation of respective High Court constitute the commercial
courts at district level, for the purpose of exercising the jurisdiction and powers conferred on those
courts under this act.

State govt after consultation with HC may

1. specify pecuniary value which shall be not less than 3lakh rupees or such higher value

2. extend, alter and reduce the jurisdiction of such court within local limits

3. appoint one or more persons having experience in dealing with commercial disputes to be the
judge of such court.

JURISDICTION

6.19
The commercial court shall have jurisdiction to try all suits and applications relating to a commercial
dispute of a Specified value arising out of the entire territory of the State over which it has been
vested territorial jurisdiction by State government with the assistance of concerned High Court.

All suits and applications relating to commercial disputes of a specified value filed in a High court
having ordinary original civil jurisdiction shall be heard and disposed of by the Commercial Division
of that High Court.

According to Section 10 of the Act, in case of matters of international commercial arbitration

pertaining to arbitration and conciliation act, 1996, the matter shall be heard and disposed of by
commercial division of that high court.

PRE-INSTITUTION MEDIATION AND SETTLEMENT

The very purpose of this Act was to resolve the commercial disputes without bringing them to the
court of law through mediation. Prior to approaching a commercial court for dispute commercial in
nature, the Act requires that the parties attempt to settle their issues through mediation.

Time period

The process of pre-litigation mediation shall be completed within a period of three months from the
date of application made. It can be extended for a further period of two months with the consent of
the parties.

Award/ Settlement

It shall be in writing and signed by the parties to the dispute and mediator. The award shall have
same status and effect as of an arbitral award.

Appeals

If aggrieved by the judgement of commercial court below District Judge, appeal may be filed to the
commercial appellate court.

If aggrieved by the judgement of commercial court at district judge or commercial Division of a high
court, appeal may be filed to commercial Appellate division of that High court.

All the appeals filed shall be disposed of within a period of 6months from the date of filing.

Summary Judgement (Order 13Aof The Commercial Courts Act, 2015)

It provides that the disputes which are recognized as commercial dispute under the Act, can be
disposed off by the commercial court established under the Act without a full-fledged trial.

It is on similar lines to summary suits provided in CPC with the primary difference that the
application for summary judgement can be in respect of any relief in a commercial dispute while
summary suits relate to such relief relating to liquidated demand or fixed sum of debt.

6.20
The application for summary judgement can be made by either party after the service of summons
to the defendant and before the framing of issues. Upon consideration and satisfaction of the
Court, a summary judgement may be given that

a. The plaintiff/defendant has no real prospect of succeeding on the claim/ defence, as

the case may be and
b. There is no compelling reason as to why the claim should not be disposed of before
the recording of oral evidence.

NECESSARY PARTY and PROPER PARTY

A “necessary party“ is one whose presence is indispensable for proceeding with the suit and for final
decision thereof, on the other hand,

“Proper Party” is one in whose absence an effective order can be passed, but whose presence is
required for complete and final decision of the suit.

In case of Hardeva v. Ismail, two tests have been mentioned for determining the question whether a
particular party is a necessary party to a proceeding:

1. there must be a right to some relief against such party in respect of the matter involved in the
proceeding in question and

2. it should not be possible to pass an effective decree in absence of such a party.

Mis joinder and non-joinder

Mis-joinder – where there are more plaintiffs than one and they are joined together in one suit, but
the right to relief in respect, or arising out of the same act or transaction or series of acts or
transactions alleged to exist in such persons does not arise out of same act or transactions and if
separate suits were brought, no common question of law or fact would arise, it is a case of mis-
joinder of plaintiffs.

Non-joinder – where a person who is necessary party to a suit has not been joined as a party to the
suit, it is a case of non-joinder.

Order I rule 9 : “no suit shall be defeated by reason of the misjoinder or non-joinder of parties and
the court in every suit may deal with the matter in controversy so far as the rights and interests of
the parties actually before it.

Provided that nothing in this section shall apply to non-joinder of a necessary party.

6.21
The Bharatiya Nyaya Sanhita, 2023
INTRODUCTION TO CRIME
• Crime is a social phenomenon i.e., a wrong committed by an individual in a society.
• It arises first when a state is organized, people set up rules, the breaking of which is an act called
crime.
• The concept of crime changes from time to time and as per the society.
Difference between Criminal and Civil Wrong
The difference between a criminal offence and a civil wrong is that while the former is considered a
wrong against the society because of their grave nature, a civil wrong is a wrong done to an individual.
The Bharatiya Nyaya Sanhita, 2023
An Act to consolidate and amend the provisions relating to offences and for
• matters connected therewith or incidental thereto.
• The Bharatiya Nyaya Sanhita replaces the IPC 1860.
• It defines acts which constitute an offence and lays down punishment for the same.
• community service as a form of punishment.
• Organized crime has been added as an offence. It includes crimes such as
• kidnapping, extortion and cyber-crime committed on behalf of a crime
• syndicate. Petty organized crime is also an offence now.
• The Bharatiya Nyaya Sanhita, 2023 consist 20 Chapters and 358 Sections.
INTRA TERRITORIAL V/S EXTRA TERRITORIAL JURISDICTION OF BHARATIYA NYAYA
SANHITA, 2023
The geographical area or the subjects to which a law applies is defined as the jurisdiction of that law.
Ordinarily, laws made by a country are applicable within its own boundaries because a country cannot
have a legal machinery to enforce its laws in other sovereign countries. Thus, for most of the laws, the
territorial jurisdiction of a law is the international boundary of that country.
Intra-territorial jurisdiction
Where a crime under any provision of SANHITA is committed within the territory of India the SANHITA
applies and the courts can try and punish irrespective of the fact that the person who had committed
the crime is an Indian national or foreigner. This is called ‘intra-territorial jurisdiction’ because the
submission to the jurisdiction of the court is by virtue of the crime being committed within the Indian
territory.
Section 1 (3) of the Sanhita deals with Intra-Territorial Jurisdiction of the
The section declares the jurisdictional scope of operation of the Sanhita to offences committed within
India. The emphasis on ‘every person’ makes it very clear that in terms of considering the guilt for any
act or omission, the law shall be applied equally without any discrimination on the ground caste, creed
(Belief), nationality, rank, status or privilege. The Sanhita applies to any offence committed:
• Within the territory of India as defined in Article 1 of Constitution of India.
Or
• Within the territorial waters of India
7.1
 Or
• On any ship or aircraft either owned by India or registered in India.
Note: It should be noted that it is not defence that the foreigner did not know that he was committing a
wrong, the act itself not being an offence in his own country. (Ignorance of Law is no Excuse)
Exemptions from Intra-Territorial jurisdiction of Sanhita
1. Article 361(2) of the Constitution protects criminal proceedings against the President or
Governor of a state in any court, during the time they hold office.
2. In accordance with well-recognized principles of international law, foreign sovereigns are
exempt from criminal proceedings in India.
3. This immunity (protection) is also enjoyed by the ambassadors and diplomats of foreign
countries who have official status in India.
4. This protection is extended to all secretaries and political and military attaches, who are formally
part of the missions.
Extra-territorial jurisdiction
Countries, however, also make laws that apply to territories outside of their own country. This is called
the extra-territorial jurisdiction.
Section 1(4) and section 1(5) of the Sanhita provide for extra-territorial jurisdiction
Where a crime is committed outside the territory of India by an Indian national, such a person may be
tried and punished by the Indian courts.
According to section 1(4) if anyone commits any offence beyond India which is punishable in our
country under any Indian law, he is liable to be convicted and punished in the same manner as if the
crime was committed in India.
Section 1(5) expands on section 1(4), while at the same time clarifying that the provisions of the Sanhita
shall apply to first, in case of Indians, for any offence committed outside and beyond India; and second,
in case of any person in any place without and beyond India for targeting computer resource located in
India. (Computer Hacking)
Section 1(5) also talks about the applicability of Sanhita to any offence committed by any person on any
ship or aircraft registered in India wherever it may be. (Indian Plane Hijacked in Nepal by Pakistani
Terrorists)
Admiralty Jurisdiction
The jurisdiction of a court over offences committed in high seas is based on the precept that a ship in
the high seas is considered to be a floating island belonging to the nation whose flag the ship flies. It
does not matter where the ship or boat is, whether it is in high seas or on rivers, whether it is moving or
stationery, having been anchored for the time being. This jurisdiction called the ‘admiralty jurisdiction’.
THE FUNDAMENTAL ELEMENTS OF CRIME

7.2
The basic function of criminal law is to punish the offender and to deter (discourage) the incidence of
crime in the society.
A criminal act must contain the following elements:
1. Human Being
The first requirement for commission of crime is that the act must be committed by a human being. The
human being must be under legal obligation to act in particular manner and be physically and mentally
fit for conviction in case he has not acted in accordance with the legal obligation. Only a human being
under legal obligation and capable of being punished can be the proper subject of criminal law.
2. Mens Rea
The basic principle of criminal liability is embodied in the legal maxim ‘actus non facit reum, nisi mens
sit rea’. It means ‘the act alone does not amount to guilt; the act must be accompanied by a guilty
mind’. The intention and the act must both concur to constitute the crime. Mens rea is defined as the
mental element necessary to constitute criminal liability. It is the attitude of mind which accompanies
and directs the conduct which results in the ‘actus reus’. The act is judged not from the mind of the
wrong-doer, but the mind of the wrong-doer is judged from the act. ‘Mens rea’ is judged from the
external conduct of the wrong-doer by applying objective standards.
Case Law Girja Nath v State
Supreme Court in Girja Nath v State said that mens rea is a loose term of elastic signification
and covers a wide range of mental status and conditions the existence of which give criminal
hue to actus reus.
Forms of Mens Rea
a. Intention
• Intention is defined as ‘the purpose or design with which an act is done’.
• Intention indicates the position of mind, condition of someone at particular time of commission
of offence and also will of the accused to see effects of his unlawful conduct.
• Criminal intention includes the specific intention includes the generic intention.
• For: A poisons the food which B was supposed to eat with the intention of killing B. C eats that
food instead of B and is killed. A is liable for killing C although A never intended it.
b. Negligence
Negligence is the second form of mens rea.
7.3
Negligence is not taking care, where there is a duty to take care.
Negligence or carelessness indicates a state of mind where there is absence of a desire to cause a
particular consequence.
What amounts to reasonable care differs from thing to thing depending situation of each case. In
criminal law, the negligent conduct amounts to means rea.
c. Recklessness
Recklessness occurs when the actor does not desire the consequence, but foresees the possibility and
consciously takes the risk. It is a total disregard for the consequences of one’s own actions.
Note: -The mens rea or evil intent of the wrong-doer is indicated by the use of such words as
intentionally, voluntarily, fraudulently, dishonestly, maliciously, knowingly etc.
Exceptional cases where mens rea is not required
1. Where a statute imposes liability, the presence of absence of a guilty mind is irrelevant. Many
laws passed in the interest of public safety and social welfare imposes absolute liability. This is so
in matters concerning public health, food, drugs, etc. There is absolute liability (mens rea is not
essential) in the licensing of shops, hotels, restaurants and chemists establishments. The same is
true of cases under the Motor Vehicles Act and the Arms Act, offences against the State like
waging of war, sedition (incitement to rebellion) etc.
2. Where it is difficult to prove mens rea and penalties are petty fines. In such petty cases, speedy
disposal of cases is necessary and the proving of mens rea is not easy. An accused may be fined
even without any proof of mens rea. In the interest of public safety, strict liability is imposed and
whether a person
3. causes public nuisance with a guilty mind or without guilty mind, he is punished. If a person
violates a law even without the knowledge of the existence of the law, it can still be said that he
has committed an act which is prohibited by law. In such cases, the fact that he was not aware of
the law and hence did not intend to violate it is no defense and he would be liable as if he was
aware of the law. This follows from the maxim 'ignorance of the law is no excuse'.
[Section 2(26)] Corporate Body and Mens Rea
Section 2(26) of the Sanhita, the word ‘person’ includes any Company or Association, or body of
persons, whether incorporated or not. Thus, companies are covered under the provisions of the Sanhita.
Virtually in all jurisdictions across the world governed by the rule of law, companies can no longer claim
immunity from criminal prosecution on the ground that they are incapable of possessing the necessary
mens rea for the commission of criminal offences. The criminal intent of the ‘alter ego’ of the company/
body corporate, i.e., the person or group of persons that guide the business of the company, is imputed
to the company.
Case Law State of Maharastra v M/s Syndicate Transport, 1964
In State of Maharastra v M/s Syndicate Transport, 1964, it was held that the question whether a
corporate body should or should not be liable for criminal action resulting from the acts of some
individual must depend on the nature of offence disclosed by the allegations in the complaint or in the
charge sheet, the relative position of the officer or agent vis-à-vis the corporate body and other relevant
facts and circumstances which could show that the corporate body, as such, meant or intended to
commit that act.
7.4
3. Actus Reus (act or omission)
The third essential element of crime is Actus Reus. A human being and an evil intent are not enough to
constitute a crime for one cannot know the intentions of a man. Actus Reus means overt act or unlawful
commission must be done in carrying out a plan with the guilty intention. Actus Reus is defined as a
result of voluntary human conduct which law prohibits. It is the doing of some act by the person to be
held liable. An ‘act’ is a willed movement of body. A man may be held fully liable even when he has
taken no part in the actual commission of the crime. For, if a number of people conspire to murder a
person and only one of them actually shoots the person, every conspirator would be held liable for it. A
person will also be held fully responsible if he has made use of an innocent agent to commit a crime.

THE STAGES OF CRIME

The commission of a crime consists of some significant stages.
1. Criminal Intention
• Criminal intention is the first stage in the commission of offence. Intention is the
conscious exercise of mental faculties of a person to do an act for the purpose of
accomplishing or satisfying a purpose.
• Law does not as a rule punish individuals for their evil thoughts or criminal intentions.
• Intention means doing any act with one’s will, desire, voluntariness, malafides and for
some purpose.
• In the SANHITA, all these varied expressions find place in the various sections of the
Sanhita Intention can also be imputed under the law. For eg: if a man drives in a rash and
reckless manner resulting in an accident-causing death of a person, the reckless driver
cannot plead innocence by stating that he never intended to cause the death of the
person. It may be true in the strict sense of term. But a reckless driver should know that
reckless driving is likely to result in harm and can even cause death of the persons on the
road, So, by virtue of definition of the word ‘voluntarily’ in the Code, a reckless driver
who causes person can be presumed or deemed to have intended to cause the death of
the death of a person.
2. Preparation
Preparation means to arrange necessary measures for commission of intended criminal act.
Preparation itself is not punishable as it is difficult to prove that necessary preparations were made for
commission of the offence.
But in certain exceptional cases mere preparation is also punishable.
Some of them are as follows:
• Preparation to wage war against the Government.
• Preparation for counterfeiting of coins or Government Stamps.
• Possessing counterfeit coins, false weights or measurements and forged documents.
• Making preparation to commit dacoit.
3. Attempt
• Attempt, which is the third stage in the commission of a crime, is punishable.

7.5
 • Attempt has been called as a preliminary crime.
• Section 62 of the SANHITA provides for punishment for attempting to commit an offence.
• Attempt means the direct movement towards commission of a crime after necessary
preparations have been made.
• When a person wants to commit a crime, he firstly forms an intention, then makes some
preparation and finally does something for achieving the object; if he succeeds in his object he is
guilty of completed offence otherwise only for making an attempt.
Under the SANHITA, the sections on attempt can be divided into four broad categories
a. Those sections in which the commission of an offence and the attempt to commit are dealt
within the same section, the extent of the punishment being the same for both the offence as
also the attempt. The s of this category are those offences against the State such as waging or
attempting to wage war against the Government of India, assaulting or attempting to assault the
President or Governor with intent to compel or restrain the exercise of lawful power, sedition, a
public servant accepting or attempting to accept gratification, using or attempting to use
evidence knowing it to be false, dacoity etc.
b. Those offences in which the attempt to commit specific offences are dealt side by side with the
offences themselves, but separately, and separate punishments have been provided for the
attempt other than that provided for the offences which have been completed. Some of this
category are attempt to commit an offence punishable with death or imprisonment for life
including robbery, murder etc.
c. Attempt to commit suicide specifically provided under section 226 SANHITA.
d. The fourth category relates to the attempt to commit offences for which no specific punishment
has been provided in the SANHITA. Such attempts are covered under section 62. Commission of
Crime or Accomplishment
4. Commission of crime
The last stage in the commission of crime is its accomplishment. If the accused succeeds in his attempt,
the result is the commission of crime and he will be guilty of the offence. If his attempt is unsuccessful,
he will be guilty for an attempt only. If the offence is complete, the offender will be tried and punished
under the specific provisions of the SANHITA.
Presumption of Innocence and Burden of Proof
There is a presumption of innocence in favour of any person accused of committing any crime. It means
that in the eyes of the law, the accused person is innocent till it is proven otherwise by the prosecution.
So strong is this presumption that in order to rebut it, the prosecution must prove it ‘beyond reasonable
doubts’ that the crime was committed by the accused. If the person accused of committing a crime,
while defending himself, is able to introduce any doubt in the case of the prosecution, he will not be
held guilty.
SECTION-4 PUNISHMENTS
The punishments to which offenders are liable under the provisions of SANHITA are –
1. Death

7.6
A death sentence is the harshest of punishments provided in the SANHITA, which involves the judicial
killing or taking the life of the accused as a form of punishment. The Supreme Court has ruled that death
sentence ought to be imposed only in the ‘rarest of rarest cases’. The SANHITA provides for capital
punishment for the following offences:
Murder
• Dacoit with Murder
• Waging War against the Government of India.
• Abetting mutiny actually committed.
• Giving or fabricating false evidence upon which an innocent person suffers death.
• Abetment of a suicide by a minor or insane person.
• Attempted murder by a life convict.
2. Life Imprisonment
Imprisonment for life meant rigorous imprisonment, that is, till the last breath of the convict.
3. Imprisonment
Imprisonment which is of two descriptions namely –
• Rigorous Imprisonment, that is hard labour;
• Simple Imprisonment
4. Forfeiture of Property
Forfeiture is the divestiture of specific property without compensation in consequence of some default
or act forbidden by law. The Courts may order for forfeiture of property of the accused in certain
occasions. The courts are empowered to forfeit property of the guilty under section 153 and section 154
of the SANHITA.
5. Fine
Fine is forfeiture of money by way of penalty. It should be imposed individually and not collectively.
When court sentences an accused for a punishment, which includes a fine amount, it can specify that in
the event the convict does not pay the fine amount, he would have to suffer imprisonment for a further
period as indicated by the court, which is generally referred to as default sentence.
6. Community Service
BNS 2023 includes community service as a form of punishment for minor offences.
Purpose:
To create a more balanced and rehabilitative criminal justice system by focusing om restorative justice.
The goal is to promote rehabilitation and reduce the burden on the prison system. It has been widely
used in America to punish petty offences.
How it works:
Courts can choose community service over fines. For example: offenders involved in thefts of property
valued under Rs 5000 can avoid traditional punishments by returning the stolen goods and performing
community service.
Community service for offences under BNS 2023
➢ Involvement of public servants in illegal trade
➢ Non-appearance in response to a proclamation
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 ➢ Attempt to commit suicide to influence legal authority
➢ First conviction of petty theft involving property valued below Rs 5000 and the property must
have been recovered
➢ Public misconduct by a drunken person
➢ defamation

Kinds of punishments

Forfeiture Life Community

Fine imprisonment Death
of property imprisonment service

Rigorous
Rigorous
Permitted Simple till last Judicial killing
Imprisonment
by section breathe (Hang till
Monetary 153 & 154 death)
penalty
+
+ Hard labour
Nonpayment of Rarest of rare
+ case
fine may lead
to further No meeting with Eg:-
extension of outsider
Punishment of
imprisonment
1. murder
2. Dacoity with
murder
3. waging war
4. Abetting
mutiny
etc.

COGNIZABLE OFFENCE AND NON- COGNIZABLE OFFENCE

Cognizable offence means an offence in which, a police officer may, arrest any person without warrant.
Generally, Cognizable offences are more serious in nature and heavy punishment are prescribed for these
kind of offence.

Non-cognizable offence means an offence in which a police officer has no authority to arrest without
warrant. Thus, a non-cognizable offence needs special authority to arrest by the police officer.

In order to be a cognizable case under Section 2(c) of the Code, it would be enough if one or more (not
ordinarily all) of the offences are cognizable.

CLASSES OF CRIMINAL COURTS

Following are the different classes of criminal courts:

7.8
 • Supreme Court
• High Court;
• Courts of Session;
• Chief judicial magistrates
• Magistrates of the First class
• Magistrates of the second class

The Supreme Court is also vested with some criminal powers. Article 134 of Constitution of India
confers appellate Jurisdiction on the Supreme Court in regard to criminal matters from a High Court
in certain cases.

POWER OF COURT TO PASS SENTENCES

COURT FINE PERSON
Supreme court/ high court Any amount Any number of years including
death sentences
Additional session judge Any amount Any number of years including
death sentence but death
sentence in consultation with
high court
Assistant session judge Any amount Not more than 10years of
imprisonment
Chief judicial magistrate/ chief Any amount Not more than 7years of
metropolitan magistrate imprisonment
Magistrate of 1st class / Not more than Rs.50,000 Not more than 3years of
metropolitan magistrate imprisonment
Magistrate of 2nd class Not more than Rs, 10,000 Not more than 1year of
imprisonment

SENTENCE OF IMPRISONMENT IN DEFAULT OF FINE

Where a fine is imposed on an accused and it is not paid, the law provides that he can be
imprisoned for a term in addition to a substantive imprisonment awarded to him, if any.

Section 30 provides that, where imprisonment has been awarded as part of the substantive
sentence, it should not exceed 1/4th of the term of imprisonment which the Magistrate is
competent to inflict as punishment for the offence.

SECTION 35: ARREST OF PERSONS WITHOUT WARRANT (NON-PREVENTIVE ARREST)

Following are the cases in which a police officer may arrest a person without a warrant:

(a) Who has been concerned in any cognizable offence or

(b) Who has in his possession without lawful excuse, the burden of proving which excuse shall lie on
such person, any implement of house breaking or

7.9
 (c) who has been proclaimed as an offender either under this Code or by order of the State
Government; or
(d) in whose possession anything is found which may reasonably be suspected to be stolen property
or
(e) who obstructs a police officer while in the execution of his duty, or who has escaped, or
attempts to escape, from lawful custody; or
(f) who is reasonably suspected of being a deserter from any of the Armed Forces of the Union; or
(g) who has committed any act at any place out of India which, if committed in India, would have
been punishable as an offence, and for which he is liable to be apprehended or detained in
custody in India.
no arrest shall be made without the prior permission of an officer not below the rank of Deputy
Superintendent of police in case of an offence which is punishable for imprisonment of less than 3years
and such person is infirm or is above 60years of age.
SECTION 35: Issue a notice to appear

The police officer in all the cases where the arrest of a person is not required under Sec 41, shall
issue a notice directing the person against whom a reasonable complaint has been made, or credible
information has been received or a reasonable suspicion exists that he has committed a cognizable
offence, to appear before him or at such other place as may be specified in the notice.

Where such notice is issued to any person, it shall be the duty of that person to comply with the
terms of notice and where such person complies and continues to comply with the notice, he shall
not be arrested in respect of the offence referred to in the notice

SECTION 36: Procedure to be followed

Every police officer while making arrest shall-

Bear an accurate, visible and clear identification of his name which will facilitate easy identification;

Prepare a memorandum of arrest which shall be:

a. Attested by atleast one witness, who is the member of the family of the person arrested or a
respectable member of the locality where the arrest is made

b. countersigned by the person arrested and

c. inform the person arrested, unless the memorandum is attested by a member of his family that he
has the right to have a relative or friend named by him to be informed of his arrest.

SECTION 38:
when any person is arrested and interrogated by the police, he shall be entitled to meet an advocate of
his choice during interrogation.

SECTION 42: ARREST ON REFUSAL TO GIVE NAME AND RESIDENCE

If any person who is accused of committing a non-cognizable offence does not give his name, residence or
gives a name and residence which the police officer feels to be false, he may be taken into custody.
However, such person cannot be detained beyond 24 hours if his true name and address cannot be
ascertained or fails to execute a bond or furnish sufficient sureties. In that event he shall be forwarded to
the nearest Magistrate having jurisdiction

7.10
SECTION 40: ARREST BY A PRIVATE PERSON

A private person may arrest or cause to be arrested any person:

(a) who in his presence commits a non-bailable and cognizable offence or

(b) who is a proclaimed offender

And without unnescessary delay but within 6hrs from such arrest shall make over such person to a police office or
nearest police station.

SECTION 41: ARREST BY MAGISTRATE

The Magistrate has been given power to arrest a person who has committed an offence in his
presence and also commit him to custody.

However, Section 41 protects members of Armed Forces from arrest where they do something in
discharge of their official duties. They could be arrested only after obtaining the consent of the Central
Government.

SECTION 43: PROCEDURE OF HOW ARREST IS MADE

Persons arrested are to taken before the magistrate or officer-in-charge of a police station without
unnecessary delay. When a person is arrested without a warrant, he can be kept into custody for period
not exceeding 24 hours, and before the expiry of that period he is to be produced before the nearest
magistrate, who can order his detention for a term not exceeding 15 days, or he can be taken to a
magistrate, under whose jurisdiction he is to be tried, and such Magistrate can remand him to custody for
a term which may exceed 15 days but not more than 60 days.
PREVENTION ARREST
Arrest by police officer before committing crime with lawful authorities. No unreasonable detention

SUMMONS
A summon is issued either for appearance or for producing a document or thing which may be
issued to an accused person or witness.

ESSENTIALS OF SUMMONS:

✓ It should be in writing.
✓ It should be in duplicate.
✓ It should be signed by presiding officer of such court or by such officer as is authorized by
High Court.
✓ It contains seal of court.
✓ The summons should be clear and specific in its terms as to title of the court, the place at
which, the day and time when the attendance of the person summoned is required.

WARRANTS OF ARREST
A warrant is described as a legal document issued by a judge or magistrate, which empowers a
police officer to make an arrest, search or seize premise. Every warrant of arrest issued by a Court
under this Code shall be in writing, signed by the presiding officer of such Court, and shall bear the
seal of the Court. Such warrant shall remain in force until it is cancelled by the Court which issued it,
or until it is executed (Section 70).

7.11
 The requisites of a warrant are as follows:

1. It must be in writing.
2. It must bear the name and designation of the person who is to execute it;
3. It must give full name and description of the person to be arrested;
4. It must state the offence charged;
5. It must be signed by the presiding officer; and
6. It must be sealed.

PROCLAMATION AND ATTACHMENT

If a Court has reason to believe that any person against whom a warrant has been issued by it has
absconded or is concealing himself so that such warrant cannot be executed, the Court may publish

a written proclamation requiring him to appear at a specified place and at a specified time not less
than 30 days from the date of publishing such proclamation. (Section 82)

While issuing proclamation, the Magistrate must record to his satisfaction that the accused has
absconded or is concealing himself. The object of attaching property is not to punish him but to
compel his appearance.

SEARCH WARRANT
According to Section 96, a search warrant can be issued only in the following cases:

1. Where court has reason to believe that a person summoned to produce any document will
not produce it.
2. Where such document or thing is not known to the court to be in possession of any person
3. Where general search or inspection is necessary

SUMMARY TRIALS – section 283

Summary trial means the “speedy disposal” of cases. Summary cases applies to such offences not
punishable with death, imprisonment for life or imprisonment for a term exceeding two years.

Summary trial can be only conducted by:

(a) any Chief Judicial Magistrate;

(b) any Metropolitan Magistrate;
(c) any Magistrate of the First class who is specially empowered in this behalf by the High Court

Section 262 state that no sentence of imprisonment for a term exceeding 3 month shall be passed in
any conviction in summary trial.

Cases which can undergo summary trial (examples):

✓ Cases which relate to offences punishable with imprisonment upto 2years.

✓ those offences in which the value of property does not exceed Rs.2000
✓ offences under section 454 and 456 of IPC i.e housebreaking and house trespassing.

7.12
 ✓ Insult with intent to provoke the breach of peace, under section 504 of IPC.
✓ Abatement of any foregoing offences
✓ An attempt to commit any foregoing offences, when such attempt is an offence.

COMPOUNDING OF OFFENCES (Sec 359)

Offences which are punishable under the sections of IPC can be compounded only with the
permission of the court. Few examples :

Name of Offence Who can compound offence

Voluntarily causing grievous hurt To whom hurt has been caused

Assault or criminal force in attempting The person assaulted or to whom the force has
wrongfully to confine a person been used

Theft, by clerk or servant of property in The owner of the property stolen

possession of master

Criminal breach of trust The owner of the property on which a breach of

trust has been occurred

Cheating with knowledge that wrongful loss may The peson who has been cheated
ensue to a person whose interest offender is
bound to protect

Cheating and dishonestly inducing delivery of The person who has been cheated
property

BAIL
It means the temporary release of the accused from the custody of the officers of law and
entrusting him to the private custody of persons who are sureties to produce the accused to answer
the charge at the stipulated time or date.

An “anticipatory bail” is granted by the High Court or a Court of Session, to a person who
apprehends arrest for having committed a non-bailable offence, but has not yet been arrested
(Section 438). An opportunity of hearing must be given to the opposite party before granting
anticipatory bail (State of Assam v. R.K. Krishna Kumar)

Features

Available only in case of non bailable offence

7.13
 Granted before arrest

Can be granted by high court or any session court at its discretion

An opportunity of hearing to opposite party

Difference between fine and penalty

FINE- a sum imposed as punishment for an offence

PENALTY – the suffering or the sum to be forfeited to which a person agrees to be subjected in case
of non-fulfilment of stipulations.

Analysis – punishments are against offences and penalties are against non-compliances.

OFFENCES AGAINST THE PROPERTY

THEFT (Section 303)

Whoever intending to take dishonestly any movable property out of the possession of any person
without that person’s consent, moves that property in order to such taking, is said to commit theft.

There should be an intention to dishonestly take the property.

The property should be movable property

The property should be taken out of the possession without that person’s consent.

The property should be moved in order to take that property.

Situation which do not constitute theft

Z, goingon a journey, entrusts his plate to A, the warehousekeeper, till Z returns. A carries the plate
to a goldsmith and sells it. Here, the plate was not in Z’s possession. It could not therefore be taken
out of Z’s possession, and A has not committed theft, though he may have committed Criminal
breach of trust.

PUNISHMENT – imprisonment which may extend to 3years or with fine or both.

However, there are different punishment for theft depending upon situation.

EXTORTION (Section 308)

Whoever intentionally puts any person in fear of any injury to that person, or to any other, and
thereby dishonestly induces the person so put in fear to deliver to any person any property, or
valuable security or anything signed or sealed which may be converted into a valuable security,
commits extortion.

7.14
Difference between theft and extortion

a. Extortion is done by wrongfully getting the consent of the owner while there is no present of
consent in case of theft.

b. Both movable and immovable property may be the subject of an extortion whereas theft is limited
to movable property only because of its nature.
ROBBERY (Section 309)

In all robbery, there is either theft or extortion.

When theft is robbery - Theft is robbery if,in order to committing of theft or in

committing the theft, or in carrying away or attempting to carry away property
obtained by the theft, the offender for that end voluntarily causes or attempts to cause
to any person death or hurt or wrongful restrain or fear of instant death or of instant
hurt or of instant wrongful restrain.

When extortion is robbery - Extortion is robbery if the offender, at the time of

committing the extortion, is in the presence of the person put in fear, and commits the
extortion by putting that person in fear of instant death, of instant hurt, or of instant
wrongful restrain to that person or to some other person and by so putting in fear,
induces the person so put in fear then and there to deliver up the thing extorted.

PUNISHMENT- imprisonment upto 10years and fine

If robbery committed on highway between sunset and sunrise, imprisonment may

extend upto 14years.

PUNISHMENT FOR ATTEMPT OF ROBBERY - imprisonment upto 7years and fine.

DACOITY (Section 310)

when five or more persons co-jointly commit or attempt to commit a robbery, or where
the whole number of person co-jointly committing or attempting to commit a robbery
and persons present and aiding such commission or attempt, amount to five or more,
every person so committing or attempting or aiding is said to commit dacoity.

PUNISHMENT

Imprisonment for life, or imprisonment which may extend upto 10years and shall also
be liable to fine.

DISHONESTLY RECEIVING STOLEN PROPERTY

Imprisonment which may extend upto 3years or fine or both.

SECTION 61 - CRIMINAL CONSPIRACY

Definition of criminal conspiracy (Section 61(1))
7.15
When two or more persons agree to do, or cause to be done, —
• An illegal act
Or
• An act which is not illegal by illegal means, such an agreement is designated a
criminal conspiracy.
Case Law R. Venkatkrishnan v CBI, (2009)
The above ingredients of the offence of criminal conspiracy are laid down by the Supreme
Court in R. Venkatkrishnan v CBI, (2009) According to Halsbury’s Laws of England, the
essence of the offence of conspiracy is the fact of combination by agreement. The
agreement may be express or implied, or in part express and in part implied.

Case Law NCT of Delhi v Navjot Sandhu, 2005

In NCT of Delhi v Navjot Sandhu, 2005 (Parliament attack case) the accused had never
contacted the deceased terrorist on place but had helped one of the conspirators to flee to
a safer place after incident was not held guilty as conspirator.
Punishment of Criminal Conspiracy
Whoever is a party to a criminal conspiracy to commit an offence punishable
1. with death, imprisonment for life or rigorous imprisonment for a term of two years
or upwards, shall, where no express provision is made in this Sanhita for the
punishment of such a conspiracy, be punished in the same manner as if he had
abetted such offence.
2. Whoever is a party to a criminal conspiracy other than a criminal conspiracy to
commit an offence punishable as aforesaid shall be punished with imprisonment of
either description for a term not exceeding six months, or with fine or with both.
SECTION 318 - CHEATING
Sections 318 of The Bharatiya Nyaya Sanhita, 2023 deal with the offence of Cheating.
Whoever, by deceiving any person, fraudulently or dishonestly induces the person so
deceived to deliver any property to any person, or to consent that any person shall retain
any property, or intentionally induces the person so deceived to do or omit to do anything
which he would not do or omit if he were not so deceived, and which act or omission causes
or is likely to cause damage or harm to that person in body, mind, reputation or property, is
said to “cheat”.
Explanation. —A dishonest concealment of facts is a deception within the meaning of this
section.
(2) Whoever cheats shall be punished with imprisonment of either description for a term
which may extend to three years, or with fine, or with both.
(3) Whoever cheats with the knowledge that he is likely thereby to cause wrongful loss to a
person whose interest in the transaction to which the cheating relates, he was bound, either
by law, or by a legal contract, to protect, shall be punished with imprisonment of either
description for a term which may extend to five years, or with fine, or with both.
(4) Whoever cheats and thereby dishonestly induces the person deceived to deliver any
property to any person, or to make, alter or destroy the whole or any part of a valuable

7.16
security, or anything which is signed or sealed, and which is capable of being converted into
a valuable security, shall be punished with imprisonment of either description for a term
which may extend to seven years, and shall also be liable to fine.

Examples
1. Cheating by Personation - A, by falsely pretending to be in the Civil Service,
intentionally deceives Z, and thus dishonestly induces Z to let him have on credit
goods for which he does not mean to pay. A cheats.

2. A, by exhibiting to Z a false sample of an article intentionally deceives Z into believing

7.17
 that the article corresponds with the sample, and thereby dishonestly induces Z to
buy and pay for the article. A cheats.

3. A, by pledging as diamond articles which he knows are not diamonds, intentionally

deceives Z, and thereby dishonestly induces Z to lend money. A cheats.

4. A Intentionally deceives Z into a belief that A means to repay any money that Z may
lend to him and thereby dishonestly induces Z to lend him money, A not intending to
repay it. A cheats.

7.18
Cheating – Main Ingredients
The main ingredients of cheating are as under:
1. Deception of any person.
2. Fraudulently or dishonestly inducing that person
• To deliver any property to any person
Or
• To consent that any person shall retain any property
Or
• Intentionally inducing that person to do or omit to do anything which he would not
do or omit if he were not so deceived, and which act or omission causes or is likely to
cause damage or harm to that person in body, mind, reputation or property.
Case Law Iridium India Telecom Ltd. v Motorola Incorporated and Ors., (2005)
The Supreme Court in Iridium India Telecom Ltd. v Motorola Incorporated and Ors., (2005)
has held that deception is necessary ingredient under both parts of section. Complainant
must prove that inducement has been caused by deception exercised by the accused. It was
held that non-disclosure of relevant information would also be treated a misrepresentation
of facts leading to deception.
Case Law M.N. Ojha and others v Alok Kumar Srivastav, (2009)
The Supreme Court in M.N. Ojha and others v Alok Kumar Srivastav, (2009) has held that
where the intention on the part of the accused is to retain wrongfully the excise duty which
the State is empowered under law to recover from another person who has removed non-
duty paid tobacco from one bonded warehouse to another, they are held guilty of cheating.
Case Law T.R. Arya v State of Punjab, (1987)
In T.R. Arya v State of Punjab, (1987), it was held that negligence in duty without any
dishonest intention cannot amount to cheating. A bank employee when on comparison of
signature of drawer passes a cheque there may be negligence resulting in loss to bank, but it
cannot be held to be cheating.

Section 319 - Cheating by Personation

7.19
As per section 319(1) a person is said to “cheat by personation” if he cheats by pretending
to be some other person, or by knowingly substituting one person for another, or
representing that he or any other person is a person other than he or such other person
really is.

Note – Cheating by false identity whether real or imaginary

Explanation
The offence is committed whether the individual personated is a real or imaginary person.
Examples
1. A cheats by pretending to be a certain rich banker of the same name. A cheats by
personation.
2. A cheats by pretending to be B, a person who is deceased. A cheats by personation.
Punishment for Cheating
Section 319(2) provides that whoever cheats shall be punished with imprisonment of either
description for a term which may extend to five year, or with fine, or with both.

Punishment

cheating u/s 318 cheating by personation u/s 319

Section 318(2) whoever cheats, shall be punishable

for imprisonment upto 3 years, or with fine, or with Section 319(2) Shall be punishable for imprisonment
both upto 5 years, or with fine, or with both

Section 318(3) whoever cheats with the knowledge

shall be punishable for imprisonment upto 5 years,
or with fine, or with both

7.20
Case Law Mohd. Ibrahim and others v State of Bihar and another, (2009)
In Mohd. Ibrahim and others v State of Bihar and another (2009) the accused was alleged to
have executed false sale deeds and a complaint was filed by real owner of property. The
accused had a bonafide belief that the property belonged to him and purchaser also
believed that suit property belongs to the accused. It was held that accused was not guilty
of cheating as ingredients of cheating were not present.
Case Law Shruti Enterprises v State of Bihar and ors, (2006)
In Shruti Enterprises v State of Bihar and ors (2006) it was held that mere breach of contract
cannot give rise to criminal prosecution under section 420 (Section 318(4) of Sanhita) unless
fraudulent or dishonest intention is shown right at the beginning of transaction when the
offence is said to have been committed. If it is established that the intention of the accused
was dishonest at the time of entering into the agreement then liability will be criminal and
the accused will be guilty of offence of cheating.

CRIMINAL MISAPPROPRIATION OF PROPERTY

Section 314 and 315 of the Bharatiya Nyaya Sanhita, 2023 deal with Criminal
Misappropriation of Property.
Section 314 - Dishonest misappropriation of property
Whoever dishonestly misappropriates or converts to his own use any movable property,
shall be punished with imprisonment of either description for a term which shall not be less
than six months but which may extend to two years, or with fine, or with both.

7.21
Examples 1.
A takes property belonging to Z out of Z's possession, in good faith believing at the time
when he takes it, that the property belongs to himself. A is not guilty of theft; but if A, after
discovering his mistake, dishonestly appropriates the property to his own use, he is guilty of
an offence under this section.

Examples 2
A takes property belonging to Z out of Z's possession, in good faith believing at the time
when he takes it, that the property belongs to himself. A is not guilty of theft; but if A, after
discovering his mistake, dishonestly appropriates the property to his own use, he is guilty of
an offence under this section.

A and B, being, joint owners of a horse, A takes the horse out of B's possession, intending to use it.
Here, as A has a right to use the horse, he does not dishonestly misappropriate it. But, if A sells the
horse and appropriates the whole proceeds to his own use, he is guilty of an offence under this
section.

7.22
Explanation to Section 314
Explanation 1
A dishonest misappropriation for a time only is a misappropriation within the meaning of
this section.
Example
A finds a Government promissory note belonging to Z, bearing a blank endorsement. A,
knowing that the note belongs to Z, pledges it with a banker as a security or a loan,
intending at a future time to restore it to Z. A has committed an offence under this section.
Explanation 2
A person who finds property not in the possession of any other person, and takes such
property for the purpose of protecting it for, or of restoring it to, the owner, does not take
or misappropriate it dishonestly, and is not guilty of an offence; but he is guilty of an offence
above defined, if he appropriates it to his own use, when he knows or has the means of
discovering the owner, or before he has used reasonable means to discover and give notice
to the owner and has kept the property a reasonable time to enable the owner to claim it.
What are reasonable means or what is a reasonable time in such a case, is a question of
fact.
It is not necessary that the finder should know who is the owner of the property, or that any
particular person is the owner of it; it is sufficient if, at the time of appropriating it, he does
not believe it to be his own property, or in good faith believe that the real owner cannot be
found.
Examples
1. A finds a rupee on the high road, not knowing to whom the rupee belongs, A picks
up the rupee. Here A has not committed the offence defined in this section.
2. A finds a letter on the road, containing a bank note. From the direction and contents
of the letter he learns to whom the note belongs. He appropriates the note. He is
guilty of an offence under this section.
3. A finds a cheque payable to bearer. He can form no conjecture as to the person who
has lost the cheque. But the name of the person, who has drawn the cheque,
appears. A knows that this person can direct him to the person in whose favour the
cheque was drawn. A appropriates the cheque without attempting to discover the
owner. He is guilty of an offence under this section.

7.23
 4. A sees Z drop his purse with money in it. A picks up the purse with the intention of
restoring it to Z, but afterwards appropriates it to his own use. A has committed an
offence under this section.
5. A finds a purse with money, not knowing to whom it belongs; he afterwards
discovers that it belongs to Z, and appropriates it to his own use. A is guilty of an
offence under this section.
6. A finds a valuable ring, not knowing to whom it belongs. A sells it immediately
without attempting to discover the owner. A is guilty of an offence under this
section.
Important Points to Remember in relation to Section 314
Finder of money has not committed an offence by picking of money Because
1. tracing of true owner is impossible.
2. Finder of goods is not willing to return the goods even after the true owner is traced
is guilty u/s 314.
3. Finder of a bearer cheque gets it realized at the counter of payer’s bank, he has
committed offence u/s 314 because owner can be traced easily.
4. Finder of ring sells it immediately without attempt to trace true owner. It is an
offence u/s 314.
ILLUSTRATION
a. Finder of money has not committed an offence by picking of many (Because tracing
of true owner is impossible)
b. Finder of goods is not willing to return the goods even after the true owner is traced
is guilty u/s 314
c. Finder of bearer cheque gets it realized at the counter of payer’s bank, he has
committed offence u/s 314 because owner can be traced easily
d. Finder of ring sells it immediately without attempt to trace true owner,it is an
offence u/s 314
Dishonestly is an essential ingredient of the offence and the Sanhita provides that whoever
does anything with the intention of causing wrongful gain to one person or wrongful loss to
another person, is said to do that ‘dishonestly’.
Misappropriation means the intentional, illegal use of the property or funds of another
person for one's own use or other unauthorized purpose.
There are two things necessary before an offence under section 314 can be established.
Firstly, that the property must be misappropriated or converted to the use of the accused,
and, secondly, that he must misappropriate or convert it dishonestly.
Case Law Bhagiram Dome v Abar Dome, (1888) 15 Cal 388, 400
In Bhagiram Dome v Abar Dome (1888) 15 Cal 388, 400, it has been held that under Section
403(Section 314) criminal misappropriation takes place even when the possession has been
innocently come by, but where, by a subsequent change of intention or from the knowledge
of some new fact which the party was not previously acquainted, the retaining become
wrongful and fraudulent.

7.24
Case Law Mohammad Ali v State, 2006 Cr LJ 1368 (MP)
In Mohammad Ali v State, 2006 Cr LJ 1368 (MP), fifteen bundles of electric wire were seized
from the appellant but none including electricity department claimed that wires were stolen
property. Evidence on records showed that impugned electric wire was purchased by the
applicant from scrap seller.
Merely applicant not having any receipt for purchase of impugned wire cannot be said to be
guilty of offence punishable under section 403 of the Code (Section 314 of The Bharatiya
Nyaya Sanhita, 2023). Order of framing charge was, therefore, quashed by the Supreme
Court and the accused was not held guilty under section 403 of the Indian Penal Code, 1860
(Section 314 of The Bharatiya Nyaya Sanhita, 2023).
Case Law U. Dhar v State of Jharkhand, (2003) 2 SCC 219
In U. Dhar v State of Jharkhand, (2003) 2 SCC 219, there were two contracts - one between
the principal and contractor and another between contractor and sub-contractor. On
completion of work sub-contractor demanded money for completion of work and on non-
payment filed a criminal complaint alleging that contractor having received the payment
from principal had misappropriated the money. The magistrate took cognizance of the case
and High Court refused to quash the order of magistrate. On appeal to the Supreme Court, it
was held that matter was of civil nature and criminal complaint was not maintainable and
was liable to be quashed. The Supreme Court also observed that money paid by the
principal to the contractor was not money belonging to the complainant, sub-contractor,
hence there was no question of misappropriation.

[Section 315] Dishonest misappropriation of property possessed by deceased

person at the time of his death
Whoever dishonestly misappropriates or converts to his own use property, knowing that
such property was in the possession of a deceased person at the time of that person's
death, and has not since been in the possession of any person legally entitled to such
possession, shall be punished with imprisonment of either description for a term which may
extend to three years, and shall also be liable to fine, and if the offender at the time of such
person's death was employed by him as a clerk or servant, the imprisonment may extend to
seven years.

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 Section 315

Dishonest misappropriation of property possessed

by deceased person at the time of his death

If any person dishonestly misappropriates the property of the

deceased person which such deceased person was possessing
at a timing of death shall be punished.

Fine (+) upto 3 years or Fine (+) upto 7 years

imprisonment imprisonment

Offender is unknown to Offender is an employee of

deceased person such deceased person

Example
Z dies in possession of furniture and money. His servant A, before the money comes into the
possession of any person entitled to such possession, dishonestly misappropriates it. A has
committed the offence defined in this section.
The offence under this section consists in the pillaging of property during the interval which
elapses between the time when the possessor of the property dies, and the time when it
comes into the possession of some person or officer authorized to take charge of it.

[Section 316] Criminal breach of trust

Whoever, being in any manner entrusted with property, or with any dominion over
property, dishonestly misappropriates or converts to his own use that property, or
dishonestly uses or disposes of that property in violation of any direction of law prescribing
the mode in which such trust is to be discharged, or of any legal contract, express or
implied, which he has made touching the discharge of such trust, or wilfully suffers any
other person so to do, commits “criminal breach of trust”.
Explanation 1
A person, being an employer of an establishment whether exempted under section 17 of
the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952) or not
who deducts the employee’s contribution from the wages payable to the employee for the
credit to a Provident Fund or Family Pension Fund established by any law for the time being
in force, shall be deemed to have been entrusted with the amount of contribution so
deducted by him and if he makes default in the payment of such contribution to the said
Fund in violation of the said law, shall be deemed to have dishonestly used the amount of
the said contribution in violation of a direction of law as aforesaid.

7.26
Explanation 2
A person, being an employer, who deducts the employees’ contribution from the wages
payable to the employee for credit to the Employees' State Insurance Fund held and
administered by the Employees' State Insurance Corporation established under the
Employees’ State Insurance Act, 1948 (34 of 1948), shall be deemed to have been entrusted
with the amount of contribution so deducted by him and if he makes default in payment of
such contribution to the said Fund in violation of the said Act, shall be deemed to have
dishonestly used the amount of said contribution in violation of a direction of law as
aforesaid.

Examples
1. A, being executor to the will of a deceased person, dishonestly disobeys the law
which directs him to divide the effects according to the will, and appropriates them
to his own use. A has committed criminal breach of trust.
2. A is a warehouse-keeper. Z going on a journey, entrusts his furniture to A, under a
contract that it shall be returned on payment of a stipulated sum for warehouse
room. A dishonestly sells the goods. A has committed criminal breach of trust.
3. A, residing in Calcutta, is agent for Z, residing at Delhi. There is an express or implied
contract between A and Z, that all sums remitted by Z to A shall be invested by A,
according to Z's direction. Z remits a lakh of rupees to A, with directions to A to
invest the same in Company's paper. A dishonestly disobeys the directions and
employs the money in his own business. A has committed criminal breach of trust.
4. But if A, in the last example, not dishonestly but in good faith, believing that it will
be more for Z's advantage to hold shares in the Bank of Bengal, disobeys Z's
directions, and buys shares in the Bank of Bengal, for Z, instead of buying Company's
paper, here, though Z should suffer loss, and should be entitled to bring a civil action
against A, on account of that loss, yet A, not having acted dishonestly, has not
committed criminal breach of trust.
5. A, a revenue-officer, is entrusted with public money and is either directed by law, or
bound by a contract, express or implied, with the Government, to pay into a certain

7.27
 treasury all the public money which he holds. A dishonestly appropriates the money.
A has committed criminal breach of trust.
6. A, a carrier, is entrusted by Z with property to be carried by land or by water. A
dishonestly misappropriates the property. A has committed criminal breach of trust.
The gist of the offence of criminal breach of trust as defined under section 405 of the
Indian Penal Code, 1860 is ‘dishonest misappropriation’ or ‘conversion to own use’,
another person’s property.
Essential Ingredients of Criminal Breach of Trust
The essential ingredients of the offence of criminal breach of trust are as under;
1. The accused must be entrusted with the property or with dominion over it,
2. The person so entrusted must use that property, or;
3. The accused must dishonestly use or dispose of that property or wilfully suffer any other
person to do so in violation:
• Of any direction of law prescribing the mode in which such trust is to be discharged
or
• Of any legal contract made touching the discharge of such trust.

Case Law V.R. Dalal v Yugendra Naranji Thakkar, 2008 (15) SCC 625 Pratibha
Rani v Suraj Kumar, AIR 1985 SC 628
The Supreme Court of India in V.R. Dalal v Yugendra Naranji Thakkar, 2008 (15) SCC 625,
has held that the first ingredient of criminal breach of trust is entrustment and where it is
missing, the same would not constitute a criminal breach of trust. Breach of trust may be
held to be a civil wrong but when mens-rea is involved it gives rise to criminal liability also.
The expression ‘direction of law’ in the context of Section 405 (Section 316 of The Bharatiya
Nyaya Sanhita, 2023) would include not only legislations pure and simple but also directions,
instruments and circulars issued by authority entitled therefor.
Pratibha Rani v Suraj Kumar, AIR 1985 SC 628, the appellant alleged that her stridhan
property was entrusted to her in–laws which they dishonestly misappropriated for their
own use. She made out a clear, specific and unambiguous case against in–laws. The accused
were held guilty of this offence and she was held entitled to prove her case and no court
would be justified in quashing her complaint.

Case Law S.K. Alagh v State of U.P.and others, 2008 (5) SCC 662
In S.K. Alagh v State of U.P. and others 2008 (5) SCC 662, where demand drafts were drawn
in the name of company for supply of goods and neither the goods were sent by the
company nor the money was returned, the Managing Director of the company cannot be
said to have committed the offence under Section 406 of Indian Penal Code (Section 316(2)
of The Bharatiya Nyaya Sanhita, 2023). It was pointed out that in absence of any provision
laid down under statute, a director of a company or an employer cannot be held vicariously
liable for any offence committed by company itself.

After analyzing all the cases we may conclude that for an offence to fall under this section all the
four requirements are essential to be fulfilled.

7.28
 1. The person handing over the property must have confidence in the person taking the
property so as to create a fiduciary relationship between them or to put him in position of
trustee.
2. The accused must be in such a position where he could exercise his control over the
property i.e.; dominion over the property.
3. The term property includes both movable as well as immovable property within its ambit.
4. It has to be established that the accused has dishonestly put the property to his.own use or
to some unauthorized use. Dishonest intention to misappropriate is a crucial fact to be
proved to bring home the charge of criminal breach of trust.

Section 316

Points to be
remember

Accused entrusted Property can be Dishonest And

with property (or) Movable (or) Fiduciary
Unauthorized
Dominion over Relation
Immovable use
property

[Section 316(2)] Punishment for criminal breach of trust

Whoever commits criminal breach of trust shall be punished with imprisonment of either
description for a term which may extend to five years, or with fine, or with both

[Section 316(3)] Criminal breach of trust by Carrier

Whoever, being entrusted with property as a carrier, wharfinger or warehouse- keeper,
commits criminal breach of trust in respect of such property, shall be punished with
imprisonment of either description for a term which may extend to seven years, and shall
also be liable to fine.

[Section 316(4)] Criminal breach of trust by Clerk or Servant

Whoever, being a clerk or servant or employed as a clerk or servant, and being in any
manner entrusted in such capacity with property, or with any dominion over property,
commits criminal breach of trust in respect of that property, shall be punished with
imprisonment of either description for a term which may extend to seven years, and shall
also be liable to fine.

7.29
[Section 316 (5)] Criminal breach of trust by Public servant or by Banker or
Merchant Banker or Agent
Whoever, being in any manner entrusted with property, or with any dominion over property
in his capacity of a public servant or in the way of his business as a banker, merchant, factor,
broker, attorney or agent, commits criminal breach of trust in respect of that property, shall
be punished with imprisonment for life, or with imprisonment of either description for a
term which may extend to ten years, and shall also be liable to fine.

The acts of criminal breach of trust done by strangers is treated less harshly than acts of
criminal breach of trust on part of the persons who enjoy special trust and also in a position
to be privy to a lot of information or authority or on account of the status enjoyed by them,
say as in the case of a public servant.

The persons having a fiduciary relationship between them have a greater responsibility for
honesty as they have more control over the property entrusted to them due to their special
relationship. Under this section the punishment is severe and the persons of fiduciary
relationship have been classified as public servants, bankers, factors, brokers, attorneys and
agents.

Case Law Bagga Singh v State of Punjab

In Bagga Singh v State of Punjab, the appellant was a taxation clerk in the Municipal
Committee, Sangrur. He had collected arrears of tax from tax-payers but the sum was not
deposited in the funds of the committee after collection but was deposited after about 5
months. He pleaded that money was deposited with the cashier Madan Lal, a co-accused,
who had defaulted on the same but the cashier proved that he had not received any such
sum and was acquitted by lower court. The mere fact that the co-accused cashier was
acquitted was not sufficient to acquit accused in the absence of any proof that he had
discharged the trust expected of him. As such the accused was liable under section 409 of
Indian Penal Code, 1860. (Section 316(5) of The Bharatiya Nyaya Sanhita,2023).

Case Law Bachchu Singh v State of Haryana, AIR 1999 SC 2285

In Bachchu Singh v State of Haryana, AIR 1999 SC 2285, the appellant was working as ‘Gram
Sachiv’ for eight gram panchayats. He collected a sum of Rs. 648 from thirty villagers
towards the house tax and executed receipts for the same. As he was a public servant, and
in that capacity he had collected money as house tax but did not remit the same, he was
charged under Section 409 of Indian Penal Code, 1860. (Section 316(5) of The Bharatiya
Nyaya Sanhita, 2023). It was held that the appellant dishonestly misappropriated or
converted the said amount for his own use and his conviction under section 409 of Indian
Penal Code, 1860 (Section 316(5) of The Bharatiya Nyaya Sanhita, 2023). was upheld by the
Supreme Court.

7.30
Case Law Girish Saini v State of Rajasthan
In Girish Saini v State of Rajasthan, a public servant was accused of neither depositing nor
making entries of stationery required for official purpose.
Accused public servant was in charge of the store in the concerned department at the time
of commission of offence. Hence entrustment was proved. It was held accused could not
take the benefit of misplacing of one of the registers of company as he could not prove
maintenance of two registers by department.
Therefore, the accused was held guilty of committing criminal breach of trust.

[SECTION 320 TO 323] FRAUDULENT DEEDS AND DISPOSITIONS OF PROPERTY

Fraudulent Deeds and Dispositions of Property are covered under section 320 to 323 of the
Bharatiya Nyaya Sanhita, 2023. These sections deal with fraudulent conveyances referred to
in section 53 of the Transfer of Property Act and the Presidency-towns and Provincial
Insolvency Acts.

Dishonest of fraudulent removal or concealment of property to prevent

distribution among creditors (section 320)
Whoever dishonestly or fraudulently removes, conceals or delivers to any person, or
transfers or causes to be transferred to any person, without adequate consideration, any
property, intending thereby to prevent, or knowing it to be likely that he will thereby
prevent, the distribution of that property according to law among his creditors or the
creditors of any other person, shall be punished with imprisonment of either description for
a term which shall not be less than six months but which may extend to two years, or with
fine, or with both.

Case Law Ramavtar Chaukhany v Hari Ram Todi 1982

Guwahati High Court in Ramavtar Chaukhany v Hari Ram Todi 1982, held that an offence
under this section has following essential ingredients:
1. That the accused removed, concealed or delivered the property or that he
transferred, it caused it to be transferred to someone.
2. That such a transfer was without adequate consideration.
3. That the accused thereby intended to prevent or knew that he was thereby likely to
prevent the distribution of that property according to law among his creditors or
creditors of another person.
4. That he acted dishonestly and fraudulently.

This section specifically refers to frauds connected with insolvency. The offence under it
consists in a dishonest disposition of property with intent to cause wrongful loss to the
creditors. It applies to movable as well as immovable properties. In view of this section, the

7.31
property of a debtor cannot be distributed according to law except after the provisions of
the relevant enactments have been complied with.
[Section 321] Dishonestly or fraudulently preventing debt being available for
creditors
Whoever dishonestly or fraudulently conceals or removes any property of himself or any
other person, or dishonestly or fraudulently assists in the concealment or removal thereof,
or dishonestly releases any demand or claim to which he is entitled, shall be punished with
imprisonment of either description for a term which may extend to two years, or with fine,
or with both.
This section, like the preceding section 320, is intended to prevent the defrauding of
creditors by making property.

Case Law Commissioner of Wealth Tax v G.D. Naidu, AIR 1966 Mad 74
The expression ‘debt’ has not been defined in the Sanhita or in the General Clauses Act but
there are judicial pronouncements on the same. In Commissioner of Wealth Tax v G.D.
Naidu, AIR 1966 Mad 74, it was held that the essential requisites of debt are-
• Ascertained or ascertainable
• An absolute liability, in present or future
• An obligation which has already accrued and is subsisting. All debts are liabilities but
all liabilities are not debt.
Case Law Mangoo Singh v Election Tribunal, AIR 1957 SC 871
The Supreme Court in Mangoo Singh v Election Tribunal, AIR 1957 SC 871, has laid down
that the word ‘demand’ ordinarily means something more than what is due; it means
something which has been demanded, called for or asked for, but the meaning of the word
must take colour from the context and so ‘demand’ may also mean arrears or dues.

[Section 322] Dishonest or fraudulent execution of deed of transfer

containing false statement of consideration
Whoever dishonestly or fraudulently signs, executes or becomes a party to any deed or
instrument which purports to transfer or subject to any charge on property, or any interest
therein, and which contains any false statement relating to the consideration for such
transfer or charge, or relating to the person or persons for whose use or benefit it is really
intended to operate, shall be punished with imprisonment of either description for a term
which may extend to three years, or with fine, or with both.
This section deals with fraudulent and fictitious conveyances and transfers. The essential
ingredient of an offence under section 322 is that the sale deed or a deed subjecting an
immovable property to a charge must contain a false statement relating to the
consideration or relating to the person for whose use or benefit it is intended to operate.

7.32
[Section 323] Dishonest or fraudulent removal or concealment of property
Whoever dishonestly or fraudulently conceals or removes any property of himself or any
other person, or dishonestly or fraudulently assists in the concealment or removal thereof,
or dishonestly releases any demand or claim to which he is entitled, shall be punished with
imprisonment of either description for a term which may extend to three years, or with fine,
or with both.
The essential ingredients to bring an offence under section 323 are as follows:
• There is a property.
• That the accused concealed or removed the said property or assisted in concealing
or removing the said property.
• That the said concealment or removal or assisting in removal or concealment was
done dishonestly or fraudulently.
Or
• That the accused was entitled to a demand or claim.
• That the accused released the same.
• That he so released dishonestly or fraudulently.

[Section 336] Forgery

wrong document or
electronic record

wrong act done

wrong act done with
without any
document
document

Forgery Cheating

[SECTION 336] FORGERY

Whoever makes any false document or false electronic record or part of a document or
electronic record, with intent
• to cause damage or injury, to the public or to any person or
• to support any claim or title or
• to cause any person to part with property or
• to enter into any express or implied contract or

7.33
 • with intent to commit fraud or that fraud may be committed, commits forgery.

Definition of forgery
In order words, whenever a person is willing to cause damage or injury to other or profit or
benefit to himself on the basis of false document or record (electronic), wholly or partially,
such an attempt if accomplished is called forgery.

Section 336(2) Punishment for Forgery

Case Laws related to Forgery

Case Law Ramchandran v State, AIR 2010
The Supreme Court in Ramchandran v State, AIR 2010 has held that to constitute an offence
of forgery document must be made with dishonest or fraudulent intention. A person is said
to do a thing fraudulently if he does that thing with intent to defraud but not otherwise.
Case Law Parminder Kaur v State of UP
The Supreme Court in Parminder Kaur v State of UP, has held that mere alteration of
document does not make it a forged document. Alteration must be made for some gain or
for some objective.
Case Law Balbir Kaur v State of Punjab, 2011
Similarly, in Balbir Kaur v State of Punjab, 2011, the allegation against the accused was that
she furnished a certificate to get employment as ETT teacher which was found to be bogus
and forged in as much as school was not recognized for period given in certificate. However,
the certificate did not anywhere say that school was recognized. It was held that merely
indicating teaching experience of the accused, per-se, cannot be said to indicate wrong
facts. So the direction which was issued for prosecution is liable to be quashed.

[SECTION 356] DEFAMATION

• by words either spoken or intended to be read, or

7.34
 • by signs or
• by visible representations
makes or publishes any imputation concerning any person intending to harm, or knowing or
having reason to believe that such imputation will harm, the reputation of such person, is
said, except in the cases hereinafter excepted, to defame that person.
Explanation 1
It may amount to defamation to impute anything to a deceased person, if the imputation
would harm the reputation of that person if living, and is intended to be hurtful to the
feelings of his family or other near relatives.
Explanation 2
It may amount to defamation to make an imputation concerning a company or an
association or collection of persons as such.
Explanation 3
An imputation in the form of an alternative or expressed ironically, may amount to
defamation.
Explanation 4
No imputation is said to harm a person's reputation, unless that imputation directly or
indirectly, in the estimation of others, lowers the moral or intellectual character of that
person, or lowers the character of that person in respect of his caste or of his calling, or
lowers the credit of that person, or causes it to be believed that the body of that person is in
a loathsome state, or in a state generally considered as disgraceful.
Examples
1. A says— “Z is an honest man; he never stole B's watch”; intending to cause it to be
believed that Z did steal B's watch. This is defamation, unless it fall within one of the
exceptions.
2. A is asked who stole B's watch. A points to Z, intending to cause it to be believed
that Z stole B's watch. This is defamation, unless it fall within one of the exceptions.
3. A draws a picture of Z running away with B's watch, intending it to be believed that Z
stole B's watch.
Exceptions under Defamation
1. Imputation of truth which public good requires to be made or published
It is not defamation to impute anything which is true concerning any person, if it be
for the public good that the imputation should be made or published.
2. Public conduct of public servants
It is not defamation to express in good faith any opinion whatever respecting the
conduct of a public servant in the discharge of his public functions, or respecting his
character, so far as his character appears in that conduct, and no further.
3. Conduct of any person touching any public question
It is not defamation to express in good faith any opinion whatever respecting the
conduct of any person touching any public question, and respecting his character, so
far as his character appears in that conduct, and no further.

7.35
Example
It is not defamation in A to express in good faith any opinion whatever respecting Z's
conduct in petitioning Government on a public question, in signing a requisition for a
meeting on a public question, in presiding or attending at such meeting, in forming or
joining any society which invites the public support, in voting or canvassing for a particular
candidate for any situation in the efficient discharge of the duties of which the public is
interested.
4. Publication of reports of proceedings of courts
It is not defamation to publish substantially true report of the proceedings of a Court
of justice, or of the result of any such proceedings.
Explanation
A Justice of the Peace or other officer holding an enquiry in open Court preliminary to a trial
in a Court of Justice, is a Court within the meaning of the above section.
5. Merits of case decided in Court or conduct of witnesses and others concerned
It is not defamation to express in good faith any opinion whatever respecting the
merits of any case, civil or criminal, which has been decided by a Court of Justice, or
respecting the conduct of any person as a party, witness or agent, in any such case,
or respecting the character of such person, as far as his character appears in that
conduct, and no further.
Examples
A. A says—“I think Z's evidence on that trial is so contradictory that he must be stupid
or dishonest.” A is within this exception if he says this in good faith, in as much as the
opinion which he expresses respects Z's character as it appears in Z's conduct as a
witness, and no farther. But if A says—“I do not believe what Z asserted at that trial
because I know
B. him to be a man without veracity”; A is not within this exception, in as much as the
opinion which express of Z's character, is an opinion not founded on Z's conduct as a
witness.
Merits of public performance
6. It is not defamation to express in good faith any opinion respecting the merits of any
performance which its author has submitted to the judgment of the public, or
respecting the character of the author so far as his character appears in such
performance, and no further.
Explanation
A performance may be submitted to the judgment of the public expressly or by acts on the
part of the author which imply such submission to the judgment of the public.
Examples
A. A person who publishes a book, submits that book to the judgment of the public.
B. A person who makes a speech in public, submits that speech to the judgment of the
public.
C. An actor or singer who appears on a public stage, submits his acting or singing to the
judgment of the public.

7.36
 D. A says of a book published by Z— “Z’s book is foolish; Z must be a weak man. Z's
book is indecent; Z must be a man of impure mind.” A is within the exception, if he
says this in good faith, in as much as the opinion which he expresses of Z respects Z's
character only so far as it appears in Z's book, and no further.
E. But if A says “I am not surprised that Z's book is foolish and indecent, for he is a weak
man and a libertine.” A is not within this exception, inasmuch as the opinion which
he expresses of Z's character is an opinion not founded on Z's book.
7. Censure (Warning) passed in good faith by person having lawful authority over
another
It is not defamation in a person having over another any authority, either conferred
by law or arising out of a lawful contract made with that other, to pass in good faith
any censure on the conduct of that other in matters to which such lawful authority
relates.
Example
A Judge censuring in good faith the conduct of a witness, or of an officer of the Court; a
head of a department censuring in good faith those who are under his orders, a parent
censuring in good faith a child in the presence of other children; a schoolmaster, whose
authority is derived from a parent, censuring in good faith a pupil in the presence of other
pupils; a master censuring a servant in good faith for remissness in service; a banker
censuring in good faith the cashier of his bank for the conduct of such cashier as such
cashier are within this exception.
8. Accusation preferred in good faith to authorised person
It is not defamation to prefer in good faith an accusation against any person to any
of those who have lawful authority over that person with respect to the subject-
matter of accusation.
Example
If A in good faith accuses Z before a Magistrate; if A in good faith complains of the conduct
of Z, a servant, to Z's master; if A in good faith complains of the conduct of Z, a child, to Z's
father- A is within this exception.
9. Imputation made in good faith by person for protection of his or other's interests
It is not defamation to make an imputation on the character of another provided
that the imputation be made in good faith for the protection of the interests of the
person making it, or of any other person, or for the public good.
Examples
A. A, a shopkeeper, says to B, who manages his business—“Sell nothing to Z unless he
pays you ready money, for I have no opinion of his honesty.” A is within the
exception, if he has made this imputation on Z in good faith for the protection of his
own interests.
B. A, a Magistrate, in making a report to his own superior officer, casts an imputation
on the character of Z.
Here, if the imputation is made in good faith, and for the public good, A is within the
exception.
10. Caution intended for good of person to whom conveyed or for public good

7.37
 It is not defamation to convey a caution, in good faith, to one person against
another, provided that such caution be intended for the good of the person to whom
it is conveyed, or of some person in whom that person is interested, or for the public
good.

Exceptions
of
Defamation

Expression in Warning Merit

Merit of Imputation good faith given by Acquisitio of Expression of
Imputati conduct Publicati To
made in regarding senior to n public public
on of of good faith on of convey
conduct of any his junior preferred perfo conduct of
Truth (+) witnesse by person judicial caution
person in good in good rman public
Disclose s pronoun good
for his touching any faith faith to ce servant in
in public decided interest or cement faith
interest public authorize good faith
in court other question (class d person
action suit)

[Section 356(2)] Punishment for defamation

According to section 356(2) whoever defames another shall be punished with simple
imprisonment for a term which may extend to two years, or with fine, or with both, or with
community service.

Kinds of Defamation
The wrong of defamation is of two kinds- libel and slander.
In libel, the defamatory statement is made in some permanent and visible form, such as
writing, printing or pictures.
Slander is made in spoken words or in some other transitory form, whether visible or
audible, such as gestures or inarticulate but significant sounds.
The ambit of ‘publish’ is very wide. The publication of defamatory matter means that it is
communicated to some person other than the person about whom it is addressed.

[Section 356(3)] Printing or engraving matter known to be defamatory

Section 356(3) provides that whoever prints or engraves any matter, knowing or having
good reason to believe that such matter is defamatory of any person, shall be punished with
simple imprisonment for a term which may extend to two years, or with fine, or with both. A
person printing or engraving defamatory matter abets the offence of defamation and is
guilty under section 356(3).. Printing or engraving of defamatory material is not sufficient
and the court is required to be satisfied that the accused knew or had good reasons to

7.38
believe that such a matter was defamatory before holding a person guilty under section
356(3)..
Case Law Sankaran v Ramkrishna Pillai, AIR 1960 Ker 141
In Sankaran v Ramkrishna Pillai, AIR 1960 Ker 141, the defamatory matter was printed in
Malayalam and the accused did not know the language, his mens rea was absent and he was
not guilty.

[Section 356(4)] Sale of printed or engraved substance containing defamatory

matter
Whoever sells or offers for sale any printed or engraved substance containing defamatory
matter, knowing that it contains such matter, shall be punished with simple imprisonment
for a term which may extend to two years, or with fine, or with both.

To bring an offence under section 356(4), it must be:

1. That the published material was defamatory as per section 356(1) of the Sanhita.
2. That the published material was either printed or engraved.
3. That the accused knew that such matter contained defamatory imputation.
4. That the accused sold or offered for sale the defamatory matter.

[SECTION 14 TO 33] GENERAL EXCEPTIONS OR DEFENCES UNDER THE

BHARATIYA NYAYA SANHITA, 2023
The Bharatiya Nyaya Sanhita, 2023 also provides for general exceptions for a person accused
of committing any offence under the Sanhita to plead in his defense.
1. [Section 14] Mistake of Fact bound by law
According to section 14, if any one commits any act which he is bound to do or
mistakenly believes in good faith that he is bound by law to do it, he is not guilty.
The mistake or ignorance must be of fact, but not of law. If the mistaken facts were
true, the act would not be an offence. Mistake of fact, is a general defence based on
the Common Law maxim - ignorantiafacitexcusat; igoranita juris non excusat-
(Ignorance of fact excuses; Ignorance of law does not excuse). In mistake of fact the
accused does not possess mens rea or guilty mind.
2. [Section 15] Act of Judge when acting judicially
If any judge in his authority in good faith believing authorized by law commits any
act, no offence is attracted.
3. [Section 16] Act done pursuant to the judgment or order of Court
When any act is committed on judgment or order of the Court of Justice which is in
force, it is no offence even if the judgment or order of the Court is without any
jurisdiction, though the person who executes the judgment and order must believe
that the Court has the jurisdiction.

7.39
 Section 15 protects judges from any criminal liability for their judicial acts.
Section 16 extends this protection to ministerial and other staff, who may be
required to execute orders of the court. If such immunity was not extended, then
executing or implementing court orders would become impossible.
4. [Section 17] Mistake of Fact-justified by law
According to section 17 of the Sanhita, if any one commits any act which is justified
by law or by reason of mistake of fact and not by reason of mistake of law believes
himself to be justified by Law.
5. [Section 18] Accident in doing a lawful act
According to section 18, if any one commits any offence by accident or misfortune
without mala fide or without knowledge in performance of his legal duty in legal
manner with proper care and caution is no offence.
The protection under this section will apply only if the act is a result of an accident or
a misfortune. The word ‘accident’ is derived from the Latin word ‘accidere’ signifying
‘fall upon, befall, happen, chance. It rather means an unintentional, an unexpected
act. Thus, injuries caused due to accidents in games and sports are all covered by this
section.
6. [Section 19] Act likely to cause harm, but done without criminal intent, and to
prevent other harm
Any act done by anyone without any criminal intent for saving or preventing harm to
third person or property in good faith is no offence.
7. [Section 20] Act of a child under seven years of age
If any child who is below seven years of age commits any offence, he is not guilty
because it is the presumption of law that that a child below 7 years of age is
incapable to having a criminal intention (mens rea) necessary to commit a crime.
8. [Section 21] Act of a child above seven and under twelve of immature
understanding
If any minor child is in between seven and twelve years of age and not attained the
maturity of what is wrong and contrary to law at the time of commission of offence
is not liable to be convicted and punished.
9. [Section 22] Act of a person of unsound mind
Nothing done by any person of unsound mind is an offence if at the time of doing it,
by reason of unsoundness of mind, is incapable of knowing the nature of the act, or
that he is doing what is either wrong or contrary to law.
10. [Section 23] Act of a person incapable of judgment by reason of intoxication
caused against his will
Nothing is an offence which is done by a person who, at the time of doing it, is, by
reason of intoxication, incapable of knowing the nature of the act, or that he is doing
what is either wrong, or contrary to law: provided that the thing which intoxicated
him was administered to him without his knowledge or against his will.

7.40
11. [Section 24] Offence requiring a particular intent or knowledge committed by one
who is intoxicated
In cases where an act done is not an offence unless done with a particular
knowledge or intent, a person who does the act in a state of intoxication shall be
liable to be dealt with as if he had the same knowledge as he would have had if he
had not been intoxicated, unless the thing which intoxicated him was administered
to him without his knowledge or against his will. If the accused himself takes and
consumes intoxicated thing or material with knowledge or intention and under
intoxication he commit any offence he is liable for punishment.
12. [Section 25] Act not intended and not known to be likely to cause death or
grievous hurt, done by consent
When anyone commits any act without any intention to cause death or grievous
hurt and which is not within the knowledge of that person to likely to cause death or
grievious hurt to any person who is more than eighteen years of age and has
consented to take the risk of that harm, the person doing the act has committed no
offence. This section is based on the principle of ‘volenti-non-fit injuria’ which means
he who consents suffers no injury. The policy behind this section is that everyone is
the best judge of his own interest and no one consents to that which he considers
injurious to his own interest.
13. [Section 26] Act not intended to cause death, done by consent in good faith for
person's benefit
Nothing, which is not intented to cause death, is an offence by reason of any harm
which it may cause, or be intended by the doer to cause, or be known by the doer to
be likely to cause, to any person for whose benefit it is done in good faith, and who
has given a consent, whether express or implied, to suffer that harm, or to take the
risk of that harm.
Section 26 extends the operation of consent to all acts except that of causing death
intentionally provided that the act is done in good faith for the benefit of the
consenting party.
For:- A, a surgeon, knowing that a particular operation is likely to cause the death of
Z who suffers under the painful complaint but not intending to cause Z’s death and
intending in good faith Z’s benefit, performs that operation on Z with Z’s consent. A
has committed no offence. But if surgeon while performing the operation leaves a
needle inside the abdomen of the patient who die due to septic- He would be liable
criminally for causing death by negligence because he did not perform the operation
with due care and caution.
14. [Section 27] On consent of guardian if any act is done in good faith to it
This section gives power to the guardian of a child under 12 years of age or a person
of unsound mind to consent to do an act done by a third person for the benefit of
the child or a person of unsound mind. Anything done by the third person will not be
an offence provided that it is done in good faith and for the benefit of the child or a

7.41
 person of unsound mind. This section gives protection to the guardians as well as
other person acting with the consent of a guardian of a person under 12 years of age
or a person of unsound mind.
15. [Section 28] Consent
The consent is not valid if it is obtained from a person who is under fear of injury, or
under a misconception of fact and if the person doing the act knows, or has reason
to believe, that the consent was given in consequence of such fear or misconception.
The consent is also not valid if it’s given by a person who, from unsoundness of mind,
or intoxication, is unable to understand the nature and consequence of that to which
he gives his consent. The consent is given by a person who is under twelve years of
age is also not valid unless the contrary appears from the context.
16. [Section 29] Exclusion of acts which are offences independently of harm caused
The exceptions in sections 25, 26 and 27 do not extend to acts which are offences
independently of any harm which they may cause, or be intended to cause, or be
known to be likely to cause, to the person giving the consent, or on whose behalf the
consent is given.
17. [Section 30] Act done in good faith for benefit of a person without consent
Nothing is an offence by reason of any harm which it may cause to a person for
whose benefit it is done in good faith, even without that person's consent, if the
circumstances are such that it is impossible for that person to signify consent, or if
that person is incapable of giving consent, and has no guardian or other person in
lawful charge of him from whom it is possible to obtain consent in time for the thing
to be done with benefit.
18. [Section 31] Communication made in good faith
No communication made in good faith is an offence by reason of any harm to the
person to whom it is made, if it is made for the benefit of that person. For: A, a
surgeon, in good faith, communicates to a patient his opinion that he cannot live.
The patient dies in consequence of the shock. A has committed no offence, though
he knew it to be likely that the communication might cause the patient's death.
19. [Section 32] Act to which a person is compelled by threats
Except murder, and offences against the State punishable with death, nothing is an
offence which is done by a person who is compelled to do it by threats, which, at the
time of doing it, reasonably cause the apprehension that instant death to that
person will otherwise be the consequence. For this defense to be valid the person
acting under threat should not have himself put under such a situation.
20. [Section 33] Act causing slight harm
Nothing is an offence by reason that it causes, or that it is intended to cause, or that
it is known to be likely to cause, any harm, if that harm is so slight that no person of
ordinary sense and temper would complain of such harm.

7.42
Chp 8 - Bharatiya Sakshya Adhiniyam, 2023
The law of evidence may be defined as a system of rules for ascertaining controverted questions of
fact in judicial enquiries. The rules contained in this act are applicable both in civil as well as criminal
matters. The Act extends to the whole of India.

It is applicable on:

All the judicial proceedings in the court or before the court.

Court Martials

Non-Applicability:

Proceedings before an arbitrator

Affidavits presented to any court or officer

Court Martial conveyed under the Army Act, the Naval Discipline Act or India Navy Discipline Act, 1934
or the Air Force act.

MEANING OF EVIDENCE (SECTION 3)

Evidence means and includes:

• all statements which the Court permits or requires to be made before it by witnesses, in
relation to matters of fact under inquiry; such statements are called oral evidence
• all documents (including electronic records) produced for the inspection of the Court; such
documents are called documentary evidence.

8.1
 TYPES OF EVIDENCE

ORAL/ PERSONAL EVIDENCE:

It means and indicates all the statement which the court permits or requires to be made
before it by witness, in relation to matters of facts under enquiry.

DOCUMENTARY EVIDENCE

Documents produced for the inspection of the Court is called Documentary Evidence. Section
60 provides that the contents of a document must be proved either by PRIMARY OR BY
SECONDARY EVIDENCE. It includes electronic records also.

Primary evidence- means the document Secondary evidence- is generally in the

itself produced for the inspection of the form of compared copies, certified copies or
Court copies made by such mechanical processes
as in themselves ensure accuracy.

CIRCUMSTANTIAL EVIDENCE

Evidence that is drawn not from direct observations of a fact at issue but from events or
circumstances that surrounds it is called circumstantial evidence.

For example- from the evidence that the person was seen running away from the place of crime,
a judge may infer that the person may have committed the crime.

PRIMARY EVIDENCE

“Primary evidence” means the document itself produced for the inspection of the Court (Section 62).
The rule that the best evidence must be given of which the nature of the case permit has often been
regarded as expressing the great fundamental principles upon which the law of evidence depends.
The general rule requiring primary evidence of producing documents is commonly said to be based on
the evidence principle and to be supported by the so called presumption that if inferior evidence is
produced where better might be given, the latter would tell against the withholder.

SECONDARY EVIDENCE

Secondary evidence is generally in the form of compared copies, certified copies or copies made by
such mechanical processes as in themselves ensure accuracy. Section 63 defines the kind of secondary
evidence permitted by the Act. According to Section 63, “secondary evidence” means and includes.

8.2
 • certified copies given under the provisions here after contained.
• copies made from the original by mechanical processes which in themselves ensure the
accuracy of the copy, and copies compared with the original;
• copies made from or compared with the original;
• counterparts of documents as against the parties who did not execute them;
• oral accounts of the contents of a document given by some person who has himself seen it.

FACT (section 3)
According to Section 3, “fact” means and includes:

• anything, state of things, or relation of things capable of being perceived by the senses;
• any mental condition of which any person is conscious.

Thus, facts are classified into physical and psychological facts.

Illustrations

• That there are certain objects arranged in a certain order in a certain place, is a fact.
• That a person heard or saw something, is a fact.
• That a person said certain words, is a fact.

2 TYPES OF FACTS

FACTS IN ISSUE RELEVANT FACTS

Facts which are constituents of a In order to prove the existence or non

litigated right, liability or disability are existence of facts in issue, certain other
called facts in issue. interconnected facts may be given in
evidence. These are termed as relevant
facts.

Evidence can be given only of facts in issue and relevant facts and no other fact

RELEVANT FACTS

One fact is said to be relevant to another when the one is connected with the other in any of the ways
referred to in the provisions of this Act relating to the relevancy of facts.

Where in a case direct evidence is not available to prove a fact in issue then it may be proved by any
circumstantial evidence and in such a case every piece of circumstantial evidence would be an instance
of a relevant fact

Logical relevancy and legal relevancy

8.3
A fact is said to be logically relevant to another when it bears such casual relation with the other as to
render probably the existence or non-existence of the latter. All facts logically relevant are not,
however, legally relevant. Relevancy under the Act is not a question of pure logic but of law, as no
fact, however logically relevant, is receivable in evidence unless it is declared by the Act to be relevant.
Of course, every fact legally relevant will be found to be logically relevant; but every fact logically
relevant is not necessarily relevant under the Act as common sense or logical relevancy is wider than
legal relevancy. A judge might in ordinary transaction, take one fact as evidence of another and act
upon it himself, when in Court, he may rule that it was legally irrelevant. And he may exclude facts,
although logically relevant, if they appear to him too remote to be really material to the issue.

Legal relevancy and admissibility

Relevancy and admissibility are not co-extensive or interchangeable terms. A fact may be legally
relevant, yet its reception in evidence may be prohibited on the grounds of public policy, or on some
other ground. Similarly, every admissible fact is not necessarily relevant. The tenth Chapter of the Act
makes a number of facts receivable in evidence, but these facts are not “relevant” under the second
Chapter which alone defines relevancy

FACTS IN ISSUE

According to Section 3 the expression “facts in issue” means and includes-any fact from which, either
by itself or in connection with other facts, the existence, non-existence, nature or extent of any right,
liability, or disability, asserted or denied in any suit or proceedings, necessarily follows. A fact in issue
is called as principal fact to be proved or factum probandum.

Illustration

A IS ACCUSED OF THE MURDER OF B.

AT HIS TRIAL THE FOLLOWING FACTS MAY BE ISSUE:

• that A caused B’s death;

• that A intended to cause B’s death;
• that A had received grave and sudden provocation from B

FUNDAMENTAL RULES

1. no facts other than those having rational probative value should be admitted in evidence.

2. all facts having rational probative value are admissible in evidence unless excluded by a positive
rule of paramount importance.

According to section 2(1)(h) of BSA, Whenever it is provided by this Adhiniyam that the Court may
presume a fact, it may either regard such fact as proved, unless and until it is disproved or may call for
proof of it.

Presumption is an inference of the existence of some fact, which is drawn, without evidence, from
some other fact already proved or assumed to exist (wills). Presumption is either of a fact or law. These

8.4
presumptions which are inference are always rebuttable. Presumption of law is either conclusive or
rebuttable.

CLASSIFICATION OF RELEVANT FACTS

1. facts connected with the facts to be proved; (Sections 4 to 14)
2. statement about the facts to be proved e.g. admission, confession;(Sections 15 to 25)
3. statements by persons who cannot be called as witnesses; (Sections 26 to 27)
4. statements made under special circumstances; (Sections 28 to 32)
5. how much of a statement is to be proved (section 33)
6. judgement of court when relevant (section 34 to 38)
7. opinions of third persons, when relevant; (Sections 39 to 45)
8. character when relevant (section 46 to 50)

1. FACTS CONNECTED WITH THE FACT TO BE PROVED (SECTIONS 4 TO 14)

The facts coming under this category are as follows:

a. RES GESTAE
It means surrounding accompanying circumstances which are inseparable from the facts in issue
and are necessary to explain the nature of the main act. They include act or declarations
accompanying or explaining the transaction or facts in issue. The area of events covered by RES
GESTAE depends upon the circumstances of each case.
OR
RELEVANT OF FACT FORMING PART OF THE SAME TRANSACTION {SECTION 4}
Section 6 lays down the requirement that the interconnection between facts in issue and other
connected facts must be such that they form part of the same transaction.

“Facts which thought not in issue, are so connected with a fact in issue as to form part of the same
transaction are relevant whether they occurred at the same time or at different times and places.”
For e.g. A is accused of the murder of B by beating him. Whatever was said or done by A or B or
the by the standers at the beating, or so shortly before or after it as to form part of the
transaction, is a relevant fact.
In Ratan v/s Queen a man was prosecuted for murder of his wife. His defence was that the bullet
went off accidently. There was evidence to the extent that deceased before her death, telephoned
to telephone operator and said “get the police” please before the operator could have connected
the call to police, the lady had given the address and call suddenly ended. Thereafter police came
to the house and found the dead body of the lady. Her call and the word she had spoken to
telephone operator were held to be relevant as a part of same transaction

FACTS WHICH ARE OCCASION, CAUSE OR EFFECT OF FACTS IN ISSUE OR RELEVANT FACTS
(SECTION 5): FACTS which are the occasion, cause or effect, immediate or otherwise, of relevant
facts, or facts in issue, or which constitute the state of things under which they happened, or which
afforded an opportunity for their occurrence or transaction, are relevant.

MOTIVE, PREPARATION AND PREVIOUS OR SUBSEQUENT CONDUCT (section 6)

8.5
 EVERY CRIME HAS FOUR STAGES

MOTIVE

PREPARATION

Attempt to commit

Actual Commission of crime

Section 8 provide as follows:

“Any fact is relevant which shows or constitution a motive, or preparation for any fact in issue or
relevant fact.”

MOTIVE is that which induces or moves a person to act in ascertain way in criminal law, it is necessary
to prove the intention of the person which constitutes the means rea

PREPARATION means the measures and means necessary for the commission of any offence.

CONDUCT means attempt to commit the crime and actual commission of crime

FACTS NECESSARY TO EXPLAIN OR INTRODUCE RELEVANT FACTS (SECTION 7)

According to Section 7, such facts are –

• which are necessary to explain or introduce a fact in issue or relevant fact, or

• which support or rebut an inference suggested by a fact in issue or relevant fact, or
• which establish the identity of a person or thing whose identity is relevant, or fix the
time or place at which any fact in issue or relevant fact happened, or
• which show the relation of parties by whom any such fact was transacted, are relevant
in so far as they are necessary for that purpose.

SECTION 8 – THINGS SAID OR DONE BY CONSPIRATOR IN REFERENCE TO COMMON DESIGN

Essence: Statements/actions by any conspirator after forming the common intention are
admissible against all.

Example: A, B, C plan to overthrow the government. C buys arms, B collects funds. These
actions are admissible against A even if A wasn't present.

SECTION 9 – WHEN FACTS NOT OTHERWISE RELEVANT BECOME RELEVANT

Essence: Facts that make existence of a relevant fact highly probable or improbable are relevant.

Example: A is accused of a crime in Chennai. Proof that he was in Ladakh at the time is relevant.

SECTION 10 – FACTS RELEVANT TO DETERMINE AMOUNT OF DAMAGES

8.6
Essence: In civil suits, facts that help decide compensation are admissible.

Example: In a defamation suit, public reaction and loss of reputation may help determine the damage
amount.

SECTION 11 – FACTS RELEVANT WHEN RIGHT OR CUSTOM IS IN QUESTION

Essence: Past transactions or actions supporting or negating a claimed right/custom are relevant.

Example: A claims fishing rights. A mortgage by A’s father of the fishery is relevant to support the
claim.

SECTION 12 – FACTS SHOWING EXISTENCE OF STATE OF MIND, BODY OR BODILY FEELING

Essence: State of mind (intention, knowledge, good/bad faith) or body is relevant when in issue.

Example: If A is accused of fraud, evidence of him previously delivering fake currency is relevant.

SECTION 13 – FACTS BEARING ON WHETHER ACT WAS ACCIDENTAL OR INTENTIONAL

Essence: If someone is repeatedly involved in similar events, it can show intent rather than accident.
Example: A sets fire to multiple insured houses — it suggests intention, not accident.

SECTION 14 – EXISTENCE OF COURSE OF BUSINESS

Essence: If something is done in the usual course of business, it supports the likelihood that it
happened. Example: If a letter is claimed to have been sent, proving it was usual to post letters placed
in a box is relevant.

2. STATEMENT ABOUT THE FACTS TO BE PROVED E.G. ADMISSION, CONFESSION;(SECTION

15 TO 25)
ADMISSIONS {SECTION 15}
Admission is a statement given by a person admitting a fact which suggests as to the existence of
his liability. An admission is the best evidence against the person making it. It is based on the
principle that what a party himself admits to be true may be reasonably presumed to be true so
that until the presumption is rebutted the fact admitted must be taken to be true.
E.g. A undertaken to collect rent for B. B sues A for not collecting rent due from C to B. A denies
that rent was due from C to B. a statement by C that he owed rent to B is an admission and is a
relevant fact as against A, if A denies that C did owes rent to B.

CONFESSION
The word confession is not defined in the Indian Evidence Act.1872. Hence, the definition of
admission given in sec 22 is also applicable to confession. Thus, confession is a statement given by
an accused admitting his guilt. If confession is made to court, it is called judicial confession and if
the confession is made to any person outside the court it is called Extra Judicial Confession.

TYPES OF CONFESSION

IN COURT OUT OF COURT

8.7
 Judicial confession Extra Judicial Confession

Confession is a special from of admission.

The main points of difference between them are:

ADMISSION CONFESSIONS
Admission can be either in civil or criminal Confessions can only be in criminal proceedings.
proceedings.
Admission need not to be voluntary always. Confessions need to be voluntary always.
Admission can be made by anybody Confessions can be made only by accused.
Admission can’t bind co-accused Confessions can bind co-accused
Every admission may not amount to a Every confession must be an admission
confession

ADMISSION IS WIDER TERM THAN CONFESSION.

ALL CONFESSION IS ADMISSION BUT ALL ADMISSION ARE NOT CONFESSION

• Confession must be free and on voluntary basis

Confession must not be caused by inducement, threat or promise.

• Confession made to police officer will be irrelevant and inadmissible

• Confession made to police officer in the immediate of magistrate is admissible
• A statement in the form of confession to a police officer will be admissible provided that the
statement leads to the discovery of a fact connected with a crime.

E.g. A confesses to police that he has murdered B with a revolver and that the revolver is with C. The
police recovered the revolver from C. Thus, it will be valid confession.

• When a statement in the form of a confession is given by co-accused then such statement
may be used against another co-accused.

e.g., A and B together murdered C. There is allegation on them and B confesses before a judge that he
has murdered C along with A. This is a statement by co-accused and thus can be used against another
co-accused i.e. A.

3. STATEMENTS BY PERSONS WHO CANNOT BE CALLED AS WITNESSES

Certain statements made by persons who are dead, or cannot be found or produced without
unreasonable delay or expense, makes the second exception to the general rule. However, the
following conditions must be fulfilled for the relevancy of the statements:

a) That the statement must relate to a fact in issue or relevant fact,

b) That the statement must fall under any of following categories:
• the statement is made by a person as to the cause of this death or as to any of the
circumstances resulting in his death;

8.8
 • statement made in the course of business;
• Statement which is against the interest of the maker.
• a statement giving the opinion as to the public right or custom or matters of general interest;
• a statement made before the commencement of the controversy as to the relationship of
persons, alive or dead, if the maker of the statement has special means of knowledge on the
subject;
• a statement made before the commencement of the controversy as to the relationship of
persons deceased, made in any will or deed relating to family affairs to which any such
deceased person belong;
• a statement in any will, deed or other document relating to any transaction by which a right
or custom was created, claimed, modified, etc.;
• a statement made by a number of persons expressing their feelings or impression;

4. STATEMENTS MADE UNDER SPECIAL CIRCUMSTANCES

The following statements become relevant on account of their having been made under
special circumstances:
• Entries made in books of account, including those maintained in an electronic form
regularly kept in the course of business. Such entries, though relevant, cannot, alone,
be sufficient to charge a person with liability;
• Entries made in public or official records or an electronic record made by a public
servant in the discharge of his official duties, or by any other person in performance of
a duty specially enjoined by the law;
• Statements made in published maps or charts generally offered for the public sale, or
in maps or plans made under the authority of the Central Government or any State
government;
• Statement as to fact of public nature contained in certain Acts or notification;
• Statement as to any foreign law contained in books purporting to be printed or
published by the Government of the foreign country, or in reports of decisions of that
country.

4. OPINION OF THIRD PERSONS WHEN RELEVANT

The general rule is that opinion of a witness on a question whether of fact or law, is irrelevant.
However, there are some exceptions to this general rule. These are:
(a) Opinions of experts: when the court has to form an opinion upon a point of foreign law
or of science or art, or as to identify handwriting or finger impression, the opinions upon
that point of persons especially skilled in such are relevant. (sec 39)
(b) Opinion as to the handwriting of a person if the person giving the opinion is acquainted
with the handwriting of the person in question;
(c) Opinion as to the digital signature of any person, the opinion of the Certifying
Authority which has issued the Digital Signature Certificate;
(d) When it is the question of relationship between two persons the opinion of someone
who knows the facts about it would be relevant
FACTS OF WHICH EVIDENCE CANNOT BE GIVEN
There are some facts of which evidence cannot be given though they are relevant facts. They are
classified as privileged communications. The privileges are enumerated below:

8.9
 1. Privileges of judges and magistrate (sec 127)
No judge or magistrate shall except upon the special order of some court to which he is
subordinate be compelled to answer any question as to his own conduct in court as judge or
magistrate

2. Communication during marriage (sec 128)

Section 128 prevent communication between the husband and wife from being disclosed.
Thus, a wife or husband can’t be permitted to disclose what her husband or his wife
respectively has stated with regard to the matters in issue, such communication remains
protected after the divorce. However, communication made before the marriage or after
the divorce are not protected.

3. Official communication (Sec 130)

No public officer shall be compelled to disclose communication made to him in official
confidence when he considers that public interest would suffer from such disclosures.

4. Professional communication (sec 132)

Communications made by a client to his advocate for the purpose of his professional work
are not permitted to do disclosed.

5. As to affairs of state (sec 129)

No one shall be permitted to give any evidence derived from unpublished official records
relating to any affairs of state except with the permission of the officer who is the head of
the department concerned.

WHO CAN BE WITNESS

Every person is a competent witness if he/she:-

(a) Understand the questions posed to him.

(b) Can give logical and rational answer to those questions.

ESTOPPEL
When one person has by his declaration, act or caused an admission or permitted another person to
believe a thing to be true and to act upon such belief, neither he nor his representative shall be
allowed, in any suit or proceeding between himself and such person or his representative to deny the
truth of that thing.

e.g., A intentionally and falsely led B to believe that certain land belongs to him and thereby induces
B to buy and pay for it. The land afterwards becomes the property of A and A set aside the sale on the
ground that at the time of sale he had no title he must not be allowed to prove his want of title the
fact constituting the estoppels will be relevant and admissible.

DIFFERENT KINDS OF ESTOPPEL

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 • Estoppel by attestation
• Estoppel by contract
• Estoppel by election
• Constructive Estoppel
• Equitable Estoppel
• Estoppel by negligence
• Estoppel by silence

CASE LAWS

S.NO CASE NAME PROVISONS

1 Sorat Chunder v. Gopal The doctrine of estoppel is based on the principle
Chunder that it would be most inequitable and unjust that if
one person, by a representation made, or by conduct
amounting to a representation, has induced another
to act as he would not otherwise have done, the
person who made the representation should not be
allowed to deny or repudiate the effect of his former
statement to the loss and injury of the person who
acted on it
2 Mohori Bibee v. The rule of estoppel does not apply where the
Dharmodas Ghosh statement is made to a person who knows the real
facts represented and is not accordingly misled by it.
The principle is that in such a case the conduct of the
person seeking to invoke rule of estoppel is in no
sense the effect of the representation made to him.
The main determining element is not the effect of his
representation or conduct as having induced another
to act on the faith of such representation or conduct.
3 Biju Patnaik University One private university permitted to conduct special
of Tech. Orissa v. Sairam examination of students prosecuting studies under
College one time approval policy. After inspection, 67
students were permitted to appear in the
examination and their results declared. However,
university declined to issue degree certificates to the
students on the ground that they had to appear for
further examination for another condensed course as
per syllabus of university. It was held that once
students appeared in an examination and their
results declared, the university is estopped from
taking decision withholding degree certificate after
declaration of results.
PROVISIONS OF EVIDENCE RELATING TO ELECTRONIC RECORDS / ELECTRONIC
EVIDENCE
Section 63(1) of the Indian Evidence Act, 1872 provides that the contents of electronic records may
be proved in accordance with the provisions of Section 63(2)

8.11
UNDER Section 63(2) any information contained an electronic record which is printed on paper,
stored, recorded or copied in optical or magnetic media produced by computer shall be deemed to be
a document

For ex. Babloo borrowed Rs.5000 from Shambhu, which was recorded on a printed paper and stored
in computer as the computer output. After some time, Shambhu demanded money from Babloo,
which the letter refused to pay. Shambhu field a suit for recovery of money from Babloo on the basis
of computer records. The Court will treat it as sufficient proof for granting relief of Shambhu against
Babloo.

Sec 63(3) has led to conflicting interpretations. It states that if the electronic evidence is to be used in
a judicial proceeding, a certificate must be presented that identifies the electronic record and provides
details about the device involved in producing the electronic record. The certificate should be signed
by a person holding a responsible official position related to the operation of the relevant device or
by someone involved in managing the relevant activities. The signature on the certificate serves as an
evidence of its authority.

There was an uncertainity regarding whether a certificate under Section 63(3) was necessary when
presenting the original copy of an electronic record as evidence. Another question was whether strict
compliance with the provision of Sec 63(3) was mandatory or if the requirement for a certificate could
be waived.

The following case provides clarity:

The SC decision in Arjun vs Kailash

a. in SC, the court had to adjudicate on an election petition which challenged the election of a
candidate from Jalna 101 Legislative Assembly Constituency, on the ground that the nomination
papers were filed after the stipulated deadline.

b. the respondents wished to rely on video camera recordings to prove that the candidate had filed
his nomination after the stipulated deadline.

c. the election commission produced CDs which contained a copy of the video camera recordings, in
accordance with the directions given by the HC.

d. however, the necessary certificates were not produced in accordance with Section 65B(4) despite
multiple requests made by petitioner.

e. during cross examination, it was testified that the video recordings are authentic. Based on this
testimony, the HC admitted the evidence even though certificate has not been produced.

f. the HC held that it was satisfied that there was “substantial compliance“ with Section 65B, as a
competent officer has testified that the video recordings are authentic.

g. it was noted that Section 63(1) differentiates between the “original” electronic record, which is
contained in the computer in which the information is first stored and the secondary copies that are
made from the primary electronic record.

8.12
h. in the present case, the original record – the computer in which video footage is first stored

and secondary copy – the CDs

i. it was held that a certificate under sec 63(3) shall have to be obtained only when the secondary
copies of the electronic record are produced before the court. Production of a certificate shall not be
necessary when the original electronic record is produced.

PRESUMPTIONS
BSA recognizes some rules as to presumptions. A presumption in itself is not an evidence but only
makes a prima facie case for the party in whose favour it exists. A presumption is a rule of law that
courts shall or may draw a particular inference from a particular fact or from particular evidence
unless and until the truth of such inference is disapproved.

Three Categories of Presumption

1. presumption of law – it is a rule of law that a particular inference shall be drawn by a court from
particular circumstances.

2. presumption of fact – it is a rule of law that a fact otherwise doubtful may be inferred from a fact
which is proved.

3. mixed presumptions – they consider mainly certain inferences between the presumption of law
and presumption of fact.

8.13
 Chapter 9 Law Relating to Specific Relief

The expression ‘specific relief’ means a relief in specific. It is a remedy which aims at the
exact fulfillment of an obligation.
The Specific Relief Act, 1963 is not exhaustive. It does not consolidate the whole law on
the subject. As the Preamble would indicate, it is an Act to define and amend the law
relating to certain kinds of specific relief. It does not purport to lay down the law relating
to specific relief in all its ramifications (AIR 1972 SC 1826)

SPECIFIC RELIEF AND DEFENSE

Section 5 - Recovery of specific immovable property
According to Section 5 of the Specific Relief Act, 1963 a person entitled to the
possession of specific immovable property may recover it in the manner provided
by the Code of Civil Procedure, 1908.
Such a suit is a general suit and the plaintiff has to prove that he has a better title.

Section 6- Suit by person dispossessed of immovable property

Section 6 provides that if any person is dispossessed without his consent of
immovable property otherwise than in due course of law, he or any person through
whom he has been in possession or any person claiming through him may, by suit,
recover possession thereof, notwithstanding any other title that may be set up in
such suit.

No suit under section 6 shall be brought-

(a) After the expiry of six months from the date of dispossession; or
(b) Against the Government.
No appeal shall lie from any order or decree passed in any suit instituted under
section 6, nor shall any review of any such order or decree be allowed.
Section 6 shall not bar any person from suing to establish his title to such property
and to recover possession thereof. Section 5 and 6 provide alternative remedies
which are mutually exclusive.

Section 7 and 8 - Recovery of specific movable property

Section 7 and 8 provide for recovery of specific movable properties.
As per Section 7, a person entitled to the possession of specific movable property
may recover it in the manner provided by the Code of Civil Procedure, 1908.

9.1
Section 8 - Liability of person in possession, not as owner, to deliver to persons
entitled to immediate possession
Section 8 provides that any person having the possession or control of a particular
article of movable property, of which he is not the owner, may be compelled
specifically to deliver it to the person entitled to its immediate possession, in any
of the following cases:—

SPECIFIC PERFORMANCE OF CONTRACTS AND DEFENSE

Section 9 - Defences respecting suits for relief based on contract
According to section 9, where any relief is claimed in respect of a contract, the
person against whom the relief is claimed may plead by way of defence any
ground which is available to him under any law relating to contracts.
The contract in question should be valid and enforceable.

Section 10- Specific performance in respect of contracts

As per section 10 of the Act, the specific performance of a contract shall be
enforced by the court subject to the provisions contained in section 11(2), section
14 and section 16 of the Specific Relief Act, 1963.

9.2
Section 11- Case in which specific performance of contracts connected with
trusts enforceable
Section 11 provides that except as otherwise provided in this Act, specific
performance of a contract shall be enforced when the act agreed to be done is in
the performance wholly or partly of a trust.
A contract made by a trustee in excess of his powers or in breach of trust cannot
be specifically enforced.

Section 12 - Specific performance of part of contract

Section 12 deals with specific performance of a part of a contract. Sub-section (1)
lays down the general principle that except as otherwise hereinafter provided in
this section, the Court shall not direct the specific performance of a part of a
contract. Sub-sections (2)-(4) lay down the exceptions to this general rule as
follows:

9.3
Section 13 - Rights of purchaser or lessee against person with no title or
imperfect title
Section 13 lays down the rights of a purchaser or lessee against the seller or lessor
with no title or imperfect title. It lays down that where a person contracts to sell
or let certain immovable property having no title or only an imperfect title, the
purchaser or lessee (subject to the other provisions of this Chapter), has the
following rights, namely:-

9.4
Section 14 - Contracts not specifically enforceable
Section 14 lays down the contracts which cannot be specifically enforced. The
following contracts cannot be specifically enforced, namely:—

Power of court to engage experts

Section 15 - Who may obtain specific performance

Section 15 lays down that the specific performance of a contract may be by—

9.5
Unenforceable contracts
Section 16 - Personal bars to relief
According to Section 16 Specific performance of a contract cannot be enforced in
favour of a person—

Section 17 - Contract to sell or let property by one who has no title, not
specifically Enforceable
As per Section 17, a contract to sell or let any immovable property cannot be
specifically enforced in favour of a vendor or lessor—
(a) who, knowing himself not to have any title to the property, has contracted to
sell or let the property;
9.6
(b) who, though he entered into the contract believing that he had a good title to
the property, cannot at the time fixed by the parties or by the court for the
completion of the sale or letting, give the purchaser or lessee a title free from
reasonable doubt.

Section 18 - Non — enforcement except with variation

Where a plaintiff seeks specific performance of a contract in writing, to which the
defendant sets up a variation, the plaintiff cannot obtain the performance sought,
except with the variation so set up, in the following cases, namely:—

Section 19- Relief against parties and person claiming under them by
subsequent title
Section 19 lays down that specific performance of a contract may be enforced
against—

9.7
Substituted performance of contracts etc
1. Where the contract is broken due to non- performance of promise by any
party, the party who suffers by such breach shall have the option of substituted
performance through a third party or by his own agency, and, recover the
expenses and other costs actually incurred, spent or suffered by him, from the
party committing such breach.

2. No substituted performance of contract under above sub-section (1) shall be

undertaken unless the party who suffers such breach has given a notice in writing,
of not less than thirty days.

3. He shall not be entitled to claim relief of specific performance against the party
in breach.
Section 20 shall not prevent the party who has suffered breach of contract from
claiming compensation from the party in breach.

9.8
Special provisions for contract relating to infrastructure project
No injunction shall be granted by a court in a suit under this Act involving a
contract relating to an infrastructure project specified in the Schedule, where
granting injunction would cause impediment or delay in the progress or
completion of such infrastructure project.

Section 20B - Special Courts

Section 20B empowers the State Government, in consultation with the Chief
Justice of the High Court, shall designate, by notification published in the Official
Gazette, one or more Civil Courts as Special Courts, within the local limits of the
area to exercise jurisdiction and to try a suit under this Act in respect of contracts
relating to infrastructure projects.

Expeditious disposal of suits

A suit filed under the provisions of this Act shall be disposed of by the court within
a period of twelve months from the date of service of summons to the defendant:
The above stated period may be extended for a further period not exceeding six
months in aggregate after recording reasons in writing for such extension by the
court.

Section 21 - Power to award compensation in certain cases

Under section 21 of the Specific Relief Act, 1963, the Court is empowered to
award compensation in certain cases. They are as follows:

9.9
Section 22 - Power to grant relief for possession, partition, refund of earnest
money etc
Section 22 gives power to grant relief for possession, partition, refund of earnest
money, etc. Under section 22(1) any person suing for the specific performance of
a contract for the transfer of immovable property may, in an appropriate case,
ask for—
(a) Possession, or partition and separate possession, of the property in addition to
such performance; or
(b) Any other relief to which he may be entitled, including the refund of any
earnest money or deposit paid or made by him, in case his claim for specific
performance is refused.

Section 23, 24, 25

Section 26 – rectification of instruments

9.10
RESCISSION OF CONTRACTS (SECTIONS 27-30)
Section 27 deals with when recission may be adjudged or refused
“Rescission” means putting an end to a contract which is still operative and
making it null and void ab initio. It does not apply to void contracts.
Section 27(1) states that any person interested in a contract may sue to have it
rescinded, and such rescission may be adjudged by the court in any of the
following cases, namely:—
(a) where the contract is voidable or terminable by the plaintiff;
(b) where the contract is unlawful for causes not apparent on its face and the
defendant is more to blame than the plaintiff.
As per Section 27(2) the court may refuse to rescind the contract—

The ‘contract’ in this section, in relation to the territories to which the Transfer of
Property, 1882 does not extend, means a contract in writing.
9.11
Section 28 - Rescission in certain circumstances of contracts for the sale or lease
of Immovable property, the specific performance of which has been decreed
Section 28(1) provides that where in any suit a decree for specific performance of
a contract for the sale or lease of immovable property has been made and the
purchaser or lessee does not, within the period allowed by the decree or such
further period as the court may allow, pay the purchase money or other sum
which the court has ordered him to pay, the vendor or lessor may apply in the
same suit in which the decree is made, to have the contract rescinded and on
such application the court may, by order, rescind the contract either so far as
regards the party in default or altogether, as the justice of the case may require.

Separate suit in respect of any relief which may be claimed shall not lie at the
instance of a vendor, purchaser, lessor or lessee, as the case may be. The costs of
any proceedings under this section shall be in the discretion of the court.

Section 29 - Alternative prayer for rescission in suit for specific performance

Section 29 of the Act, provides that a plaintiff instituting a suit for the specific
performance of a contract in writing may pray in the alternative that, if the
contract cannot be specifically enforced, it may be rescinded and delivered up to
be cancelled; and the court, if it refuses to enforce the contract specifically, may
direct it to be rescinded and delivered up accordingly.

Section 30 - Court may require parties rescinding to do equity

According to Section 30, on adjudging the rescission of a contract, the court may
require the party to whom such relief is granted to restore, so far as may be, any
benefit which he may have received from the other party and to make any
compensation to him which justice may be require.

Cancellation of Instruments (Section 31 -33)

Section 31 dealing with when cancellation may be ordered. Section 31(1) provides
that any person against whom a written instrument is void or voidable, and who
has reasonable apprehension that such instrument, if left outstanding may cause
him serious injury, may sue to have it adjudged void or voidable; and the court
may, in its discretion, so adjudge it and order it to be delivered up and cancelled.
As per Section 30(2), if the instrument has been registered under the Indian
Registration Act, 1908, the court shall also send a copy of its decree to the officer

9.12
in whose office the instrument has been so registered; and such officer shall note
on the copy of the instrument contained in his books the fact of its cancellation.

Section 32- What instruments may be partially cancelled

According to Section 32 of the Act, where an instrument is evidence of different
rights or different obligations, the court may, in a proper case, cancel it in part
and allow it to stand for the residue.

Section 33- Power to require benefit to be restored or compensation to be

made when instrument is cancelled or is successfully resisted as being void or
voidable
Section 33 provides that on adjudging the cancellation of an instrument, the court
may require the party to whom such relief is granted, to restore, so far as may be
any benefit which he may have received from the other party and to make any
compensation to him which justice may require.

Declaratory decrees (Section 34-35)

A declaratory decree is a decree whereby any right as to any property or the legal
character of a person is judicially ascertained.

Section 34 - Discretion of court as to declaration of status or right

Section 34 lays down that any person entitled to any legal character, or to any
right as to any property, may institute a suit against any person denying, or
interested to deny, his title to such character or right, and the court may in its
discretion make therein a declaration that he is so entitled, and the plaintiff need
not in such suit ask for any further relief.

Section 35 - Effect of declaration

According to Section 35 of the Act, a declaration made is binding only on the
parties to the suit, persons claiming through them respectively, and, where any of

9.13
the parties are trustees, on the persons for whom, if in existence at the date of
the declaration, such parties would be trustees.
Preventive relief (Section 36-41)
An injunction is a specific order of the Court forbidding the commission of a
wrong threatened or the continuance of a wrongful course of action already
begun, or in some cases (when it is called a ‘mandatory injunction’) commanding
active restitution of the former state of things.
The main difference between an injunction and specific performance is that the
remedy in case of an injunction is generally directed to prevent the violation of a
negative act and therefore deals not only with contracts but also with torts and
many other subjects of purely equitable one, whereas specific performance is
directed to compelling performance of an active duty.

Characteristics of an injunction
An injunction has three characteristic features;
(a) It is a judicial process.
(b) The object of this judicial process is to restrain or to prevent.
(c) The act restrained or prevented is a wrongful act. An injunction acts or
operates always in personam.
If the wrongful act has already taken place, the injunction prevents its repetition.
If it is merely threatened, the threat is prevented from being executed.

Injunctions generally
As per Section 36 of the Act, preventive relief is granted at the discretion of the
court by injunction, temporary or perpetual.

Temporary and perpetual injunctions

9.14
Perpetual injunctions
Specific performance is decreed to compel the performance of an active duty,
while injunction is decreed to prevent the violation of a negative duty. Normally,
the former deals with contracts, while the latter with torts and other subjects of
equitable nature. If a contract is positive in its nature, it calls for the relief of
specific performance, on the other hand, if it is negative in its nature, it calls for
relief of injunction.
According to Section 38, a perpetual injunction may be granted to the plaintiff to
prevent the breach of an obligation existing in his favour, whether expressly or by
implication. When any such obligation arises from contract, the court shall be
guided by the rules and provisions contained in Chapter II.

When the defendant invades or threatens to invade the plaintiff’s right to, or
enjoyment of, property, the court may grant a perpetual injunction in the
following cases, namely:—

Mandatory injunctions
As per Section 39 of the Act, when, to prevent the breach of an obligation, it is
necessary to compel the performance of certain acts which the court is capable of
enforcing, the court may in its discretion grant an injunction to prevent the
breach complained of, and also to compel performance of the requisite acts.

Damages in lieu of, or in addition to, injunctions

Relief for damages shall not be granted unless the plaintiff has claimed such relief
in his plaint. Where no such damages have been claimed in the plaint, the court
shall, at any stage of the proceedings, allow the plaintiff to amend the plaint on
such terms as may be just for including such claim.
The dismissal of a suit to prevent the breach of an obligation existing in favour of
the plaintiff shall bar his right to sue for damages for such breach.

Section 41 - Injunction when refused

9.15
Section 41 gives a list of cases when injunction cannot be granted. It says that an
injunction cannot be granted —

Section 42- Injunction to perform negative agreement

Section 42 of the Act provides that notwithstanding anything contained in section
41(e), where a contract comprises an affirmative agreement to do a certain act,
coupled with a negative agreement, express or implied, not to do a certain act,
the circumstance that the court is unable to compel specific performance of the
affirmative agreement shall not preclude it from granting an injunction to
perform the negative agreement. It may be noted that the plaintiff has not failed
to perform the contract so far as it is binding on him.

9.16
 LIMITATION ACT, 1963
INTRODUCTION
• It came in to force in 1st January 1963
• It is applicable all over India including state of Jammu and Kashmir
• The object of act to quite long possession and extinguish stale demands
• The law helps the diligent and not indolent
• If a men has been negligently sleeping over his right for an undue length of time law does
not allow him to litigate in respect of those rights
• It is applicable to all civil cases and some criminal cases.

LIMITATION IS STATUE OF REPOSE, PEACE AND JUSTICE

Limitation as a Statue of repose: limitation extinguish stale demands and quiet titles

Limitation as a Statue of peace: limitation secures peace as they ensure security of rights. After the
lapse of certain period people may rest in peace and relay upon titles or other right that they have
acquired

Limitation as a Statue of justice: limitation secure justice as by lapse of time evidence may have
been destroyed

LAW RELATING TO LIMITATION

The law relating to limitation is incorporated in the limitation Act of 1963.Which prescribes different
periods of limitation for suits, petitions or application. The law of limitation bars the remedy in a
court of law only when the period of limitation has expired, but it does not extinguish the right that
it cannot be enforced by judicial process.

SECTION 3: BARS OF LIMITATION

Any suit, appeal or application if made beyond the prescribed period of limitation, it is the duty of
the court not to proceed with such suits irrespective of the fact whether the plea of limitation has
been set up in defence or not.

LAW OF LIMITATION BARS ONLY THE REMEDY

The Law of limitation bars the remedy in a court of law only when the period of limitation has
expired, but it does not extinguish the right that it cannot be enforced by judicial process. (Bombay
Dying & Mfg. Co. Ltd. v. State of Bombay).

Thus, if a claim is satisfied outside the Court of law after the expiry of period of limitation, that is not
illegal.

SECTION 5: EXTENSION OF TIME IN CERTAIN CASES / DOCTRINE OF

SUFFICIENT CAUSE / CONDONATION OF DELAY
Section 5 allows the extension of prescribed period in certain cases on sufficient cause being shown
for the delay. This is known as doctrine of “sufficient cause” for condonation of delay.

10.1
Section 5 provides that any appeal or any application may be admitted after the prescribed period if
the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the
appeal or making the application within such period.

Thus, the Court may admit an application or appeal even after the expiry of the specified period of
limitation if it is satisfied with the applicant or the appellant, as the case may be as to sufficient
cause for not making it within time.

The term ‘sufficient cause’ has not been defined in the limitation Act. It depends on the
circumstances of each case. However, it must be a cause which is beyond the control of the party.

EXCEPTION

The Section is not applicable to suits.

It applies only to appeals or applications as specified therein. The reason for non-applicability of the
Section to suits is that, the period of limitation allowed in most of the suits extends from 3 to 12
years whereas in appeals and application it does not exceed 6 months.

What is sufficient cause and what is not may be explained by the following judicial observations:

1. Wrong practice of High Court which misled the appellant or his counsel in not filing the appeal
should be regarded as sufficient cause under Section 5

2. In certain cases, mistake of counsel may be taken into consideration in condonation of delay. But
such mistake must be bona fide;

3. Wrong advice given by advocate can give rise to sufficient cause in certain cases;

4. Mistake of law in establishing or exercising the right given by law may be considered as sufficient
cause. However, ignorance of law is not excuse, nor the negligence of the party or the legal adviser
constitutes a sufficient cause;

5. Imprisonment of the party or serious illness of the party may be considered for condonation of
delay;

6. Time taken for obtaining certified copies of the decree of the judgment necessary to accompany
the appeal or application was considered for condoning the delay.

7. Non availability of the file of the case to the State counsel or Panel lawyer is no ground for
condonation of inordinate delay (Collector and Authorised Chief Settlement Commissioner v.
Darshan Singh and others).

8. Ailment of father during which period the defendant was looking after him has been held to be a
sufficient and genuine cause (Mahendra Yadav v. Ratna Devi & others)

9. There are no categories of sufficient cause. The categories of sufficient cause are never exhausted.
Each case spells out a unique experience to be dealt with by the Court as such. [R B Ramlingam v. R B
Bhvansewari].

SECTION 6, 7, 8: PERSON UNDER THE LEGAL DISABILITY

SECTION 6

10.2
Section 6 provides that a person’s is under a legal disability if such person is a minor (minor includes
child in the womb) insane, and idiot. In such cases the persons will be entitled to fresh starting point
of limitation from the date on which legal disability cases to exit subject to the following conditions:

• Such a legal disability must be existing at the from which the period of limitation is to be
commenced.
• The person under legal disability must be entitled to institute the suit or make an application

SECTION 6 FURTHER PROVIDES THAT-

• If a person is affected by several disability at one point of time then the person may file a
suit or make an application after disability have ceased (ending).

• If one legal disability is followed by another then the person may institute a suit after all
disabilities have ceased

• If the legal disabilities continue up to the death of the person then his legal representative
may institute the suit and make an application within the same period after the death as
would otherwise have been allowed from the time specified in the schedule to the Act.

It may be noted that Section 6 does not apply to appeals.

SECTION 7
Section 7 is applicable where several persons are jointly entitled to file the suit or make an
application for execution of a decree and out of several persons one or some of them are affected by
legal disability

The period of limitation in such a case is to be reckoned depending upon whether discharged can be
made with or without consent of the person under legal disability if discharge can be make or given
with the consent of such person the period of limitation will start only after the disability is removed.
On the other hand, where consent of person under legal disability is not required, time will run
against them all. It may be noted section 7 is not be applicable to appeals.

SECTION 8
Section 8 is an exception to Sec.6 and Sec.7 and controls both these Sections. According to Sec.8 the
period of limitations cannot extend beyond 3 years from the date of cessation of legal disability.
However, if the ordinary period of limitation computed from the original approval of the cause of
action express more than 3 years from the cessation of legal disability such period will be allowed.

SECTION 9: CONTINUOUS RUNNING OF TIME

Section 9 provides that where the limitation period has started, no subsequent disability or inability
to file a suit or make an application can stop it. This section embodies the principle that once the
time for filing a suit or an application start running, it will continue to run till it has exhausted the
prescribed period. The running process can only will stop by statutory exceptions.

Where once time has begun to run subsequent disability or inability to file a suit or make an
application can stop it”.

10.3
Disability means legal disability inability means wants of physical power to act for e.g. poverty,
illness etc.

SECTION 12: EXCLUSION OF TIME

Exclusion of time in legal proceedings-

1. In computing the period of limitation for an appeal the following period shall be excluded.
• The day on which period begins to run.
• The day on which judgement was pronounced.
• The time required for obtaining the copy of decree order, and;
• The time required for obtaining the copy of judgement.

2. In computing the period of limitation prescribed for an application for revision or review
or leave to appeal. The following shall be excluded.
• The day on which period begins to run.
• The day on which judgement pronounced.

3. In computing the period of limitation prescribed for an application to set aside an award
the following shall be excluded:
• The day on which the period begins to run
• The time required for obtaining for the copy of award

4. In computing the period of limitation prescribed for any other application only the day on
which time begins to run shall be excluded.
5. In computing the period of limitation for any suit, appeal or application the day from which
such period is to be record shall be excluded.

SECTION 16:
If a person dies before the right to sue arises, then the limitation period will commence only when
the legal representative comes into existence and is capable of instituting such suit or applications.

SECTION 17
Where the suit or application is based on the fraud or mistake of defendant or respondent or his
agent, the period of limitation shall not begin to run until the plaintiff or applicant has discovered
the fraud or mistake.

SECTION 18: EFFECT OF ACKNOWLEDGEMENT ON THE PERIOD OF

LIMITATION
Sometimes a liability may be acknowledged by the party against whom the liability is alleged within
the period of limitation. If this acknowledgment is made in writing, it would give rise to fresh period
of limitation and it would run from the date of acknowledgment.

The following requirements should be present for a valid acknowledgement:

• There must be an admission or acknowledgment

• It must be made before the expiry of period of limitation
• It must be in writing and signed by the party.

10.4
E .g - A borrows money from B on 1/1/91.The debt will become time barred after the expiry of 3 yrs
on 1/7/93. A write a letter to B saying that he is wrong that he has not able to pay to B saying that
promise to pay the full amount within 3 months. In this case a fresh period of limitation (3 yrs.) shall
start from 1/7/93.

SECTION 19: EFFECT OF PAYMENT ON ACCOUNT OF DEBT OR OF INTEREST

As per Section 19 of the Act where payment on account of a debt or of interest is made before the
expiration of the prescribed period by the person liable to pay the debt or legacy or by his agent duly
authorised in this behalf, a fresh period of limitation shall be computed from the time the payment
was made.

Thus, according to this section a fresh period of limitation becomes available to the creditor when
part-payment of debt is made by the debtor before the expiration of the period of limitation.

SECTION 25: ACQUISITION OF OWNERSHIP BY POSSESSION

Section 25 applies to acquisition of easements. It provides that the right to access and use of light or
air, way, watercourse, use of water, or any other easement which have been peaceably enjoyed
without interruption and for 20 years (30 years if property belongs to Government) shall be
absolute.

IMPORTANT LIMITATION PERIODS:

• Suits relating to movable property- 3 years.
• Suits for money payable or money lent – 3 years from the time when the loan rent – 3 years.
• Suits for arrears of rent – 3 years
• Suits relating to contract - 3 years
• Suits for an account and a share out of profits of partnership firm-3 years
• Suits in respect of wage due to seaman – 3 years
• Suits in respect of wages due to other employees- 3 years
• Suits in respect of price of food or drink sold by a hotel, restaurant, lodging, house etc. -3
years
• Suit for possession of immovable property - 30 years
• Suit in respect of compensation for false imprisonment - 1 years
• Suit in respect of compensation for malicious persecution – 1 year
• Suit for law permission to appear and defend a suit under summary procedure – 10 days
• Appeal against the sentence of death passed by session court or by the High Court of
exercise of its original jurisdiction – 30 days

CLASSIFICATION OF PERIOD OF LIMITATION

Depending upon the duration, period of limitation for different purpose may be classified in follows

PERIOD OF 30 YEARS

The maximum period of limitation prescribed by the Limitation Act is 30 years and it is provided only
for three kinds of suits-

• Suits by mortgagors for the redemption or recovery of possession of immovable property

mortgaged.
• Suits by mortgaged for force insure
• Suits by or on behalf of the central Government or any Government including the state of

10.5
 Jammu and Kashmir.

PERIOD OF 12 YEARS

A period of 12 years is prescribed as a limitation period for various kinds of suits relating to
immovable property trusts and endowments

PERIOD OF 3 YEARS

A period of 3 years has been prescribed for suits relating to accounts, contracts, and declaratory
suits, suits relating to decrees and instruments and suits relating to movable property.

PERIOD IN DAYS VARYING BETWEEN 90 TO 10 DAYS

The minimum period of limitation of 10 days prescribed for application for leave to appear and
defend a suit under summary procedure from the date of services of the summons.

LIMITATION AND WRITS UNDER THE CONSTITUTION

The subject of limitation is dealt with in entry 13, list 3 of the constitution of India. The Legislature
may, without violating the fundamental rights, enact statutes prescribing limitation within which
action may be brought or varying or changing the existing rules of limitation.

Pathapati Subba Reddy (Died) by L.Rs. & Ors. v. The Special Deputy Collector (LA) decided
by Supreme Court on 08.04.2024
Merits of the case are not required to be considered in condoning the delay. A right or the remedy
that has not been exercised or availed of for a long time must come to an end or cease to exist
after a fixed period of time

This case can be referred to understand the law relating to condonation of delay under the
Limitation Act, 1963. The present Special Leave Petition was filed challenging the judgment and
order whereby the High Court has dismissed the application of the petitioners for condoning the
delay of 5659 days in filing the proposed appeal. The question before the Hon’ble Supreme court
was whether in the facts and circumstances of the case, the High Court was justified in refusing to
condone the delay in filing the proposed appeal and to dismiss it as barred by limitation.

The Supreme Court has laid down that on a harmonious consideration of the provisions of the law,
as aforesaid, and the law laid down by this Court, it is evident that:

(i) Law of limitation is based upon public policy that there should be an end to litigation by
forfeiting the right to remedy rather than the right itself;
(ii) A right or the remedy that has not been exercised or availed of for a long time must
come to an end or cease to exist after a fixed period of time;
(iii) The provisions of the Limitation Act have to be construed differently, such as Section 3
has to be construed in a strict sense whereas Section 5 has to be construed liberally;
(iv) In order to advance substantial justice, though liberal approach, justice-oriented
approach or cause of substantial justice may be kept in mind but the same cannot be
used to defeat the substantial law of limitation contained in Section 3 of the Limitation
Act;
(v) Courts are empowered to exercise discretion to condone the delay if sufficient cause
had been explained, but that exercise of power is discretionary in nature and may not be

10.6
 exercised even if sufficient cause is established for various factors such as, where there
is inordinate delay, negligence and want of due diligence;
(vi) Merely some persons obtained relief in similar matter, it does not mean that others are
also entitled to the same benefit if the court is not satisfied with the cause shown for the
delay in filing the appeal;
(vii) Merits of the case are not required to be considered in condoning the delay; and
(viii) Delay condonation application has to be decided on the parameters laid down for
condoning the delay and condoning the delay for the reason that the conditions have
been imposed, tantamounts to disregarding the statutory provision.

10.7
 ARBITRATION AND CONCILIATION ACT, 1996
INTRODUCTION
IT CAME IN TO FORCE ON 22 AUGUST 1996

Interpretation of the provisions of the Act by Courts in some cases have resulted in delay of disposal
of arbitration proceedings and increase in interference of Courts in arbitration matters, which tend
to defeat the object of the Act.

With a view to overcome the difficulties, the Government promulgated an Ordinance (“Arbitration
and Conciliation (Amendment) Ordinanse,2015) amending the Arbitration and Conciliation Act,1996
which received assent from the President as on 23.10.2015

The Arbitration and Conciliation (Amendment) Bill, 2015 was introduced in both the Houses of
parliament to replace the Ordinance and was subsequently passed.

Thereafter, the Amendment Bill after receiving President’s assent as on 31.12.2015 and shall be
deemed to have come into force from 23.10.2015.

Such an amendment was necessary to make India a hub of International Commercial Arbitration, to
encourage foreign investment by projecting India as an investor friendly country having a sound
legal framework and ease of doing business in India.

Arbitration and Conciliation (Amendment) Act, 2015 facilitate and encourage Alternative Dispute
Mechanism, especially arbitration, for settlement of disputes in a more user-friendly, cost effective
and expeditious disposal of cases since India is committed to improve its legal framework to obviate
in disposal of cases.

ARBITRATION
Method of solving civil dispute.

Two or more parties

With the help of arbitrator.

DEFINITION
Arbitration Under Section 7, the Arbitration agreement has been defined to mean an
Agreement agreement by the parties to submit to arbitration all or certain disputes which
have arisen or which may arise between them in respect of a defined legal
relationship, whether contractual or not.
Arbitration The term “arbitration” as to mean any arbitration whether or not administered
by a permanent arbitral institution.

11.1
Ad-hoc • “Ad hoc Arbitration” is arbitration agreed to and arranged by the parties
Arbitration themselves without recourse to an Institution.
• The proceedings are conducted by the arbitrators as per the agreement
between the ‘parties’ or with concurrence of the parties.
• It can be domestic, international, or foreign arbitration.

Arbitrator The term “arbitrator” is not defined in the Arbitration and Conciliation Act. But
“arbitrator” is a person who is appointed to determine differences and
disputes between two or more parties by their mutual consent.
• It is not enough that the parties appoint an arbitrator.
• The person who is so appointed must also give his consent to act as an
arbitrator.
• His appointment is not complete till he has accepted the reference.
• The arbitrator must be absolutely disinterested and impartial.
• He is an extra-judicial tribunal whose decision is binding on the parties.

Arbitral Tribunal “Arbitral tribunal” means a sole arbitrator or a panel of arbitrators.

Court Court means,

In case of “DOMESTIC ARBITRATION AGREEMENT”-
the principal Civil Court of original jurisdiction in a district, and
INCLUDES
the High Court in exercise of its ordinary original civil jurisdiction, having
jurisdiction to decide the questions forming the subject-matter of the
arbitration if the same had been the subject-matter of a suit,
EXCLUDE
Any civil court of a grade inferior to such principal Civil Court, or any Court of
Small Causes;
In case of “INTERNATIONAL COMMERCIAL AGREEMENT”
The High Court in exercise of its ordinary original civil jurisdiction,
having jurisdiction to decide the questions forming the subject-matter
of the arbitration if the same had been the subject-matter of a suit,
and
in other cases, a High Court having jurisdiction to hear appeals from
decrees of courts subordinate to that High Court. [Section 2(1)(e)].
[AMENDMENT UNDER 2015]

International “International commercial arbitration” means an arbitration relating to

Commercial disputes arising out of legal relationships, whether contractual or not,
Arbitration considered as commercial under the law in for in India and where at least one
of the parties is,
An individual who is a resident in, any country other than India; or
A body corporate which is incorporated in any country other than
India; or
An association or a body of individuals whose central management and
control is exercised in any country other than India; or
The Government of a foreign country.

Legal The following are the persons who are legal representatives:

11.2
Representative • A person who in law represents the estate of a deceased person
• A person who intermeddles with the estate of the deceased
• A person on whom the estate of a deceased person devolves on the
death of the party acting in a representative’s capacity

ESSENTIAL /FEATURES OF ARBITRATION AGREEMENT

(a) It must be in writing.
(b) It must be signed by the parties to the agreement.
(c) There must be an intention of the parties to submit any problem dispute to arbitration.
(d) Being an agreement it must satisfy requirements of Indian Contract Act.
(e) An arbitration agreement may be in the form of an arbitration clause in a contract or in
the form of a separate agreement.

AN ARBITRATION AGREEMENT IS IN WRITING IF IT IS CONTAINED IN-

• A document signed by the parties.

• An exchange of letters, telex, telegrams or other means of telecommunication including
communication through electronic means which provide a record of the agreement; or
• An exchange of statements of claim and defence in which the existence of the agreement is
alleged by one party and not denied by the other.
• The reference in a contract to a document containing an arbitration clause constitutes an
arbitration agreement if the contract is in writing and the reference is such as to make that
arbitration clause part of the contract.

SECTION 8: POWER OF JUDICIAL AUTHORITY TO REFER PARTIES To

ARBITRATOR
Following condition must be satisfied before judicial authority to refer parties to arbitrator.

• There shall be valid arbitration agreement.

• Subject matter shall be within scope of arbitration agreement
• The application must be made by the party to arbitration agreement.
• Application must be not later than the date of submitting his first statement on the
substance of the dispute.
• Application must be accompanied by arbitration agreement or duly certified copy thereof.

It may be noted that where the original arbitration agreement or a certified copy thereof is not
available with the party applying for reference to arbitration, and the said agreement or certified
copy is retained by the other party to that agreement, then, the party so applying shall file such
application along with a copy of the arbitration agreement and a petition praying the Court to call
upon the other party to produce the original.

11.3
 MATTER WHICH CAN OR CANNOT BE REFERRED TO ARBITRATION

MATTER WHICH CAN BE MATTER WHICH CANNOT BE

REFFERED TO ARBITRATION REFFERED TO ARBITRATION

• Determination of damages in • Matter of Divorce

case of breach of contract • Matters of Validity of will
• Validity of marriage • Guardian ship of minor
• Matters of right to office • Matters of Lunacy proceedings
• Time barred claims • Matters of criminal nature

SECTION 10: NUMBER OF ARBITRATORS

Section 10 of the Act provides that, the parties are free to determine, the number of arbitrators,
provided that such number shall not be an even number. If they fail to determine the number of
arbitrators, the arbitral tribunal shall consist of a sole arbitrator.

SECTION 11: APPOINTMENT OF ARBITRATORS

A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.

Section 11(2): The parties are free to agree on a procedure for appointing the arbitrator or
arbitrators.

Section 11(6) states that where, under an appointment procedure agreed upon by the parties,-

(a) a party fails to act as required under that procedure; or

(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them
under that procedure; or
(c) a person, including an institution, fails to perform any function entrusted him or it under
that procedure,

a party may request the Supreme Court or, as the case may be, the High Court or any person or
institution designated by such Court take the necessary measure, unless the agreement on the
appointment procedure provides other means for securing the appointment.

Section 11(3) states that failing any agreement referred to in Section 11(2) above, in an arbitration
with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators,
shall appoint the third arbitrator who shall act as the presiding arbitrator.

Section 11(4) provides that if the appointment procedure in sub-section (3) applies and-

a. a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so
from the other party; or

11.4
 b. the two appointed arbitrators fail to agree on the third arbitrator within thirty days from
the date of their appointment, “the appointment shall be made upon request of a party,”
the Supreme Court or, as the case may be, the High Court or any person or institution
designated by such Court”.
c. In case there are no arbitral institutions available, the Chief Justice of the concerned High
Court may maintain a panel of arbitrators for discharging the functions and duties of arbitral
institution.

Cox and Kings Ltd. V. SAP India Pvt ltd. And Anothers

SC gave the judgement that jurisdiction of the Court under Sec 11(6) i.e to appoint arbitrators is
limited to examining whether an arbitration agreement exists between the parties. Section 16
empowers the Arbitral Tribunal to rule on its own jurisdiction, including any ruling on any objections
with respect to the existence or validity of arbitration agreement. Courts will only check whether the
arbitration agreement exists or not- nothing more nothing less.

Ajay Madhusudan Patel and others v. Jyotrindra S. Patel and others

Issue- whether the SRG group being a non-signatory to the agreement should be referred to
arbitration along with AMP group and JRS group?

Decision – court held that definition of ‘parties’ include both signatory as well as non-signatory
parties. Persons or entities who have not formally signed the arbitration agreement or the
underlying contract containing the arbitration agreement may also intend to be bound by the terms
of the agreement. Actions or conduct could be an indicator of the consent of a party to be bound by
the arbitration agreement.

R.P Garg v. The Chief General Manager, telecom department

SC held that the post award interest shall be given at the rate of 18% p.a from the date of award to
its realization irrespective of the fact that arbitration agreement does not include the clause of post
award interest.

PLACE OF ARBITRATION
As per Section 20(1) the parties are free to agree on the place of arbitration and sub-section (2)
states that if they fail to reach an agreement, the place of arbitration is determined by the arbitral
tribunal, having regard to the circumstances of the case, including the convenience of the parties.

Case Law: Brahmani River Pellets Ltd vs Kamachi Industries Ltd (respondent)

The appellant entered into an agreement with the respondent for the sale of 40000 wet metric
tonnes of Iron Ore Pellets.

Dispute arose between the parties regarding the price and payment terms and the appellant did not
deliver the goods to the respondent. The respondent claimed for damages and the appellant denied
any liability. Clause 18 of the agreement between the parties contains an arbitration clause. The

11.5
respondent invoked arbitration clause and the appellant did not agree for the appointment of
arbitrator. Hence the respondent filed petition before the Madras High Court.

The appellant contested the petition challenging the jurisdiction of the Madras High Court on the
ground that the parties have agreed that seat of arbitration be Bhuvaneshwar. The madras HC vide
impugned order appointed a former judge of madras HC as the sole arbitrator. The appellant
preferred the appeal to SC.

The SC observed that if the subject matter of the suit is situated within the arbitral jurisdiction of
two or more courts, the parties can agree to confine the jurisdiction in one of the competent courts.

The SC held that the “subject matter” is to identify the court having supervisiory control over the
arbitral proceedings. As per Section 20 , parties are free to agree on the place of arbitration.

The SC observed that when the parties have agreed to have the ‘venue’ of arbitration at
Bhuvaneshwar, the Madras HC erred in assuming the jurisdiction since only Orissa HC will have the
jurisdiction to entertain the petition filed. The impugned order was liable to be set aside.

Case law: Uttar Pradesh Ban Nigam Almora vs Bishan Nath Goswami

In this case it was held that no arbitrator can decide or fix the place of seat, venue of arbitration
without taking into account the material information such as convenience of parties, their residence,
subject matter, their witnesses etc. The tribunal shall take into consideration all the above material
information while fixing the place of venue of arbitration. Arbitrator should follow the principle of
natural justice.

COMMENCEMENT OF ARBITRAL PROCEEDINGS

According to Section 21 of the Act, unless otherwise agreed by the parties, the arbitral proceedings
in respect of a particular dispute commence on the date on which a request for that dispute to be
referred to arbitration is received by the respondent.

LANGUAGE

Section 22(1) provides that the parties are free to agree upon the language or languages to be used
in the arbitral proceedings and under sub-section (2) if they fail to reach an agreement, the arbitral
tribunal shall determine the language or languages to be used in the arbitral proceedings.

SECTION 12: GROUNDS FOR CHALLENGE

An arbitrator may be challenged by a party only if

(a) Circumstances exits that give rise to justifiable doubts as to his independence or impartiality,
(b) He does not possess the qualifications agreed to by the parties.

CHALLENGE PROCEDURE

11.6
Section 13 of the Act contains detailed provisions regarding challenge procedure. Sub-section (1)
provides that subject to provisions of Sub-section (4), the parties are free to agree on a procedure
for challenging an arbitrator

Sub-Section (4) states that if a challenge under any procedure agreed upon by the parties or under
the procedure under Sub-section (2) is not successful, the arbitral tribunal shall continue the arbitral
proceedings and make an arbitral award. But at that stage, the challenging party has the right to
make an application in the Court to set aside the award

Sub-section (2) provides that failing any agreement referred to in sub-section (1) of Section 13, a
party who intends to challenge an arbitrator shall, within 15 days after becoming aware of the
constitution of the arbitral tribunal or after becoming aware of any circumstances referred to in Sub-
section (3) of Section 12, send a written statement of the reasons for the challenge to the arbitral
tribunal. The tribunal shall decide on the challenge unless the arbitrator challenged under sub-
section (2) withdraws from his office or the other party agrees to the challenge. It is also provided
that where an award is set aside on an application made under sub-section (5) of Section 13 of the
Act, the Court may decide as to whether the arbitrator who is challenged is entitled to any fees.

ARBITRAL AWARD
As per Section 2(1)(c), “arbitral award” includes an interim award. The definition does not give much
detail of the ingredients of an arbitral award. However, taking into account other provisions of the
Act, the following features are noticed

DECISION OF ARBITRATOR IS CALLED AWARD

TWO TYPES OF AWARD

FINAL AWARD INTERIM AWARD

FINAL award is the FINAL The arbitral tribunal can make an interim
decision of arbitrator / Arbitral award on any matter with respect to which
Tribunal it may make a final award. “Arbitral award”
includes an interim award.

TYPES OF ARBITRAL AWARD

1. interim award – it is the award made by tribunal during the pendency of the matter.

2. Additional award – a party with the notice to the other party, may request, within 30days from
the receipt of the arbitral award, the arbitral tribunal to make an additional arbitral award as to

11.7
claims presented in arbitral proceedings but omitted from the arbitral award. If the arbitral tribunal
considers the request to be justified, it shall make the additional arbitral award withing 60days from
the receipt of such request.

3. Settlement Award – the arbitral tribunal may use mediation, conciliation or other procedures at
any time during the arbitral proceedings to encourage settlement. If the parties settle the dispute,
the arbitral tribunal shall terminate the proceedings and if requested by the parties and not objected
to by the arbitral tribunal, record the settlement in the form of an arbitral award on agreed terms.

4. Final Award – an award which finally determines all the issues in a dispute.

ESSENTIAL / REQUISITE/CONTENTS OF A VALID AWARD

(a) An arbitration award is required to be in writing’

(b) The arbitral award is required to be made on stamp paper of prescribed value
(c) The award is to be signed by the members of the arbitral tribunal
(d) The award should contain reasons. However, there are two exceptions where an award
without reasons is valid i.e.
• Where the arbitration agreement expressly provides that no reasons are to be given, or
• Where the parties settled the dispute and the arbitral tribunal has recorded the settlement
in the form of an arbitral award on agreed terms.
(e) The award should be dated i.e. the date of making of the award should be mentioned in the
award.
(f) The arbitral tribunal is under obligation to state the place of arbitration
(g) After the award is made, a signed copy should be delivered to each party for appropriate
action like implementation or recourse against arbitral award.

TIME LIMIT FOR ARBITRAL AWARD

Section 29A(1) provides that the award shall be made within a period of twelve months from the
date of completion of pleadings.

Explanation –For the purpose of this sub-section, an arbitral tribunal shall be deemed to have
entered upon the reference on the date on which the arbitrator or all the arbitrators, as the case
may be, have received notice, in writing, of their appointment.

Section 29A(2) states that if the award is made within a period of six months from the date the
arbitral tribunal enters upon the reference, the arbitral tribunal shall be entitled to receive such
amount of additional fees as the parties may agree.

Under Section 29A(3) the parties may, by consent, extend the period specified in sub-section (1) for
making award for a further period not exceeding six months.

Section 29A(4) states that if the award is not made within the period specified in sub-section (1) or
the extended period specified under sub-section (3), the mandate of the arbitrator(s) shall terminate
unless the Court has, either prior to or after the expiry of the period so specified, extended the
period

11.8
Provided that while extending the period under this subsection, if the Court finds that the
proceedings have been delayed for the reasons attributable to the arbitral tribunal, then, it may
order reduction of fees of arbitrator(s) by not exceeding five per cent for each month of such delay.

SECTION 29B: FAST TRACK PROCEDURE

Section 29B(1) provides that notwithstanding anything contained in this Act, the parties to an
arbitration agreement, may, at any stage either before or at the time of appointment of the arbitral
tribunal, agree in writing to have their dispute resolved by fast track procedure specified in sub-
section (3).

Section 29B (2) states that the parties to the arbitration agreement, while agreeing for resolution of
dispute by fast track procedure, may agree that the arbitral tribunal shall consist of a sole arbitrator
who shall be chosen by the parties.

Section 29B (3) says that the arbitral tribunal shall follow the following procedure while conducting
arbitration proceedings under sub-section (1):

• The arbitral tribunal shall decide the dispute on the basis of written pleadings, documents
and submissions filed by the parties without any oral hearing;
• he arbitral tribunal shall have power to call for any further information or clarification from
the parties in addition to the pleadings and documents filed by them
• An oral hearing may be held only, if, all the parties make a request or if the arbitral tribunal
considers it necessary to have oral hearing for clarifying certain issues
• The arbitral tribunal may dispense with any technical formalities, if an oral hearing is held,
and adopt such procedure as deemed appropriate for expeditious disposal of the case.
• Section 29B(4) states that the award under this section shall be made within a period of six
months from the date the arbitral tribunal enters upon the reference.

SECTION 32: TERMINATION OF PROCEEDINGS

As per section 32(1), the arbitral proceedings shall be terminated by the final arbitral award or by an
order of the arbitral tribunal under sub-section (2).

Under section 32(2), the arbitral tribunal shall issue an order for the termination of the arbitral
proceedings where,

(a) the claimant withdraws his claim, unless the respondent objects to the order and the
arbitral tribunal recognises a legitimate interest on his part in, obtaining a final settlement of
the dispute,
(b) the parties agree on the termination of the proceedings
(c) the arbitral tribunal finds that the continuation of the proceedings has for any other mason
become unnecessary or impossible.

Section 32(3) says that the mandate of the arbitral tribunal terminates with the termination of the
arbitral proceedings. This is subject to the provisions of Sections 33 and 34(4) of the Act.

11.9
SECTION 33: CORRECTION AND INTERPRETATION OF AWARD
Section 33(1) provides that within 30 days from the receipt of the arbitral award, unless another
period of time has been agreed upon by the parties

(a) a party, with notice to the other party, may request the arbitral tribunal to correct any
computation errors, any clerical or typographical errors or any other errors of a similar
nature occurring in the award
(b) If so agreed by the parties, a party, with notice to the other party, may request the arbitral
tribunal to give an interpretation of a specific point or part of the award.

Further Section 33 (2) states that if the arbitral tribunal considers the request made under sub-
section (1) to be justified, it shall make the correction or give the interpretation within thirty days
from the receipt of the request and the interpretation shall form part of the arbitral award.

Further Section 33 (3) states that the arbitral tribunal may correct any error of the type referred to in
clause (a) of sub-section (1), on its own initiative, within thirty days from the date of the arbitral
award.

ADDITIONAL AWARD
Section 33 (4) provides that unless otherwise agreed by the parties,

Under Section 33 (6) the arbitral tribunal may extend, if necessary, the period of time within which it
shall make a correction, give an interpretation or make an additional arbitral award under sub-
section (2) or sub- section (5).

Section 33 (7) states that section 31 shall apply to a connection or interpretation of the arbitral
award or to an additional arbitral award made under this section.

SECTION 34: APPLICATION FOR SETTING ASIDE ARBITRAL AWARD

Section 34(1) provides that recourse to a Court against an arbitral award may be made only by an
application for setting aside such award in accordance with sub-section (2) and subsection (3).

Section 34 (2) states that an arbitral award may be set aside by the Court only if- the party making
the application furnishes proof that-

• A party was under some incapacity

• The arbitration agreement is not valid
• The party making the application was not given proper notice of the appointment of an
arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
• The arbitral award deals with a dispute not contemplated by or not falling within the terms
of the submission to arbitration,
• The composition of the arbitral tribunal or the arbitral procedure was not in accordance with
the agreement of the parties,

11.10
 • The subject-matter of the dispute is not capable of settlement by arbitration under the law
for the time being in force, or
• The arbitral award is in conflict with the public policy of India.

GROUNDS ON WHICH AN AWARD IS IN CONFLICT WITH THE PUBLIC POLICY

i. The making of the award was induced or affected by fraud

ii. It is in contravention with the fundamental policy of Indian law; or
iii. It is in conflict with the most basic notion of morality or justice.

Provided that an award shall not be set aside merely on the ground of an erroneous application of
the law or by re appreciation of evidence.

TIME LIMIT FOR SETTING ASIDE ARBITRAL AWARD

Section 34(3) provides that an application for setting aside may not be made after three months
have elapsed from the date on which the party making that application had received the arbitral
award or, if a request had been made under section 33, from the date on which that request had
been disposed of by the arbitral tribunal:

Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from
making the application within the said period of three months it may entertain the application
within a further period of thirty days, but not thereafter.

Under Section 34(4) on receipt of an application under sub-section (1), the Court may, where it is
appropriate and it is so requested by a party, adjourn the proceedings for a period of time
determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral
proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the
grounds for setting aside the arbitral award.

As per Section 34(5) an application under this section shall be filed by a party only after issuing a
prior notice to the other party and such application shall be accompanied by an affidavit by the
applicant endorsing compliance with the said requirement.

Under Section 34(6) an application under this section shall be disposed of expeditiously, and in any
event, within a period of one year from the date on which the notice referred to in sub-section (5) is
served upon the other party.

SECTION 35: FINALITY OF ARBITRAL AWARDS

Section 35 provides that an arbitral award made under the Act is final and binding on the parties
and persons claiming under them respectively.

SECTION 36: ENFORCEMENT

Section 36(1) provides that where the time for making an application to set aside the arbitral award
under section 34 has expired, then, subject to the provisions of sub-section (2), such award shall be

11.11
enforced in accordance with the provisions of the Code of Civil Procedure, 1908, in the same manner
as if it were a decree of the court.

ARBITRAL TRIBUNAL Section 2(1)(d)

Arbitral tribunal means a sole arbitrator or a panel of arbitrators.

SECTION 46: WHEN FOREIGN AWARD BINDING

Section 46 states that any foreign award which would be enforceable under this Chapter shall be
treated as binding for all purpose on the persons as between whom it was made, and may
accordingly be relied on by any of those persons by way of defence, set off or otherwise in any legal
proceedings in India and any references in this Chapter to enforcing a foreign award shall be
construed as including references to relying on an award.

Section 48 of the Act enumerates the conditions for the enforcement of foreign awards and provides
that the party against whom the award is invoked, may use one or more of the following grounds for
the purpose of opposing enforcement of a foreign award namely;

• The parties to the agreement were under some incapacity or the agreement is not valid or
• The parties against whom the award is invoked was not given proper notice of the
appointment of the arbitrator or
• The award deals with a difference not contemplated by or not falling within the terms of the
submission to arbitration or
• The composition of arbitral authority or the arbitral procedure was not in accordance with
the agreements of the parties or
• The award has not yet become binding on the parties or has been set aside or suspended by
a competent authority of the country in which that award was made or
• The subject matter of the difference is not capable of settlement by arbitration or
• The enforcement of the award would be contrary to the public policy of India.

REGISTRATION OF AWARD
The award which deals with immovable property of the value of Rs.100 or more requires
registration.

STAMP DUTY ON ARBITRATION AWARD

The stamp duty on the arbitration award passed by an arbitrator is payable as per the provisions of
Indian stamp act, 1899 the rate of stamp duty varies from state to state.

Failure or As per Section 14, the mandate of an arbitrator shall terminate and he shall be
Impossibility to substituted by another arbitrator, if:
Act as an (a) He becomes de jure (by right) or de facto (by law) unable to perform his
Arbitrator functions, or
(b) He fails to act without undue delay due to some other reasons.

11.12
 Mandate is also terminated, if he withdraws from his office, or the parties
agree to the termination of his mandate.
Substitution of Where the mandate of an arbitrator terminates, a substitute arbitrator shall be
Arbitrator appointed according to the rules that were applicable to such appointment
being replaced.
• Unless otherwise agreed by the parties, where an arbitrator is replaced,
any hearings previously held may be repeated at the discretion of the
arbitral tribunal.
• Unless otherwise agreed by the parties, an order or ruling of the arbitral
tribunal made prior to the replacement of an arbitrator under this Section
shall not be invalid solely because there has been a change in the
composition of the arbitral tribunal
Interim Measures • The arbitral tribunal shall have power to grant all kinds of interim
Ordered by measures which the Court is empowered to grant under section 9 of the
Arbitral Tribunal Act. Such interim measures can be granted by the arbitral tribunal during
the arbitral proceedings or at any time after making the arbitral award,
but before it is enforced under section 36 of the Act.
• Any order issued by the arbitral tribunal for grant of interim measures
shall be deemed to be an order of the Court for all purposes and shall be
enforceable under the Code of Civil Procedure, 1908, in the same manner
as if it were an order of the Court.
Example:
For appointment of guardian for minor.
Preservation of interim custody for sale of goods.
Securing the amount in dispute.
Detention or inspection of any property.
Appointment of receiver
Other measures

SECTION 23-27: ARBITRAL PROCEEDINGS/ARBITRATION PROCEDURE

It commences on the date on which the request for dispute be referred to arbitration.

Parties are free to decide language for arbitral proceedings.

STATEMENTS OF CLAIMS AND DEFENCE – to be completed within 6months from date of

appointment of arbitrators

Within the period of time agreed upon by the parties or determined by the tribunal, the claimant
has to state the facts in supporting his claim, the points at issue and the relief or remedy sought,
Similarly, the respondent shall also state his defence in respect of these particulars.

HEARING AND WRITTEN PROCEEDINGS

It is open parties to agree for holding oral hearings for presentation of evidence and for oral
arguments, or, alternatively, for conducting proceedings on the basis of documents such as
affidavit. In the absence of any such agreement, a decision in this regard may be taken by the
arbitral tribunal.

The arbitral tribunal shall hold oral hearing for the presentation of evidence or oral arguments11.13
on
the day to day basis and shall not grand any adjournment without any sufficient cause.
 AMENDMENTS

Parties may amend or supplement these statements during the proceedings, unless:-

i. Parties have agreed otherwise , or

ii. Arbitral tribunal considers it inappropriate to allow the amendment or supplement, due to
delay in making it.

DETERMINATION OF RULES OF ARBITRAL PROCEDURE

According to Section 19 the arbitral tribunal is neither bound by the Code of Civil Procedure 1908,
nor by the Indian Evidence Act, 1872.

COURT ASSISTANCE IN TAKING EVIDENCE

The arbitral tribunal as well as any party, with the approval of the arbitral, can apply to the court
for assistance in taking evidence.

Section 29 of the Act provides for decision by majority where there is more than one arbitrator.

APPOINTMENT OF EXPERTS BY ARBITRAL TRIBUNAL

Section 26 of the Act, provides for appointment of experts subject to agreement between the
DEFAULT OF A PARTY
parties.
FAILURE UNDER THE ACT CONSEQUENCE

Claimant fails to communicate his statement of Arbitral tribunal shall terminate the proceedings
claim

Respondent fails to communicate his statement Arbitral tribunal shall continue the proceedings
of defence without treating that failure in itself as an
admission of the allegation of the allegation by
claimant and shall have the discretion to treat
the right of the respondent to file such
statement of defence as having been forfeited.

Party fails to appear an oral hearing or to Arbitral tribunal may continue the proceedings
produce documentary evidence and make the arbitral award an evidence before
it.

11.14
CONCILLIATION
Meaning • Conciliation is an informal process in which the conciliator (the third party)
tries to bring the disputants to agreement. He does this by lowering
tensions, improving communications, interpreting issues, providing
technical assistance, exploring potential solutions and bringing about a
negotiated settlement.
• The Act gives a formal recognition to conciliation in India.
Number of • There shall be one conciliator unless the parties agree that there shall be two
Conciliators or three conciliators
• Where there is more than one conciliator, they ought, as a general rule, to act
jointly.
Appointment (a) In conciliation proceedings with one conciliator, the parties may agree on
of Conciliators the name of a sole conciliator;
(b) In conciliation proceedings with two conciliators, each party may appoint
one conciliator;
(c) In conciliation proceedings with three conciliators, each party may
appoint one conciliator and the parties may agree on the name of the
third conciliator who shall act as the presiding conciliator.
Role of • The conciliator shall assist the parties in an independent and impartial
Conciliator manner in their attempt to reach an amicable settlement of their dispute.
• the conciliator shall be guided by principles of objectivity, fairness and justice,
giving consideration to, among other things, the rights and obligations of the
parties, the usages of the trade concerned and the circumstances surrounding
the dispute, including any previous business practices between the parties.
• The conciliator may conduct the conciliation proceedings in such a manner as
he considers appropriate, taking into account the circumstances of the case,
the wishes the parties may express, including any request by a party that the
conciliator hear oral statements, and the need for a speedy settlement of the
dispute.
• The conciliator may, at any stage of the conciliation proceedings, make
proposals for a settlement of the dispute. Such proposals need not be in
writing and need not be accompanied by a statement of the reasons
therefore.

SETTLEMENT AGREEMENT
Sub-section (1) of section 73 provides that when it appears to the conciliator that there exist
elements of a settlement which may be acceptable to the parties, he shall formulate the terms of a
possible settlement and submit them to the parties for their observations. After receiving the
observations of the parties, the conciliator may reformulate the terms of a possible settlement in
the light of such observations.
Further sub-section (2) provides that if the parties reach agreement on a settlement of the dispute,
they may draw up and sign a written settlement agreement. If requested by the parties, the
conciliator may draw up, or assist the parties in drawing up, the settlement agreement.

11.15
Sub-section (3) states that when the parties sign the settlement agreement, it shall be, final and
binding on the parties and persons claiming under them respectively
As per sub-section (4) the conciliator shall authenticate the settlement agreement and furnish a
copy thereof to each of the parties.

COMMENCEMENT OF CONCILLIATION PROCEEDINGS

Party initiating shall send notice to another party.

Conciliation will commence only when other party accepts invitation in writing.

If party rejects the invitation, the conciliation proceedings will not take effect.

If initiating party do not get reply in 30days, it will be deemed rejected.

TERMINATION OF CONCILIATION PROCEEDINGS

the conciliation proceedings shall be terminated:

By the signing of the settlement agreement by the parties on the date of the agreement; or
By a written declaration of the conciliator, after consultation with the parties, to the effect that
further efforts at conciliation are no longer justified, on the date of the declaration or
By a written declaration of the parties addressed to the conciliator to the effect that the conciliation
proceedings are terminated, on the date of the declaration.

DEPOSITS

The conciliator may direct each party to deposit an equal amount as an advance for the costs which
he expects will be incurred.

The conciliator may direct supplementary deposits in an equal amount from each party.

If the required deposits are not paid in full by both parties within 30days, the conciliator may
suspend the proceedings or may make a written declaration of termination of the proceedings to
the parties , effective on the date of that declaration.

Upon termination of the conciliation proceedings, the conciliator shall render an accounting to the
parties of the deposits received and shall return any unexpected balance to the parties.

ALTERNATIVE DISPUTE RESOLUTION SYSTEM(ADRS)

1. Alternate dispute resolution would include within it any method of dispute resolution other
than court litigation. It would include arbitration, mediation and conciliation in main.
2. There is a growing awareness that courts will not be in a position to bear the entire burden
of justice system.
3. A very large number of disputes lend themselves to resolution by alternative modes such as
arbitration, mediation, conciliation, negotiation, etc.
4. The ADR processes provide procedural flexibility save valuable time and money and avoid
the stress of a conventional trial.

11.16
There is a growing awareness that courts will not be in a position to bear the entire burden of justice
system. A very large number of disputes lend themselves to resolution by alternative modes such as
arbitration, mediation, conciliation, negotiation, etc.

The ADR processes provide procedural flexibility save valuable time and money and avoid the stress
of a conventional trial.

Alternate dispute resolution would include within it, any method of dispute resolution other than
court litigation. It would include arbitration, mediation and conciliation in main.

The International Centre for Alternate Dispute Resolution (ICADR) is an independent non-profit
making organization which maintains the panel of independent experts in the implementation of
ADR processes.

It is an independent non-profit making organisation.

No suit or proceedings shall lie against the arbitrator for anything which is in good done or intended
to be done under this act or the rules or regulations made thereunder.

Deals with civil labour, family or commercial dispute.

RESIGNATION OF MEMBERS
Chairman or the members may resign anytime by giving notice in writing.

Provided that they shall continue the office until they are permitted by CG to relinquish his office or
until the expiry of three months from the date of the receipt of such notice or until the person duly
appointed as his successor enters upon his office or until the expiry of his term of office

Whichever is earlier

11.17
ARBITRATION COUNCIL OF INDIA(ACI) AQ
ACI

head office at
Delhi.
established by Central
Govt.
composition of
Council

chairperson - member - to secretary

member - to be secretary to
appointed by CG to the govt
be appointed the govt of
in consultation of India in
nominated by CG in India in dept one part
with chief justice dept of CEO -
by CG consultation of time
of India legal member-
with chair affairs, expenditure, member
person ministry of appointe secretary,
ministry of ex-officio
qualification term law and finance - d by CG
who is
who is justice - member, ex-
arbitration
academicia member, officio
practitioner,
has been a 3yrs but n having
both domestic ex-officio
judge of SC or upto experience
and
70yrs international. and
chief justice of teaching in
HC or the field of not
arbitration below the
3yrs upto rank of not below
judge of HC or 67yrs Joint the rank of
3yrs
Secretary Joint
upto
person with Secretary
67yrs
knowledge
and
experience in
this field

DIFFERENCE:
ARBITRATION CONCILIATION
Person appointed for arbitration process is Person appointed for conciliation process is
called arbitrator. called conciliator.
Arbitrator has power to enforce his decision. Conciliator only settle the dispute and has no
power of enforcement.
For arbitration, prior agreement is needed. No prior agreement is needed.
Arbitrator can only be in odd numbers. Conciliator can be in odd or even also.
Arbitration agreement can be done for existing Conciliation can be done only for existing
and future disputes. disputes.

MEDIATION:
Mediation shall be the process, whether referred to by the express mediation, pre- litigation
mediation, online mediation, community mediation, conciliation or an expression of similar import,
whereby party or parties, request a third person referred to as mediator or mediation service
provider to assist them in their attempt to reach an amicable settlement of a dispute.

11.18
Mediation is a voluntary, party-centred and structured negotiation process where a neutral third
party assists the party in resolving their dispute by using specialized communication and negotiation
technique.

The goal of mediation is to find a mutually acceptable solution that adequately and legitimately
satisfies the need, desires and interests of the parties. Mediation provides an efficient, effective,
speedy, convenient and less expensive process to resolve a dispute with dignity, mutual respect and
civility.

TYPES OF MEDIATION

Court referred mediation - the courts have mediation centres where cases are referred and
following a preliminary investigation, the cases are assigned to skilled and qualified mediators from
the mediation centres’ panel of mediators.

Court annexed mediation – the mediation services are provided by the court as a part and parcel of
the same judicial system as against Court referred Mediation, wherein the court merely refers the
matter to a mediator.

Statutory / Mandatory Mediation - Some disputes, like those involving labour and family laws, are
required by law to go through the mediation procedure. Mandatory mediation simply refers to the
act of attempting mediation rather than requiring parties to resolve their problems through
mediation.

Private mediation- qualified mediators offer their services on a private, fee for service basis to the
court, to the members of the public, to the members of commercial sectors and also to the
government sector to resolve disputes through mediation. Private mediation can be used in
connection with disputes pending in Court and pre-litigation disputes.

Online mediation - online mediation including pre-litigation mediation may be conducted at any
stage of mediation under this act, with the written consent of the parties including by the use of
electronic form or computer networks.

MERITS OF MEDIATION

• Quick and responsive

• Economical
• No extra cost
• Harmonious settlement
• Creating solutions and remedies
• Confidential and informal
• Parties controlling the proceedings.

DIFFERENCE BETWEEN ARBITRATION AND MEDIATION

ARBITRATION MEDIATION

It is like litigation which is outside the court and Mediation is when the neutral third party aims

11.19
which results in an award like an order to assist the parties in arriving at mutually
agreeable solution

More adversarial Collaborative

More formal More informal

The outcome is controlled by the arbitrator The outcome is controlled by the parties

The dispute is always settled in either party’s The dispute may or may not be resolved
favour

MEDIATION RULES MADE BY HIGHER COURTS

SUPREME COURT MANUAL

It aims at facilitating and help guiding mediation in growing not as an alternative dispute resolution
mechanism but as another effective mode of dispute resolution. It is a uniform training manual
applicable throughout India, which can be used by trainers, mediators, referral judges, litigants etc.

Mediation is a dynamic process in which the mediator assists the parties to negotiate a settlement
for resolving their dispute. In doing so, the mediator uses the four functional stages of mediation
namely,

1. introduction and opening statement

2. joint session

3. separate session

4. closing

These functional stages are used in an informal and flexible manner so that the mediation process
gains momentum.

MEDIATION RULES MADE BY HIGH COURT

High Courts in India come up with their own ADR rules.

According to these rules, arbitration as a means the process by which an arbitrator appointed by the
parties or the court, to adjudicate the dispute between them and passes an award by applying the
provisions of the Arbitration and Conciliation Act, 1996.

Conciliation means the process by which a conciliator who is appointed by the parties or by the
court, conciliates the disputes between them in exercise of his power by making proposals for a
settlement of the dispute.

Mediation means the process by which a mediator appointed by the parties or by the court,
mediates the disputes between them by applying the provisions of the Mediation Rules.

11.20
Judicial Settlement means a final settlement by way of compromise before a Lok Adalat or before a
suitable institution or person, which shall be deemed to be a settlement before a Lok Adalat.

According to Rule 4, the qualification or mediator or conciliator are as under:

Retired judges of the SC of India.

Retired judges of the HC

Retired District and Session judges/ Additional District and Sessions Judge

Legal practitioners with atleast 5years standing at the Bar in the SC/HC/District court.

Experts or other professionals with atleast 15years standing.

Institutions which are themselves experts in mediation and have been recognized as such by the HC.

According to Rule 5, disqualification of mediator or conciliator are as under:

Any person who has been adjudged insolvent

Any person against whom criminal charges involving moral turpitude have been framed by a criminal
court and are pending

Any person who has been convicted by a criminal court for any offence involving moral turpitude

Any person against whom disciplinary proceedings have been initiated by the competent authority.

ALTERNATE DISPUTE RESOLUTION (ADR)

There is a growing awareness that the courts will not be in a position to bear the entire burden of
justice system. A very large number of disputes lend themselves to resolution by alternative modes
such as arbitration, mediation, conciliation, negotiation etc.

The ADR processes provide procedural flexibity, save valuable time and money and avoid the stress
of a conventional trial.

The ICADR (international centre for alternate dispute resolution) makes provision for promoting
teaching and research in the field of ADR as also for offering ADR services to the parties not only in
India but also in the world. It is a society registered under Societies Registration Act, 1860. It is an
independent non-profit organization. It maintains panels of independent experts in the
implementation of ADR processes.

MEDIATION ACT, 2023

Received the assent of President on 14th September, 2023.

It extends to whole of India. It shall come into force on such date as the CG may notify.

Sec 45 provides for creation of “Mediation Fund” and prescribes the amount that may be credited to
this fund.

11.21
Further, the amount of the council are to be audited by CAG and any expenditure incurred by him in
connection with such audit shall be payable by the Council to CAG.

In exercise of its powers or the performance of its functions under this Act, the Council shall be
bound by the direction on the question of policy as the CG may give in writing to it and decision of
the CG shall be final.

Sec 50 provides that no suit, prosecution or proceeding shall lie against CG or SG or any officer of the
Council or Mediator etc which is done in good faith under Mediation Act.

11.22
 INDIAN STAMP ACT, 1899
INTRODUCTION
The Indian Stamp Act, 1899 is the law relating to stamps which consolidates and amend the law
relating to stamp duty. It is a fiscal legislation envisaging levy of stamp duty on certain and specified
instruments.

DOCUMENT
1. A document is a paper or other material thing providing information, proof or evidence of
anything.
2. Ordinarily the word “document” denotes a TEXTUAL RECORD.

MEANING OF DOCUMENT

Section 3 of the Indian Evidence act,1872 Section 3 (18) of the General Clauses Act,
states that a “Document” means any 1897 states that a “Document” shall
matter expressed or described upon any include any matter written. Expressed or
substance by means of letters, figures or described upon any substance by means
marks or by more than one of those of letters, figures, or marks or by more
means, intended to be used or which may than one of those means, which is
be used, for the purpose of recording that intended to be used or which may be
matter. used for the purpose of recording that
matter. E.g. minutes of a meeting.

EXAMPLE

A. Writing is a document.
B. Words printed, lithographed or photographed are documents.
C. A map is a document
D. An inscription on a metal plate or stone is a document.
E. A CARICATURE is a document.
F. Thus, document is a paper or other material thing affording information, proof or evidence
of anything.

Thus, the word “Document” has been used in a wide sense, and it includes instruments, deeds,
agreements etc.

SECTION 2(14): INSTRUMENT

1. It defines instrument as including every document by which any right or liability is or
purported to be created, transferred, limited, extinguished or recorded Eg. promissory
Note.

12.1
 2. It may be noted that all instruments are document but all documents need not be
instruments.
3. Stamp duty is payable on every instrument but it is not so in the case of a document.

CASE LAW

S.NO CASE NAME PROVISIONS

1 V.P.Sugar Works v. Instrument does not include Acts of parliament unless there
C.I. of Stamps U.P. is a statutory definition to that effect in any Act
2 Bishun v. Suraj Mukhi A will is an instrument
3 Savitribai v. The word “instrument” in Section 1 of the Interest Act is
Radhakishna wide enough to cover a decree

DIGRAMATIC REPRESENTATION OF DIFFERENCE B/W DOCUMENT AND INSTRUMENT

DOCUMENT

INSTRUMENTS

Creation of rights
IN FAVOUR OF
OTHERS

SPECIAL NOTE: With the help of this chart we can say

➢ Document is wider term than Instruments.

➢ All Instrument are documents but all documents are not Instrument

DEED
1. The term deed is normally used to describe all instruments by which two or more persons,
agree to affect any right or liability. Ex. Sale deed, gift deed, deed of settlement etc.
2. A deed is present grant rather than a promise to be performed in future.
3. It may be noted that all deeds are instruments but all instruments need not be deeds.
4. Further, instruments may be bilateral like a lease deed and multi-lateral like a partition deed
among 3 or more persons.
5. Thus, it seems that there is no clear-cut distinction between instrument and deed and
hence, these terms are used interchangeably.

SCOPE, APPLICABILITY & OBJECT BEHIND OF INDIAN STAMP ACT 1999

Applicability

• Indian Stamp Act gets into force on 1st July 1899.

12.2
 • It extends to whole of the Indian except Jammu & Kashmir.
• Under this act stamp duty is leviable on an instrument and not on transaction.

Object

• Primary object of this act is to raise revenue for the state.

• Levy of stamp duty is a state object, but in certain cases parliament has the power to fix the
rates of duty.
• For example- Bills of exchange, promissory notes, transfer of shares are such instruments.

Meaning of Conveyance
• The term “conveyance” includes a conveyance on sale and every instrument by which
property (where movable or immovable) is transferred inter vivo (during lifetime) and which
is not otherwise specifically provided for by Schedule.
• It does not include a will.
• In other word, all transfers of property whether movable or immovable, on sale (which are
not otherwise specially provided for by the Schedule), are chargeable as conveyances.
• Transfer which are otherwise provided for in the Schedule are Composition Deed, Exchange
of Property, Gift, Lease, Mortgage, Re-conveyance, Release, Settlement, Transfer, Transfer
of Lease and Declaration of Trust.

Meaning of Stamp
• “Stamp” means any mark, seal or endorsement by any agency or person duly authorized by
the State Government. It includes an adhesive or impressed stamp for the purposes of duty
chargeable under this Act.

INSTRUMENT CHARGEABLE WITH DUTY SEC 3

INSTRUMENTS CHARGEABLE WITH THE STAMP DUTY

Following instruments shall be chargeable Instruments Exempted from Duty

with the amount of duty mentioned in the
• Instruments in favour of government
schedule.
these include instruments executed
• Instrument executed in India, whether it by or on behalf of or in favour of
relates to property situated or to any government.
matter or things to be done in or out of • Bills of exchange and promissory
India, is chargeable to stamp duty. notes executed outside India and
• Instrument executed out of India are acted upon outside India.
chargeable to duty if they relate to some • Instrument for the sale, transfer or
property situated in India or some matter other disposition of any ship/vessel.
or thing done or to be done in India. • Document executed by or on behalf
• Bills of Exchange and promissory note of person or in favour of person in
made and executed in India. connection with SEZ.

Exception: Bills exchange payable on demand is 12.3

not chargeable to stamp duty.
CLASSIFICATION OF INSTRUMENTS
Sec.4 Sec. 5 Sec.6
Single Transaction effected Multifarious Instruments Multi discretion Instruments
by several Instruments
1=Transaction 1=Instruments 1= Instruments
2=Instruments 2=Transaction FALLS UNDER THE 2 HEADS
DUTY ONLY ON PRINCIPAL DUTY ON BOTH TRANSACTIONS HIGHEST OF DUTY PAID
INSTRUMENT
Parties are free to decide principal instrument but highest duty to be payable.

DETAILS ANALYSIS OF SECTION 4,5 AND 6

SECTION 4
Single Transaction Meaning Single transaction like sale, mortgage or settlement is
effected by several completed by several documents. In such a case it
Instruments (Sec. 4) would inequitable/unfair of all these instruments are
subjected to stamp duty.
Amount of Duty Sec.4 which deals with it provides as follows :
A principal instrument only shall be chargeable to duty.
Transaction:
a) Principal Document shall be chargeable, where a
single duty prescribed in schedule 1
b) Other instrument called subsidiary / ancillary
instruments shall be chargeable with duty of Re.1
which may depend upon from state to state.
Conditions Sec. 4 applies when three conditions are satisfied:
a) Several instruments should be there for
completing a transaction.
b) Several instrument should be employed to
complete the same transaction.
c) Must be a sale, mortgage, or settlement.

Illustrations (Section 4 held applicable)

S.NO CASE NAME PROVISIONS

1 Illustration-1 A executed a conveyance of immovable property. On the same deed
his nephew (undivided in status) endorsed his consent to the sale, as
such consent was considered to be necessary. It was held that the
conveyance was the principal instrument. The consent was
chargeable with only one rupee.
2 Illustration-2 Subsequent to a sale of immovable property, two declarations were
executed reciting that the sale was subject to an equitable mortgage
created by the vendor. These declarations were held to be
chargeable, together with the sale deed, as having completed the
conveyance (Somaiya Organics Ltd. v. Chief Controlling Revenue
Authority).
3 Illustration-3 Brother A executed in favour of brother B a gift of all his property. By

12.4
 another deed, brother B made provision for the living expenses of
brother A and hypothecating in favour of brother A a part of the
property included in the above mentioned gift deed, in order to
secure the payment of the living expenses. It was held that the two
documents were part of the same transaction. They amounted to a
settlement and Section 4 applied.
Illustration-4 B conveyed the whole of his property to three persons who
undertook to provide for him and to perform his obsequies. By
another document, the three donees agreed to provide for B. This
was mentioned in the deed executed by A also. It was held that the
two documents had to be construed as part of the same act; the first
was liable to duty as a conveyance while the second was liable to a
duty of Rupee 1 only.
Section 4 is not applicable on:

If the second document is executed for altering the terms of first lease deed and the second
document is stamped as a lease, then section 4 not applicable.

A purchaser of land executes a mortgage of the land in favour of the vendor for a portion of the
purchase money. The mortgage is liable to full duty as a separate instrument. Sec 4 not applicable

SECTION 5, 6
Sec.5 Meaning Where several distinct matters or transactions are embodied in a
Multifarious single instrument. The instrument is called multifarious
Instruments instruments. [i.e. The matter of different kind]
Amount of Any instrument comprising or relating to several distinct matters
Duty shall be chargeable with the aggregate amount of the duties with
which separate instrument each comprising or relating to one of
such matters would be chargeable under the act”.

Distinct matters Meaning The expression ‘distinct matters’ connotes different transactions.
The term ‘distinct matter’ means the matters of different kinds
such as agreement for service and lease.
1) A document containing both an agreement for the dissolution
of a partnership and a bond, is chargeable with the aggregate
of the duties with which two such separate instruments
would be chargeable. The two are “distinct matters”
(Chinmoyee Basu v. Sankare Prasad Singh)
2) n agreement containing two covenants making certain
properties chargeable in the first instance and creating a
charge over certain properties if the first mentioned
properties are found insufficient does not fall within Section 5
(Tek Ram v. Maqbul Shah)
3) A grant of annuity by several persons requires only one stamp
(because there is only one transaction).
4) A lease to joint tenants requires only one stamp.
5) A conveyance by several persons jointly relating to their
separate interest in certain shares in an incorporated
company requires only one stamp.
6) A power of attorney executed by several persons authorising

12.5
 the agent to do similar acts for them in relation to different
subject matter is chargeable under Section 5, where they
have no common interest.
7) Where a person having a representative capacity (as a
trustee) and a personal capacity delegates his powers in both
the capacities, section 5 applies. In law, a person acting as a
trustee is a different entity from the same person acting in his
personal capacity.
8) The position is the same where a person is an executive or
administrator and signs an instrument containing a
disposition by him in his personal capacity and also a
disposition as executor. The two capacities are different
(Member, Board of Revenue v. Archur Paul Benthall

(Sec.6) Multi Meaning & When an instrument falls within the provisions of two or more
discretion Amount of articles in schedule 1 and the instrument does not contain distinct
Instruments Duty matters it is to be charged with the highest of the duties when
the duties chargeable are different.
Scope The provisions of Sec.6 are subject to the provision by Sec.5 i.e. if
the instrument is containing the distinct matters then in such case
Sec.6 shall not apply because in such situation Sec.5 lies.
Example A document fall in the definition in both a bond and a promissory
note. It was held that highest of the duties payable on the
promissory notes and the bond shall be paid.

SECTION 8: BONDS, DEBENTURES, ETC. ISSUED UNDER THE LOCAL

AUTHORITIES LOAN ACT, 1879
Section 8 provides that any local authority raising a loan under the provisions of the Local
Authorities Loans Act, 1879 or of any other law for the time being in force by the issue of bonds,
debentures or other securities, shall, in respect of such loans, be chargeable with a duty of one
percent on the total amount of the bonds, debentures or other securities issued by it. Such bonds,
debentures or other securities need not be stamped and shall not be chargeable with any further
duty on renewal, consolidation, sub-division or otherwise. This is so notwithstanding anything
contained in the Indian Stamp Act: In the event of willful neglect to pay the duty required by this
section, the local authority shall be liable to forfeit to the Government, a sum equal to 10 percent of
the amount of duty payable and a like penalty for every month after the first, during which the
neglect continues.

SECTION 8A
Securities dealt in depositories are not liable to pay stamp duty.

SECTION 8B
corporatisation and demutualisation schemes and related instruments are not liable to stamp duty.

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SECTION 10: MODE OF PAYMENTS OF STAMP DUTY

Mode of payment of stamp duty

(section 10)

Adhesive stamp (section 11) Impressed stamp (section 13)

SECTION 11: Adhesive Stamp

The following instruments may be stamped with adhesive stamps namely:

Instrument chargeable with duty not exceeding 10 paisa except Bills of exchange payable
otherwise then on demand.
Bills of exchange and promissory notes drawn or made out of India.
Notarial Acts
Instrument relating to transfer of shares of company.

SECTION 12: Cancellation of Adhesive Stamps

Sec.12 provides for the cancellation of adhesive stamps at the time the stamp is affixed if the
instrument has already been executed or at the time of execution.

The object of cancellation is to prevent the same stamps to being used again.

Sec.12 further provides that:

Whoever affix any adhesive stamp on nay instrument chargeable with duty which has been executed
by any person shall, when affixing such stamps cancel the same by writing on all across the stamps
his name or initials of his firm along with the date or in any other effectual manner. Whoever
executes any instrument or any paper bearing an adhesive stamp shall at the time of execution,
cancel the same.

Effectual Manner of Cancellation

1) Drawing a solitary (single) line across the stamps.

2) Drawing of Diagonal lines across the stamp with the ends extending on the paper or
instrument.

It may be noted that any instrument bearing an adhesive stamp, which has not been cancelled
shall be deemed to be unstamped.

JUDICIAL PRONOUNCEMENT

1) In Mahadeo Koeri v. Sheoraj Ram Teli, it was held that a stamp may be treated as
having been effectively cancelled by merely drawing a line across it.
2) But , in Hafiz Allah Baksh v. Dost Mohammed , it was held that if it is possible to use a

12.7
 stamp a second time, inspite of a line being drawn across it, there is no effectual
cancellation.
3) In Melaram v. Brij Lal, it was held that a very effective method of cancellation is the
draeing of diagonal lines right across the stamps with ends extending on to the paper of
the document.
4) A cross marked by an illiterate person indicating his acknowledgement, was held to be
an effective cancellation of the stamp in Kolai sai v. Balai Hajam.

IMPRESSED STAMPS
Definition (section 2(13))

‘Impressed Stamp’ means stamp is impressed on the paper by mechanical means (these are the
stamp papers we purchase from stamp vendor)

“Impressed stamp” means & includes:

Labels affixed and impressed by the proper officer; and

Stamps embossed or engraved on stamp paper.

1) The rules framed under the Act invariably prescribe to what documents impressed stamps
are to be used. The term includes both a stamp impressed by the Collector and also a stamp
embossed on stamp paper. Special adhesive stamps are labels (Ganga Devi v. State of Bihar).
2) The instrument is duly stamped if it has been duly stamped at the time of execution and is
admissible in evidence, though the stamp is subsequently removed or lost (Mt. Mewa
Kunwari v. Bourey)

Manner of use

Every instrument written upon paper stamped with an impressed stamp shall be written in such a
manner that the stamp may appear on the face of an instrument and cannot be used for any other
instrument.

RULES

Where a single sheet of paper is insufficient rule 7 of the stamp rule 1925 provides as follows

Where two or more stamp papers are used, a portion of such instrument shall be written on each
sheet so used. Where on e stamp paper is insufficient in space plane may be added but the
substantial part of the instrument must appear on the stamp paper.

HOW THE INSTRUMENTS STAMPED WITH IMPRESSED STAMPS BE WRITTEN?

Section 13 provides that every instrument written upon paper stamped with an impressed stamp
shall be written in such manner that the stamp may appear on the face of the instrument and
cannot be used for or applied to any other instrument.

12.8
 In Dowlat Ram Harji v. Vitho Radhoji, 5 Bom. 188, it was held when the face of a deed or document
is mentioned, no particular side of the parchment or paper, on which the deed or document is
written, is thereby indicated. Even the last line may constitute the face.

Under Section 14, no second instrument chargeable with duty shall be written upon piece of stamp
paper upon which an instrument chargeable with duty has already been written. However,
this section shall not prevent any endorsement which is duly stamped or is not chargeable
with duty, being made upon any instrument for the purpose of transferring any right created
or evidenced thereby, or of getting the receipt of any money or goods the payment or
delivery of which, is secured thereby.
Section 15 of the Act deems every instrument written in contravention of Section 13 or Section 14 to
be unstamped and to be inadmissible in evidence as not being duly stamped.

TIME OF STAMPING INSTRUMENTS

TIME OF STAMPING INSTRUMENT

Sec.17 Instruments Sec.18 Executed Section 19 Bill of exchange and

executed in India out of India: promissory notes drawn out of India

Stamped before or at Within 3 months of By first holder in India before

the time of Execution. its receipt in India. presentation for acceptance or
payment or endorsement in India

VALUATION FOR DUTY (Sections 20 to 26)

SECTION 20: VALUE OF AMOUNT IS EXPRESSED IN FOREIGN CURRENCY

Where an instrument is chargeable with ad-valorem duty at the basis of value of

property/transaction in respect of any money expressed in any foreign currency, such duty shall be
calculated on the value of such money in the currency of India according to the current rate of
exchange on the day of the date of the instrument.

The central government may time to time prescribed a rate of exchange for the valuation of any
foreign currency into Indian currency for the purpose of calculating stamp duty.

SECTION 21: VALUE OF STOCK AND MARKETABLE SECURITIES

Where an instrument is chargeable with ad valorem duty in respect of any share or of any
marketable securities such as debentures or bond such duty shall be calculated on the value of such
shares and securities on the average price or the value of day of date of the instruments.

SECTION 22: EFFECT OF STATEMENT OF RATE OF EXCHANGE OR AVERAGE PRICE

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Where an instrument contains a statement of current rate of exchange or average price. As the case
may require and is stamped with such statements it shall be presumed until the contrary is proved
to be duly stamped.

SECTION 23: INSTRUMENTS RESERVING INTEREST

Where the interest is expressly made payable by the terms of the instruments, such instruments
shall not be chargeable with a duty higher than that with which it would have been chargeable, had
no mention of interest been made therein.

SECTION 24: VALUATION IN CASE OF TRANSFER IN CONSIDERATION OF DEBIT

Where any property is transferred to any person in satisfaction of any debt due to such person, such
debt shall be treated as consideration for valuation of a duty.

Similarly, if property is transferred subject to payment or transfer of any money or stock, such
money or stock will be considered as consideration for valuation purposes.

Further provisions are:

If the sale of property subject to a mortgage. any unpaid mortgage together with interest
due, if any, will be treated as part of consideration.
Where property transferred is subject to mortgage, duty already paid in respect of mortgage
will be deducted (section 24)

Example:

A sells a property to B for Rs. 500 which is subject to a mortgage to C for Rs. 1,000/- and unpaid
interest Rs. 200/-. Stamp duty is payable on 1,700.

SECTION 25: VALUATION IN CASE OF ANNUITY

Sec.25 provides for the mode of assessment of duty in case of agreements that provides for
payment for annuity i.e. Instalment payments and not lump sum payment. In such cases valuation is
done in the following manner

1. Period of annuity is definite. Total amount of annuity is to be paid shall be considered.

2. Period of annuity is indefinite. Total amount payable within 20 years of the date of first
payment.
3. Subject to life of a person. Annuity payable for 12 years from the date of first payment.

SECTION 26: DUTY WHERE VALUE OF SUBJECT MATTER IS UNDETERMINED

Where the amount or value of the subject matter of any instrument chargeable with ad-valorem
duty cannot be ascertained at the date of its execution, the executants may use any stamp he
pleases, but he shall not be entitled to recover under such document any amount in excess of the
amount for which stamp duty is sufficient.

SECTION 29: WHO SHOULD PAY THE STAMP DUTY

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 1. In case of promissory notes and bills of exchange – The maker or drawer.
2. In case of mortgage deed – The person executing the instrument i.e. mortgager.
3. In case of insurance – The insurer
4. In case of conveyance – The transferee
5. In case of lease – The lessee
6. In case of partition deed – Parties to partition have to pay stamp duty in proportion to their
respective shares in the property.

SECTION 31: ADJUDICATION AS TO STAMPS

Under Section 31(1) when an instrument, (whether executed or not and whether previously
stamped or not), is brought to the Collector, and the person bringing it applies to have the opinion of
that officer as to the duty if any, with which it is chargeable, and pays a fee (not exceeding Rs. 5 and
not less than 50 naya paise as the Collector may direct), the Collector shall determine the duty if any
with which in his judgment, the instrument is chargeable.

Under Section 31 (2), the Collector may require to be furnished with an abstract of the instrument
and also with such affidavit or other evidence as he may deem necessary to prove that all the facts
and circumstances affecting the chargeability of the instrument with duty, or the amount of duty
with which it is chargeable, are fully and truly set-forth therein, and may refuse to proceed upon
accordingly.

The collector is not authorised to impound the instrument or to impose any penalty if he comes to
the conclusion that the instrument is not sufficiently stamped.

SECTION 32: CERTIFICATE BY COLLECTOR

When the Collector is of the opinion that the instrument is already fully stamped or the duty
determined by the Collector under Section 31 or such a sum as (with the duty already paid in respect
of the instrument), is equal to the duty so determined, has been paid, or that any such instrument
brought to him is not chargeable with duty the Collector shall certify by endorsement on such
instrument, accordingly.

The collector shall not make any endorsement on any instrument under Section 32 where:
i. any instrument is executed or first executed in India and brought to him after the expiration of
One month from the date of its execution or its first execution as the case may be or
ii. any instrument is executed or first executed out of India and brought to him after the expiration
of three months after it has been first received in India; or
iii. any instrument chargeable with a duty not exceeding 10naya paisa or any bill of exchange or
promissory note is brought to him after the drawing or execution thereof on paper not duly
stamped.

PRACTICAL ASPECTS WITH REGARD TO THE CALCULATION AND PAYMENT OF

STAMP DUTY
HOW TO PAY
1. Go to SHCIL official website
2. click on e-stamping

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3. a separate web page will be opened
4. click on stamp duty payment – issuance of new shares for NCT of Delhi
5. after clicking, a separate web page will be opened
6. after that, click on register now
7. after signing in, a page will be opened
8. click on share details entry form
9. fill the form and attach the files attachments in pdf
10. after filling the form and attaching all the files, click on submit button.
11. your form will be submitted.

SECTION 34: UNSTAMPED RECEIPTS

Section 34 provides that where the instrument is an unstamped receipt produced in the course of an
audit of any public account, the officer before whom the receipt is produced has a discretion either
to impound or to require the receipt to be stamped. This section applies where the receipt is
chargeable with a duty not exceeding 10 naya paisa. The officer concerned can, instead of
impounding the receipt require a duly stamped receipt to be substituted therefor.
INSTRUMENTS NOT DULY STAMPED – TREATMENT AND CONSEQUENCES (IMPOUNDING)

MEANING OF DULY STAMPED SECTION-2(11)

Duly stamped means that the instrument bears an adhesive or impressed stamp not less than
proper amount and that such stamp has been affixed or used in accordance with law in force in
India.

In case of adhesive stamps, the stamps have to be effectively cancelled so that they cannot
be used again.
Similarly, impressed stamps have to be written in such a way that it cannot be used for other
instrument and stamp appears on face of instrument.
If stamp is not so used the instrument is treated as ‘un-stamped’.
Similarly, when stamp duty paid is not adequate, the document is treated as “not duly
stamped’.
If the stamps are affixed but are not cancelled. They are deemed to be un-stamped
(Muniamnia vs. Arthi Cine Enterprises (p.Ltd.).
Normally, such cancellation is done by drawing lines (at least two) across the stamps so that
they extend to be sides of stamp, so that the same cannot be used again or they can be
cancelled by signing or putting date etc.

SECTION 35: INSTRUMENTS NOT DULY STAMPED INADMISSIBLE IN EVIDENCE

Section 35 stipulates that no instrument chargeable with duty shall be –

a) Admitted in evidence for any purpose whatsoever by any person authorised by law (such as
judges or commissioners) or by the consent of the parties (such as arbitrators) to record
evidence; or
b) Shall be acted upon; or

12.12
 c) Registered or
d) Authenticated by any such person as aforesaid or by any public officer Unless such
instrument is duly stamped.

An insufficiently stamped instrument is not an invalid document and it can be admitted in

evidence on payment of penalty.

CASES WHERE UNSTAMPED INSTRUMENT CAN BE ADMITTED IN EVIDENCE

The proviso to Section 35 provides exception to section 35 as under:-

a) Any instrument e admitted in evidence on payment of the duty with which the same is
chargeable, or, in the case of an instrument insufficiently stamped, of the amount required to
make up such duty, together with a penalty of Rs. 5/- or ten times the amount of the proper
duty or deficient portion, whichever is higher.
b) Unstamped receipt would be admissible in evidence on payment of a penalty of Re.1/-
c) Any instrument can be admitted in evidence in any proceeding in a criminal Court.
d) When such instrument has been executed by or on behalf of the Government , it is
admissible.

SECTION 36: ADMISSION OF INSTRUMENTS (WHERE NOT TO BE

QUESTIONED)
Section 36 provides that where an instrument has been admitted in evidence, such an admission
shall not be questioned at any stage of the same suit or proceeding on the ground that the
instrument has not been duly stamped. (Guni Ram v. Kodar)

SOME IMPORTANT TERMS

Apportionment (Section 28)

Section 28 prescribe certain rules for apportionment of the consideration, in cases of certain
conveyances arising out of a property being contracted to be sold and thereafter conveyed in parts
etc.

Under Section 28(1) where a person contracts the sale of property as a whole and thereafter
conveys to the purchaser the property in separate parts, the consideration shall be apportioned in
such manner as the parties think fit, provided that a distinct consideration is set-forth for each
separate part in the conveyance and thereafter the conveyances shall be chargeable with ad
valorem in respect of such distinct consideration.

Denoting Duty (Section16)

The object of this section is to spare parties to an instrument, the inconvenience of having to
produce (in cases in which the duty payable on an instrument depends upon the duty already paid
on another instrument), and the original or principal instrument in order to prove that the second
instrument has been duly stamped.

12.13
Section 16 provides that where the duty with which an instrument is chargeable, or its exemption
from duty, depends in any manner upon the duty actually paid in respect of another instrument, the
payment of such last mentioned duty, shall, if application is made in writing to the Collector for that
purpose, and on production of both the instruments, be denoted upon such first mentioned
instrument, by endorsement under the hand of the Collector of Stamps or in such other manner as
the rules of the State Government may provide.

SECTION 49 – ALLOWANCE FOR SPOILED STAMPS

Applies only to impressed stamps and not adhesive stamps. The collector may on an application
made within 2months and if he is satisfied as to the facts, make allowance for impressed stamps
spoiled in following cases namely:

a. Where the stamp paper is spoiled before any document has been written thereon, or is spoiled in
the course of writing and before execution.

b. where the document has been written out wholly or in part but not executed.

c. bill of exchange payable otherwise than on demand and promisory note, when these have not
been accepted or made use of.

d. refunds after execution.

The stamp used for an instrument executed by any party thereto which:

▪ Has been afterwards found to be absolutely void in law from the beginning.
▪ Has been afterwards found unfit, by reason of any error or mistake therein
▪ By reason of death of any person by whom it is necessary that it should be executed,
without having executed the same or the refusal of any such person to execute the same,
cannot be completed so as to effect the intended transaction in the form proposed.
▪ Is deficient in value and the transaction effected has been effected by some other
instrument between the same parties and and bearing the stamp of not less value.
▪ Is inadvertently and undesignedly spoiled, and in lieu thereof another instrument made
between same parties and for the same purpose is executed and duly stamped.
▪ Such other cases

Provided that in case of executed instruments, no legal proceedings has been commenced in which
the instrument could or would have been given or offered in evidence and that the instrument is
given up to be cancelled.

SECTION 50 – TIME LIMITS

The time limit within which an application for relief in respect of impressed stamps spoiled, can be
made

In case of Section 49, within 2months from the date of instrument.

In case of a stamped paper on which no instrument has been executed by any of the parties thereto,
within 6months after the stamp has been spoiled.

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In case of a stamped paper in which an instrument has been executed by any of the parties thereto,
within 6months after the execution thereof by the person by whom it was first or alone executed,

Provided that: when the spoiled instrument has been for sufficient reason sent out of India, the
application may be made within 6months after it has been received back in India.

SECTION 51: UNUSED FORMS

Section 51 of the Act enables the Chief Controlling Revenue Authority or the Collector if authorised
by the Chief Controlling Revenue Authority, for such purpose to allow refunds in cases where
refunds of stamps on printed forms used by bankers, incorporated companies/bodies corporate if
required. Allowance may be made without limit of time, for stamped papers used for printed forms
of instruments by any bankers or by any incorporated company or other body corporate, if for any
sufficient reasons such forms have ceased to be required by the said banker, company or body
corporate: provided that the Chief Controlling Revenue Authority or the Collector, as the case may
be, is satisfied that the duty in respect of such stamped papers has been duly paid.

SECTION 52: MISUSED STAMPS

Section 52 deals with allowance for misused stamps and applies to both impressed and adhesive
stamps in the following instances:

a) When any person has inadvertently used, for an instrument chargeable with duty, a stamp of a
description other than that prescribed for such instrument by the rules made under this Act, or a
stamp of greater value than was necessary, or has inadvertently used any stamp for an
instrument not chargeable with any duty; or
b) When any stamp used for an instrument has been inadvertently rendered useless under Section
15, owing to such instrument having been written in contravention of the provisions of Section
13.

The Collector may, on application made within six months after the date of instrument or, if it is not
dated, within six months after the execution thereof by the person by whom it was first or alone
executed, and upon the instrument, if chargeable with duty, being restamped with the proper duty,
cancel and allow as spoiled the stamp so misused or rendered useless.

SECTION 53 – ALLOWANCE FOR SPOILED OR MISUSED STAMPS

Under Section 53, in any case in which allowance is made for spoiled or misused stamps, the
Collector may give in lieu thereof:
(a) other stamps of the same description and value; or
(b) if required and he thinks fit, stamps of any other description to the same amount in value; or
(c) at his discretion, the same value in money, deducting ten naya paisa for each rupee or fraction of
a rupee.

SECTION 54 – ALLOWANCE FOR STAMPS NOT REQUIRED FOR USE

Section 54 of the Act enables a person to obtain refund of the value of stamps purchased by him, if
he has no immediate use thereof. Under this section, when any person is possessed of a stamp or
stamps which have not been spoiled or rendered unfit or useless for the purpose intended, but for

12.15
which he has no immediate use, the Collector shall repay to such person the value of such stamp or
stamps in money, deducting ten naya paise for each rupee or portion of a rupee, upon such person
delivering up the same to be cancelled and proving to the Collector’s satisfaction.
(a) that such stamp or stamps were purchased by such person with a bona fide intention to use
them; and
(b) that he has paid the full price thereof; and
(c) that they were so purchased within the period of six months next preceding the date on which
they were so delivered.
Provided that, where the person is a licensed vendor of stamps, the Collector may, if he thinks fit,
make the repayment of the sum actually paid by the vendor without any such deduction as
aforesaid.

E- Stamping
E-Stamping is a computer-based application and a secured way of stamping duty and paying Non-
Judicial stamp duty to the Government.

The Stock Holding Corporation of India Ltd (SHCIL) is the central record keeping agency(CRA).

The benefits of e-Stamping are:

• e-Stamp Certificate can be generated within minutes,

• e-Stamp Certificate generated is tamper proof,
• Easy accessibility and faster processing,
• Security,
• Cost savings and User friendly.

Verification of e-stamping

An e-stamp can be verified online by clicking on verify e-stamp certificate and entering the required
details i.e

✓ State
✓ Certificate number
✓ Stamp duty type (description of document)
✓ Certificate issue date
✓ 6 character alphanumeric string

AUTHORISED COLLECTION CENTER (ACC)

Scheduled Banks and Post Office can become ACCs by completing the registration process.

MODE OF PAYMENT OF STAMP DUTY

▪ Cash
▪ Cheque
▪ Demand draft
▪ RTGS
▪ NEFT

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 ▪ Account to account transfer

SECTION 55: ALLOWANCE ON RENEWAL OF CERTAIN DEBENTURES

Section 55 is intended to relieve companies renewing debentures issued by them from the liability
to pay stamp duty on both the original and the renewed debenture. As per this section, when any
duly stamped debenture is renewed by the issue of a new debenture in the same terms, the
Collector shall, upon application made within one month, repay to the person issuing such
debenture, the value of the stamp on the original or on the new debenture whichever shall be less

Provided that the original debenture is produced before the Collector and cancelled by him in such
manner as the State Government may direct.

A debenture shall be deemed to be renewed in the same terms within the meaning of this section
notwithstanding the following changes:

o the issue of two or more debentures in place of one original debenture, the total amount
secured being the same
o the issue of one debenture in place of two or more original debentures, the total amount
secured being the same;
o the substitution of the name of the holder at the time of renewal for the name of the
original holder
o the alteration of the rate of interest of the date of payment hereof.

SECTION 56 TO 61: REFERENCE AND REVISION

If any Collector, feels doubt as to the amount of duty with which any instrument is chargeable, he
may draw up a statement of the case, and refer it, with his own opinion thereon, for the decision of
the Chief Controlling Revenue Authority.

Such authority shall consider the case and send a copy of its decision to the collector, who shall
proceed to access and charge the duty(if any) in conformity with such decision.

Such authority also with its own opinion thereon refer such case to the High Court and same shall be
decided by not less than 3 Judges of the HC and the majority decision shall prevail.

The HC shall decide the questions raised and give its judgement to the Authority who shall dispose of
the case as per the judgement.

Case law:
LIC v. state of Rajasthan and Ors

Issue was whether the state of Rajasthan has the power and jurisdiction to levy and collect stamp
duty on policies of insurance issued within the state.

The SC held that

12.17
The state have the power to levy and collect the stamp duty since it falls in the concurrent list entry
44 of constitution which implies that both central and state have power to impose stamp duty.
However, the rate of stamp duty shall be prescribed by the Parliament.

12.18
 CHAPTER 13 - LAW RELATING TO REGISTRATION
OF DOCUMENTS
INTRODUCTION
1. The Registration Act, 1908 was set up with the purpose of ensuring registration of
documents related to deal regarding land or other immovable property. A document
which is registered becomes more authentic and trustable.
2. The registration is of a document and not of a transaction.
3. Documents affecting immovable property through sale, gift, partition, release,
mortgage, lease, sale agreement are some of the compulsorily registerable documents.
4. Record preservation is one of the prime objectives behind the Registration Act.
5. Civil courts depend on the records of Registration Department in deciding the issues like
title, ownership, possession of immovable properties.
CLASSES OF DOCUMENTS
There are two kinds of classes of documents:
i. Compulsory Registerable Documents
ii. Optional Registerable Documents
DOCUMENTS WHICH ARE COMPULSORILY REGISTRABLE – SECTION 17
There are certain documents which are compulsorily registrable. Section 17 of the Registration
Act, 1908 lays down all the documents which are compulsorily required to be registered and
those documents are:
1. Instruments of gift of immovable property
i. In a case where the donor dies before registration, the document may be presented
for registration after his death and if registered it will have the same effect as
registration in his life time.
ii. On registration the deed of gift operates as from the date of execution.
iii. It was held in Kalyana Sundram v. Karuppa, that while registration is a necessary
solemnity for the enforcement of a gift of immovable property, it does not suspend
the gift until registration actually takes place, when the instrument of gift has been
handed over by the donor to the donee and accepted by him, the former has done
everything in his power to complete the donation and to make it effective.
iv. And if it is presented by a person having necessary interest within the prescribed
period, the Registrar must register it. Neither death nor the express revocation by
the donor, is a ground for refusing registration.
2. Other Non-testamentary instrument: Other non-testamentary instruments which
purport or operate to create, declare, assign, limit or extinguish, whether in present or

13.1
 in future, any right, title of interest whether vested or contingent, of the value of one
hundred rupees and upwards, to or in immovable property.
3. Non-testamentary instruments which acknowledge the receipt or payment: Non-
testamentary instruments which acknowledge the receipt or payment of any
consideration on account of the creation, declaration, assignment, limitation, or
extinction of any such right, title or interest. This clause requires an acknowledgement
in the form of a receipt to be registered, but not an acknowledgement of the fact that a
transaction has taken place. To be registrable under this clause a receipt must satisfy
the following two conditions:
i. It must be the receipt of a consideration, and
ii. It must on the face of it be an acknowledgement of payment or some consideration
on account of the creation, declaration, assignment, limitation or extinction of an
interest of the value of Rs. 100 or upwards in immovable property.
4. Lease of immovable property from year to year: Leases of immovable property from
year to year, or for any term exceeding one year, or reserving a yearly rent.
Example
A Lease Deed for a premises for 1 year or more is compulsorily registrable.
Exception: A lease for one year containing an option to the tenant to renew for a further
period of one year or any other term is not a lease for a term exceeding one year, and does
not require registration under this clause. Under Section 107 of the Transfer of Property
Act, a lease of one year or reserving a yearly rent can be made only by a registered
instrument. But where the lease is only for one year with a reserved rent for the period for
which it has been granted, viz. one year, it does not require registration.
5. Non-testamentary instruments transferring or assigning any decree or order of a
Court: Non testamentary instruments transferring or assigning any decree or order of a
Court or any award when such decree or order or award purports or operates to create,
declare, assign, limit or extinguish, whether in present or in future, any right, title or
interest, whether vested or contingent, of the value of one hundred rupees and
upwards, to or in immovable property.
Further, the State Government has power to exempt the operation of clause (1) to
clause (5) for any lease executed in any district for terms up to five years and rents up to
fifty rupees.
Example
A sold a plot in Mumbai to B by virtue of court’s order, through a Sale Deed for Rs. 25 Lakhs.
The registration of this sale deed is compulsory.

13.2
EXCEPTIONS TO SECTION 17(1)
The registration of the non-testamentary documents mentioned in clauses (2) and (3) of
Section 17(1) is subject to the exceptions provided in Sub-section (2) of Section 17. These are as
follows:
1. Any composition deed, i.e., every deed the essence of which is composition, or
2. Any instrument relating to shares in Joint Stock Company, or
3. Any debentures issued by any such Company, or
4. Any endorsement upon or transfer of any debenture, or
5. Any decree or order of a court, or
6. Any grant of immovable property by the Government, or
7. Any instrument of partition made by Revenue-officer, or
8. Any order granting a loan or instrument of collateral security granted under the Land
Improvement Act, 1871, or the Land Improvement Loans Act, 1883, or
9. Any order granting loan made under the Agriculturists Loans Act, 1884 or instrument for
securing the repayment of a loan made under that Act, or
10. Any certificate of sale granted to the purchaser of any property sold by public auction by
Civil or Revenue Officer.

DOCUMENTS OF WHICH REGISTRATION IS OPTIONAL – SECTION 18

All the documents that are not included in Section 17 of The Registration Act, 1908 have the
option of the optional registration. It provides that any of the following documents may be
registered under this Act, namely:
1. Instruments which purport or operate to create, declare, assign, limit or extinguish,
whether in present or in future, any right, title or interest whether vested or contingent,
of value less than one hundred rupees, to or in immovable property,
2. Instruments acknowledging the receipt or payment of any consideration on account of
the creation, declaration, assignment, limitation or extinction of any such right, title or
interest, of value less than one hundred rupees, to or in immovable property,
3. Leases of immovable property for any term not exceeding one year
4. Instruments transferring or assigning any decree or order of a court or any award when
such decree or order or award purports or operates to create, declare, assign, limit or
extinguish, whether in present or in future, any right, title or interest, whether vested or
contingent of a value less than one hundred rupees, to or in immovable property
5. Instruments which purport or operate to create, declare, assign, limit or extinguish any
right, title or interest to or in movable property,
6. Wills, and
7. Other documents not required by Section 17 to be registered.

13.3
TIME AND PLACE OF REGISTRATION

A Document other than

a will must be
presented within 4
months of its
Document Executed in
execution. In case of
India
urgent necessary, etc.
the period is 8 months,
Time limit for but higher fee has to
Registration be paid.

It has been presented

Document Executed for registration within 4
Outside India months after its arrival
in India.

Case Laws
A document other than a will must be presented within four months of its execution. But in any
case, the delay shall not exceed four months. That means a document shall be presented
before the concerned Registering Officer for registration within four months without any
penalty, and within eight months by paying penalty. But no document shall be accepted for
registration after lapse of eight months from the date of signing (execution) by the parties.
These limits are mandatory.
OTHER IMPORTANT PROVISIONS
RE-REGISTRATION – SECTION 23A
Section 23A provides for the re-registration of certain documents. The section is mainly
intended to deal with situations where the original presentation was by a person not duly
authorised.

SEVERAL EXECUTANTS – SECTION 24

Under Section 24 a document executed by several persons at different times may be presented
for registration and re-registration within four months from the date of each execution. The
registration is “partial” in regard to each party.

DOCUMENTS EXECUTED OUT OF INDIA

Where the registering officer is satisfied that the document was executed outside India and it
has been presented for registration within four months after its arrival in India, he may accept
such document for registration on payment of proper registration fee.

13.4
A document executed outside India is not valid unless it is registered in India.
Incidentally, Section 26 indicates that the Act applies to ex-India documents relating to property
in India.
PRESENTATION OF A WILL
Section 27 provides that a will may be presented for registration at any time. Registration of a
will is optional under Section 18(e).
PLACE OF REGISTRATION
1. Documents affecting immovable property shall be presented for registration in the
office of a Sub-Registrar within whose sub-district the whole or some portion of the
property is situated and any other document may be presented for registration in the
office of the Sub-Registrar in whose sub- district the document was executed or in the
office of any other Sub-Registrar under the State at which all the persons executing
desire the document to be registered.
2. Registration of a document elsewhere has been held to be void.
3. There is nothing in law to prohibit a person conveying property in one district and
residing and owing property in another district and asking the vendee to accept a
conveyance also of some small property in the district in which he resides, so that the
sale-deed may be registered there and he may not be put to the trouble and expense of
a journey to the other district. It is not correct to say in such a case that the sale-deed is
not validly registered at the place where it is got registered.

PLACE FOR REGISTERING OTHER DOCUMENTS

Every document not being a document referred to in section 28, may be presented for
registration:
1. Either in the office of the Sub-Registrar in whose sub-district the document was
executed, or
2. In the office of any other Sub-Registrar under the State Government at which all the
persons executing and claiming under the document desire the same to be registered.

PRESENTING OF DOCUMENTS FOR REGISTRATION

Section 32 specifies the persons who can present documents for registration at the proper
registration office. Such persons are as follows:
1. Some person executing or claiming under the same, or
2. The representative or assignee of such person, or
3. The agent of such person.
It is immaterial whether the registration is compulsory or optional, but, if it is presented for

13.5
registration by a person other than a party not mentioned in Section 32, such presentation is
wholly inoperative and the registration of such a document is void.

PRESENTING WILLS AND AUTHORITIES TO ADOPT

Who is entitled to present 1. The testator, or after his death, any person claiming as
Wills and authorises to executor or otherwise under a will, may present it to any
adopt Registrar or Sub-Registrar for registration.
2. In case of authority for adoption, the donor or (after his
death) the donee, or any authority to adopt, or the
adoptive son, may present it to any Registrar or Sub-
Registrar for registration. Thus, even a legatee can present
a will.
Registration of will and 1. A will, or an authority to adopt, if presented by the testator
authority to adopt or the donor, may be registered in the same manner as any
other document.
2. If presented by any other person entitled to present it, it
shall be registered if the registering officer is satisfied about
the particulars mentioned.

DEPOSIT OF WILLS
1. Any testator may, either personally or by duly authorised agent, deposit with any
Registrar his will in a sealed cover superscribed with the name of the testator and that
of his agent, if any, and with a statement of the nature of the document.
2. On receiving such documents, the Registrar on being satisfied shall transcribe in his
Register Book No. 5, the superscription and shall note the date, time, month, of such
receipt and shall then place and retain the sealed cover in his fire-proof box.
3. However, the testator may withdraw it by applying for the same and the Registrar shall
deliver it accordingly.
REGISTER DOCUMENT WHEN OPERATIVE
1. A registered document shall operate from the time from which it would have
commenced to operate if no registration thereof had been required or made and not
from the time of its registration.
2. As between two registered documents, the date of execution determines the priority.
Of the two registered documents, executed by same persons in respect of the same
property to two different persons at two different times, the one which is executed first
gets priority over the other, although the former deed is registered subsequently to the
later one.
REGISTERED DOCUMENT RELATING TO PROPERTY WHEN TO TAKE EFFECT
AGAINST ORAL AGREEMENT

13.6
 1. Registered documents relating to any property whether movable or immovable shall
take effect against any oral agreements or declaration relating to such property unless
followed by delivery of possession which constitutes a valid transfer under any law for
the time being in force.
2. Generally, priority to rights accorded by different transfers is governed by the principles
embodied in the maxim qui prior tempore potior Est jure that is “he who is first in time
is better in law”. But this general rule is subject to exceptions created by Sections 48 and
50.
3. Section 48 refers to the priority of the registered agreements over oral agreements and
Section 50 refers to the priority of registered agreements over non-registered
agreements.

EFFECT OF PRIOR NOTICE

In spite of the explicit wording of Section 48, it has for long time been held, that a subsequent
registered deed will not prevail over a prior unregistered deed or a prior oral transaction if the
subsequent transferee had notice of the prior transaction.

CONSEQUENCES OF NON-REGISTRATION OF DOCUMENTS REQUIRED TO BE

REGISTERED COMPULSORILY – SECTION 49
1. Section 49 of the Registration Act provides that no document required by Section 17 or
by any provision of the Transfer of Property Act, 1882 to be registered shall:
i. Affect any immovable property comprised therein, or
ii. Confer any power to adopt, or
iii. Be received as evidence of any transaction affecting such property or conferring
such power, unless it has been registered.
2. Section 49 is mandatory, and a document which is required to be registered cannot be
received in evidence as affecting immovable property.
3. An unregistered document which comes within Section 17 cannot be used in any legal
proceeding to bring out indirectly the effect which it would have if registered.
Example
A buys a land for Rs. 2.50 Crore from B in Delhi. A and B executed the sale deed but didn’t
register it from the Sub-Registrar. After entering into sale deed, it came into knowledge of A
that some dispute was pending in the land. Now, A cannot knock the door of court as the sale
deed is not registered. This is because of such document is dealt by Section 17 which
contemplates mandatory registration. Afterwards, A cannot give excuse that he was unaware of
the law because ignorance of law is no excuse.
However, after payment of the duty he may be allowed subject to the compliance of necessary
provisions.

13.7
 4. However, an unregistered document affecting immovable property may be received as
evidence of a contract in a suit for specific performance or as evidence of part
performance of a contract.
5. In K. Narasimha Rao v. Sai Vishnu, it has been held that: It is settled legal principle that
an unstamped instrument is not at all admissible in evidence even for collateral
purpose. But an unregistered instrument originally unstamped, if duly stamped
subsequently can be admitted in evidence even though it continues to be unregistered.
MISCELLANEOUS PROVISIONS
The following books must be kept in the several offices as follows:
A. In all Registration Offices
Book 1 – “Register of non-testamentary documents relating to immovable property”,
Book 2 – “Record of reasons for refusal to register”,
Book 3 – “Register of wills and authorities to adopt”,
Book 4 – “Miscellaneous Register”.
B. In the Offices of Registrars
Book 5 – “Register of deposits of Wills”.
PROCEDURE ON ADMISSION TO REGISTRATION
PARTICULARS TO BE ENDORSED ON DOCUMENTS ADMITTED TO REGISTRATION:
1. On every document admitted to registration, there shall be endorsed from time to time
the following particulars, namely:
i. The signature and addition of every person admitting the execution of the
document,
ii. The signature and addition of every person examined in reference to such document
under any of the provisions of this Act, and
iii. Any payment of money or delivery of goods made in the presence of the registering
officer.
2. If any person admitting the execution of a document refuses to endorse the same, the
registering officer shall nevertheless register it, but shall at the same time endorse a
note of such refusal.
CERTIFICATE OF REGISTRATION
1. The registering officer shall endorse thereon a certificate containing the word
“registered” along with the number, and page of the book in which the document has
been copied. The certificate shall be signed, sealed and dated by the registering officer.
2. The certificate of registration in respect of a document is prima facie an evidence that
the document has been legally registered.

PROCEDURE AFTER REGISTRATION OF DOCUMENTS RELATING TO LAND

13.8
Forwarding Memorandum On registering any non-testamentary document relating to
to Sub-Registrars immovable property the Registrar shall forward a memorandum
of such document to each Sub- Registrar subordinate to himself
in whose sub- district any part of the property is situate.
Registrar shall file in Book Such Registrar, on receiving any such copy, shall file it in his Book
No. 1 No. 1 and shall also send a memorandum of the copy to the Sub-
Registrar subordinate to him within whose sub-district any part
of the property is situate.
Sub- Registrar shall file in Every Sub-Registrar receiving any memorandum under this
Book No. 1 Section shall file it in his Book No. 1.

PRECAUTIONS/ PREREQUISITES FOR Registration

1. Attest blanks, erasures, alterations: If there are any blanks, and alterations in the
document, the parties shall attest them with their signatures or initials.
2. Full and identifiable property description: Property shall be described with full details
to identify the same without any ambiguity. In case of agriculture property, the survey
number (old and new), full extent of survey number, extent of property under
transaction, village name, panchayat name, mandal name, district name shall be written
clearly.
3. In respect of house property, the details like door number (old and new), assessment
number of the property, street name, and village/city name shall be mentioned.
4. Check whether property is Assigned/Government/Endowment Lands, etc.: Purchase or
otherwise dealing with the government, assigned, Endowment, Scheduled Areas lands is
prohibited and entails criminal proceedings. Therefore, it is advised to check and ensure
that the property under transaction is not one of these lands.
5. Document shall be presented for registration within four months from the date of
signing
6. Will deeds can be presented at any time: There is no time limit to present will deeds. A
will can be presented for registration even after 50 years.
7. Competent Registrar/Sub Registrar Office: Documents in respect of immovable
property transactions such as sale, lease, mortgage, release, partition,
agreement/development agreements etc shall be presented to the jurisdiction
Registrar/Sub Registrar Office for registration. It is always advisable to get the
documents registered with the jurisdiction Sub Registrar.
8. Persons competent to present the document for registration: Person signing the
document is called executant of the document. The executant can present the
document for registration. If there is more than one executant in the document.
9. Affixing of photograph and fingerprints .

13.9
 10. Address proof of parties, witnesses/identifying witnesses: Along with the document,
the parties shall also enclose copies of address proof of the executing, claiming parties,
attesting witnesses and identifying witnesses.

REFUSAL TO REGISTER BY THE SUB-REGISTRAR

Reasons for refusal to register to be recorded
1. Every Sub-Registrar refusing to register a document, except on the ground that the
property to which it relates is not situate within his sub-district, shall make an order of
refusal and record his reasons for such order in his Book No. 2 and endorse the words
“Registration refused” and, on application made by any person executing or claiming
under the document, shall without payment and unnecessary delay, give him a copy of
the reasons so recorded.
2. No registering officer shall accept for registration a document so endorsed unless and
until, under the provisions hereinafter contained, the document is directed to be
registered. Registration cannot be refused on the ground of undervaluation for stamp or
any other extraneous reason.
APPEAL TO REGISTRAR
1. An appeal shall lie against an order of a Sub-Registrar refusing to admit a document to
registration (whether the registration of such document is compulsory or optional) to
the Registrar to whom such Sub-Registrar is subordinate if presented to such Registrar
within thirty days from the date of the order; and the Registrar may reverse or alter
such order.
2. This does not apply where the refusal is on the ground of denial of execution.
3. If the order of the Registrar directs the document to be registered and the document is
duly presented for registration within thirty days after the making of such order, the
Sub-Registrar shall obey the same, and such registration shall take effect as if the
document had been registered when it was first duly presented for registration.
4. Application to registrar Refusal to register on the ground of denial of execution is
governed by Section 73, under which the aggrieved party can make an “application” not
appeal to the Registrar.
PROCEDURE BEFORE THE REGISTRAR
In the case falling under Section 73 (refusal to register on the ground of denial of execution
before the Sub Registrar) and also where denial of registration is made before the Registrar
himself, the Registrar shall inquire:
1. Whether the document has been executed, and
2. Whether the requirements of the law have been satisfied so as to entitle the document
to registration.

13.10
 If a person denies execution, the Sub-Registrar must refuse registration leaving the
parties to appeal under Section 73
INSTITUTION OF SUIT IN CASE OF ORDER OF REFUSAL BY REGISTRAR
Where the Registrar refuses to order the document to be registered any person claiming under
such document, or his representative, assign or agent, may, within thirty days after the making
of the order of refusal, institute in the Civil Court, within the local limits of whose original
jurisdiction is situate the office in which the document is sought to be registered a suit for a
decree directing the document to be registered in such office if it be duly presented for
registration within thirty days after the passing of such decree.

EXEMPTION OF CERTAIN DOCUMENTS EXECUTED BY OR IN FAVOUR OF

GOVERNMENT
Documents issued, received or attested by any officer engaged in making a settlement or
revision of settlement of land revenue and which form part of the records of such settlement.
Documents and maps issued, received or authenticated by any officer engaged on behalf of
Government in making or revising the survey of any land which form part of the record of such
survey.
Documents which, under any law for the time being in force are filed periodically in any
revenue office by patwaris or other officers charged with the preparation of village records.
Sanads, inam, title deeds and other documents purporting to be an evidence, grants or
assignments by Government, of land or of any interest in land.
Notices given under the Bombay Land Revenue Code, 1879 of relinquishment of occupancy by
occupants or of land by holders of such land.

PROVISIONS OF TRANSFER OF PROPERTY ACT, 1882 AND REGISTRATION OF

DOCUMENTS
1. The Transfer of Property Act was enacted with the object to amend the law relating to
the transfer of property by act of parties i.e. from one person to another person.
2. The Act excludes from its purview the transfers by operation of law, i.e. by sale in
execution, forfeiture, insolvency or intestate succession.
3. The scope of the Act is limited, as it is confined to transfers inter vivos and excludes
testamentary succession, i.e. transfers by will.
4. Whereas, the Registration Act, 1908 lays down all essential amendments that show the
importance of registering a document.
5. The Registration Act, 1908 is the law relating to registration of documents. The
registration is of a document and not of a transaction.

13.11
SCHEME OF THE ACT

Testamentary(takes effect Sales

after death and governed
(Ss. 54-57)
by the Indian by the T.P
Act)
Transfer of Mortgages and
By act of parties property whether Charges (Ss 58-
movable or 104)
Inter Vivos(takes effect Immovable
between two living
persons and governed Leases
Transfer
Succession Act Special Transfer (Ss. 105-117)
of Immovable
property Exchanges
By operation of
law (Ss. 118-121)

Gifts
(Ss. 122-129)

Actionable claims
(Ss. 130-137)

IMPORTANT DEFINITIONS
INSTRUMENT
Instrument means a non-testamentary instrument.
ATTACHED TO THE EARTH
Attach to the earth means:
1. Rooted in the earth, as in the case of trees and shrubs,
2. Imbedded in the earth, as in the case of walls or buildings, or
3. Attached to what is so embedded for the permanent beneficial enjoyment of that to
which it is attached.

ABSOLUTE INTEREST
When a person owns property, he has an “absolute interest” in the property. Ownership
consists of a bundle of rights, the right to possession, right to enjoyment and right to do
anything such as selling, mortgaging or making gift of the property.

13.12
REVERSION AND REMAINDER
1. Some interests in the property are called in English Law, reversion and remainders. A
“reversion” is the residue of an original interest which is left after the grantor has
granted the lessee a small estate.
For example, A, the owner of a land may lease it to B for a period of five years. The
person who grants the lease is the lessor and the person who takes the lease is called
the lessee. Here, after the period of 5 years the lease will come to an end and the
property reverts back to the lessor. The property which reverts back to him is called the
reversion or the reversionary interest.
2. When the owner of the property grants a limited interest in favour of a person or
persons and gives the remaining to others, it is called a “remainder”.
3. For instance, A the owner of a land transfers property to B for life and then to C
absolutely. Here the interest in favour of B is a limited interest, i.e., it is only for life. So
long as A is alive he enjoys the property.
4. He has a limited right since he cannot sell away the property. His right is only to enjoy
the property. If he sells this interest it will be valid so long as he is alive. So after B’s
death the property will go to C, interest is called a remainder.
VESTED AND CONTINGENT INTERESTS
1. The word “vested” is used in two different senses. It may mean “vested in possession”
or “vested in interest”.
2. A right is said to be “vested in possession” when it is a right to present possession of
property and it is said to be “vested in interest” when it is not a right to present
possession but a present right to future possession.
3. For instance, if a land is given to A for life with a remainder to B, A’s right is vested in
possession, B’s right is vested in interest.
4. In the above example, the interest of B is not subject to any uncertain condition. It will
come into his possession after A’s life comes to an end.
5. Therefore, an interest is said to be vested when it is not subject to any condition,
precedent, i.e., when it is to take effect on the happening of an event which is certain,
whereas an estate is contingent when the right to enjoyment depends upon the
happening of an event which may or may not happen.
6. Thus, a gift to A on the death of B creates a vested interest in A even during the life time
of B for there is nothing more certain than death. But a gift to A on the marriage of B
creates a contingent interest, for B may never marry at all but that contingent interest
becomes vested if and when B marries.
7. A vested interest is transferable and heritable. A contingent interest, as said above, is an
interest which takes effect after the condition is satisfied. It is subject to a condition

13.13
 precedent, i.e., unless A marries B’s daughter, he will not get the property. The
contingent interest is not heritable although it is transferable.
MEANING OF TRANSFER OF PROPERTY - SECTION 5
1. “Transfer of property” means an act by which a living person conveys property, in
present or in future, to one or more other living persons, or to himself and one or more
other living persons, and “to transfer property” is to perform such act.
2. The term “living person” includes a company or association or body of individuals,
whether incorporated or not.
3. The term ‘transfer’ in the act basically involves transfer through a mortgage, exchange,
gift, sale, actionable claim or lease.
MOVEABLE PROPERTY
The Transfer of Property Act does not define the term “moveable property”. Therefore, it is to
be defined with the help of other statutes. For e.g., it has been defined in the General Clauses
Act, 1897 as to mean “property of every description except immoveable property”. The
Registration Act defines “moveable property” to include property of every description excluding
immoveable property but including standing timber, growing crops and grass. For the purpose
of law, moveable property is sometimes regarded as immoveable property.
Case Law
Thus, where the owner of a piece of land installed a bone mill along with machinery being held
by iron bars which have been dug to a considerable depth then it is a permanent fixture and
this will become immoveable property.
IMMOVEABLE PROPERTY
The term “immoveable property” is also not defined under the Act. However, it is defined in the
negative sense as “the immoveable property does not include standing timber, growing crops,
or grass” .The General Clauses Act defines the term “immoveable property” but not
exhaustively. It states: “immoveable property shall include land, benefits to arise out of land
and things attached to the earth, or permanently fastened to anything attached to the earth”.
Concluding Definition:
Immoveable property will be found to include land, benefit to arise out of land such as rent,
and things attached to the earth like trees and buildings but not standing timber, growing crops
and grass. The last three things are regarded as severable from the land on which they stand
and, therefore, they are not included in the term “immoveable property”.

The following have been recognized as immoveable property:

13.14
 Right to collect
A right to collect
rents of
A right to way dues from fair on a Hereditary offices
Immovable
piece of land
property

The equity of The interest of Right to collect lac

A right of ferry
redemption mortgagee from trees

Right to receive
Reversion in
A right of fishery future rents and A factory
property leased
profits of land

The following have been held not to be immoveable property:

Right to Worship

Government promissory notes

Royalty

A right to recover maintanence allowance

Copyright

A decree for sale on a mortgagee deed

A decree for arrears of rent

SUBJECT MATTER OF TRANSFER

Section 6 of the Transfer of Property Act says that property of any kind may be transferred
except as provided by this Act. Property of any kind excludes from its purview the future
property. A transfer of future property can only operate as a contract which may be specifically
performed when the property comes into existence.

13.15
FORMALITIES OF TRANSFER
Property can be transferred either orally or by writing. Moveable property can be transferred
by delivery of possession or by registration. Section 54 lays down the mode of transfer of
immoveable property. Such transfer, in the case of tangible immoveable property of the value
of one hundred rupees and upwards, or in the case of a reversion or other intangible thing, can
be made only by a registered instrument.
In the case of tangible immoveable property of a value less than one hundred rupees, such
transfer may be made either by a registered instrument or by delivery of the property .
1. Attestation
Attestation, in relation to a document, signifies the fact of authentication of the
signature of the executant of that document by the attestator by putting down his own
signature on the Document. All transfers do not require attestation. For example, a sale
or a lease does not require attestation. But a mortgage or a gift requires that a
mortgage deed or a gift deed must be attested by two or more witnesses.
Attestation is valid and complete when two witnesses sign the instrument. The following
essentials are required for a valid attestation:
i. There must be at least two or more witnesses,
ii. Each witness must sign the instrument, in the presence of the executant.
2. Registration
Registration is an essential legal formality to effect a valid transfer in certain cases. The
advantage of registering a document is that any person who deals with the property
would be bound by the rights that are created in earlier registered document.
3. Notice
Notice, may be actual or constructive. If a person knows about a fact, he has an actual
notice. But, in certain circumstances law treats a man who ought to have known a fact
even though he did not in fact know it. This is called constructive notice. A person is
deemed in the eye of law to have constructive notice of a fact when
i. But for wilful absentation from an enquiry or search which he ought reasonably
to have made, or
ii. Gross negligence on his part, he would have known it. In law such a presumption
will arise when (1) there is a wilful absentation on the part of a person to make
necessary enquiries regarding the existence of certain facts, or (2) he showed
gross negligence in the matter.
Other Illustration
Where a purchaser was informed that the title deeds were in the possession of a bank for safe
custody and yet failed to make any enquiry in the bank. It was held that he was guilty of gross
negligence and must be deemed to have notice of the rights of the bank which has the custody
of the title needs.

13.16
RESTRAINT ON TRANSFERS OR RULE AGAINST INALIENABILITY
Section 10 of the Act says that when property is transferred, the transferee should not be
restrained absolutely from alienating the property. One may give property to another subject to
a condition, but the condition should not be one which absolutely prevents the transferee from
alienating the property.
Examples of absolute restraint
Suppose, A gives to B property worth only Rs. 2,000 rupees and adds a condition that B should
sell property for Rs.50,000 and not below that amount, this condition will at once become
invalid for no one will buy the property which is only worth Rs.2,000 for Rs. 50,000. Similarly, A
gives to B property worth Rs.50,000 and stipulates that if B wants to sell the property he should
sell it to C only for Rs. 1,000. This again will operate as an absolute restraint.
There was a partition between a Hindu father and his five sons. The deed of partition provided
that if any one of the sons wanted to sell his share, he should not sell it to a stranger but to one
of his brothers who should have the option to buy for a sum not exceeding Rs.1,000. It was held
by the Court that the condition absolutely prevented the son from selling the property to any
one for good value. In this case the market value of the property of the son was far greater than
Rs.1,000. Hence, the condition was declared invalid.
Partial restraint valid
Though absolute restraints are bad in law, partial restraints are valid. If there are conditions
which restrain the transferee not to alienate the property outside the family, it has been held
by the Courts that they are partial restraints.
When absolute restraint valid?
There are two exceptions to the rule that absolute restraints are void. Firstly, in the case of a
lease. The second exception is made in respect of a woman who is not a Hindu, Buddhist or
Muslim. In such a case, a condition to the effect that she shall not have power during her
marriage to transfer the property is valid.
Restraint on enjoyment
Section 11 of the Act also embodies a rule which is based on the principle that restraint on the
enjoyment of the property is invalid. The section lays down that where land is transferred by
one to another, the transferor should not impose conditions as to how and in what manner the
transferee should enjoy the property.
Illustrations
i. A sells his house to B and adds a condition that B only should reside in that house,
the condition is invalid. This is subject to the exception that, if a person transfers a
plot of land keeping another plot for himself, he can impose certain conditions
which may interfere with the right of enjoyment of the transferee.
ii. A has properties X and Y. He sells property Y to B and puts a condition that B should
not construct on property Y more than one storey so that A’s property X which he
retains should have good light and free air. This condition is valid

13.17
Thus, it is clear in the above illustration that the condition which is imposed by A is for the
benefit of another property which he retains. Such a condition is valid.
Section 12 also makes the transfer void if a property is transferred to any person adding a
condition that if such person becomes insolvent he ceases to hold that property. Such a
condition is not recognised as valid in law. Again, this is subject to the exception that if a
landlord leases his property he can impose a condition on the lessee that if the lessee becomes
insolvent the lease should come to an end.

PROPERTIES WHICH CANNOT BE TRANSFERRED

Section 6 of this Transfer of Property Act contains some exceptions to the general rule that
property of any kind may be transferred. Consequently, the following properties cannot be
transferred, namely:
1. The chance of an heir apparent succeeding to an estate.
2. A mere right of re-entry for breach of a condition subsequent cannot be transferred to
anyone except the owner of the property affected thereby.
3. An easement cannot be transferred apart from the dominant heritage.
4. An interest is property restricted in its enjoyment to the owner personally cannot be
transferred by him.
5. A right to future maintenance in whatsoever manner arising, secured or determined,
cannot be transferred.
6. A mere right to sue cannot be transferred.
7. A public office cannot be transferred nor can the salary of a public officer, whether
before or after it has become payable.
8. Stipends allowed to military, naval, air force and civil pensioners of the Government and
political pensions cannot be transferred.
TRANSFER FOR BENEFIT OF UNBORN PERSON
Section 13 of the Transfer of Property Act lays down that where on a transfer of property, an
interest therein is created for the benefit of a person not in existence at the date of transfer,
subject to a prior interest created by the same transfer, the interest created for the benefit of
such person shall not take effect unless it extends to the whole of the remaining interest of the
transferor in the property. Thus if a property is given to an unborn person, two conditions
should be satisfied:
1. It should be preceded by a life estate in favour of person living.
2. It should comprise the whole of the remaining interest of the transferor so that there
can be no further interest in favour of others.
Illustration
A transfers property of which he is the owner to B in trust for A and his intended wife
successively for their lives, and after the death of the survivor, for the eldest son of the

13.18
intended marriage for life, and after his death for A’s second son. The interest so created for
the benefit of the eldest son does not take effect, because it does not extend to the whole of
A’s remaining interest in the property.
RULE AGAINST PERPETUITY
1. Section 14 of the Act provides that no transfer of property can operate to create an
interest which is to take effect after the life time of one or more persons living at the
date of such transfer, and the minority of some person who shall be in existence at the
expiration for that period, and to whom, if he attains full age, the interest created is to
belong.
2. Perpetuity has been described as “exemptions from intermission or ceasing”. This has
been said to be “Bad in law, destructive to the commonwealth, and an impediment to
commence, but preventing the wholesome circulation of property”.
3. Any number of successive estates can be created between the transferees who are
living persons e.g. A transfer may be made to A for life and then to B for life and then to
C for life and so on, provided that A, B and C are all living persons at the date of the
transfer.
4. But if the ultimate beneficiary is someone who is not in existence at the date of the
transfer, the whole residue of the estate should be transferred to him. If he is born
before the termination of the last prior estate, he takes a vested interest at birth and
takes possession on the termination of the last prior estate but if he is not born till the
termination of the last prior estate, the transfer to him fails.
5. Further, the rule is not that vested interest is created at the birth of the beneficiary but
that vested interest cannot be delayed in any case beyond his minority.
6. In India minority terminates at the end of 18 years. The rule against perpetuities applies
to both moveable and immoveable property. Thus, the rule against perpetuity contains
two propositions, i.e.:

13.19
 Transfer can be extended to a person
who is not in existence but if he is in
existence at the time of termination of
No transfer is valid after the life time of
the period of last transfer, the moment
one or more persons living at the date
the person is born he shall have
of such transfer.Transfer can remain in
contingent interest and after minority
effect only during life time of an
i.e after the age of 18 years,he shall
existing person.
have vested interest. barring thes two
conditions, a restriction on alienation
of a property is void.

7. However, Section 18 provides an exception to the above rule of perpetuity, where the
transfer of property is for the benefit of the public in the advancement of religion,
knowledge, commerce, health, safety, or any other object beneficial to mankind.
EFFECT OF A TRANSFER ON FAILURE OF PRIOR INTEREST
1. Further, where by reason of any rules or the rules contained in Sections 13 and 14,
interest created for the benefit of a person or class of persons fails in regard to such
person or the whole of such class, any interest created in the same transaction and
intended to take effect or upon failure of such prior interests also fail (Section 16).
2. For example, property is transferred to A for life then to his unborn son B for life and
then to C, who is living at the date of transfer, absolutely. Here B is given only a life
interest. So the transfer to B is invalid.
3. The subsequent transfer to C absolutely is also invalid, because according to Section 16,
if a prior transfer fails, the subsequent transfer will also fail.
4. No transfer of property can operate to create an interest which is to take effect after
the life time of one or more persons living at date on such transfer, and the minority of
some person who shall be in existence on the expiration of that period, to whom, if he
attains full age, the interest created is to belong.
5. The policy of the law has been to prevent property being tied up for ever. The vesting
cannot be postponed beyond the life time of any person living at the date of transfer.
6. For example, if an estate is given to a living person A for life and then to the unborn son
of A, the son of A must be in existence on or before the date of the expiry of the life
estate in favour of A.
7. The vesting of absolute interest in favour of an unborn person may be postponed until
he attains majority. For example, an estate may be transferred to A, living person, and

13.20
 after his death to his unborn son when he attains the age of 18. Such transfer would not
be violative of the rule against perpetuity.
ACCUMULATION OF INCOME
Section 17 does not allow accumulation of income from the land for an unlimited period
without the income being enjoyed by owner of the property. The law allows accumulation of
income for a certain period only. The period for which such accumulation is valid is:
1. The life of the transferor, or
2. Eighteen years from the date of transfer.
Any direction to accumulate the income beyond the period mentioned above is void except
where it is for:
i. The payment of the debts of the transferor or any other person taking any interest
under the transferor,
ii. Portions for children or any other person taking any interest in the property under
the transfer, and
iii. For the preservation and maintenance of the property transferred.
DOCTRINE OF LIS PENDENS - SECTION 52
Lis means dispute, Lis pendens means a pending suit, action, petition or the like. It states that
during the pendency of a suit in a Court of Law, property which is subject to a litigation cannot
be transferred.
ESSENTIALS
In order to constitute a Lis pendens, the following elements must be present:

There must be a suit or proceeding in a court of competent

jurisdiction

The suit or proceeding must not be collusive

The litigation must be one in which right to immovable

property is directly and specially in question

There must be transfer of or otherwise dealing with the

property in dispute by any party to the litigation

Such transfer must effect the rights of the other party that may
ultimately accrue under the terms of of the decree or order

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The rule is based on the doctrine of expediency i.e., the necessity for final adjudication. A plea
of lis pendens will be allowed to be raised even though the point is not taken in the pleadings or
raised as an issue. A suit in foreign Court cannot operate as lis pendens. The doctrine of lis
pendens does not apply to moveables.
Effect
If the parties to the litigation, are completely prevented from transferring the property in
litigation, it would cause unnecessary delay and hardship, as they would have to wait till the
final disposal of the case. So, Section 53 creates a limitation over the transfer by making it
subject to the result of the litigation. The effect of this doctrine is not to invalidate or avoid the
transfer, or to prevent the vesting of title in the transfer, but to make it subject to the decision
of the case, and the rule would operate even if the transferee had no notice of the pending suit
or proceeding at the time of the transfer.

DOCTRINE OF PART-PERFORMANCE
A contract for the sale of land has been entered into between A and B. The transferee has paid
the price entering into possession and is willing to carry out his contractual obligations. As
registration has not been effected, A, the transferor, seeks to evict B from the land. Can he do
so?
No, B will not be allowed to suffer simply because the formality of registration has not been
through. The legislature grants some relief to such a transferee under Section 53A, which
embodies the doctrine of part-performance.
Followings are the essential conditions for the operation of the doctrine of part-performance
according to Section 53A.
1. There must be a contract to transfer immoveable property.
2. It must be for consideration.
3. The contract should be in writing and signed by the transferor himself or on his behalf.
4. The terms necessary to constitute the transfer must be ascertainable with reasonable
certainty from the contract itself.
5. The transferee should have taken the possession of the property in part performance of
the contract.
6. In case he is already in possession, he must have continued in possession in part
performance of the contract and must have done something in furtherance of the
contract.
7. The transferee must have fulfilled or be ready to fulfil his part of the obligation under the
contract.
If all the abovementioned conditions are satisfied, then, the transferor and the persons
claiming under him are debarred form exercising any right in relation to the property other
than the rights expressly provided by the terms of the contract notwithstanding the fact that
the instrument of transfer has not been registered or complete in the manner prescribed
therefor by the law for time being in force.

13.22
SALE
“Sale” has been defined as a transfer of ownership in exchange for a price paid or promised or
part paid and part-promised.
ESSENTIALS
1. The seller must be a person competent to transfer. The buyer must be any person who
is not disqualified to be the transferee.
2. The subject matter is transferable property.
3. There is a transfer of ownership.
4. It must be an exchange for a price paid or promised or part paid and part promised.
5. There must be present a money consideration. If the consideration is not money but
some other valuable consideration it may be an exchange or barter but not a sale.

EXCHANGE
When two persons mutually transfer the ownership of one thing for the ownership of another,
neither thing or both things being money only, the transaction is called an “exchange”.
ESSENTIALS
1. The person making the exchange must be competent to contract.
2. There must be mutual consent.
3. There is a mutual transfer of ownership though things and interests may not be
identical.
4. Neither party must have paid money only. This Section applies to both moveable and
immoveable property.
MORTGAGES
Sections 58 to 104 of the Act deal with “Mortgages”.
“Mortgage” is the transfer of an interest in specific immoveable property for the purpose of
securing the payment of money advanced or to be advanced by way of loan, an existing or
future debt or the performance of an engagement which may give rise to pecuniary liability.
The transferor is called a mortgagor, the transferee a mortgagee. The principal money and
interest the payment of which is secured for the time being are called the mortgage money and
the instrument by which the transfer is effected is called a mortgage deed.
ESSENTIALS OF A MORTGAGE:
1. Transfer of interest: The first thing to note is that a mortgage is a transfer of interest in
the specific immoveable property. The mortgagor as an owner of the property is
possessed of all the interests in it, and when he mortgages the property to secure a
loan, he only parts with an interest in that property in favour of the mortgagor. If the
mortgagor transfers this property, the transferee gets it subject to the right of the
mortgagor to recover from it what is due to him, i.e., the principal plus interest.

13.23
 2. Specific immoveable property: The second point is that the property must be
specifically mentioned in the mortgage deed. Where, for instance, the mortgagor stated
“all of my property” in the mortgage deed, it was held by the Court that this was not a
mortgage.
3. To secure the payment of a loan: Another characteristic of a mortgage is that the
transaction is for the purpose of securing the payment of a loan for the performance of
an obligation which may give rise to pecuniary liability. It may be for the purpose of
obtaining a loan, or if a loan has already been granted to secure the repayment of such
loan.
To sum up, it may be stated that there are three outstanding characteristics of a mortgage:
i. The mortgagee’s interest in the property mortgaged terminates upon the
performance of the obligation secured by the Mortgage.
ii. The mortgagor has a right of foreclosure upon the mortgagor’s failure to perform.
iii. The mortgagor has a right to redeem or regain the property on repayment of the
debt or performance of the obligation.

Kinds of mortgages:

Simple Mortgage

Mortgage conditional
Anomalous mortgage
sale

Mortgage by deposit
Usufractuary
of title deeds or
mortgage
equitable mortgage

English mortgage

1. Simple mortgage

13.24
 In a simple mortgage, the mortgagor binds himself personally to pay the debt and
agrees in the event of his failure to pay the mortgage money, the mortgagee shall have
the right to cause the property to be applied so far as may be necessary by means of a
decree for the sale of property. If the mortgaged property is not sufficient to discharge
the debt, the mortgagee can bring a personal action against the mortgagor and obtain a
decree which, like any other money decree, can be executed against other properties of
the mortgagor. In simple mortgage, no right of possession or foreclosure is available to
the mortgagee.
2. Mortgage by conditional sale
In this type of mortgage, the property is mortgaged with a condition super added that in
the event of a failure by the debtor to repay the debt at the stipulated time, the
transaction should be regarded a sale, and in case the loan is repaid at the stipulated
time, the sale shall be invalid, or on condition that on such payment being made the
buyer shall transfer the property to the seller. This type of mortgage is ostensible sale of
the mortgaged property with a condition for re-purchase by the mortgagor by repaying
the loan.
It may be noted that the mortgagor transfers the property with the following three conditions:
i. If the loan is repaid, the sale becomes void.
ii. If the loan is not repaid at the stipulated time, the sale will become absolute and
binding.
iii. When the debt has been repaid at the stipulated time, the mortgagee shall re-
transfer the property to the mortgagor.
3. Usufructuary mortgage
i. where the mortgagor delivers possession or expressly or by implication binds
himself to deliver possession of the mortgaged property to the mortgagee, and
authorises him to retain such possession until payment of the mortgage money, and
to receive the rents and profits accruing from the property or any part of such rents
and profits and to appropriate the same in lieu of interest, or in payment of the
mortgage money, or partly in lieu of interest or partly in payment of the mortgage
money, the transaction is called an usufructuary mortgage. It is also called a
mortgage with possession.
ii. In Pratap Bahadur vs. Gajadhar, it was agreed that the mortgagee will put the
mortgagor in possession of a village on a certain date and to pay interest till
possession was delivered.
iii. It was held that mortgage was an usufructuary mortgage.
iv. The mortgagee is authorised to retain possession and receive rents, until he
recovers the whole debt and the interest.
v. The usufructuary mortgagee has to look only to the profits that arise out of the
property for realising his debt, there is no personal liability on the part of the

13.25
 mortgagor. Similarly, the mortgagee has no right to foreclose the mortgage or to sue
for sale.
Thus, a usufructuary mortgage has the following characteristics:
i. Possession of property must be delivered to the mortgagee;
ii. There is no personal liability on the part of the mortgagor to pay;
iii. The mortgagee is entitled to rents and profits in lieu of interest or principal or both; and
iv. The mortgagee however is not entitled to foreclose the mortgagee or to sue for sale.
vi. A mortgage may be regarded as usufructuary even though the entire debt is not to
be paid out of the profits of the property. Therefore, a usufructuary mortgage may
be either
a. where the entire mortgage money is to be paid from the profit of the land, or
b. where only part of the mortgage money is principal or interest amount is to be
paid from the profit of the land.
4. English mortgage
“Where the mortgagor binds himself to repay the mortgage money on a certain date,
and transfers the mortgaged property absolutely to the mortgagee but subject to a
proviso that he will retransfer it to the mortgagor upon payment of the money as
agreed, the transaction is called an English mortgage”.
Here the mortgagor transfers the ownership of the property as security and the
mortgagee promises to re-transfer the ownership, if the money is paid within a definite
time. There is also a personal covenant as the mortgagor promises to repay within a
certain date. In this type of mortgage, there is proviso that if money is repaid the
property would be reconveyed. The remedy of the mortgagee is sale of the property to
recover the debt.
The essential features of an English mortgage are as under:
i. The mortgagor binds himself to repay the mortgage money on a certain day. In other
words, there should be a personal undertaking to pay.
ii. The mortgaged property is absolutely transferred to the mortgagee.
iii. Such absolute transfer is subject to a proviso that the mortgagee will reconvey the
property to the mortgagor upon payment by him of the mortgage money on the
fixed day.

Distinction between English mortgage and mortgage by conditional sale

i. In English mortgage there is a personal liability undertaken by the mortgagor to pay
the debt. In a mortgage by conditional sale there is no personal covenant,
ii. In English mortgage the ownership in the mortgaged property is absolutely
transferred to the creditor which however, may be divested on repayment of the
loan on the fixed day. In a mortgage by conditional sale, the mortgagee gets only a

13.26
 qualified ownership which may, however, converted into an absolute ownership in
default of payment of the mortgage money.
5. Mortgage by deposit of title deeds
This type of mortgage is called equitable mortgage in English law. In this transaction, a
person delivers to the creditor or his agent documents of title of his immoveable
property with an intention to create a security, and obtains a loan. The requisites of
such a mortgage are
i. A debt,
ii. Deposit of title deeds, and
iii. An intention that the deeds shall be security for the debt.
In case of a mortgage by deposit of title deeds, it need not be registered and an oral
agreement between the person and the creditor followed by the delivery of the
documents of title to the property is enough. The creditor will have the possession of
the documents and he will advance the money at the stipulated rate of interest. In case
the mortgagor does not repay the loan, the creditor on the basis of having the title
deeds in his possession can sue the debtor to recover the money.
It should be noted that this type of mortgage can be created only in certain towns and
not everywhere in India. The facility to create a valid mortgage is available in the
following towns in India: Calcutta, Madras, Bombay, Adoni, Ajmer, Allahabad, Alwar,
Bangalore, Bellary, Cochin, Coimbatore, Delhi, Jaipur, Jodhpur, Kanpur, Rajahmundry,
Udaipur, Vellor, Ellora, Pali, Bhilwara, Bikaner, Kakinada, Narayanganj, Mysore, and
Madurai. Though this type of mortgage is limited to specific cities it is at par with any
other legal mortgage
6. Anomalous mortgage
“A mortgage which is not a simple mortgage, a mortgage by conditional sale,
usufructuary mortgage, an English mortgage, or a mortgage by deposit of title deeds
within the meaning of this section is called an anomalous mortgage”.
SUB-MORTGAGE:
Where the mortgagee transfers by mortgage his interest in the mortgaged property, or creates
a mortgage of a mortgage the transaction is known as a sub-mortgage. For example, where A
mortgages his house to B for Rs. 10,000 and B mortgage his mortgagee right to C for Rs. 8,000.
B creates a sub-mortgage.
PUISNE MORTGAGE:
Where the mortgagor, having mortgaged his property, mortgages it to another person to
secure another loan, the second mortgage is called a puisne mortgage. For example, where A
mortgages his house worth Rs. One lakh to B for Rs.40,000 and mortgages the same house to C
for a further sum of Rs.30,000, the mortgage to B is first mortgage and that to C the second or
puisne mortgage. C is the puisne mortgagee, and can recover the debt subject to the right of B,
the first mortgagee, to recover his debt of Rs.40,000 plus interest.

13.27
RIGHTS OF MORTGAGOR:
1. Right of redemption: The first and the most important right of the mortgagor is the
right to redeem i.e., take back the mortgaged property by paying the mortgage money
at any time after the stipulated date for repayment.
2. Right against clog on equity of redemption: Right of redemption or equity of
redemption is the essence of a mortgage, and any provision inserted in the mortgage
deed to prevent, evade or hamper redemption is void. Any condition which prevents the
mortgagor from redeeming the property is called a “clog” on the equity or right of
redemption and is void. The rule of equity that once a mortgage always a mortgage
prohibits a clog on the right of redemption. In other words, once a transaction is found
to be a mortgage, the Court would not permit any condition in a mortgage deed which
would prevent or impede redemption or repayment of the loan for which the security
was given.
3. Right of partial redemption: Section 61 of the Act gives a right of partial redemption
stating that “a mortgagor who has executed two or more mortgages in favour of the
same mortgagee shall, in the absence of a contract to the contrary, when the principal
money of any two or more of the mortgages has become due, be entitled to redeem any
one such mortgage separately or any two or more of such mortgages together.”
IMPLIED CONTRACT BY MORTGAGOR
Section 65 provides for implied terms as follows:
1. Mortgagor is entitled to transfer the interest (covenant for title),
2. Mortgagor will assist the mortgagee to enjoy quiet possession,
3. Mortgagor will pay public charges in respect of the mortgaged property,
4. Mortgagor covenants as to payment of the rent due on lease where, the mortgaged
property is leased,
5. Mortgagor covenants as to payment of interest and principal on prior encumbrances,
where the mortgage is a second or subsequent encumbrance on the property.
RIGHTS OF MORTGAGEE AND HIS REMEDIES:
If the mortgagor does not pay the mortgage money, the mortgagee may proceed to recover:
1. From the mortgaged property, or
2. Sue for recovery from the mortgagor personally.
Thus the mortgagor has two remedies: one against the property and the other against
the mortgagor personally.
CHARGE
“Charge” has been defined under Section 100 as follows: “Where immoveable property of one
person is by the act of parties or operation of law made security for the payment of money to
another, and the transaction does not amount to a mortgage, the latter person is said to have a

13.28
charge on the property”. A charge comes into existence either by the act of parties or by
operation of law.
Charge by act of parties: When in a transaction for value, both the parties (debtor and creditor)
intend that the property existing or future shall be made available as security for the payment
of a debt and that the creditor shall have a present right to have it made available, there is a
charge.
Charge by Operation of Law: Charges created by law are those which arise on account of some
statutory provisions. They are not created by the voluntary action of parties but arise as a result
of some legal obligation.
Floating charge: A charge may be floating as well as fixed. A fixed charge is a charge on specific
property but a floating charge is an equitable charge on the assets for time being of a going
concern. It is peculiar to companies which are able to borrow money without any interference
with their assets so long as they are going concern.
A floating charge has the following characteristics:
1. It is a charge on class of assets both present and future.
2. The class of assets charged is one which in the ordinary course of business would be
changing from time to time.
3. It is contemplated by the charge that until some future step is taken by those who are
interested in the charge the company may carry on its business in the ordinary way, i.e.,
it may use its assets charged in the ordinary course of its business.

CRYSTALLISATION OF FLOATING CHARGE

A floating charge becomes fixed or crystallises in the following cases:
1. When the money becomes payable under a condition in the debenture and the
debenture holder, takes some steps to enforce the security,
2. When the company ceases to carry on business, and
3. When the company is being wound-up.

DISTINCTION BETWEEN MORTGAGE AND CHARGE

Aspect Mortgage Charge
1. Nature of Transfer of interest in the Not a transfer of interest in the
Security property as security for a loan property but serves as security
for an amount.
2. Creation Created only by the act of parties Can be created by the act of
parties or by operation of law.
3. Formalities Mortgage deed must be Charge need not be in writing; if
registered and attested by two written, no attestation or
witnesses. registration is required.
4. Enforcement Transferee of mortgaged Charge generally cannot be
Against property is bound by the enforced against a transferee for

13.29
 Transferee mortgage. consideration without notice.
5. Personal Mortgage can involve both In a charge, there is usually no
Liability security and personal liability. personal liability; the remedy is
against the specific property.

LEASE
MEANING AND NATURE OF LEASE
“Lease” of immoveable property is a transfer of a right to enjoy property. Since it is a transfer to
enjoy and use the property, possession is always given to the transferee. The lease of
immoveable property must be made for a certain period. For example, you may give a lease of
property for a definite number of years, or for life, or even permanently.
Essentials
The essentials of a lease are:
1. It is a transfer of a right to enjoy immoveable property,
2. Such transfer is for a certain time or perpetuity,
3. It is made for consideration which is either premium or rent or both,
4. The transfer must be accepted by the transferee.
The transferor is called the lessor, the transferee is called the lessee, the price is called
premium and the money, share, service or any other thing of value to be so rendered is called
the rent.
LEASE AND LICENCE
1. A lease should be distinguished from a licence. A licence is a right to do or continue to
do in or upon the immoveable property of the grantor, something which would, in the
absence of such a right, be unlawful.
2. A licence does not transfer any interest in the property and the licencee has no right to
possession.
3. A licence can be revoked by the grantor at any time, whereas a lease cannot be revoked.
If, I sell the fruits of my garden to you, you are given permission or licence to enter my
garden and take away the fruits.
4. A lease involves a transfer of interest followed by possession of the property for a
specified period. The real test is the intention of the parties.
5. If the document creates an interest in the property, it is a lease but if it only permits
another to make use of the property of which the legal possession continues with the
owner, it is a licence because it does not create any interest in that property.
REQUIREMENTS OF A VALID NOTICE
If the lease is a lease from month to month, 15 days, notice is required. If it is from year to year
6 months’ notice is required. A lease of the moveable property for agricultural or
manufacturing purposes shall be deemed to be a lease from year to year. The notice should

13.30
expire with the end of the period of the tenancy. If it is a lease from month to month and the
notice is given by the landlord, the tenant should be asked to quit at the end of the month of
the tenancy. The landlord cannot ask his tenant to quit at any time before the expiry of a month
or a year of the tenancy.
DETERMINATION OF LEASES
A lease is determined, i.e., comes to an end in the following ways:
1. By efflux of time or lapse of time: A lease for a definite period, such as a lease for a
year, or for a term of years, expires on the last day of the term and the lessor or any
person entitled to get back the property may enter without notice or any other
formality.
2. By the happening of a special event: When a lease is granted subject to the happening
of an event, it comes to an end when the event takes place. Thus, if B grants lease to A
for life, it comes to an end on the death of A.
3. Merger: A lease comes to an end when the lessee buys the property of the lessor or
when the lessee takes the lessor’s interest by succession. Here the right of the lessee
merges in that of the lessor. Naturally, the lessee becomes the owner of the property
after he acquires it. So there will be no more a lease.
4. By surrender: A lease may come to an end by surrender. Surrender may be either
express or implied. Express surrender arises when the lessee yields up his interest under
a lease by mutual consent. Implied surrender occurs, as follows: if during the
subsistence of the lease, a new lease is granted to the tenant to commence at once in
substitution for the existing lease, it operates as a surrender of the old lease.
5. By forfeiture: A lease also comes to an end by forfeiture. A forfeiture occurs when there
is breach of a condition in a lease contract by the lessee. Forfeiture occurs in the
following circumstances - the first case in which forfeiture occurs is the case when the
lessee breaks an express condition which may be of various types such as, if the lessee
does not pay the rent regularly, or if the lessee becomes insolvent, or where the lessee
sublets the property to another person. In all such cases there will be a forfeiture.
GIFT
1. Transfer of Property Act defines “gift” as follows:
“Gift” is the transfer of certain existing moveable or immoveable property made voluntarily
and without consideration by one person called the donor, to another called the donee and
accepted by or on behalf of the donee.
2. Such acceptance must be made during the life time of the donor and while he is still
capable of giving. If the donee dies before acceptance, the gift is void.
Essentials
i. There must be a transfer of ownership.

13.31
 ii. The subject matter of gift must be a certain existing moveable or immoveable
property.
iii. The transfer must be made voluntarily.
iv. It must be done without consideration.
v. There must be acceptance by or on behalf of the donee, and such acceptance must
be made during the lifetime of the donor and while he is capable of giving.
3. There are two parties to the gift: donor and donee. The donor must be a person
competent to transfer, whereas the donee may be any person.
4. The gift can be made to any one, to an incompetent person or even to a juridical person.
The essence of a gift is that it is a gratuitous transfer.
5. A gift of immoveable property must be made by a registered instrument. A gift of
moveable property may be made by a registered instrument or by delivery of property.
6. A gift of immoveable property, as said above, must be effected by registration. Where a
gift in favour of someone is registered but it is not accepted by the donee, the gift is
incomplete.
7. Suppose, a document is executed by the donor who makes a gift of immoveable
property and the deeds are delivered to donee, and the done accepts the gifts but the
document is not registered. Will the gift be valid? It has been held by the Courts that the
gift is valid. While registration is a necessary formality for the enforcement of a gift of
immoveable property, it does not suspend the gift until registration actually takes place.
8. The donee in such a case can ask the donor to complete the gift by registration. Thus,
the most essential thing for the validity of a gift is its acceptance. If the gift is accepted
but not registered it is a valid gift.
9. A gift which comes into existence on the fulfilment of a condition, that is to say, a gift
which is subject to a condition precedent is also valid.
10. But the condition attached to the gift should not be illegal or immoral. For instance, a
gift to A on condition that he murders B is not valid.
Onerous gift:
1. Lastly reference may also be made to what is known as an onerous gift. It may be that
several things are transferred as a gift by single transaction. Whereas some of them are
really beneficial the others convey burdensome obligations.
2. The result is that the benefit which it confers is more than counter balanced by the
burden it places.
3. For instance, A makes a gift of shares in the companies X and Y. X is prosperous but
heavy calls are expected in respect of shares in Y company. The gift is onerous.
4. The rule as laid down in Section 127 is that the donee takes nothing by the gift unless he
accepts it fully.

13.32
 5. Where the gift is in the form of two or more independent transfers to the same person
of several things, the donee is at liberty to accept one of them and refuse the other.
6. The rules pertaining to gifts in the Transfer of Property Act do not apply to the gifts by
Mohammedans.
7. If a gift is made by a Mohammedan, its validity has to be judged according to Muslim
law and not according to the Transfer of Property Act.
ACTIONABLE CLAIMS
1. A claim to any debt, other than a debt secured by mortgage of immoveable property or
by hypothecation or pledge of moveable property, or to any beneficial interest in
moveable property not in the possession, either actual or constructive, of the claimant,
which the Civil courts recognize as affording grounds for relief, whether such debt or
beneficial interest be existent, accruing, conditional or contingent.
2. Actionable claims are claims, to unsecured debts. If a debt is secured by the mortgage of
immoveable property it is not an actionable claim, because the Section clearly excludes
such a debt.
3. A debt is a liquidated money obligation which is usually recoverable by a suit. To create
a debt, first of all, there must be a liquidated or definite sum which is actually due. For
example, arrears of rent due.
4. The term debt may also include a sum of money which is due in the sense that it exists,
but is not actually payable until a later date.
5. For example, A borrows money from B on the 1st of January and promises to repay on
March 15, the amount is not payable till the 15th of March, but certainly it is a debt and
it is an accruing debt.
6. Another essential of an actionable claim is that it is not in possession of a person and
the person can claim such a debt by bringing an action in a Court of law.
7. The Section also says that it must be a claim to any debt which the Civil Courts recognise
as affording grounds for relief to the person who claims it.
NON-ACTIONABLE CLAIMS
1. Debentures are secured debts and therefore not regarded as actionable claims.
2. Copy right though a beneficial interest in immoveable property is not an actionable
claim since the owner has actual or constructive possession of the same.
CASES UNDER SECTION 107 OF TRANSFER OF PROPERTY ACT, AND SECTION
17(1)(D) OF REGISTRATION ACT
A comparison of both these Sections would show that a lease of immovable property is
compulsory registrable:
1. If it is from year to year, or
2. If it is for a term exceeding one year, or

13.33
3. If it reserves a yearly rent. If a lease is of a very high value but is neither from year to
year, nor for any term exceeding one year, nor reserving a yearly rent, it does not
require registration.
4. Non-testamentary instruments transferring or assigning any decree or order of a Court
or any award in order to create interests as mentioned in Clause (2).
A transfer of a decree or order of a court or of any award when such decree or order or
award operates to create, declare, etc. any interest of the value of Rs. 100 and upwards
in immovable property, requires registration.

13.34
 RIGHT TO INFORMATION ACT,2005
INTRODUCTION
In India, the Government enacted Right to Information (RTI) Act in 2005 allowing transparency and
autonomy and access to accountability in public authorities.

It may be pointed out the Right to information Bill was passed by the Lok Sabha on May 11, 2005
and by the Rajya Sabha on May 12, 2005 and received the assent of the President on June 15, 2005.
The Act considered as watershed legislation, is the most significant milestone in the history of Right
to information movement in India allowing transparency and autonomy and access to accountability.

The RTI Act confers on all citizens a right to information. The Right to Information Act, 2005 provides
an effective framework for effectuating the right to information recognized under Article 19 of the
Constitution. The RTI Act came into force on 12th Oct, 2005.

RIGHT TO KNOW

CASE LAWS

S.NO CASE NAME PROVISIONS

1 R.P. Limited v Supreme Court read into Article 21 the right to know. The Supreme
Indian Express Court held that right to know is a necessary ingredient of
Newspapers participatory democracy. Article 21 confers on all persons a right to
know which include a right to receive information.

CONSTITUTION VALIDITY OF ACT

Thus, a citizen has a right to receive information and that right is derived from the concept of
freedom of speech and expression comprised in Article 19(1) (a).

SALIENT FEATURES OF THE ACT

1. The RTI Act extends to the whole of India except Jammu & Kashmir.
2. It shall apply to public Authorities.
3. All citizens shall have the right to information, subject to provisions of the act.
4. The public Information Officers/Assistant Public information Officer will be responsible to deal
with the requests for information and also to assist persons seeking information.
5. Fees will be payable by the applicant depending on the nature of information sought
6. Certain categories of information have been exempted from disclosure Section 8 and 9 of the
Act.

IMPORTANT DEFINITIONS
“Public authority” means any authority or body or institution of self-government established or
constituted –

14.1
 (a) By any other law made by Parliament;
(b) By and other law made by State Legislature;
(c) By notification issued or order made by the appropriate Govt.

“Record” includes–

(a) any document, manuscript and file;

(b) any microfilm, microfiche and facsimile copy of a document;
(c) any reproduction of image or images embodied in such microfilm
(d) any other material produced by a computer or any other device

“Information” means any material in any form, including records, documents, memos, e-mails,
opinions, advices, press releases, circulars, orders, logbooks, contracts, reports, papers, samples,
models, data material held in any electronic form.

“Right to information” means the right to information accessible under this Act which is held by or
under the control of any public authority and includes the right to–

(a) taking notes, extracts, or certified copies of documents or records;

(b) inspection of work, documents, records;
(c) taking certified samples of material;
(d) obtaining information in the form of diskettes, floppies, tapes, video cassettes or in any
other electronic mode or through printouts where such information is stored in a computer
or in any other device;

“Third Party” means a person other than the citizen making a request for information and includes
a public authority.

OBLIGATIONS OF PUBLIC AUTHORITY (SECTION 4)

Every public authority under the Act has been entrusted with a duty to maintain records and publish
manuals, rules, regulations, instructions, etc. in its possession as prescribed under the Act.

As per Sec 4(1)(b), every public authority has to publish within 120days of enactment of this act-

• Particulars of its organizations and functional duties

• Powers and duties of its officers and employees
• Directory of its employee, officers etc
• Monthly remuneration of each employee and officers.
• Name , designation and other information of PIO.
• Facility available to citizens for obtaining information
• Statement of categories of documents held by it or controlled by it
• Norms set by it for discharge of its functions
• Rules, regulations and instructions used by employee for discharging its functions

DESIGNATION OF PUBLIC INFORMATION OFFICERS (PIO)(SECTION 5)

Every public authority has to–

14.2
 (a) Designate in all administrative units or offices Central or State Public Information Officers to
provide information to persons who have made a request for the information.
(b) Designate at each sub-divisional level or sub-district level Central Assistant or State
Assistant Public Information Officers to receive the applications for information or appeals
for forwarding the same to the Central or State Public Information Officers.
(c) No reason to be given by the person making request for information except those that may
be necessary for contacting him.

REQUEST FOR OBTAINING INFORMATION (SECTION 6)

The Act specifies the manner in which requests may be made by a citizen to the authority for
obtaining the information. It also provides for transferring the request to the other concerned public
authority who may hold the information.

(a) Application is to be submitted in writing or electronically, with prescribed fee, to Public

Information Officer (PIO).
(b) Information to be provided within 30 days
(c) 35 days if application is made to assistant PIO
(d) 40 days if interest of 3rd party involve
(e) 48 hours where life or liberty is involved.
(f) No action on application for 30 days is a deemed refusal
(g) No fees for delayed response.

DUTIES OF A PIO (PUBLIC INFORMATION OFFICER)

PIO shall deal with the request from persons seeking information and if the person cannot make the
request in writing, then PIO should help to do so

If the information requested is related to public authority, then he has to transfer it within 5days
and inform the applicant immediately

PIO should provide the requested information as early as possible and maximum within 30 days
from the date of receipt of request either provide the information or reject the request

If the request is rejected then PIO shall communicate the following:

Reason for rejection

Period for appeal for such rejection

Particulars of appellate tribunal

Time limit within which above appeal can be filled

Where the information requested for concerns the life or liberty of a person, the same shall be
provided within forty-eight hours of the receipt of the request. If the PIO fails to give decision on the
request within the period specified, he shall be deemed to have refused the request.

PARTIAL DISCLOSURE ALLOWED (SECTION 10)

14.3
Under Section 10 of the RTI Act, only that part of the record which does not contain any information
which is exempt from disclosure and which can reasonably be severed from any part that contains
exempt information, may be provided.

If allowing partial access, the PIO shall give a notice to the applicant, informing:-

That only part of the record requested, after severance of the record containing information which is
exempt from disclosure, is being provided;

The reasons for the decision, including any findings on any material question of fact, referring to the
material on which those findings were based;

The name and designation of the person giving the decision;

EXEMPTION FROM DISCLOSURE (SECTION 8)

Certain categories of information have been exempted from disclosure under the Act. These are:-

(a) Where disclosure prejudicially affects the sovereignty and integrity of India, the security,
strategic, scientific or economic interests of the State, relation with foreign State or lead to
incitement of an offence;
(b) Information which has been expressly forbidden by any court or tribunal or the disclosure of
which may constitute contempt of court;
(c) Where disclosure would cause a breach of privilege of Parliament or the State Legislature;
(d) Information including commercial confidence, trade secrets or intellectual property, where
disclosure would harm competitive position of a third party, or available to a person in his
fiduciary relationship, unless larger public interest so warrants;
(e) Information received in confidence from a foreign government;
(f) Information the disclosure of which endangers life or physical safety of any person or identifies
confidential source of information or assistance;
(g) Information that would impede the process of investigation or apprehension or prosecution of
offenders
(h) Cabinet papers including records of deliberations of the Council of Ministers, Secretaries and
other officers:
(i) The PIO has been empowered to reject a request for information where an infringement of
copyright subsisting in a person would be involved.

Provided that the decisions of Council of Ministers, the reasons thereof, and the material on the
basis of which the decisions were taken shall be made public after the decision has been taken.

WHO IS EXCLUDED?

The Act excludes Central Intelligence and Security agencies specified in the Second Schedule like IB,
R&AW, Directorate of Revenue Intelligence, Central Economic Intelligence Bureau, Directorate of
Enforcement, Narcotics Control Bureau, Aviation Research Centre, Special Frontier Force, BSF, CRPF,
ITBP, CISF, NSG, Assam Rifles, Special Service Bureau, Special Branch (CID), Andaman and Nicobar,
the Crime Branch-CID-CB, Dadra and Nagar Haveli and Special Branch, Lakshadweep Police. Agencies
specified by the State Governments through a Notification will also be excluded.

14.4
 The exclusion, however, is not absolute and these organizations have an obligation to provide
information pertaining to allegations of corruption and human rights violations. Further,
information relating to allegations of human rights violation shall be given only with the approval of
the Central Information Commission within forty-five days from the date of the receipt of request.

INFORMATION COMMISSIONS
INFORMATION COMMISSIONS

CENTRAL INFORMATION STATE INFORMATION

COMMISSION (CIC) COMMISSION(SIC)

COMPOSITION OF (CIC) COMPOSITION OF (SIC)

The Chief Central One State Chief Not more than 10

Information Information Information State Information
Commission Commissioners Commissioner Commissioners
not exceeding (SCIC) (SIC)
10

The Chief CIC/IC shall not be a POWERS OF INFORMATION COMMISSIONS

Information Member of
Commissioner and Parliament or The Central Information Commission/State
Information Member of the Information Commission has a duty to
Commissioners shall Legislature of any receive complaints from any persons:-
be persons of State or Union (a) Who has not been able to submit an
eminence in public Territory. He shall not information request because a PIO has
life with wide hold any other office not been appointed
knowledge and of profit or connected (b) Who has been refused information that
experience in law, with any political was requested;
science and party or carrying on (c) Who has received no response to his/her
technology, social any business or information request within the specified
service, profession. CIC shall time limits
management, be appointed for such (d) Who thinks the fees charged are
journalism, mass term as prescribed by unreasonable
media or CG from date on (e) Who thinks information given is
administration and which he enters upon incomplete or false or misleading ;and
governance. his office or till he
attains the age of 65 If the Commission feels satisfied, an enquiry
No reappointment
years, whichever is may be initiated and while initiating an
earlier. No enquiry the Commission has same powers as
reappointment. vested in a Civil Court

14.5
If Central Information Commissioner have to become Central Chief information Commissioner or if
State Information Commissioner have to become State Chief Information Commissioner then the
aggregate term is of 5years.

APPELLATE AUTHORITIES
Any person who does not receive a decision within the specified time or is aggrieved by a decision of
the PIO may file an appeal under the Act.

First Appeal: First appeal to the officer senior in rank to the PIO in the concerned Public Authority
within 30 days from the expiry of the prescribed time limit or from the receipt of the decision (delay
may be condoned by the Appellate Authority if sufficient cause is shown).

Second Appeal: Second appeal to the Central Information Commission or the State Information
Commission as the case may be, within 90 days of the date on which the decision was given or
should have been made by the First Appellate Authority (delay may be condoned by the Commission
if sufficient cause is shown).

Third Party appeal against PIO’s decision must be filed within 30 days before first Appellate
Authority; and, within 90 days of the decision on the first appeal, before the appropriate Information
Commission which is the second appellate authority.

Burden of proving that denial of information was justified lies with the PIO. First Appeal shall be
disposed of within 30 days from the date of its receipt or within such extended period not exceeding
a total of forty-five days from the date of filing thereof, for reasons to be recorded in writing. Time
period could be extended by 15 days if necessary. (Section 19)

APPEALS

Any person who does not receive a decision within the specified time or is
aggrieved by a decision of the PIO may file an appeal under the Act.

FIRST APPEAL

First appeal to the officer senior in rank to the PIO in the concerned Public
Authority within 30 days from the expiry of the prescribed time limit or
from the receipt of the decision (delay may be condoned by the Appellate
Authority if sufficient cause is shown).

First Appeal shall be disposed of within 30 days from the date of its
receipt or within such extended period not exceeding a total of forty five
days from the date of filing thereof, for reasons to be recorded in writing.

SECOND APPEAL

Second appeal to the Central Information Commission or the State

Information Commission as the case may be, within 90 days of the date on
which the decision was given or should have been made by the First
Appellate Authority (delay may be condoned by the Commission if 14.6
sufficient cause is shown).
POWERS OF INFORMATION COMMISSIONS
The Central Information Commission/State Information Commission has a duty to receive
complaints from any person

• who has not been able to submit an information request because a PIO has not been appointed
• who has been refused information that was requested
• who has received no response to his/her information request within the specified time limit
• who thinks the fees charged are unreasonable
• who thinks information given is incomplete or false or misleading
• any other matter relating to obtaining information under this law.

If the Commission feels satisfied, an enquiry may be initiated and while initiating an enquiry the
Commission has same powers as vested in a Civil Court. The Central Information Commission or the
State Information Commission during the inquiry of any complaint under this Act may examine any
record which is under the control of the public authority, and no such record may be withheld from
it on any grounds. (Section 18)

PENALTIES(Section 20)
Section 20 of the Act imposes stringent penalty on a Public Information Officer (PIO) for failing to
provide information. Every PIO will be liable for fine of Rs.250 per day, up to a maximum of
Rs.25,000/-, for

• Not accepting an application;

• Malafidely denying information

• Destroying information that has been requested

• knowingly giving wrong information

• Delaying information

ROLE OF CENTRAL OR STATE GOVERNMENT

It authorizes the Central/State Government to:

14.7
 develop and organize educational programmes
to advance the understanding of the public
encourage public authorities to participate in the development and organization
of referred to clause (a) and to undertake such programmes themselves.
promote timely and effective dissemination of accurate
information by public authorities about their activities
train central/state public information officers and produce relevant
training materials for use by public authorities themselves

14.8
 INFORMATION TECHNOLOGY ACT, 2000
INTRODUCTION

➢ Extra -territorial jurisdiction

➢ Applies to whole India including Jammu and Kashmir.
➢ Effective from 17th Oct, 2000.
➢ Amended Information technology act was passed on 2008

OBJECTIVES OF THE INFORMATION TECHNOLOGY ACT, 2000

a) It provides legal recognition for transactions carried out by means of electronic data
interchange and other means of electronic communication, usually referred to, as
“electronic Commerce”.
b) It facilitates the electronic filing of documents with the Government agencies, (and also
with the publication of rules etc., in the electronic form).
c) It amends the, Indian Penal Code, the Indian Evidence Act, 1872, the Bankers’ Book
Evidence Act, 1891, and the Reserve Bank of India Act, 1934, so as to bring in electronic
documentation within the purview of the respective enactments.
d) To stop computer crime and protect privacy of internet users including data theft.
e) To provide legal recognition to digital signature.
f) To enable to enter into contracts through computer.
g) Facilitate electronic fund transfer.

DOCUMENTS OR TRANSACTIONS TO WHICH THE ACT SHALL NOT APPLY

1. A negotiable instrument (other than a cheque, a demand promissory note or a bill of
exchange) as defined in section 13 of the Negotiable Instruments Act, 1881 issued in favour
of or endorsed by an entity regulated by RBI, national housing bank, SEBI, IRDAI.
2. A power-of-attorney excluding those power of attorney that empower an entity regulated
by RBI, national housing bank, SEBI, IRDAI as defined in section 1A of the Powers-of-Attorney
Act, 1882.
3. A trust as defined in section 3 of the Indian Trust Act, 1882.
4. A will as defined in clause (h) of section 2 of the Indian Succession Act, 1925
5. Any contract for the sale or conveyance of immovable property or any interest in such
property.

SECTION 2: DEFINITIONS OF BASIC EXPRESSIONS

S.NO Definition PROVISONS
1 ACCESS ACCESS with its grammatical variations and cognate
expressions means gaining entry into, instructing or
communicating with the logical, arithmetical, or memory
function resources of a computer, computer system or
computer network. [Section 2(1)(a)]

15.1
2 ASYMMETRIC CRYPTO ASYMMETRIC CRYPTO SYSTEM means a system of a secure
SYSTEM key pair consisting of a private key for creating a digital
signature and a public key to verify the digital signature
[Section 2(1)(f)]
3 COMPUTER COMPUTER means any electronic, magnetic, optical or
other high-speed data processing device or system which
performs logical, arithmetic, and memory functions, by
manipulations of electronic, magnetic or optical impulses,
and includes all input, output, processing, storage,
computer software, or communication facilities which are
connected or related to the computer in a computer system
or computer network. [Section 2(1)(i)
COMPUTER NETWORK COMPUTER NETWORK means the interconnection of one or
more computers through –
i) the use of satellite, microwave, terrestrial line or
other communication media; and
ii) terminals or a complex consisting of two or more
interconnected computers, whether or not the
interconnection is continuously maintained.
[Section 2(1)(j)
COMPUTER RESOURCE COMPUTER RESOURCE means computer, computer system,
computer network, data, computer database or software.
[Section 2(1)(k)]
COMPUTER SYSTEM COMPUTER SYSTEM means a device or collection of
devices, including input and output support devices and
excluding calculators which are not programmable and
capable of being used in conjunction with external files,
which contain computer programmes, electronic
instructions, input data, and output data, that performs
logic, arithmetic, data storage and retrieval, communication
control and other functions. [Section 2(1)(l)]
DIGITAL SIGNATURE DIGITAL SIGNATURE means authentication of any electronic
record by a subscriber by means of an electronic method or
procedure in accordance with the provisions of Section 3.
[Section 2(1)(p)]
ELECTRONIC RECORD ELECTRONIC RECORD means data, recorded or data
generated, image or sound stored, received or sent in an
electronic form or microfilm or computer generated micro
fiche. [Section 2(1)(t)]
ELECTRONIC SIGNATURE ELECTRONIC SIGNATURE means authentication of any
electronic record by a subscriber by means of the electronic
technique specified in the Second Schedule and includes
digital signature.[Section 2(1)(ta)]
ELECTRONIC SIGNATURE ELECTRONIC SIGNATURE CERTIDICATE means an Electronic
CERTIDICATE Signature Certificate issued under section 35 and includes
Digital Signature Certificate.[Section 2(1)(tb)]
INFORMATION INFORMATION includes data, message, text, images, sound,
voice, codes, computer programmes, software and data
bases or micro film or computer generated micro fiche.
[Section 2(1)(v)]
KEY PAIR KEY PAIR in an asymmetric crypto system, means a private

15.2
 key and its mathematically related public key, which are so
related that the public key can verify a digital signature
created by the private key. [Section 2(1)(x)]
ORIGINATOR ORIGINATOR means a person who sends, generates, stores
or transmits any electronic message or causes any
electronic message to be sent, generated, stored or
transmitted to any other person, but does not include an
intermediary. [Section 2(1)(za)]
PRIVATEKEY PRIVATEKEY means the key of a key pair, used to create a
digital signature. [Section 2(1)(zc)]
PUBLIC KEY PUBLIC KEY means the key of a key pair, used to verify a
digital signature and listed in the Digital Signature
Certificate. [Section 2(1)(zd)]
SECURE SYSTEM SECURE SYSTEM means computer hardware, software, and
procedure that–
• are reasonably secure from unauthorised access
and misuse;
• provide a reasonable level of reliability and correct
operation;
• are reasonably suited to performing the intended
functions; and
• adhere to generally accepted security procedures;

DIGITAL SIGNATURE AND ELECTRONIC SIGNATURE

Digital signature (i.e. authentication of an electronic record by a subscriber, by electronic means) is
recognised as a valid method of authentication. The authentication is to be effected by the use of
“asymmetric crypto system and hash function”, which envelop and transform electronic record into
another electronic record. [Sections 3(1), 3(2)]

Verification of the electronic record is done by the use of a public key of the subscriber. [Section
3(3)] The private key and the public key are unique to the subscriber and constitute a functioning
“key pair”.

Section 3A deals with electronic signature. Section 3A(1) provides that notwithstanding anything
contained in section 3(1), but subject to the provisions of sub-section (2), a subscriber may
authenticate any electronic record by such electronic signature or electronic authentication
technique which

a) is considered reliable; and

b) may be specified in the Second Schedule.

For the purposes of above any electronic signature or electronic authentication technique shall be
considered reliable if

a) the signature creation data or the authentication data are, within the context in which
they are used, linked to the signatory or, as the case may be, the authenticator and to no
other person;
b) the signature creation data or the authentication data were, at the time of signing, under

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 the control of the signatory or, as the case may be, the authenticator and of no other
person;
c) any alteration to the electronic signature made after affixing such signature is detectable
d) any alteration to the information made after its authentication by electronic signature is
detectable; and
e) It fulfils such other conditions which may be prescribed.

DIFFERENCE
BASIS ELECTRONIC SIGNATURE DIGITAL SIGNATURE

Meaning an electronic signature is a Digital signature is a secured

digital form of web link signature that works with an
signature that is legally binding electronic signature and relies
and secure on public key.

Purpose It is used for verifying a It is used for securing a

document document

Validation The validation of electronic While the validation of digital

signature is not performed by signature is performed by
any trusted certificate trusted certificate authorities
authorities or trust service or trust service providers.
providers.

Security It is vulnerable to tampering as While it is highly secure as it

there are fewer security comprised of more security
features in electronic features.
signatures.

Verification Electronic signature cannot be Digital signature can be verified

verified

Types Verbal, electronic ticks, or It includes Adobe and Microsoft

scanned signatures are the
common types of e-signatures

Utility It is simple to use, but it a lesser It is generally preferred

level of evidential value because of mote authenticity.

SEC 4: ELECTRONIC GOVERNANCE (LEGAL RECOGNITION OF ELECTRONIC

RECORDS)
SECTION 4 - The Act grants legal recognition to electronic records by laying down that where (by any
law) “information” or any other matter is to be in:

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 (a) writing or
(b) typewritten form or
(c) printed form, then, such requirement is satisfied, if such information or matter is:
• rendered or made available in an electronic form; and
• accessible, so as to be usable for a subsequent reference. (Section 4)

PRIVATE TRANSACTION

Section 4 of the Information Technology Act, practically equates electronic record with a manual or
typed or printed record.

SEC 5: LEGAL RECOGNITION OF DIGITAL SIGNATURE

Section 5 deals with legal recognition of electronic signatures. It states that where any law provides
that information or any other matter shall be authenticated by affixing the signature or any
document shall be signed or bear the signature of any person, then, notwithstanding anything
contained in such law, such requirement shall be deemed to have been satisfied, if such information
or matter is authenticated by means of electronic signature affixed in such manner as may be
prescribed by the Central Government.

It may be noted that “signed”, with its grammatical variations and cognate expressions, shall, with
reference to a person, mean affixing of his hand written signature or any mark on any document and
the expression “signature” shall be construed accordingly.

SECTION 6: PUBLIC RECORDS

Above provisions are primarily intended for private transactions. The Act then proceeds to bring in
the regime of electronic records and electronic signature in public records, by making an analogous
provision which grants recognition to electronic records and electronic record signatures, in cases
where any law provides for

(a) the filing of any form, application or any other document with a Governmental office
or agency or
(b) the grant of any licence, permit etc. or
(c) the receipt or payment of money in a particular manner. (Section 6)

Delivery of services by service provider

According to Section 6A the appropriate Government may, for the purposes of this Chapter and for
efficient delivery of services to the public through electronic means authorise, by order, any service
provider to set up, maintain and upgrade the computerised facilities and perform such other
services as it may specify, by notification in the Official Gazette. It may be noted that service
provider so authorised includes any individual, private agency, private company, partnership firm,
sole proprietor firm or any such other body or agency which has been granted permission by the
appropriate Government to offer services through electronic means in accordance with the policy
governing such service sector.

SECTION 7: RETENTION OF INFORMATION

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The Act also seeks to permit the retention of information in electronic form, where any law provides
that certain documents, records or information shall be retained for any specific period. Certain
conditions as to accessibility, format etc. are also laid down.

SECTION 7A: AUDIT OF DOCUMENTS MAINTAINED IN ELECTRONIC FORM

Where in any law for the time being in force, there is a provision for audit of documents, records or
information, that provision shall also be applicable for audit of documents, records or information
processed and maintained in the electronic form.

SECTION 8: SUBORDINATE LEGISLATION

Subordinate legislation is also authorised, by the Act, to be published in the Official Gazette or the
electronic Gazette, and the date of its first publication in either of the two Gazette shall be deemed
to be the date of publication.

But the provisions summarised above shall not confer any right upon any person to insist, that any
Government agency shall accept, issue etc. any document in electronic form or effect any monetary
transaction in electronic form. (Section 9)

SECTION 10A: VALIDITY OF CONTRACTS FORMED THROUGH ELECTRONIC

MEANS
As per section 10A of the Act, where in a contract formation, the communication of proposals, the
acceptance of proposals, the revocation of proposals and acceptances, as the case may be, are
expressed in electronic form or by means of an electronic record, such contract shall not be deemed
to be unenforceable solely on the ground that such electronic form or means was used for that
purpose

SECTION 11: ATTRIBUTION AND DISPATCH OF ELECTRONIC RECORDS

Since, in an electronic record, the maker remains behind the curtain, it was considered desirable to
make a provision for “attribution” of the record. An electronic record is attributed to the
“originator”.

Broadly, the “originator” is the person at whose instance it was sent in the following cases-

(a) if it was sent by the originator himself; or

(b) if it was sent by a person authorised to act on behalf of the originator in respect of
that electronic record; or
(c) if it was sent by an information system programmed by or on behalf of the
originator to operate automatically.

SECTION 12: ACKNOWLEDGEMENT OF RECEIPTS OF ELECTRONIC RECORDS

Regarding acknowledgement of receipt of electronic records, the Act provides that where there is no
agreement that the acknowledgment be given in a particular form etc. then the acknowledgement
may be given by:

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a) any communication by the addressee (automated or otherwise) or
b) any conduct of the addressee which is sufficient to indicate to the originator that the electronic
record has been received.

Special provisions have been made for cases where the originator has stipulated for receipt of
acknowledgment, or where the acknowledgement is not received by the originator in time.

TIME AND PLACE OF DISPATCH ETC.

The date of offer and the date of acceptance are crucial, in determining whether and which contract
has come into existence.

As per agreement between the parties,

Or if there is no agreement, the dispatch of an electronic record occurs, when it enters a “computer
resource” outside the control of the originator.

SECTION 13: TIME OF RECEIPT

As regards the time of receipt of electronic records, two situations are dealt with, separately. Subject
to agreement, if the addressee has designated a computer resource for receipt, then receipt occurs
when the electronic record enters the designated resource. However, if the record is sent to a
computer resource of the addressee which is not the designated resource, then receipt occurs at the
time when the electronic record is retrieved by the addressee.

SECTION 14: SECURE ELECTRONIC RECORDS

The Central Government is required, by the Act, to prescribe the security procedure for electronic
records, having regard to the commercial circumstances prevailing at the procedure is used (Section
16). When the procedure has been applied to an electronic record at a specific point of time, then
such record is deemed to be a secure electronic record, from such point of time to the time of
verification.

SECTION 15
An electronic signature shall be deemed to be a secure electronic signature if—

• the signature creation data, at the time of affixing signature, was under the exclusive control of
signatory and no other person; and
• the signature creation data was stored and affixed in such exclusive manner as may be
prescribed.

CERTIFYING AUTHORITIES
The Act contains detailed provisions as to “Certifying Authorities”. A Certifying Authority is expected
to reliably identify persons applying for “signature key certificates”, reliably verify their legal capacity
and confirm the attribution of a public signature key to an identified physical person by means of a

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signature key certificate. To regulate the Certifying Authorities, there is a Controller of Certifying
Authorities.

Obligations of Certifying Authorities are also set out, in the Act.

ELECTRONIC SIGNATURE CERTIFICATES

Procedure of obtaining electronic signature Certificate:

(1) Any person may make an application in prescribed form to the Certifying Authority for the
issue of electronic signature Certificate in such form as may be prescribed by the Central
Government.
(2) Every such application shall be accompanied by prescribed fees
(3) Every such application shall be accompanied by a certification practice statement or where
there is no such statement, a statement containing such particulars, as may be specified by
regulations.
(4) On receipt of an application, the Certifying Authority may, after consideration of the
certification practice statement or the other statement and after making such enquiries as it
may deem fit, grant the electronic signature Certificate or for reasons to be recorded in
writing, reject the application.

It may be noted that no application shall be rejected unless the applicant has been given a
reasonable opportunity of showing cause against the proposed rejection.

PENALTIES AND ADJUDICATIONS

Section 43 provides that if any person without permission of the owner or any other person who is
in charge of a computer, computer system or computer network:

(a) accesses or secures access to such computer, computer system or computer network or
computer resource;
(b) downloads, copies or extracts any data, computer data base or information from such
computer, computer system or computer network including information or data held or stored
in any removable storage medium;
(c) introduces or causes to be introduced any computer contaminant or computer virus into any
computer, computer system or computer network;
(d) damages or causes to be damaged any computer, computer system or computer network,
data, computer data base or any other programmes residing in such computer, computer
system or computer network;
(e) disrupts or causes disruption of any computer, computer system or computer network;
(f) denies or causes the denial of access to any person authorised to access any computer,
computer system or computer network by any means;
(g) provides any assistance to any person to facilitate access to a computer, computer system or
computer network in contravention of the provisions of this Act, rules or regulations made
thereunder;
(h) charges the services availed of by a person to the account of another person by tampering with
or manipulating any computer, computer system, or computer network;

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 (i) destroys, deletes or alters any information residing in a computer resource or diminishes its
value or utility or affects it injuriously by any means;
(j) steal, conceal, destroys or alters or causes any person to steal, conceal, destroy or alter any
computer source code used for a computer resource with an intention to cause damage; he
shall be liable to pay damages by way of compensation to the person so affected.

COMPENSATION FOR FAILURE TO PROTECT DATA

Where a body corporate, possessing, dealing or handling any sensitive personal data or information
in a computer resource which it owns, controls or operates, is negligent in implementing and
maintaining reasonable security practices and procedures and thereby causes wrongful loss or
wrongful gain to any person, such body corporate shall be liable to pay damages by way of
compensation to the person so affected.

(Section 43A) It may be noted that: (i) “body corporate” means any company and includes a firm,
sole proprietorship or other association of individuals engaged in commercial or professional
activities;

Sec 44

Defaults Penalty

Failure to furnish any document, return or report Not exceeding 15lakh rupees
to controller or certifying authority

Failure to file any return or furnish any Not exceeding 50,000 rupees per day of default
information , books , documents etc within the
time specified

Failure to maintain books of accounts Not exceeding 1lakh rupees for every day default

Adjudicating officer – section 46

An adjudication officer not below the rank of a director to the Govt of India or an equivalent officer
of a state government is to be appointed by the Central Government for adjudging whether any
person has committed a contravention of the Act or of any rule, regulation, direction or order issued
under the Act. He may impose penalty or award compensation in accordance with the provisions of
the relevant section

the adjudication officer appointed shall exercise the jurisdiction to adjudicate matters in which the
claim for damage does not exceed Rs 5Cr.

The Act takes-care to set out the factors to be taken into account by the Adjudicating officer, in
adjudging the quantum of compensation under this Chapter. He has to have due regard to the
following factors:

(a) the amount of gain of unfair advantage (wherever quantifiable), made as a result of the

15.9
 default;
(b) the amount of loss caused to any person as a result of the default; and
(c) the repetitive nature of the default.

every adjudicating officer shall have the powers of a civil court.

SECTION 48-62: APPELLATE TRIBUNAL

It is the body established under this act to exercise the jurisdiction, power and authority.

Central government to appoint appellate tribunal by notification

The Central Government shall specify, by notification the matters and places in relation to which the
Appellate Tribunal may exercise jurisdiction.

Any person aggrieved by an order of the Controller of Certifying Authorities or of the adjudicator can
appeal to the Appellate Tribunal, within 45 days. (Section 57)

Any person aggrieved by “any decision or order” of the Appellate Tribunal may appeal to the High
Court, within 60 days. Jurisdiction of Civil Courts is barred, in respect of any matter which an
adjudicating officer or the Appellate Tribunal has power to determine.

SECTION 65: TEMPERING WITH COMPUTER SOURCE DOCUMENTS

Whoever knowingly or intentionally conceals, destroys or alters or intentionally or knowingly causes
another to conceal, destroy, or alter any computer source code used for a computer, computer
programme, computer system or computer network, when the computer source code is required to
be kept or maintained by law for the time being in force, shall be punishable with imprisonment up
to three years, or with fine which may extend up to two lakh rupees, or with both.

It may be noted that “computer source code” means the listing of programmes, computer
commands, design and layout and programme analysis of computer resource in any form.

SECTION 66: COMPUTER RELATED OFFENCES

If any person, dishonestly or fraudulently, does any act referred to in section 43, he shall be
punishable with imprisonment for a term which may extend to three years or with fine which may
extend to five lakh rupees or with both.

The offences listed in the Act are the following –

➢ Dishonestly receiving stolen computer resource or communication device

➢ Identity theft
➢ Cheating by personation by using computer resource
➢ Violation of privacy
➢ Cyber terrorism
➢ Publishing or transmitting of material containing sexually explicit act, etc., in electronic form

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 ➢ Publishing or transmitting of material depicting children in sexually explicit act, etc., in
electronic form
➢ Misrepresentation
➢ Breach of confidentiality and privacy
➢ Disclosure of information in breach of lawful contract
➢ Publishing electronic signature Certificate false in certain particulars
➢ Publication for fraudulent purpose.

PUBLISHING OF MATERIAL OFFENCE IN ELECTRONIC FORM

Punishment- 1st convicted- imprisonment 3years, fine 5lacs rupees

2nd convicted and subsequent - imprisonment 5years, fine 10lacs rupees

This Chapter XI of the I T Act also contains certain provisions empowering the Controller of Certifying
Authorities to issue certain directions to certifying Authorities (Section 68).

Further, as per section 69 where the Central Government or a State Government or any of its
officers specially authorised by the Central Government or the State Government, as the case may
be, in this behalf may, if satisfied that it is necessary or expedient so to do , in the interest of the
sovereignty or integrity of India, defence of India, security of the State, friendly relations with foreign
States or public order or for preventing incitement to the commission of any cognizable offence
relating to above or for investigation of any offence, it may subject to the provisions of safeguard
and procedure as may be prescribed , for reasons to be recorded in writing, by order, direct any
agency of the appropriate Government to intercept, monitor or decrypt or cause to be intercepted
or monitored or decrypted any information generated, transmitted, received or stored in any
computer resource.

SECTION 75: EXTRATERRIORIAL OPERATION

Extra-territorial operation of the Act is provided for, by enacting that the provisions of the Act apply
to any offence or contravention committed outside India by any person, irrespective of his
nationality, if the act or conduct in question involves a computer, computer system or computer
network located in India.

SECTION 79: LIABILITY OF NETWORK SERVICE PROVIDERS

The Internet system depends, for its working, on network service providers- i.e. intermediaries. An
“intermediary”, with respect to any particular electronic records, means any person who on behalf
of another person receives, stores or transmits that record or provides any service with respect to
that record and includes telecom service providers, network service providers, internet service
providers, web-hosting service providers, search engines, online payment sites, online-auction sites,
online-market places and cyber cafes.

In his capacity as an intermediary, a network service provider may have to handle matter which may
contravene the Act. To avoid such a consequence, the Act declares that no network service provider
shall be liable “under this Act, rule or regulation made thereunder”, for any third-party information

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or data made available by him, if he proves that the offence or contravention was committed
without his knowledge or that he had exercised all due diligence to prevent the commission of such
offence or contravention.

LAW OF PERSONAL DATA PROTECTION

Digital Personal Data Protection Act, 2023 has got assent of president on 11th august 2023.

The purpose of this law is to provide the law relating to the processing of digital personal data in a
manner that recognises both the rights of individuals to protect their personal data and the need to
process such personal data for lawful purposes and for the matters connected therewith or
incidental thereto.

DEFINITION

DATA PRINCIPAL – It means the individual to whom the personal data relates and where such
individual is

i) a child, includes the parents or lawful guardian of the child

ii) a person with disability, includes her lawful guardian, acting on her behalf.

APPLICATION OF THE ACT (SECTION 3)

It shall apply to the processing of digital personal data within the territory of India where the
personal data is collected –

In digital form or

In non-digital form and digitised subsequently

It also applies to the processing of digital personal data outside the territory of India, if such
processing is in connection with any activity related to the offering of goods or services to Data
Principals within the territory of India.

It does not apply to

1. personal data processed by an individual for any personal or domestic purpose and

2. personal data that is made or caused to be made publicly available by –

The data principal to whom the personal data relates or

Any other person who is under an obligation under any law for the time being in force in
India to make such personal data publicly available.

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 CHAPTER 16 – CONTRACT LAW
MEANING AND NATURE OF CONTRACT
1. The law relating to contract is governed by the Indian Contract Act, 1872. The Act came
into force on the first day of September, 1872.
2. The Act is by no means exhaustive on the law of contract. It does not deal with all the
branches of the law of contract.
3. Thus, contracts relating to partnership, sale of goods, negotiable instruments, insurance
etc. are dealt with by separate Acts.
4. The Act is divisible into two parts, the first part (Section 1-75) deals with the general
principles of the law of contract, and therefore applies to all contracts irrespective of
their nature. The second part (Sections 124-238) deals with certain special kinds of
contracts, namely contracts of Indemnity and Guarantee, Bailment, Pledge, and Agency.
AGREEMENT
As per Section 2(e) of the Indian Contract Act “every promise and every set of promises,
forming the consideration for each other, is an agreement”
What is a promise?
According to Section 2(b) of the Indian Contract Act “when the person to whom the proposal is
made signifies his assent thereto, the proposal is said to be accepted. A proposal, when
accepted, becomes a promise.
In nutshell, an agreement is the sum total of offer and acceptance.

Agreement

Plurality of persons Consensus ad idem

There must be two or more persons to The meeting of the minds is called
make an agreement because one person consensus ad-idem.It means both the
cannot enter into an agreement with parties to an agreement must agree
himself. about the subject matter of the
agreement in the same sense and at the
same time.

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OBLIGATION
An obligation is the legal duty to do or abstain from doing what one has promised to do or
abstain from doing.
Section 2(b) says that when the person to whom the proposal is made signifies his assent
thereto, the proposal is said to be accepted and a proposal when accepted becomes a promise.
Rights and Obligations
Where parties have made a binding contract, they have created rights and obligations between
themselves. The contractual rights and obligations are correlative, e.g., A agrees with B to sell
his car for Rs. 10,000 to him. In this example, the following rights and obligations have been
created:
i. A is under an obligation to deliver the car to B. B has a corresponding right to receive
the car.
ii. B is under an obligation to pay Rs. 10,00,000 to A. A has a correlative right to receive
Rs. 10,00,000.

AGREEMENTS WHICH ARE NOT CONTRACTS

Agreements in which the idea of bargain is absent and there is no intention to create legal
relations are not contracts.
These are:
1. Agreements relating to social matters: An agreement between two persons to go
together to the cinema, or for a walk, does not create a legal obligation on their part to
abide by it. There cannot be any offer and acceptance to hospitality.
2. Domestic arrangements between husband and wife: In Balfour v. Balfour , a husband
working in Ceylone, had agreed in writing to pay a housekeeping allowance to his wife
living in England. On receiving information that she was unfaithful to him; he stopped
the allowance. Held, he was entitled to do so. This was a mere domestic arrangement
with no intention to create legally binding relations. Therefore, there was no contract.
Three consequences follow from the above discussion:
i. To constitute a contract, the parties must intend to create legal relationship.
ii. The law of contract is the law of those agreements which create obligations, and
those obligations which have their source in agreement.
iii. Agreement is the genus of which contract is the specie and, therefore, all contracts
are agreements but all agreements are not contracts.
INTENTION TO CREATE LEGAL RELATIONS
1. Intention to Create Legal Relations is an essential element of a valid contract.
2. If there is no such intention on the part of the parties, there is no contract between
them.

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 3. A proposal or an offer is made with a view to obtain the assent to the other party and
when that other party expresses his willingness to the act or abstinence proposed, he
accepts the offer and a contract is made between the two.
4. Both offer and acceptance must be made with the intention of creating legal relations
between the parties.
OTHER IMPORTANT TYPES OF CONTRACTS
Contingent Contract (section 31)
A contingent contract is a contract to do or not to do something, if some event collateral to
such contract, does or does not happen. For example, A contracts to sell B 10 bales of cotton
for Rs. 20,000, if the ship by which they are coming returns safely. This is a contingent contract.
Contract of insurance and contracts of indemnity and guarantee are popular instances of
contingent contracts.
Rules regarding contingent contracts
The following rules are contained in Section 32-36:
1. Contracts contingent upon the happening of a future uncertain event cannot be
enforced by law unless and until that event has happened. If the event becomes
impossible, the contract becomes void:
i. A makes a contract to buy B’s house if A survives C. This contract cannot be enforced
by law unless and until C dies in A’s lifetime.
2. Contracts contingent upon the non-happening of an uncertain future event can be
enforced when the happening of that event becomes impossible and not before. A
contracts to pay B a certain sum of money if a certain ship does not return. The ship is
sunk. The contract can be enforced when the ship sinks.
3. If a contract is contingent upon how a person will act at an unspecified time, the event
shall be considered to become impossible when such person does anything which
renders it impossible that he should so act within any definite time.
4. Contracts contingent on the happening of an event within a fixed time become void if,
at the expiration of the time, such event has not happened, or if, before the time fixed,
such event becomes impossible.
5. Contracts contingent upon the non-happening of an event within a fixed time may be
enforced by law when the time fixed has expired and such event has not happened or
before the time fixed has expired, if it becomes certain that such event will not happen.
6. Contingent agreements to do or not to do anything if an impossible event happens, are
void, whether the impossibility of the event is known or not known to the parties to the
agreement at the time when it is made
LAW RELATING OTHER IMPORTANT TYPES OF CONTRACTS
There are some special type of contracts. These are:

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 1. Indemnity
2. Guarantee
3. Bailment
4. Pledge
5. Joint Ventures, Collaborations.

ESSENTIAL ELEMENTS OF A VALID CONTRACT

Section 10 of the Indian Contract Act, 1872 provides that “all agreements are contracts if they
are made by the free consent of parties competent to contract, for a lawful consideration and
with a lawful object, and are not hereby expressly declared to be void”
Therefore, the essential elements of a valid contract are:
1. An offer or proposal by one party and acceptance of that offer by another party.
2. An intention to create legal relations.
3. The agreement is supported by a lawful consideration.
4. The parties to the contract are legally capable of contracting.
5. Genuine consent.
6. The object and consideration of the contract is legal and is not opposed to public policy.
7. The terms of the contract are certain.
8. The agreement is capable of being performed i.e. it is not impossible of being
performed.
Question: A & B, entered into contract in which A will send goods to B free of cost and B is not
required to do anything against it. Is the contract valid? No, a valid contract must have
consideration unless falls into in to exempted category.

KINDS OF OFFER, COMMUNICATION , ACCEPTANCE AND REVOCATION OF OFFER

AND ACCEPTANCE
OFFER OR PROPOSAL AND ACCEPTANCE
One of the early steps in the formation of a contract lies in arriving at an agreement between
the contracting parties by means of an offer and acceptance.
WHAT IS AN OFFER OR A PROPOSAL?
A proposal is also termed as an offer. An offer is a proposal by one person, whereby he
expresses his willingness to enter into a contractual obligation in return for a promise, act or
forbearance.
KINDS OF OFFERS
There are generally 7 types of Offers with difference as to type of offers and their parties. They
are as under:

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1. Particular offer/Specific Offer: The offer is made and addressed to a certain person
only. It can only be accepted by person to whom it has been made or its authorized
person.
2. General Offer: In general offers, the Offer are made to public at large and may be
accepted by anyone. Tickets are one such example of general offer.
3. Cross Offers: When two parties gives offers to each other. This is not material that the
counter offers are made with similar terms of different terms. Even when two offers
were made with similar terms and no offer was accepted, there can be no concluded
contract.

Example A offers to sell his old mobile phone to B at a price of Rs 10,000/-. B offers to
purchase A’s old mobile phone at a price of Rs. 10,000/-. There is no concluded contract.
4. Open/Continuing/Standing Offer:
i. Where a person offers to another to supply specific goods, up to a stated quantity or
in any quantity which may be required, at a certain rate, during a fixed period, he
makes a standing offer. Thus, a tender to supply goods as and when required,
amounts to a standing offer.
ii. A standing offer or a tender is of the nature of a continuing offer.
iii. An acceptance of such an offer merely amounts to intimation that the offer will be
considered to remain open during the period specified and that it will be accepted
from time to time by placing order for specified quantities.
iv. Each successive order given, while the offer remains in force, is an acceptance of the
standing offer as to the quantity ordered, and creates a separate contract. It does
not bind either party unless and until such orders are given.
v. Where P tendered to supply goods to L up to a certain amount and over a certain
period, L’s order did not come up to the amount expected and P sued for breach of
contract Held: Each order made was a separate contract and P was bound to fulfil
orders made, but there was no obligation on L to make any order to all.

Example A tender was floated to obtain raw coffee beans by a Company. The coffee beans
were required to be provided as and when the order is placed. The tender was awarded to a
partnership firm. There is no concluded contract. Contract will be concluded on placing of
the order.
5. Counter offer: An offer made against an offer already made. In these offers, the
contracts can be made only after acceptance of counter offer.
6. Contracts by Post: Contracts by post are subject to the same rules as others, but
because of their importance, these are stated below separately:
i. An offer by post may be accepted by post, unless the offeror indicates anything to
the contrary.

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 ii. An offer is made only when it actually reaches the offeree and not before, i.e., when
the letter containing the offer is delivered to the offeree.
iii. An acceptance is made as far as the offeror is concerned, as soon as the letter
containing the acceptance is posted, to offerors correct address, it binds the offeror,
but not the acceptor. An acceptance binds the acceptor only when the letter
containing the acceptance reaches the offeror. The result is that the acceptor can
revoke his acceptance before it reaches the offeror.
iv. An offer may be revoked before the letter containing the acceptance is posted. An
acceptance can be revoked before it reaches the offeror.
7. Contracts over the Telephone: Contracts over the telephone are regarded the same in
principle as those negotiated by the parties in the actual presence of each other. In both
cases an oral offer is made and an oral acceptance is expected. It is important that the
acceptance must be audible, heard and understood by the offeror. If during the
conversation the telephone lines go “dead” and the offeror does not hear the offerees
word of acceptance, there is no contract at the moment. If the whole conversation is
repeated and the offeror hears and understands the words of acceptance, the contract
is complete [Kanhaiyalal v. Dineshwarchandra]
RULES GOVERNING OFFERS
A valid offer must comply with the following rules:
1. An offer must be clear, definite, complete and final. It must not be vague.
2. An offer must be communicated to the offeree. An offer becomes effective only when it
has been communicated to the offeree.
3. The communication of an offer may be made by express words-oral or written-or it may
be implied by conduct. A offers his car to B for Rs. 10,000. It is an express offer. A bus
plying on a definite route goes along the street. This is an implied offer on the part of
the owners of the bus to carry passengers at the scheduled fares for the various stages.
Case Laws
1. Carlill v. Carbolic Smoke Ball Co. The company offered by advertisement, a reward of
`100 to anyone who contacted influenza after using their smoke ball.
2. Mrs. Carlill did use smoke ball in the specified manner, but was attacked by influenza.
She claimed the reward and it was held that she could recover the reward as general
offer can be accepted by anybody.
3. Since this offer is of a continuing nature, more than one person can accept it.
4. The prior condition is that the claimant must have prior knowledge of the reward before
doing that act or providing that information.

Example A advertises in the newspaper that he will pay Rs 1000 to anyone who brings to him
his lost cat. B without knowing of this reward finds A’s lost cat and restore him to A. In this case
since B did not know of the reward, he cannot claim it from A even though he finds A’s lost cat

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and brings him to A.

OFFER AND INVITATION TO OFFER

Invitation to offer is a communication to invite certain person(s) or public for making offer. The
same may be understood from below mentioned examples:
1. An invitation to make an offer: an auctioneers request for bids (which are offered by the
bidders), the display of goods in a shop window with prices marked upon them, or the
display of priced goods in a self-service store or a shopkeepers catalogue of prices are
invitations to an offer.
2. A mere statement of intention: an announcement of a coming auction sale. Thus, a
person who attended the advertised place of auction could not sue for breach of
contract if the auction was cancelled.
3. A mere communication of information in the course of negotiation: a statement of the
price at which one is prepared to consider negotiating the sale of piece of land.
An offer that has been communicated properly continues as such until it lapses, or until it is
revoked by the offeror, or rejected or accepted by the offeree.
LAPSE OF OFFER
Section 6 deals with various modes of lapse of an offer. It states that an offer lapses if:
1. It is not accepted within the specified time (if any) or after a reasonable time, if none is
specified,
2. It is not accepted in the mode prescribed or if no mode is prescribed in some usual and
reasonable manner,
3. The offeree rejects it by distinct refusal to accept it,
4. Either the offeror or the offeree dies before acceptance,
5. The acceptor fails to fulfil a condition precedent to an acceptance,
6. The offeree makes a counter offer, it amounts to rejection of the offer and an offer by
the offeree may be accepted or rejected by the offeror.
REVOCATION OF OFFER BY THE OFFEROR
An offer may be revoked by the offeror at any time before acceptance. Like any offer,
revocation must be communicated to the offeree, as it does not take effect until it is actually
communicated to the offeree. Before its actual communication, the offeree, may accept the
offer and create a binding contract. The revocation must reach the offeree before he sends out
the acceptance.
MODE OF REVOCATION
Section 6 provides the following modes for revocation:
1. By the communication of notice of revocation by the proposer to the other party,
2. By the lapse of the time prescribed in such proposal for its acceptance,

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 3. By the failure of the acceptor to fulfil a condition precedent to acceptance,
4. By the death or insanity of the proposer, if the fact of his death or insanity comes to the
knowledge of the acceptor before acceptance.

ACCEPTANCE
A contract emerges from the acceptance of an offer. Under Section 2(b) of the Contract Act
when a person to whom the proposal is made signifies his assent thereto, the proposal is said
to be accepted. A proposal, when accepted becomes a promise.
RULES GOVERNING ACCEPTANCE
1. Acceptance may be express i.e. by words spoken or written or implied from the conduct
of the parties.
2. If a particular method of acceptance is prescribed, the offer must be accepted in the
prescribed manner.
3. Acceptance must be unqualified and absolute.
4. A counter offer or conditional acceptance operates as a rejection of the offer and causes
it to lapse.
5. Acceptance must be communicated to the offeror, for acceptance is complete the
moment it is communicated.
6. Mere silence on the part of the offeree does not amount to acceptance.
7. Ordinarily, the offeror cannot frame his offer in such a way as to make the silence or
inaction of the offeree as an acceptance. In other words, the offeror can prescribe the
mode of acceptance but not the mode of rejection. Thus, if a reward is offered for
finding a lost dog, the offer is accepted by finding the dog after reading about the offer,
and it is unnecessary before beginning to search for the dog to give notice of acceptance
to the offeror.
8. If the offer is one which is to be accepted by being acted upon, no communication of
acceptance to the offeror is necessary, unless communication is stipulated for in the
offer itself.
9. Acceptance must be given within a reasonable time and before the offer lapses or is
revoked.
An acceptance never precedes an offer. There can be no acceptance of an offer which is not
communicated. Similarly, performance of conditions of an offer without the knowledge of the
specific offer, is no acceptance.
CONSIDERATION
NEED FOR CONSIDERATION
Consideration is one of the essential elements of a valid contract. A mere promise is not
enforceable at law.

16.8
DEFINITION OF CONSIDERATION
1. Section 2(d) of the Indian Contract Act, 1872 defines consideration thus: “when at the
desire of the promisor, the promisee has done or abstained from doing or promises to
do or to abstain from doing something, such act or abstinence or promise is called a
consideration for the promise”.
i. Consideration at the desire of the promisor: Section 2(d) of the Act begins with the
statement that consideration must move at the desire or request of the promisor.
This means that whatever is done must have been done at the desire of the
promisor.
ii. Consideration may move from the promisee or any other person: In English law,
consideration must move from the promisee, so that a stranger to the consideration
cannot sue on the contract.
2. In Indian law, however, consideration may move from the promisee or any other
person, so that a stranger to the consideration may maintain a suit.
3. In Chinnaya v. Ramaya, a lady by a deed of gift made over certain property to her
daughter directing her to pay an annuity to the donors brother as had been done by the
donor herself before she gifted the property.
4. On the same day, her daughter executed in writing in favour of the donors brother
agreeing to pay the annuity. Afterwards the donee (the daughter) declined to fulfil her
promise to pay her uncle saying that no consideration had moved from him.
5. The Court, however, held that the uncle could sue even though no part of the
consideration received by his niece moved from him. The consideration from her
mother was sufficient consideration.
DOCTRINE OF PRIVITY OF CONTRACT AND OF CONSIDERATION
Privity of Contract
1. A stranger to a contract cannot sue both under the English and Indian law for want of
privity of contract.
2. In Dunlop Pneumatic Tyre Co. v. Selfridge Ltd., D supplied tyres to a wholesaler X, on
condition that any retailer to whom X re-supplied the tyres should promise X, not to sell
them to the public below Ds list price. X supplied tyres to S upon this condition, but
nevertheless S sold the tyres below the list price. Held: There was a contract between D
and X and a contract between X and S. Therefore, D could not obtain damages from S, as
D had not given any consideration for S.
3. Thus, a person who is not a party to a contract cannot sue upon it even though the
contract is for his benefit.
4. Tweddle v. Atkinson, In this case, the father of a boy and the father of a girl who was to
be married to the boy, agreed that each of them shall pay a sum of money to the boy
who was to take up the new responsibilities of married life.

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 5. After the demise of both the contracting parties, the boy (the husband) sued the
executors of his father-in-law upon the agreement between his father-in-law and his
father. Held: the suit was not maintainable as the boy was not a party to the contract.
Exception to the doctrine of privity of contract: Both the Indian law and the English
law recognize certain exceptions to the rule that a stranger to a contract cannot sue on the
contract. In the following cases, a person who is not a party to a contract can enforce the
contract:
1. A beneficiary under an agreement to create a trust can sue upon the agreement, though
not a party to it, for the enforcement of the trust so as to get the trust executed for his
benefit.
2. An assignee under an assignment made by the parties, or by the operation of law (e.g. in
case of death or insolvency), can sue upon the contract for the enforcement of his
rights, tittle and interest.
3. In cases of family arrangements or settlements between male members of a Hindu
family which provide for the maintenance or expenses for marriages of female
members, the latter though not parties to the contract, possess an actual beneficial
right which place them in the position of beneficiaries under the contract, and can
therefore, sue.
4. In case of acknowledgement of liability, e.g., where A receives money from B for paying
to C, and admits to C the receipt of that amount, then A constitutes himself as the agent
of C.
5. Whenever the promisor is by his own conduct estopped from denying his liability to
perform the promise.
6. In cases where a person makes a promise to an individual for the benefit of third party
and creates a charge on certain immovable property for the purpose, the third party can
enforce the promise though, he is stranger to the contract.

Privity of consideration
In India privity of consideration is not strictly applicable. It means that consideration may be
paid by parties or any other person. The doctrine of privity of contract provides that a contract
cannot confer rights or impose obligations upon any person who is not a party to the contract.
It is applicable in India with certain exception like trust, covenant running with land, family
settlements etc.
KINDS OF CONSIDERATION
Kinds of Consideration

Executory or Executed or
Future Past
Present

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According to English law, a consideration may be executory or executed but never past. The
English law is that past consideration is no consideration. The Indian law recognizes all the
above three kinds of consideration.
RULES GOVERNING CONSIDERATION
1. Contact must be supported by valuable consideration otherwise it is formally void
subject to some exceptions.
2. Consideration may be an act of abstinence or promise.
3. There must be mutuality i.e., each party must do or agree to do something.
4. Consideration must be real, and not vague, indefinite, or illusory.
5. Although consideration must have some value, it need not be adequate.
6. Consideration must be lawful
7. Consideration must be something more than the promisee is already bound to do for
the promisor.
EXCEPTIONS OF CONSIDERATION
WHEN CONSIDERATION NOT NECESSAR
But Section 25 of the Indian Contract Act lays down certain exceptions which make a promise
without consideration valid and binding.
Thus, an agreement without consideration is valid:
If it is expressed in writing and registered and is made out of natural love and affection
between parties standing in a near relation to each other,
If it is made to compensate a person who has already done something voluntarily for the
promisor, or done something which the promisor was legally compellable to do,
If it is a promise in writing and signed by the person to be charged therewith, or by his agent ,
to pay a debt barred by the law of limitation.
Besides, according to Section 185 of the Indian Contract Act, Consideration is not required to
create an agency.
In the case of gift actually made, no consideration is necessary. There need not be nearness of
relation and even if it is, there need not be any natural love and affection between them.
The first one requires written and registered promise. The second may be oral or in writing and
the third must be in writing.
A registered agreement between a husband and his wife to pay his earnings to her is a valid
contract, as it is in writing, is registered, is between parties standing in near relation, and is for
love and affection.
[Poonoo Bibi v. FyazBuksh]
Where a husband by a registered document, after referring to quarrels and disagreement
between himself and his wife, promised to pay his wife a sum of money for her maintenance
and separate residence, it was held that the promise was unenforceable, as it was not made for
love and affection.
[Rajluckhy Deb v. Bhootnath]

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WHETHER GRATUITOUS PROMISE CAN BE ENFORCED
A gratuitous promise to subscribe to a charitable cause cannot be enforced, but if the promisee
is put to some detriment as a result of his acting on the faith of the promise and the promisor
knew the purpose and also knew that on the faith of the subscription an obligation might be
incurred, the promisor would be bound by promise
VOID, VOIDABLE & ILLEGAL CONTRACTS: FLAWS IN CONTRACT AND FREE
CONSENT
There may be the circumstances under which a contract made under these rules may still be
bad, because there is a flaw, vice or error somewhere. As a result of such a flaw, the apparent
agreement is not a real agreement.
1. VOID AGREEMENT
A void agreement is one which is destitute of all legal effects. It cannot be enforced and
confers no rights on either party. It is really not a contract at all, it is non-existent
2. VOIDABLE CONTRACT
Avoidable contract is one which a party can put to an end. He can exercise his option, if
his consent was not free. The contract will, however be binding, if he does not exercise
his option to avoid it within a reasonable time. The consent of a party is not free and so
he is entitled to avoid the contract, if he has given his consent due to misrepresentation,
fraud, coercion or undue influence.
3. ILLEGAL AGREEMENT
An illegal agreement is an unlawful agreement. The law prohibits agreements made
with unlawful object or consideration. Such an agreement, like the void agreement has
no legal effects as between the immediate parties. Further, transactions collateral to it
also become tainted with illegality and are, therefore, not enforceable. Parties to an
unlawful agreement cannot get any help from a Court of law, for no polluted hands shall
touch the pure fountain of justice.
The chief flaws in contract are:
Incapacity Mistake Misrepresentation
Undue Influence Coercion Illegality

CAPACITY TO CONTRACT
The general rule is that all natural persons have full capacity to make binding contracts. But the
Indian Contract Act, 1872 admits an exception in the case of:
1. Minors,
2. Lunatics, and
3. Persons disqualified from contracting by any law to which they are subject.

16.12
Minor’s Contract
1. A minor is a person, male or female, who has not completed the age of 18 years. In case
a guardian has been appointed to the minor or where the minor is under the
guardianship of the Court of Wards, the person continues to be a minor until he
completes his age of 21 years.
2. It was finally laid down by the Privy Council in the leading case of Mohori Bibi v.
Dharmodas Ghose, that a minor has no capacity to contract and minors contract is
absolutely void.
3. If the minor has carried out his part of the contract, then, the Courts have held, that he
can proceed against the other party. The rationale is to protect minors interest.
4. The following points must be kept in mind with respect to minors contract:
i. A minor’s contract is altogether void in law, and a minor cannot bind himself by a
contract.
ii. Since the contract is void ab initio, it cannot be ratified by the minor on attaining the
age of majority.
iii. According to Section 33 of the Specific Relief Act, 1963 the Court may, if the minor
has received any benefit under the agreement from the other party require him to
restore, so far as may be such benefit to the other party, to the extent to which he
or his estate has been benefited thereby.
iv. A minors estate is liable to pay a reasonable price for necessaries supplied to him,
The necessaries supplied must be according to the position and status in life of the
minor and must be things which the minor actually needs.
v. An agreement by a minor being void, the Court will never direct specific
performance of the contract.
vi. A minor can be an agent, but he cannot be a principal nor can he be a partner. He
can, however, be admitted to the benefits of a partnership.
vii. Since a minor is never personally liable, he cannot be adjudicated as an insolvent.
Lunatics Agreement
1. A person of unsound mind is a lunatic. That is to say for the purposes of making
contract, a person is of unsound mind if at the time when he makes the contract, he is
incapable of understanding it and of forming rational judgment as to its effect upon his
interests.
2. A person of unsound mind cannot enter into a contract. A lunatics agreement is
therefore void. But if he makes a contract when he is of sound mind, i.e., during lucid
intervals, he will be bound by it.
3. A sane man who is so drunk that he cannot understand the terms of a contract or form a
rational judgement as to its effect on his interests cannot contract whilst such state of

16.13
 drunkenness lasts. A person under the influence of hypnotism is temporarily of unsound
mind. Mental decay brought by old age or disease also comes within the definition.
4. Agreement by persons of unsound mind are void. But for necessaries supplied to a
lunatic or to any member of his family, the lunatics estate, if any, will be liable. There is
no personal liability incurred by the lunatic.
5. If a contract entered into by a lunatic or person of unsound mind is for his benefit, it can
be enforced (for the benefit) against the other party but not vice-versa
Other Persons qualified and disqualified from contracting.
Alien Enemies
A person who is not an Indian citizen is an alien. On the declaration of war between his country
and India he becomes an alien enemy. A contract with an alien enemy becomes unenforceable
on the outbreak of war.
Foreign Sovereigns and Ambassadors
Foreign sovereigns and accredited representatives of foreign states, i.e., Ambassadors, High
Commissioners, enjoy a special privilege in that they cannot be sued in Indian Courts, unless
they voluntarily submit to the jurisdiction of the Indian Courts.
Married Women
In India there is no difference between a man and a woman regarding contractual capacity. A
woman married or single can enter into contracts in the same ways as a man. She can deal with
her property in any manner she likes, provided, of course, she is a major and is of sound mind.
FREE CONSENT
The basis of a contract is agreement, i.e., mutual consent. In other words, the parties should
mean the something in the same sense and agree voluntarily. It is when there is consent, that
the parties are said to be consensus ad idem i.e. their minds have met. Not only consent is
required but it must be a free consent. Consent is not free when it has been caused by
coercion, undue influence, misrepresentation, fraud or mistake.
Mistake (Sections 20 and 21)
The law believes that contracts are made to be performed. Accordingly, the law says that it will
not aid any one to evade consequences on the plea that he was mistaken. On the other hand,
the law also realises that mistakes do occur, and that these mistakes are so fundamental that
there may be no contract at all. If the law recognises mistake in contract, the mistake will
render the contract void.
Effect of Mistake
A mistake in the nature of miscalculation or error of judgement by one or both the parties has
no effect on the validity of the contract.
Therefore, mistake must be a “vital operative mistake”, i.e. it must be a mistake of fact which is
fundamental to contract. To be operative so as to render the contract void, the mistake must
be:

16.14
 i. Of fact, and not of law or opinion,
ii. The fact must be essential to agreement, i.e., so fundamental as to negative the
agreement; and
iii. Must be on the part of both the parties. Thus, where both the parties to an
agreement are under a mistake as to a matter of fact essential to agreement, the
agreement is void. Such a mistake prevents the formation of any contract at all and
the Court will declare it void.
Mistake of Law and Mistake of Fact
Mistakes are of two kinds:
i. Mistake of law, and
ii. Mistake of fact.
If there is a mistake of law of the land, the contract is binding because everyone is deemed to
have knowledge of law of the land and ignorance of law is no excuse (ignorantia juris
nonexcusat)
But mistake of foreign law and mistake of private rights are treated as mistakes of fact and are
execusable.
Mutual or Unilateral Mistake
Mistake must be mutual i.e. it must be on the part of both parties. A unilateral mistake, i.e.,
mistake on the part of only one party, is generally of no effect.
Mutual or Common Mistake as to Subject-matter
i. Mistake as to existence of the subject matter: Where both parties believe the
subject matter of the contract to be in existence but in fact, it is not in existence at
the time of making the contract, there is mistake and the contract is void.
ii. Mistake as to identity of the subject matter: Where the parties are not in
agreement to the identity of the subject matter, i.e., one means one thing and the
other means another thing, the contract is void, there is no consensus ad idem.
iii. Mistake as to quantity of the subject matter: There may be a mistake as to quantity
or extent of the subject matter which will render the contract void even if the
mistake was caused by the negligence of a third-party.
iv. Mistake as to quality of the subject-matter or promise: Mistake as to quality raises
difficult questions. If the mistake is on the part of both the parties the contract is
void. But if the mistake is only on the part of one party difficulty arises.
Unilateral Mistake as to Nature of the Contract
The general rule is that a person who signs an instrument is bound by its terms even if he has
not read it. But a person who signs a document under a fundamental mistake as to its nature
may have it avoided provided the mistake was due to either:
i. the blindness, illiteracy, of the person signing, or
ii. a trick or fraudulent misrepresentation as to the nature of the document.

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Misrepresentation (Section 18)
The term “misrepresentation” is ordinarily used to connote both “innocent misrepresentation”
and “dishonest misrepresentation”. Misrepresentation may, therefore, be either
i. Innocent misrepresentation, or
ii. Wilful misrepresentation with intent to deceive and is called fraud.
Innocent Misrepresentation
If a person makes a representation believing what he says is true he commits innocent
misrepresentation. Thus, any false representation, which is made with an honest belief in its
truth is innocent. The effect of innocent misrepresentation is that the party misled by it can
avoid the contract, but cannot sue for damages in the normal circumstances.
But in order to avoid a contract on the ground of misrepresentation, it is necessary to prove
that:
i. There was a representation or assertion.
ii. Such assertion induced the party aggrieved to enter into the contract.
iii. The assertion related to a matter of fact
iv. The statement was not a mere opinion
v. The statement which has become or turned out to be untrue, was made with an
honest belief in its truth.
Damages for Innocent Misrepresentation
Generally the injured party can only avoid the contract and cannot get damages for innocent
misrepresentation. But in the following cases, damages are obtainable:
i. From a promoter or director who makes innocent misrepresentation in a company
prospectus,
ii. Against an agent who commits a breach of warranty of authority,
iii. Negligent representation made by one person to another between whom a
confidential relationship, like that of a solicitor and client exists.
Wilful misrepresentation or Fraud (Section 17)
Fraud is an untrue statement made knowingly or without belief in its truth or recklessly,
carelessly, whether it be true or false with the intent to deceive. The chief ingredients of a fraud
are:
1. false representation or assertion,
2. Of fact,
3. Made with the intention that it should be acted upon,
4. The representation must have actually induced the other party to enter into the
contract and so deceived him,
5. The party deceived must thereby be indemnified, for there is no fraud without damages,
and
6. The statement must have been made either with the knowledge that it was false or
without belief in its truth or recklessly without caring whether it was true or false.

16.16
It is immaterial whether the representation takes effect by false statement or with
concealment. The party defrauded can avoid the contract and also claim damages.
Contracts Uberrimae Fidei
There are contracts in which the law imposes a special duty to act with the utmost good faith
i.e., to disclose all material information. Failure to disclose such information will render the
contract voidable at the option of the other party.
Contracts uberrimae fidei are:
1. Contract of insurance of all kinds: The assured must disclose to the insurer all material
facts and whatever he states must be correct and truthful.
2. Company prospectus:
3. Contract for the sale of land: The vendor is under a duty to the purchaser to show good
title to the land he has contracted to sell.
4. Contracts of family arrangements: When the members of a family make agreements or
arrangements for the settlement of family property, each member of the family must
make full disclosure of every material fact within his knowledge.
Difference between Fraud and Innocent Misrepresentation
1. Fraud implies an intent to deceive, which is lacking if it is innocent misrepresentation.
2. In case of misrepresentation and fraudulent silence, the defendant can take a good plea
that the plaintiff had the means of discovering the truth with ordinary diligence. This
argument is not available if there is fraud
3. In misrepresentation the plaintiff can avoid or rescind the contract. In fraud, the plaintiff
can claim damages as well.
4. If there is fraud, it may lead to prosecution for an offence of cheating under the Indian
Penal Code.

Coercion (Section 15)

Coercion as defined in Section 15 means “the committing or threatening to commit any act
forbidden by the Indian Penal Code, or unlawful detaining or threatening to detain, any
property to the prejudice of any person whatever with the intention of causing any person to
enter into an agreement”. Simply stated, the doing of any act forbidden by the Indian Penal
Code is coercion even though such an act is done in a place where the Indian Penal Code is not
in force.
It has been held that mere threat by one person to another to prosecute him does not amount
to coercion. There must be a contract made under the threat and that contract should be one
sought to be avoided because of coercion.
Undue Influence (Section 16)
Under Section 16 of the Indian Contract Act, 1872, a contract is said to be produced by undue
influence “where the relations subsisting between the parties are such that one of the parties is

16.17
in a position to dominate the will of the other and uses that position to obtain an unfair
advantage over the other”.
The elements of undue influence are:
i. A dominant position, and
ii. The use of it to obtain an unfair advantage. Where there is a presumption of undue
influence, the presumption can be rebutted by showing that:
i. full disclosure of all material facts was made,
ii. the consideration was adequate, and
iii. the weaker party was in receipt of independent legal advice.
TRANSACTION WITH PARDA-NISHIN WOMEN
1. The expression ‘parda-nishin denotes complete seclusion. Thus, a woman who goes to a
Court and gives evidence, who fixes rents with tenants and collects rents, who
communicates when necessary, in matters of business, with men other than members
of her own family, could not be regarded as a parda-nishin woman.
2. The principles to be applied to transactions with parda-nishin woman are founded on
equity and good conscience and accordingly a person who contracts with parda-nishin
woman has to prove that no undue influence was used and that she had free and
independent advice, fully understood the contents of the contract and exercised her
free will. “The law throws around her a special cloak of protection”.
3. Unconscionable transactions: An unconscionable transaction is one which makes an
exorbitant profit of the others distress by a person who is in a dominant position.
Merely the fact that the rate of interest is very high in a money lending transaction shall
not make it unconscionable. But if the rate of interest is very exorbitant and the Court
regards the transaction unconscionable, the burden of proving that no undue influence
was exercised lies on the creditor.
LEGALITY OF OBJECT
One of the requisites of a valid contract is that the object should be lawful.
Section 23 of the Indian Contract Act, 1872 provides that the consideration or object of an
agreement is
i. lawful unless it is forbidden by law, or
ii. it is of such nature that if permitted it would defeat the provisions of law; or
iii. is fraudulent, or
iv. involves or implies injury to the person or property of another, or
v. the Court regards it an immoral or opposed to public policy.
VOID AND ILLEGAL CONTRACTS
1. A void contract is one which is away from legal effects altogether. An illegal contract too
has no legal effect as between the immediate parties to the contract, but has the
further effect of tainting the collateral contracts also with illegality.

16.18
 2. For instance A borrows from B Rs. 1,000 for lending to C a minor. The contract between
A and C is void, but B can nevertheless recover the money from A, On the other hand, if
A had borrowed Rs. 1,000 from B to buy a pistol to shoot C, the question whether B can
recover the money hinges on whether B was aware of the purpose for which money was
borrowed. If B had knowledge of the illegal purpose, he cannot recover. Therefore, it
may be said that all illegal agreements are void but all void agreements are not
necessarily illegal.
CONSEQUENCE OF ILLEGAL AGREEMENTS
1. An illegal agreement is entirely void,
2. No action can be brought by a party to an illegal agreement. The maxim is “Ex turpi
cause non-oritur action” - from an evil cause, no action arises,
3. Money paid or property transferred under an illegal agreement cannot be recovered.
The maxim is in parti delicto potierest condition defendeties- In cases of equal guilt,
more powerful is the condition of the defendant,
4. Where an agreement consist of two parts, one part legal and other illegal, and the legal
parts is separable from the illegal one, then the Court will enforce the legal one. If the
legal and the illegal parts cannot be separated the whole agreement is illegal, and
5. Any agreement which is collateral to an illegal agreement is also tainted with illegality
and is treated as being illegal, even though it would have been lawful by itself.
Exception to General Rule of no Recovery of Money or Property
In the following cases, a party to an illegal agreement may sue to recover money paid or
property transferred:
i. Where the transfer is not in pari delicto (equally guilty) with the defendant.
ii. If the plaintiff can frame a cause of action entirely dependent of the contract.
iii. Where a substantial part of the illegal transaction has not been carried out and the
plaintiff is truly and genuinely repentant.

AGREEMENTS VOID AS BEING OPPOSED TO PUBLIC POLICY

The following agreements are void as being against public policy but they are not illegal:

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 Agreement in Agreement in
restrain of restraint of
parental rights marriage

Marriage
Agreement in brokerage or
restraint of trade brokerage
Agreement

Agreement in
restraint of
personal freedom
are void

AGREEMENTS IN RESTRAINT OF TRADE VOID

1. Section 27 of the Indian Contract Act states that every agreement by which any one is
restrained from exercising a lawful profession, trade or business of any kind, is, to that
extent, void.
2. This Section is not happily worded and has been criticised by many authors. It appears
from the wording that every kind of restraint, whether total or partial falls within the
prohibition of this Section.
3. In English law the Courts have held that if a restraint is reasonable, it will be valid.
Leading case on his point is Nordenfelt v. Maxim Nordenfelt Guns Co., N was an inventor
and a manufacturer of guns and ammunition. He sold his world-wide business to M and
promised not to manufacture guns anywhere in the world for 25 years.
4. The House of Lords held that the restraint was reasonable as it was no more than is
necessary for the protection of the company, the contract was binding. Whether a
restraint is reasonable or not depends upon the facts of each case.
Our courts are not consistent on the point whether reasonable restraints are permitted or
not. In Madhub Chunder v. RaCoomar , A paid Rs. 900 to B’s workman. B undertook to stop
his business in a particular locality in Calcutta. He did not keep his promise. A’s suit for the
sum was dismissed since the agreement was void under Section 27. The reasonableness or
otherwise of the restraint was not discussed. However, if a restrictive meaning is adopted,
most of the ordinary mercantile agreements may be hit. Thus, the Courts have held that if
the restraint is one which is really necessary for the carrying on business, the same is not
prohibited.

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 5. Other type of restrains is personal covenants between an employer and his employee
whereby the latter agrees not to compete with the former or serve with any of his
competitors after employment.
6. This issue came before the Supreme Court in Niranjan Shanker Golikari v. The Century
Spinning and Manufacturing Co. Ltd., In this case N entered into a bond with the
company to serve for a period of five years. In case, N leaves his job earlier and joins
elsewhere with company’s competitor within five years, he was liable for damages. N
was imparted the necessary training but he left the job and joined another company.
The former employer instituted a suit against N.
7. The Supreme Court, held that the restraint was necessary for the protection of the
company’s interests and not such as the Court would refuse to enforce.
In other case, it has been reiterated that the restriction should be reasonable taking into
account the facts and circumstances of the case. In Superintendence Company of India Ltd. v.
Krishna Murgai, the Supreme Court laid down that a restraint beyond the term of service would
be void and the only ground on which it can be justified is by showing it is necessary for the
protection of the employers goodwill.

WHEN CONTRACTS IN RESTRAINT OF TRADE VALID

1. Sale of goodwill: Where the seller of the goodwill of a business undertakes not to
compete with the purchaser of the goodwill, the contract is enforceable provided the
restraint appears to be reasonable as to territorial limits and the length of time.
2. Partners agreements: Contracts between partners to provide that a partner shall not
carry on any business other than that of the firm while he is a partner.
Negative stipulations in service agreements: An agreement of service by which a person binds
himself during the term of the agreement not to take service with anyone else is not in restraint
of lawful profession and is valid.

WAGERING AGREEMENTS
The literal meaning of the word “wager” is a “bet”. Wagering agreements are nothing but
ordinary betting agreements. For example, A and B enter into an agreement that if England’s
Cricket Team wins the test match, A will pay B Rs. 100 and if it loses B will pay Rs. 100 to A. This
is a wagering agreement and nothing can be recovered by winning party under the agreement.
WAGERING AGREEMENTS VOID
In India except Mumbai, wagering agreements are void. In Mumbai, wagering agreements have
been declared illegal by the Avoiding Wagers (Amendment) Act, 1865. Therefore, in Mumbai a
wagering agreement being illegal, is void not only between the immediate parties, but taints
and renders void all collateral agreements to it.
VOID AGREEMENTS
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The following types of agreements are void under Indian Contract Act:
1. Agreement by or with a minor or a person of unsound mind or a person disqualified to
enter into a contract.
2. Agreement made under a mistake of fact, material to the agreement on the part of the
both the parties.
3. An agreement of which the consideration or object is unlawful.
4. If any part of a single consideration for one or more objects, or any one or any part of
any one of several considerations for a single object, is unlawful, the agreement is void.
5. An agreement in restraint of marriage.
6. An agreement in restraint of trade.
7. An agreement in restraint of legal proceedings.
8. Agreement by way of wager.
9. An agreement to enter into an agreement in the future.
10. An agreement to do an act impossible in itself.
WHEN CONTRACT BECOMES VOID
A contract which ceases to be enforceable by law becomes void when it ceases to be
enforceable. A contract becomes void when, by reason of some event which the promisor could
not prevent, the performance of the contract becomes impossible, e.g. by destruction of the
subject- matter of the contract after the formation of the contract. A contingent contract to do
or not do to anything if an uncertain future event happens becomes void if the event becomes
impossible.
RESTITUTION
When a contract becomes void, it is not to be performed by either party. But if any party has
received any benefit under such a contract from the other party he must restore it or make
compensation for it to the other party. A agrees to sell to B after 6 months a certain quantity of
gold and receives Rs. `500 as advance. Soon after the agreement, private sales of gold are
prohibited by law. The contract becomes void and A must return the sum of Rs. 500 to B.
CERTAIN RELATIONS RESEMBLING THOSE OF CONTRACT (QUASI CONTRACTS)
NATURE OF QUASI-CONTRACTS
1. A valid contract must contain certain essential elements, such as offer and acceptance,
capacity to contract, consideration and free consent.
2. But sometimes the law implies a promise imposing obligations on one party and
conferring right in favour of the other even when there is no offer, no acceptance, no
consensus ad idem, and in fact, there is neither agreement nor promise.
3. Such cases are not contracts in the strict sense, but the Court recognises them as
relations resembling those of contracts and enforces them as if they were contracts,
hence the term quasi- contracts (i.e., resembling a contract).

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 4. A quasi-contract rests on the equitable principle that a person shall not be allowed to
enrich himself unjustly at the expense of another.
5. In truth, it is not a contract at all.
Quasi-Contracts or Implied Contracts under the Indian Contract Act
The following types of quasi-contracts have been dealt within the Indian Contract Act:
i. Necessaries supplied to person incapable of contracting.
ii. Suit for money had and received .
iii. Quantum Meruit.
iv. Obligations of a finder of goods.
v. Obligation of person enjoying benefit of a non-gratuitous act.
NECESSARIES
Contracts by minors and persons of unsound mind are void. However, their estates are liable to
reimburse the trader, who supplies them with necessaries of life.
SUIT FOR MONEY HAD AND RECEIVED
The right to file a suit for the recovery of money may arise
1. Where the plaintiff paid money to the defendant
i. Under a mistake,
ii. In pursuance of a contract the consideration for which has failed, or
iii. Under coercion, oppression, extortion or other such means.
2. Payment to third-party of money which another is bound to pay. For example, where
A’s goods are wrongfully attached in order to realise arrears of Government revenue
due by B, and A pays the amount to save his goods from being sold, he is entitled to
recover the amount from B.
3. Money obtained by defendant from third-parties. For example, where an agent has
obtained a secret commission or a fraudulent payment from a third-party, the principle
can recover the amount from the agent.
QUANTUM MERUIT
1. The expression “Quantum Meruit” literally means “as much as earned” or reasonable
remuneration. It is used where a person claims reasonable remuneration for the
services rendered by him when there was no express promise to pay the definite
remuneration, Thus, the law implies reasonable compensation for the services rendered
by a party if there are circumstances showing that these are to be paid for.
2. The general rule is that where a party to a contract has not fully performed what the
contract demands as a condition of payment, he cannot sue for payment for that which
he has done.
3. The contract has to be indivisible and the payment can be demanded only on the
completion of the contract.

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 4. But where one party who has performed part of his contract is prevented by the other
from completing it, he may sue on a quantum meruit, for the value of what he has done.
5. The claim on a quantum meruit arises when one party abandons the contract, or
accepts the work done by another under a void contract.
6. The party in default may also sue on a “quantum meruit” for what he has done if the
contract is divisible and the other party has had the benefit of the part which has been
performed. But if the contract is not divisible, the party at fault cannot claim the value
of what he has done.
OBLIGATIONS OF FINDER OF LOST GOODS
The liability of a finder of goods belonging to someone else is that of a bailee. This means that
he must take as much care of the goods as a man of ordinary prudence would take of his own
goods of the same kind. So far as the real owner of the goods is concerned, the finder is only a
bailee and must not appropriate the goods to his own use.
OBLIGATION OF A PERSON ENJOYING BENEFIT OF NON-GRATUITOUS ACT
Section 70 of the Indian Contract Act provides that where a person lawfully does something for
another person or delivers anything to him without any intention of doing so gratuitously and
the other person accepts and enjoys the benefit thereof, the latter must compensate the
former or restore to him the thing so delivered.
DISCHARGE OR TERMINATION OF CONTRACTS
A contract is said to be discharged or terminated when the rights and obligations arising out of
a contract are extinguished.
Contracts may be discharged or terminated by any of the following modes:

Mutual
Performance Lapse of Operation Impossibility of Breech of
consent or
of contracts time of law performance contract
agreement

1. PERFORMANCE OF CONTRACTS (SECTION 37)

Section 37 of the Act provides that the parties to a contract must either perform or offer
to perform their respective promises, unless such performance is dispensed with or
excused under the provision of the Indian Contract Act, or any other law.
Tender of Performance (Section 38) In case of some contracts, it is sometimes sufficient
if the promisor performs his side of the contract. Then, if the performance is rejected,
the promisor is discharged from further liability and may sue for the breach of contract
if he so wishes. This is called discharge by tender.

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 2. DISCHARGE BY MUTUAL AGREEMENT OR CONSENT
A contract may be discharged by the agreement of all parties to the contract, or by
waiver or release by the party entitled to performance.
Methods stipulated under Sections 62 and 63 of the Indian Contract Act for discharging
a contract by mutual consent are:

Novation Alteration Rescision Remission Waiver

Novation – when a new contract is substituted for existing contract either between the same
parties or between different parties, the consideration mutually being the discharge of the old
contract.
Alteration – change in one or more of the material terms of a contract.
Rescission – by agreement between the parties at any time before it is discharged by
performance or in some other way.
Remission – acceptance of a lesser sum than what was contracted for or a lesser fulfilment of
the promise made.
Waiver – deliberate abandonment or giving up of a right which a party is entitled to under a
contract, where upon the other party to the contract is released from his obligation.
3. DISCHARGE BY LAPSES OF TIME
The Limitation Act, in certain circumstance, affords a good defence to suits for breach of
contract, and in fact terminates the contract by depriving the party of his remedy to law. For
example, where a debtor has failed to repay the loan on the stipulated date, the creditor must
file the suit against him within three years of the default. If the limitation period of three years
expires and he takes no action he will be barred from his remedy and the other party is
discharged of his liability to perform.
4. DISCHARGE BY OPERATION OF THE LAW
Discharge under this head may take place as follows:
i. By merger: When the parties embody the inferior contract in a superior contract.
ii. By the unauthorised alteration of items of a written document: Where a party to
a written contract makes any material alteration without knowledge and consent
of the other, the contract can be avoided by the other party.
iii. By insolvency
iv. Discharge by Impossibility or Frustration.
Discharge by Supervening Impossibility
A contract will be discharged by subsequent or supervening impossibility in any of the
following ways:

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 i. Where the subject-matter of the contract is destroyed without the fault of the
parties, the contract is discharged.
ii. When a contract is entered into on the basis of the continued existence of a
certain state of affairs, the contract is discharged if the state of things changes or
ceases to exist.
iii. Where the personal qualifications of a party is the basis of the contract, the
contract is discharged by the death or physical disablement of that party
Discharge by Supervening Illegality
A contract which is contrary to law at the time of its formation is void. But if, after the making
of the contract, owing to alteration of the law or the act of some person armed with statutory
authority the performance of the contract becomes impossible, the contract is discharged. This
is so because the performance of the promise is prevented or prohibited by a subsequent
change in the law. A enters into contract with B for cutting trees. By a statutory provision
cutting of trees is prohibited except under a licence and the same is refused to A. The contract
is discharged.
Cases in which there is no supervening impossibility
In the following cases contracts are not discharged on the ground of supervening impossibility–
i. Difficulty of performance.
ii. Commercial impossibilities do not discharge the contract.
iii. Strikes, lockouts and civil disturbance like riots do not terminate contracts unless
there is a clause in the contract providing for non-performance in such cases.
Supervening impossibility or illegality is known as frustration under English Law.
5. DISCHARGE BY BREACH
Where the promisor neither performs his contract nor does he tender performance, or
where the performance is defective, there is a breach of contract. The breach of
contract may be
i. Actual, or
ii. Anticipatory.
The actual breach may take place either at the time the performance is due, or when
actually performing the contract.
Anticipatory breach means a breach before the time for the performance has arrived.
This may also take place in two ways – by the promisor doing an act which makes the
performance of his promise impossible or by the promisor in some other way showing
his intention not to perform it.
REMEDIES FOR BREACH OF CONTRACT
Where a contract is broken, the injured party has several courses of action open to him. The
appropriate remedy in any case will depend upon the subject-matter of the contract and the
nature of the breach.

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In case of breach of contract, the injured party may:
i. Rescind the contract and refuse further performance of the contract,
ii. Sue for damages
iii. Sue for specific performance
iv. Sue for an injunction to restrain the breach of a negative term, and
v. Sue on quantum meruit.
DAMAGES FOR BREACH OF CONTRACT
When a contract has been broken, a party who suffers by such breach is entitled to receive,
from the party who has broken the contract, compensation for any loss or damage, caused to
him thereby, which naturally arose in the usual course of things from such breach or which the
parties knew, when they made the contract to be likely to result from the breach of it. Such
compensation is not to be given for any remote and indirect loss or damage sustained by
reason of the breach.
Liquidated and Unliquidated damages: Where the contracting parties agree in advance the
amount payable in the event of breach, the sum payable is called liquidated damages.
Where the amount of compensation claimed for a breach of contract is left to be assessed by
the Court, damages claimed are called unliquidated damages.
Unliquidated Damages
Those are of the following kinds:
i. General or ordinary damages,
ii. Special damages,
iii. Exemplary or punitive damages, and
iv. Nominal damages.
Ordinary Damages
These are restricted to pecuniary compensation to put the injured party in the position he
would have been had the contract been performed. It is the estimated amount of loss actually
incurred. Thus, it applies only to the proximate consequences of the breach of the contract and
the remote consequences are not generally regarded.
Special Damages
Special damages are those resulting from a breach of contract under some peculiar
circumstances. If at the time of entering into the contract, the party has notice of special
circumstances which makes special loss the likely result of the breach in the ordinary course of
things, then upon his-breaking the contract and the special loss following this breach, he will be
required to make good the special loss. For example, A delivered goods to the Railway
Administration to be carried to a place where an exhibition was being held and told the goods
clerk that if the goods did not reach the destination on the stipulated date he would suffer a
special loss. The goods reached late. He was entitled to claim special damages.
Exemplary Damages

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These damages are awarded to punish the defendant and are not, as a rule, granted in case of
breach of contract. In two cases, however, the court may award such damages, viz.,
i. Breach of promise to marry; and
ii. Wrongful dishonour of a customer’s cheque by the banker. In a breach of promise to
marry, the amount of the damages will depend upon the extent of injury to the
party’s feelings.
Nominal Damages
Nominal damages consist of a small token award, e.g., a rupee of even 25 paise, where there
has been an infringement of contractual rights, but no actual loss has been suffered. These
damages are awarded to establish the right to decree for breach of contract.
SPECIFIC PERFORMANCE
It means the actual carrying out by the parties of their contract, and in proper cases the Court
will insist upon the parties carrying out this agreement. Where a party fails to perform the
contract, the Court may, at its discretion, order the defendant to carry out his undertaking
according to the terms of the contract. A decree for specific performance may be granted in
addition to or instead of damages. Specific performance is usually granted in contracts
connected with land.
Specific performance will not be ordered:
i. where monetary compensation is an adequate remedy,
ii. where the Court cannot supervise the execution of the contract, e.g., a building
contract,
iii. where the contract is for personal service, and
iv. where one of the parties is a minor.
INJUNCTION
An injunction, is an order of a Court restraining a person from doing a particular act. It is a
mode of securing the specific performance of a negative term of the contract, the Court may in
its discretion issue an order to the defendant restraining him from doing what he promised not
to do. Injunction may be prohibitory or mandatory. In prohibitory, the Court restrains the
commission of a wrongful act whereas in mandatory, it restrains continuance of a wrongful
commission.
CONTRACT OF INDEMNITY AND GUARANTEE (SECTIONS 124 TO 147)
MEANING OF INDEMNITY
1. A contract of indemnity is a contract by which one party promises to save the other
party from loss caused to him by the conduct of the promisor himself, or by the conduct
of any other person. The person who promises to indemnify or make good the loss is
called the indemnifier and the person whose loss is made good is called the indemnified.

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 2. Under the Indian Contract Act, the contract of indemnity is restricted to such cases only
where the loss promised to be reimbursed, is caused by the conduct of the promisor or
of any other person.
3. The loss caused by events or accidents which do not depend on the conduct of any
person, it seems, cannot be sought to be reimbursed under a contract of indemnity.
Rights of Indemnity Holder when Sued
Under Section 125, the promisee in a contract of indemnity, acting within the scope of his
authority, is entitled to recover from the promisor—
i. all damages which he may be compelled to pay in any suit in respect of any matter
to which the promise to indemnify applies;
ii. all costs which he may be compelled to pay in any such suit;
iii. all sums which he may have paid under the terms of any compromise of any such
suit, if the compromise was not contrary to the orders of the promisor, and was one
which it would have been prudent for the promisee to make in the absence of any
contract of indemnity, or if the promisor authorised him to compromise the suit.

MEANING OF CONTRACT OF GUARANTEE

1. A contract of guarantee is a contract to perform the promise, or discharge the liability of
a third person in case of his default. The person who gives the guarantee is called the
Surety, the person for whom the guarantee is given is called the Principal Debtor, and
the person to whom the guarantee is given is called the Creditor.
2. A guarantee may be either oral or written, although in the English law, it must be in
writing.
3. Like a contract of indemnity, a guarantee must also satisfy all the essential elements of a
valid contract.
4. There is, however, a special feature with regard to consideration in a contract of
guarantee. The consideration received by the principal debtor is sufficient for surety.
5. Section 127 provides that anything done or any promise made for the benefit of the
principal debtor may be a sufficient consideration to the surety for giving the guarantee.
DISTINCTION BETWEEN INDEMNITY AND GUARANTEE
A contract of indemnity differs from a contract of guarantee in the following ways:
1. In a contract of indemnity there are only two parties: the indemnifier and the
indemnified. In a contract of guarantee, there are three parties; the surety, the principal
debtor and the creditor.
2. In a contract of indemnity, the liability of the indemnifier is primary. In a contract of
guarantee, the liability of the surety is secondary.
3. The indemnifier need not necessarily act at the request of the debtor; the surety gives
guarantee only at the request of the principal debtor.

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 4. In the case of a guarantee, there is an existing debt or duty, the performance of which is
guaranteed by the surety, whereas in the case of indemnity, the possibility of any loss
happening is the only contingency against which the indemnifier undertakes to
indemnify.
5. The surety, on payment of the debt when the principal debtor has failed to pay is
entitled to proceed against the principal debtor in his own right, but the indemnifier
cannot sue thirdparties in his own name, unless there be assignment. He must sue in the
name of the indemnified.
KINDS OF GUARANTEES
A contract of guarantee may be for an existing debt, or for a future debt. It may be a specific
guarantee, or it may be a continuing guarantee. A specific guarantee is given for a single debt
and comes to an end when the debt guaranteed has been paid. A continuing guarantee is one
which extends to a series of transactions. The liability of surety in case of a continuing
guarantee extends to all the transactions contemplated until the revocation of the guarantee.
REVOCATION OF CONTINUING GUARANTEE
A continuing guarantee is revoked in the following circumstances:
1. By notice of revocation by the surety : The notice operates to revoke the surety’s
liability as regards future transactions. He continues to be liable for transactions entered
into prior to the notice.
2. By the death of the surety: The death of the surety operates, in the absence of contract
as a revocation of a continuing guarantee, so far as regards future transactions. But for
all the transactions made before his death, the surety’s estate will be liable.
RIGHTS OF SURETY
1. Surety’s rights against the creditor: A surety is entitled to the benefit of every security
which the creditor has against the principal debtor at the time when the contract of
suretyship is entered into whether the surety knows of the existence of such security or
not and, if the creditor losses or, without the consent of the surety parts with such
security, the surety is discharged to the extent of the value of the security.
2. Rights against the principal debtor: After discharging the debt, the surety steps into the
shoes of the creditor or is subrogated to all the rights of the creditor against the Debtor.
3. Surety’s rights gains co-sureties: When a surety has paid more than his share of debt to
the creditor, he has a right of contribution from the co-securities who are equally bound
to pay with him. A, B and C are sureties to D for the sum of Rs. 3,000 lent to E who
makes default in payment. A, B and C are liable, as between themselves to pay Rs. 1,000
each. If any one of them has to pay more than Rs. 1,000 he can claim contribution from
the other two to reduce his payment to only Rs. 1,000. If one of them becomes
insolvent, the other two shall have to contribute the unpaid amount equally
Discharge of Surety

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A surety may be discharged from liability under the following circumstances:
1. By notice of revocation in case of a continuing guarantee as regards future transaction.
2. By the death of the surety as regards future transactions, in a continuing guarantee in
the absence of a contract to the contrary.
3. Any variation in the terms of the contract between the creditor and the principal debtor,
without the consent of the surety, discharges the surety as regards all transactions
taking place after the variation.
4. A surety will be discharged if the creditor releases the principal debtor, or acts or makes
an omission which results in the discharge of the principal debtor. But where the
creditor fails to sue the principal debtor within the limitation period, the surety is not
discharged.
5. Where the creditor, without the consent of the surety, makes an arrangement with the
principal debtor for composition, or promises to give time or not to sue him, the surety
will be discharged.
6. If the creditor does any act which is against the rights of the surety, or omits to do an act
which his duty to the surety requires him to do, and the eventual remedy of the surety
himself against the principal debtor is thereby impaired, the surety is discharged.
CONTRACT OF BAILMENT AND PLEDGE
1. BAILMENT
i. A bailment is a transaction whereby one person delivers goods to another person for
some purpose, upon a contract that they are, when the purpose is accomplished to
be returned or otherwise disposed of according to the directions of the person
delivering them.
ii. The person who delivers the goods is called the bailor and the person to whom they
are delivered is called the bailee.
iii. Bailment is a voluntary delivery of goods for a temporary purpose on the
understanding that they are to be returned in specie in the same or altered form.
iv. The ownership of the goods remains with the bailor, the bailee getting only the
possession. Delivery of goods may be actual or constructive, e.g. where the key of a
godown is handed over to another person, it amounts to delivery of goods in the
godown.
Gratuitous Bailment
i. A gratuitous bailment is one in which neither the bailor nor the bailee is entitled to
any remuneration.
ii. Such a bailment may be for the exclusive benefit of the bailor, e.g. when A leaves his
dog with a neighbour to be looked after in A’s absence on a holiday. It may again be
for exclusive benefit of the bailee, e.g., where you lend your book to a friend of

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 yours for a week. In neither case any charge is made. A gratuitous bailment
terminates by the death of either the bailor or the bailee.
iii. Under Section 159 the lender of a thing for use may at any time require its return if
the loan was gratuitous, even though he lent it for a specified time or purpose.
iv. But if on the faith of such loan made for a specified time or purpose, the borrower
has acted in such a manner that the return of the thing lent before the time agreed
upon would cause him loss exceeding the benefit actually derived by him from the
loan, the lender must, if he compels the return, indemnify the borrower the amount
in which the loss so occasioned exceeds the benefit so derived.
Bailment for Reward
This is for the mutual benefit of both the bailor and the bailee. For example, A lets out a motor-
car for hire to B. A is the bailor and receives the hire charges and B is the bailee and gets the
use of the car. Where, A hands over his goods to B, a carrier for carriage at a price, A is the
bailor who enjoys the benefit of carriage and B is the bailee who receives a remuneration for
carrying the goods.
Duties of Bailee
The bailee owes the following duties in respect of the goods bailed to him:
i. The bailee must take as much care of the goods bailed to him as a man of ordinary
prudence would take under similar circumstances of his own goods.
ii. The bailee is under a duty not to use the goods in an unauthorised manner or for
unauthorised purpose.
iii. He must keep the goods bailed to him separate from his own goods.
iv. He must not set up an adverse title to the goods.
v. It is the duty of the bailee to return the goods without demand on the expiry of the
time fixed or when the purpose is accomplished.
vi. In the absence of any contract to the contrary, the bailee must return to the bailor
any increase, or profits which may have accrued from the goods bailed; for example,
when A leaves a cow in the custody of B to be taken care of and the cow gets a calf,
B is bound is deliver the cow as well as the calf to A.

Bailee’s Particular Lien

Where the goods are bailed for a particular purpose and the bailee in due performance of
bailment, expands his skill and labour, he has in the absence of an agreement to the contrary a
lien on the goods, i.e., the bailee can retain the goods until his charges in respect of labour and
skill used on the goods are paid by the bailor.
Particular and General Lien is of two kinds:
A particular lien is one which is available only against that property of which the skill and
labour have been exercised. A bailee’s lien is a particular lien.

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A general lien is a right to detain any property belonging to the other and in the possession of
the person trying to exercise the lien in respect of any payment lawfully due to him.
Duties of bailor
The bailor has the following duties:
i. The bailor must disclose all the known faults in the goods; and if he fails to do that,
he will be liable for any damage resulting directly from the faults.
ii. It is the duty of the bailor to pay any extraordinary expenses incurred by the bailee.
iii. The bailor is bound to indemnify the bailee for any cost or costs which the bailee
may incur because of the defective title of the bailor of the goods bailed.
Termination of bailment
i. Where the bailee wrongfully uses or dispose of the goods bailed, the bailor may
determine the bailment.
ii. As soon as the period of bailment expires or the object of the bailment has been
achieved, the bailment comes to an end, and the bailee must return the goods to
the bailor.
iii. Bailment is terminated when the subject matter of bailment is destroyed or by
reason of change in its nature, becomes incapable of use for the purpose of
bailment.
iv. A gratuitous bailment can be terminated by the bailor at any time, even before the
agreed time, subject to the limitation that where termination before the agreed
period causes loss in excess of benefit, the bailor must compensate the bailee.
v. A gratuitous bailment terminates by the death of either the bailor or the bailee.
Finder of Lost Goods
1. The position of a finder of lost goods is exactly that of a bailee.
2. The rights of a finder are that he can sue the owner for any reward that might have
been offered, and may retain the goods until he receives the reward.
3. But where the owner has offered no reward, the finder has only a particular lien and can
detain the goods until he receives compensation for the troubles and expenses incurred
in preserving the property for finding out the true owner.
4. But he cannot file a suit for the recovery of the compensation.
5. Thus, as against the true owner, the finder of goods in a public or quasi-public place is
only a bailee, he keeps the article in trust for the real owner. As against every-one else,
the property in the goods vests in the finder on his taking possession of it. 6. The finder
has a right to sell the property:
i. where the owner cannot with reasonable diligence be found, or
ii. when found, he refuses to pay the lawful charges of the finder.
2. PLEDGE

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 Pledge or pawn is a contract whereby an article is deposited with a lender of money or
promisee as security for the repayment of a loan or performance of a promise. The bailor is
called the Pawnor and the bailee as “Pawnee”.
The following are the essential ingredients of a pledge:
1. The property pledged should be delivered to the pawnee.
2. Delivery should be in pursuance of a contract.
3. Delivery should be for the purpose of security.
4. Delivery should be upon a condition to return.
Pledge by Non-owners
Ordinarily, the owner of the goods would pledge them to secure a loan but the law permits
under certain circumstances a pledge by a person who is not the owner but is in possession of
the goods. Thus, a valid pledge may be created by the following non-owners:
1. A mercantile agent: Where a mercantile agent is, with the consent of the owner, in
possession of goods or the documents of title to goods, any pledge made by him, when
acting in the ordinary course of business of a mercantile agent, is as valid as if he were
expressly authorised by the owner of the goods to make the same.
2. Pledge by seller or buyer in possession after sale: A seller, left in possession of goods
sold, is no more the owner, but pledge by him will be valid, provided the pawnee acted
in good faith and had no notice of the sale of goods to the buyer.
3. Pledge where pawnor having limited interest: When the pawnor is not the owner of
the goods but has a limited interest in the goods which he pawns, e.g., he is a
mortgagee or he has a lien with respect of these goods, the pledge will be valid to the
extent of such interest.
4. Pledge by co-owner in possession
5. Pledge by person in possession under a voidable contract: A person may obtain
possession under a contract which is voidable at the option of the lawful owner on the
ground of misrepresentation, fraud, etc. The person in possession may pledge the goods
before the contract is avoided by the other party.
LAW OF AGENCY
Definition of Agent
An agent is a person who is employed to bring his principal into contractual relations with third-
parties.
CREATION OF AGENCY
1. Express Agency: A contract of agency may be made orally or in writing. The usual form
of written contract of agency is the Power of Attorney, which gives him the authority to
act on behalf of his principal in accordance with the terms and conditions therein. In an
agency created to transfer immovable property, the power of attorney must be

16.34
 registered. A power of attorney may be general, giving several powers to the agent, or
special, giving authority to the agent for transacting a single act.
2. Implied Agency: Implied agency may arise by conduct, situation of parties or necessity
of the case.
i. Agency by Estoppel: Estoppel arises when you are precluded from denying the truth
of anything which you have represented as a fact, although it is not a fact. Thus,
where P allows third- parties to believe that A is acting as his authorised agent, he
will be estopped from denying the agency if such third-parties relying on it make a
contract with A even when A had no authority at all.
ii. Wife as agent: Where a husband and wife are living together, the wife is presumed
to have her husband’s authority to pledge his credit for the purchase of necessaries
of life suitable to their standard of living. But the husband will not be liable if he
shows that
a. he had expressly warned the trade man not to supply goods on credit to his wife; or
b. he had expressly forbidden the wife to pledge his credit; or
c. his wife was already sufficiently supplied with the articles in question; or
d. she was supplied with a sufficient allowance.
Example - A wife deserted by her husband and thus forced to live separate from him, can pledge her
husband’s credit to buy all necessaries of life according to the position of the husband even against
his wishes.
iii. Agency of Necessity : In certain circumstances, a person who has been entrusted with
another’s property, may have to incur unauthorised expenses to protect or preserve it. Such
an agency is called an agency of necessity. For example, A sent a horse by railway and on its
arrival at the destination there was no one to receive it. The railway company, being bound
to take reasonable steps to keep the horse alive, was an agent of necessity of A.
iv. Agency by ratification: Where a person having no authority purports to act as agent, or a
duly appointed agent exceeds his authority, the principal is not bound by the contract
supposedly based on his behalf. But the principal may ratify the agents transaction and so
accept liability. In this way an agency by ratification arises. This is also known as ex post
facto agency— agency arising after the event. The effect of ratification is to render the
contract binding on the principal as if the agent had been authorised beforehand.

Ratification is effective only if the following conditions are satisfied:

i. The agent must expressly contract as agent for a principal who is in existence
and competent to contract.
ii. The principal must be competent to contract not only at the time the agent
acted, but also when he ratified the agents act.
iii. The principal at the time of ratification has full knowledge of the material facts,
and must ratify the whole contract, within a reasonable time.
iv. Only lawful acts can be ratified.

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CLASSES OF AGENTS
Agents may be special or general or, they may be mercantile agents:
1. Special Agent: A special agent is one who is appointed to do a specified act, or to
perform a specified function. He has no authority outside this special task. The third-
party has no right to assume that the agent has unlimited authority.
2. General Agent: A general agent is appointed to do anything within the authority given
to him by the principal in all transactions, or in all transactions relating to a specified
trade or matter. The third-party may assume that such an agent has power to do all that
is usual for a general agent to do in the business involved.
SUB-AGENT
1. A person who is appointed by the agent and to whom the principal’s work is delegated
to known as sub-agent.
2. Section 191 provides that “a sub-agent is a person employed by, and acting under the
control of the original agent in the business of the agency.” So, the sub-agent is the
agent of the original agent.
3. As between themselves, the relation of sub-agent and original agent is that of agent and
the principal.
4. A subagent is bound by all the duties of the original agent. The sub-agent is not directly
responsible to the principal except for fraud and wilful wrong. The sub-agent is
responsible to the original agent.
5. The original agent is responsible to the principal for the acts of the sub-agent. As regards
third persons, the principal is represented by sub-agent and he is bound and responsible
for all the acts of sub-agent as if he were an agent originally appointed by the principal.
MERCANTILE AGENT
Section 2(9) of the Sale of Goods Act, 1930, defines a mercantile agent as “a mercantile agent
having in the customary course of business as such agent authority either to sell goods or
consign goods for the purposes of sale, or to buy goods, or to raise money on the security of
goods”. This definition covers factors, brokers, auctioneers, commission agents etc.

FACTORS
A factor is a mercantile agent employed to sell goods which have been placed in his possession
or contract to buy goods for his principal. He is the apparent owner of the goods in his custody
and can sell them in his own name and receive payment for the goods. He has an insurable
interest in the goods and also a general lien in respect of any claim he may have arising out of
the agency.
BROKERS

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A broker is a mercantile agent whose ordinary course of business is to make contracts with
other parties for the sale and purchase of goods and securities of which he is not entrusted
with the possession for a commission called brokerage. He has no lien over the goods as he is
not in possession of them.
DEL CREDERE AGENT
A del credere agent is a mercantile agent, who is in consideration of an extra remuneration
guarantees to his principal that the purchasers who buy on credit will pay for the goods they
take. In the event of a third-party failing to pay, the del credere agent is bound to pay his
principal the sum owned by third-party.
AUCTIONEERS
An auctioneer is an agent who sells goods by auction, i.e., to the highest bidder in public
competition. He has no authority to warrant his principals title to the goods. He is an agent for
the seller but after the goods have been knocked down he is agent for the buyer also for the
purpose of evidence that the sale has taken place.
Duties of the Agent
1. An agent must act within the scope of the authority conferred upon him and carry out
strictly the instructions of the principal.
2. In the absence of express instructions, he must follow the custom prevailing in the same
kind of business at the place where the agent conducts the business.
3. He must do the work with reasonable skill and diligence
4. He must disclose promptly any material information coming to his knowledge which is
likely to influence the principal in the making of the contract.
5. He must not disclose confidential information entrusted to him by his principal.
6. He must not allow his interest to conflict with his duty.
7. The agent must keep true accounts and must be prepared on reasonable notice to
render an account.
8. He must not make any secret profit, he must disclose any extra profit that he may make.
But there are exceptions to this rule and the agent may delegate
i. where delegation is allowed by the principal,
ii. where the trade custom or usage sanctions delegation,
iii. where delegation is essential for proper performance,
iv. where an emergency renders it imperative,
v. where nature of the work is purely ministerial, and
vi. where the principal knows that the agent intends to delegate.
RESPONSIBILITIES OF PRINCIPAL TO THIRD-PARTIES
The effect of a contract made by an agent varies according to the circumstances under which
the agent contracted.

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There are three circumstances in which an agent may contract, namely:
1. The agent acts for a named principal,
2. The agent acts for an undisclosed principal, and
3. The agent acts for a concealed principal.
i. Disclosed principal: Where the agent contracts as agent for a named principal, he
generally incurs neither rights nor liabilities under the contract, and drops out as
soon as it is made. The effect is that the principal is bound by all acts of the agent
done within the scope of actual, apparent or ostensible authority.
ii. Undisclosed principal: Where the agent disclose that he is merely an agent but
conceals the identity of his principal, he is not personally liable, as he drops out in
normal way. The principal, on being discovered, will be responsible for the contract
made by the agent.
iii. Concealed principal: Where an agent appears to be contracting on his own behalf,
without either contracting as an agent or disclosing the existence of an agency , he
becomes personally liable. The third-party may sue either the principal (when
discovered) or the agent or both. If the third-party chooses to sue the principal and
not the agent, he must allow the principal the benefit of all payments made by him
to the agent on account of the contract before the agency was disclosed. The third-
party is also entitled to get the benefit of anything he may have paid to the agent. If
the principal discloses himself before the contract is completed, the other
contracting party may refuse to fulfil the contract if he can show that, if he had
known who the principal in the contract was, or if he had known that the agent was
not the principal, he would not have entered into the contract.
PERSONAL LIABILITY OF AGENT TO THIRD-PARTY
An agent is personally liable in the following cases:
1. Where the agent has agreed to be personally liable to the third-party.
2. Where an agent acts for a principal residing abroad.
3. When the agent signs a negotiable instrument in his own name without making it clear
that he is signing it only as agent.
4. When an agent acts for a principal who cannot be sued (e.g., he is minor),
5. An agent is liable for breach of warranty of authority. Where a person contracts as agent
without any authority there is a breach of warranty of authority. He is liable to the
person who has relied on the warranty of authority and has suffered loss.
6. Where authority is one coupled with interest or where trade, usage or custom makes
the agent personally liable, he will be liable to the third-party.
7. He is also liable for his torts committed in the course of agency.
MEANING OF AUTHORITY COUPLED WITH INTEREST

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An agency is coupled with an interest when the agent has an interest in the authority granted
to him or when the agent has an interest in the subject matter with which he is authorised to
deal. For example, where a factor had made advances to the principal and is authorised to sell
at the best price and recoup the advances made by him or where the agent is authorised to
collect money from third-parties and pay himself the debt due by the principal, the agencies are
coupled with interest. But a mere arrangement that the agent’s remuneration to paid out of
the rents collected by him, it does not give him any interest in the property and the agency is
not the one coupled with an interest. An agency coupled with interest cannot be terminated in
the absence of a contract to the contrary to the prejudice of such interest.

TERMINATION OF AGENCY
An agency comes to an end or terminates:
1. By the performance of the contract of agency,
2. By an agreement between the principal and the agent,
3. By expiration of the period fixed for the contract of agency,
4. By the death of the principal or the agency,
5. By the insanity of either the principal or the agent,
6. By the insolvency of the principal, and in some cases that of the agent,
7. Where the principal or agent is an incorporated company, by its dissolution
8. By the destruction of the subject-matter,
9. By the renunciation of his authority by the agent,
10. By the revocation of authority by the principal.

E-CONTRACT
Electronic contracts are not paper based but rather in electronic form are born out of the need
for speed, convenience and efficiency. In the electronic age, the whole transaction can be
completed in seconds, with both parties simply affixing their digital signatures to an electronic
copy of the contract. The conventional law relating to contracts is not sufficient to address all
the issues that arise in electronic contracts. The Information Technology Act, 2000 solves some
of the peculiar issues that arise in the formation and authentication of electronic contracts.

BASIC TYPE OF E-CONTRACTS

1. Shrink wrap agreements: In these type of agreements the product is wrapped. Terms
and Conditions are placed with the product itself. These are End user Licence
Agreements. Example: purchase of Anti-Virus.

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 2. Clickwrap Agreements: These agreements requires the users to accept the proposal by
clicking the “I agree”. User agree by clicking on the agree button. Example: Creation of
email id.
3. Browse Wrap Agreements: These agreements are entered by continued use of the
website. By using the website, the user is deemed to have accepted the conditions.
Example: Sale and Purchase on online platforms.
4. Scroll Wrap Agreements: In these agreements, Where users are required to scroll to the
complete terms and conditions of the documents and give their implied consent.
Example: Few mobile applications requires the user to scroll down.
5. Sign-In Wrap Agreements: In these agreements, user agree by signing in to a particular
website or mobile application. User agree with the terms and conditions by Signing in.

Case law:
Maharashtra State Electricity Distribution Co.Ltd v. Ratnagiri Gas and Power Pvt Ltd and Ors
In this case, in order to resolve the issue of non- payment of fixed charges, the first respondent
filed a petition under Electricity Act 2003 seeking the resolution of the issue of shortfall of domestic
gas. Central electricity regulatory commission (CERC) allowed the above petition and held that the
appellant liable to pay fixed capacity charges. CERC’s decision was upheld by Appellate tribunal for
electricity (APTEL). Later appeal was filled with SC.
The issue arose was whether CERC and APTEL were justified in affixing liability. The dispute
primarily turns on the terms of the Power Purchase Agreement (PPA).
The Court said that a commercial document cannot be interpreted in a manner that is at odds with
the original purpose and the intention of the parties to the document. A deviation from the plain
terms of the contract is warranted only when it serves business efficacy better. The appellant’s
arguments would entail reading in implied terms contrary to the contractual provisions which are
otherwise clear. Hence the decision was in the favour of appellant.

Rakesh Kumar Verma v. HDFC Bank Ltd.

In this case the SC decided that Sec 28 of Indian Contract Act 1872 does not bar exclusive
jurisdiction clauses. What has been barred is the absolute restriction of any party from approaching
a legal forum. The right to legal adjudication cannot be taken away from any party through contract
but can be relegated to a set of courts for the case of the parties.
Further, the court must already have legal jurisdiction to entertain such a claim. It pertains to a fact
that a contract cannot confer jurisdiction on a court that did not have such a jurisdiction is first
place.

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 CHAPTER 17 - LAW RELATING TO SALE OF GOODS
IMPORTANT DEFINITIONS
1. “Delivery” means voluntary transfer of possession from one person to another,
2. Goods are said to be in a “deliverable state” when they are in such state that the buyer
would under the contract be bound to take delivery of them,
3. “Document of title to goods” includes a bill of lading, dock-warrant, warehouse keeper’s
certificate, railway receipt.
4. “Fault” means wrongful act or default;
5. “Future goods” means goods to be manufactured or produced or acquired by the seller
after the making of the contract of sale;
6. “Mercantile agent” means an agent having in the customary course of business as such
authority either to sell goods, or to consign goods for the purposes of sale, or to buy
goods, or to raise money on the security of goods;
7. “Property” means the general property in goods, and not merely a special property,
8. “Specific goods” means goods identified and agreed upon at the time a contract of sale
is made.
CONTRACT OF SALE OF GOODS
A contract of sale of goods is a contract whereby the seller:
i. Transfers or agrees to transfer the property in goods,
ii. To the buyer,
iii. For a money consideration called the price. The expression “contract of sale”
includes both a sale where the seller transfers the ownership of the goods to the
buyer, and an agreement to sell where the ownership of goods is to be transferred
at a future time.
The following are thus the essentials of a contract of sale of goods:

Bilateral contract

All essential
Transfer of
elements of a valid
peroperty
contract

Price or
money Goods
consideration

17.1
DISTINCTION BETWEEN SALE AND AGREEMENT TO SELL
1. In a sale, the property in the goods sold passes to the buyer at the time of contract so
that he becomes the owner of the goods. In an agreement to sell, the ownership does
not pass to the buyer at the time of the contract, but it passes only when it becomes
sale.
2. An agreement to sell is an executory contract, a sale is an executed contract.
3. An agreement to sell is a contract pure and simple, but a sale is contract plus
conveyance.
4. If there is an agreement to sell and the goods are destroyed by accident, the loss falls on
the seller. In a sale, the loss falls on the buyer, even though the goods are with the
seller.
5. If there is an agreement to sell and the seller commits a breach, the buyer has only a
personal remedy against the seller, namely, a claim for damages. But if there has been a
sale, and the seller commits a breach by refusing to deliver the goods, the buyer has not
only a personal remedy against him but also the other remedies which an owner has in
respect of goods themselves.
SALE AND HIRE PURCHASE AGREEMENT
1. A “hire purchase agreement” is basically a contract of hire, but in addition, it gives the
hirer an option to purchase the goods at the end of the hiring period.
2. Consequently, until the final payment, the hirer is merely a bailee of goods and
ownership remains vested in the bailor.
3. Under such a contract, the owner of goods delivers the goods to person who agrees to
pay certain stipulated periodical payments as hire charges.
4. Though the possession is with the hirer, the ownership of the goods remains with the
original owner.
5. The essence of hire purchase agreement is that there is no agreement to buy, but only
an option is given to the hirer to buy by paying all the instalments or put an end to the
hiring and return the goods to the owner, at any time before the exercise of the option.
6. Since the hirer does not become owner of the goods until he has exercised his option to
buy, he cannot pass any title even to an innocent and bona fide purchaser.
7. The transaction of hire-purchase protects the owner of the goods against the insolvency
of the buyer, for if the buyer becomes insolvent or fails to pay the instalments, he can
take back the goods as owner. And if the hirer declines to take delivery of the goods, the
remedy of the will be damages for non-hiring and not for rent for the period agreed.
SUBJECT MATTER OF CONTRACT OF SALE OF GOODS
GOODS
1. The subject matter of the contract of sale is essentially goods.

17.2
 2. “Goods” means every kind of movable property other than actionable claims and
money and 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.
3. Actionable claims and money are not goods and cannot be brought and sold under this
Act.
4. Money means current money, i.e., the recognised currency in circulation in the country,
but not old and rare coins which may be treated as goods.
5. An actionable claim is what a person cannot make a present use of or enjoy, but what
can be recovered by him by means of a suit or an action.

Goods

Existing Future Contingent

Existing Goods may be:

i. Specific or Generic
ii. Ascertained or Unascertained

EXISTING GOODS
1. Existing goods are goods which are either owned or possessed by the seller at the time
of the contract.
2. Generic or unascertained goods are goods which are not specifically identified but are
indicated by description.
3. If a merchant agrees to supply a radio set from his stock of radio sets, it is a contract of
sale of unascertained goods because it is not known which set will be delivered.
4. As soon as a particular set is separated or identified for delivery and the buyer has
notice of it, the goods are ascertained and become specific goods.
FUTURE GOODS
Future goods are goods to be manufactured or produced or acquired by the seller after the
making of the contract of sale. A agrees to sell all the mangoes which will be produced in his
garden next season. This is an agreement for the sale of future goods.
CONTINGENT GOODS
1. Where there is a contract for the sale of goods, the acquisition of which by the seller
depends upon a contingency which may or may not happen, such goods are known as
contingent goods. Contingent goods fall in the class of future goods.

17.3
 2. Actual sale can take place only of specific goods and property in goods passes from the
seller to buyer at the time of the contract, provided the goods are in a deliverable state
and the contract is unconditional.
3. There can be an agreement to sell only in respect of future or contingent goods.
EFFECT OF PERISHING OF GOODS
1. Goods perishing before making a contract
i. Where in a contract of sale of specific goods, the goods without the knowledge of
the seller have, at the time of making the contract perished or become so damaged
as no longer to answer to their description in the contract, the contract is void.
ii. If the seller was aware of the destruction and still entered into the contract, he is
estopped from disputing the contract. Moreover, perishing of goods not only
includes loss by theft but also where the goods have lost their commercial value.
2. Goods perishing after agreement to sell
i. Where there is an agreement to sell specific goods, and subsequently the goods
without any fault of any party perish or are so damaged as no longer to answer to
their description in the agreement before the risk passes to the buyer, the
agreement is thereby avoided.
ii. The provision applies only to sale of specific goods. If the sale is of unascertained
goods, the perishing of the whole quantity of such goods in the possession of the
seller will not relieve him of his obligation to deliver.
Price
No sale can take place without a price. Thus, if there is no valuable consideration to support a
voluntary surrender of goods by the real owner to another person, the transaction is a gift, and
is not governed by the Sale of Goods Act. Therefore, price, which is money consideration for the
sale of goods, constitutes the essence for a contract of sale.

Example
With a view to boosting the sales HNMA Automobiles sells a motorcar to Mr. A on a trial basis
for a period of three days with a condition that if Mr. A is not satisfied with the performance of
the car, he can return back the car. However, the car was destroyed in a fire accident at the
place of Mr. A before the expiry of three days. Decide whether Mr. A is liable for the loss
suffered.
Provision:
As per Section 8 of the Sale of Goods Act, 1930, where there is an agreement to sell specific
goods, and subsequently without any fault on the part of the seller or buyer the goods perish or
become so damaged as no longer to answer to their description, the agreement is thereby
avoided. Thus, the contract becomes void.
In the given case that the subject matter of the contract i.e. Motorcar was destroyed before the
transfer of property from the seller to the buyer. As no ownership is passed on to the buyer,
the risk is also not passed on to him. The ownership and risk are still with the seller (i.e. HNMA

17.4
Automobiles).
Conclusion/Decision: Therefore, in the present case Mr. A is not liable for the loss suffered due
to the fire accident over which A has no control. HNMA Automobiles will have to bear whatever
loss that has taken place due to the fire accident
MODES OF FIXING PRICE
The price may be fixed:

May be left to
May be left to
At the time of be determined May be left to
be fixed in
contract by the by the course be fixed by
some way
parties of dealings some third
stipulated in
themselves between the party.
the contract
parties

Where the contract states that the price is to be fixed by a third-party and such third-party fails
to do so, the contract is void. But if the buyer has already taken the benefit of the goods, he
must pay a reasonable price for them. If the third-party’s failure to fix the price is due to the
fault of the seller or buyer, then that party is liable for an action for damages.
Where nothing is said by the parties regarding price, the buyer must pay a reasonable price.
CONDITIONS AND WARRANTIES
The parties are at liberty to enter into a contract with any terms they please. As a rule, before a
contract of sale is concluded, certain statements are made by the parties to each other. The
statement may amount to a stipulation, forming part of the contract or a mere expression of
opinion which is not part of the contract. If it is a statement by the seller on the reliance of
which the buyer makes the contract, it will amount to a stipulation. If it is a mere
commendation by the seller of his goods it does not amount to a stipulation and does not give
the right of action. The stipulation may either be a condition or a warranty.
CONDITIONS
If the stipulation forms the very basis of the contract or is essential to the main purpose of the
contract, it is a condition. The breach of the condition gives the aggrieved party a right to treat
the contract as repudiated. Thus, if the seller fails to fulfil a condition, the buyer may treat the
contract as repudiated, refuse the goods and, if he has already paid for them, recover the price.
He can also claim damages for the breach of contract.
WARRANTIES
If the stipulation is collateral to the main purpose of the contract, i.e., is a subsidiary promise, it
is a warranty.

17.5
The effect of a breach of a warranty is that the aggrieved party cannot repudiate the contract
but can only claim damages. Thus, if the seller does not fulfil a warranty, the buyer must accept
the goods and claim damages for breach of warranty.
When condition sinks to the level of warranty
In some cases a condition sinks or descends to the level of a warranty. The first two cases
depend upon the will of the buyer, but the third is compulsory and acts as estoppel against him.
i. A condition will become a warranty where the buyer waives the condition, or
ii. where the buyer treats the breach of condition as a breach of warranty, or
iii. Where the contract is indivisible and the buyer has accepted the goods or part
thereof, the breach of condition can only be treated as breach of warranty. The
buyer can only claim damages and cannot reject the goods or treat the contract as
repudiated.

Example
X ordered basmati rice 5 kg at 200 per kg to Y. Mr. Y delivered kolam rice 5 kgs at 120 per kg.
Now X would have cancelled the contract but he was in urgent need of rice so he accepted
kolam rice instead of basmati rice and he claimed damages from Mr. Y.
IMPLIED WARRANTIES/CONDITIONS
Even where no definite representations have been made, the law implies certain
representations as having been made which may be warranties or conditions. An express
warranty or condition does not negative an implied warranty or condition unless inconsistent
therewith.
IMPLIED WARRANTIES
1. Implied warranty of quiet possession: If the circumstances of the contract are such as
there is an implied warranty that the buyer shall have and enjoy quiet possession of the
goods.
2. Implied warranty against encumbrances: There is a further warranty that the goods are
not subject to any right in favour of a third-party, or the buyer’s possession shall not be
disturbed by reason of the existence of encumbrances. This means that if the buyer is
required to, and does discharge the amount of the encumbrance, there is breach of
warranty, and he is entitled to claim damages from the seller.

IMPLIED CONDITIONS
IMPLIED CONDITIONS AS TO TITLE
There is an implied condition that the seller, in an actual sale, has the right to sell the goods,
and, in an agreement to sell, he will have a right to sell the goods at the time when property is
to pass. As a result, if the title of the seller turns out to be defective, the buyer is entitled to
reject the goods and can recover the full price paid by him.
Question:

17.6
Jolly bought a second-hand car from Yogesh for ` 85,000 and paid for it. After Jolly had used the
car for six months he was deprived of it because Yogesh had no title to it. Can Jolly recover the
price of the car from Yogesh? Advice Jolly.
As per Section 14 of the Sale of Goods Act, 1930, in ‘contract of sale’, the seller should have a
good and valid title, so that he can transfer good and valid title to the buyer. If it turns out that
the seller’s title is defective, then the buyer can repudiate the contract.
In the given case, “implied condition as to title” is violated by Yogesh. Jolly can recover the price
of the car as well as can claim damages from Yogesh.
IMPLIED CONDITIONS UNDER A SALE BY DESCRIPTION
1. Goods must correspond with description: when there is a sale of goods by description,
there is an implied condition that the goods shall correspond with description. In a sale
by description, the buyer relies for his information on the description of the goods given
by the seller.
2. Goods must also be of merchantable quality:
i. Merchantable quality means that the goods must be such as would be acceptable to
a reasonable person, having regard to prevailing conditions. They are not
merchantable if they have defects which make them unfit for ordinary use,
ii. But, if the buyer has examined the goods, there is no implied condition as regards
defects which such examination ought to have revealed.
iii. If, however, examination by the buyer does not reveal the defect and he approves
and accepts the goods, but when put to work, the goods are found to be defective,
there is a breach of condition of merchantable quality.
iv. The buyer is given a right to examine the goods before accepting them. But a mere
opportunity without an actual examination, however, cursory, would not suffice to
deprive him of this right.
3. Condition as to wholesomeness: The provisions, (i.e., eatables) supplied must not only
answer the description, but they must also be merchantable and wholesome or sound.
4. Condition as to quality or fitness for a particular purpose: Ordinarily, in a contract of
sale, there is no implied warranty or condition as to the quality or fitness for any
particular purpose of goods supplied. But there is an implied condition that the goods
are reasonably fit for the purpose for which they are required if:
i. the buyer expressly or by implication makes known to the seller the particular
purpose for which the goods are required, so as to show that he relies on the seller’s
skill and judgement, and
ii. the goods are of a description which it is in the course of the seller’s business to
supply (whether he is the manufacturer or producer or not). There is no such
condition if the goods are bought under a patent or trade name.
5. Implied conditions under a sale by sample (Section 17)
In a contract of sale by sample:

17.7
 i. There is an implied condition that the bulk shall correspond with the sample in quality,
ii. There is another implied condition that the buyer shall have a reasonable opportunity of
comparing the bulk with the sample,
iii. It is further an implied condition of merchantability, as regards latent or hidden defects in
the goods which would not be apparent on reasonable examination of the sample.
6. IMPLIED CONDITIONS IN SALE BY SAMPLE AS WELL AS BY DESCRIPTION
In a sale by sample as well as by description, the goods supplied must correspond both with the
samples as well as with the description. Thus, in Nichol vs. Godts, there was a sale of “foreign
refined rape-oil having warranty only equal to sample”. The oil tendered was the same as the
sample, but it was not “foreign refined rape-oil” having a mixture of it and other oil. It was held
that the seller was liable, and the buyer could refuse to accept.
IMPLIED WARRANTIES
Following are the implied warranties in a contract of sale:
1. Warranty as to quiet possession: There is an implied warranty that the buyer shall have
and enjoy quiet possession of goods. If the buyer’s possession is disturbed by anyone
having superior title than that of the seller, the buyer is entitled to hold the seller liable
for breach of warranty.
2. Warranty as to freedom from encumbrances: In a contract of sale, there is an implied
warranty that the goods shall be free from any charge or encumbrance in favour of any
third party not declared or known to the buyer before or at the time when the contract
is made. But if the buyer is aware of any encumbrance on the goods at the time of
entering into the contract, he will not be entitled to any compensation from the seller
for discharging the encumbrance.
3. Warranty to disclose dangerous nature of goods: If the goods are inherently dangerous
or likely to be dangerous and the buyer is ignorant of the danger, the seller must warn
the buyer of the probable danger.
4. Warranties implied by the custom or usage of trade: An implied warranty or condition
as to quality or fitness for a particular purpose may be annexed by the usage of trade.
Imagine buying a toy from a store. You expect it to work and be safe to play with, even if they
don't tell you specifically. That expectation is like an implied warranty – the idea that things
should be okay even without saying it out loud.
DOCTRINE OF CAVEAT EMPTOR
1. This principle states that it is for the buyer to satisfy himself that the goods which he is
purchasing are of the quality which he requires. If he buys goods for a particular
purpose, he must satisfy himself that they are fit for that purpose.
2. In simple words, it is not the seller’s duty to give to the buyer the goods which are fit for
a suitable purpose of the buyer. If he makes a wrong selection, he cannot blame the
seller if the goods turn out to be defective or do not serve his purpose.

17.8
 3. The principle was applied in the case of Ward vs. Hobbs, where certain pigs were sold by
auction and no warranty was given by seller in respect of any fault or error of
description. The buyer paid the price for healthy pigs. But they were ill and all but one
died of typhoid fever. They also infected some of the buyer’s own pigs. It was held that
there was no implied condition or warranty that the pigs were of good health. It was the
buyer’s duty to satisfy himself regarding the health of the pig.
Exceptions: Section 16 lays down the following exceptions to the doctrine of Caveat Emptor:
i. Where the seller makes a false representation and the buyer relies on it.
ii. When the seller actively conceals a defect in the goods which is not visible on a
reasonable examination of the same.
iii. When the buyer, relying upon the skill and judgement of the seller, has expressly or
impliedly communicated to him the purpose for which the goods are required.
iv. Where goods are bought by description from a seller who deals in goods of that
description.
POSITION OF THE DOCTRINE OF CAVEAT EMPTOR AS ENSHRINED IN THE
PRESENT ERA
With the enactment of Consumer Protection Act, 2019, the legislature corroborated the rights
of buyers as against the misleading and delusive practices of the vendors. It has been
established that goods being transacted in large numbers and online purchases are two of the
most crucial reasons behind why Caveat Emptor in isolation will not be feasible for modern day
contracts. However, this does not mean that Caveat Emptor should be eradicated in absolute
sense. A blend of both the doctrines should be applied to ensure that the blanket immunity
which the doctrine of Caveat Emptor places on the sellers is being restricted with the help of
Caveat Venditor which confers accountability on sellers as well.
EFFECTS OF CONTRACTS
PASSING OF PROPERTY OR TRANSFER OF OWNERSHIP
The sole purpose of a sale is the transfer of ownership of goods from the seller to the buyer.
It is important to know the precise moment of time at which the property in the goods passes
from the seller to the buyer for the following reasons:
1. The general rule is that risk follows the ownership, whether the delivery has been made
or not. If the goods are lost or damaged by accident or otherwise, then, subject to
certain exceptions, the loss falls on the owner of the goods at the time they are lost or
damaged.
2. When there is a danger of the goods being damaged by the action of third parties, it is
generally the owner who can take action.
3. The rights of third parties may depend upon the passing of the property if the buyer
resells the goods to a third-party, the third-party will only obtain a good title if the
property in the goods has passed to the buyer before or at the time of the resale.

17.9
 Similarly, if the seller, in breach of his contract with the buyer, attempts to sell the
goods to a third party in the goods, has not passed to the buyer, e.g., where there is
only an agreement to sell.
4. In case of insolvency of either the seller or the buyer, it is necessary to know whether
the goods can be taken over by the official assignee or the official receiver. It will
depend upon whether the property in the goods was with the party adjudged insolvent.
Thus in this context, ownership and possession are two distinct concepts and these two
can at times remain separately with two different persons.
PASSING OF PROPERTY IN SPECIFIC GOODS
In a sale of specific or ascertained goods, the property in them passes to the buyer as and when
the parties intended to pass. The intention must be gathered from the terms of the contract,
the conduct of the parties and the circumstances of the case.
1. Where there is an unconditional contract for the sale of specific goods in a deliverable
state, the property in the goods passes to the buyer when the contract is made The fact
that the time of delivery or the time of payment is postponed does not prevent the
property from passing at once.
2. i. Where there is a contract for the sale of specific goods not in a deliverable state, i.e.,
the seller has to do something to the goods to put them in a deliverable state, the
property does not pass until that thing is done and the buyer has notice of it.
ii. A certain quantity of oil was brought. The oil was to be filled into casks by the seller
and then taken away by the buyer. Some casks were filled in the presence of buyer but,
before the remainder could be filled, a fire broke out and the entire quantity of oil was
destroyed, Held, the buyer must bear the loss of the oil which was put into the casks
(i.e., put in deliverable state) and the seller must bear the loss of the remainder.
3. Where there is a sale of specific goods in a deliverable state, but the seller is bound to
weigh, measure, test or do something with reference to the goods for the purpose of
ascertaining the price, the property to the goods for the purpose of ascertaining the
price, does not pass until such act or thing is done and the buyer has notice of it.
4. When goods are delivered to the buyer “on approval” or “on sale of return” or other
similar terms the property therein passes to the buyer:
i. when he signifies his approval or acceptance to the seller, or does any other act
adopting the transaction,
ii. if he does not signify his approval or acceptance but retains the goods without giving
notice of rejection, in such a case:
a. if a time has been fixed for the return of the goods, on expiration of such time, and
b. if no time has been fixed, on the expiration of a reasonable time.
OWNERSHIP IN UNASCERTAINED GOODS

17.10
The property in unascertained or future goods does not pass until the goods are ascertained.
Unascertained goods are goods defined by description only, for example, 100 quintals of wheat;
and not goods identified and agreed upon when the contract is made. The following rules are
applicable for ascertaining the intention of the parties in regard to passing of property in
respect of such goods:
1. The property in unascertained or future goods sold by description passes to the buyer
when goods of that description and in a deliverable state are unconditionally
appropriated to the contract, either by the seller with the assent of the buyer or by the
buyer with the assent of the seller. Such assent may be expressed or implied and may be
given either before or after the appropriation is made.
2. If there is a sale of a quantity of goods out of a large quantity, for example, 50 quintals
of rice out of a heap in B’s godown, the property will pass on the appropriation of the
specified quantity by one party with the assent of the other.
3. Delivery by the seller of the goods to a carrier or other buyer for the purpose of
transmission to the buyer in pursuance of the contact is an appropriation sufficient to
pass the property in the goods.
4. The property in goods, whether specific or unascertained, does not pass if the seller
reserves the right of disposal of the goods. Apart from an express reservation of the
right of disposal, the seller is deemed to reserve the right of disposal in the following
two cases:
i. where goods are shipped or delivered to a railway administration for carriage by
railway and by the bill of lading or railway receipt, the goods are deliverable to the
order of the seller or his agent.
ii. when the seller sends the bill of exchange for the price of the goods to the buyer for
this acceptance, together with the bill of lading, the property in the goods does not
pass to the buyer unless he accepts the bill of exchange.
PASSING OF RISK
1. The general rule is that goods remain at the seller’s risk until the ownership is
transferred to the buyer. After the ownership has passed to the buyer, the goods are at
the buyer’s risk whether the delivery has been made or not.
For example, ‘A’ buys goods of ‘B’ and property has passed from ‘B’ to ‘A’, but the goods
remain in ‘B’s warehouse and the price is unpaid. Before delivery, ‘B’s warehouse is burnt
down for no fault of ‘B’ and the goods are destroyed. ‘A’ must pay ‘B’ the price of the goods,
as he was the owner. The rule is resperit domino- the loss falls on the owner.
2. But the parties may agree that risk will pass at the time different from the time when
ownership passed. For example, the seller may agree to be responsible for the goods
even after the ownership is passed to the buyer or vice versa.
In Consolidated Coffee Ltd. v. Coffee Board, one of the terms adopted by coffee board for

17.11
auction of coffee was the property in the coffee knocked down to a bidder would not pass
until the payment of price and in the meantime the goods would remain with the seller but
at the risk of the buyer, In such cases, risk and property passes on at different stages.
3. It was further held in the same case that the buyer was at fault in delaying delivery
unreasonably and therefore on that ground also he was liable for the loss, because such
loss would not have arisen but for such delay.
4. Thus, where delivery has been delayed through the fault of either the buyer or the
seller, in such a case, the goods are at the risk of the party at fault as regards any loss
which might not have occurred but for such fault.
TRANSFER OF TITLE BY PERSON NOT THE OWNER
The general rule is that only the owner of goods can sell the goods. Conversely, the sale of an
article by a person who is not or who has not the authority of the owner, gives no title to the
buyer. The rule is expressed by the maxim; “Nemo Dat Quod Non Habet” i.e. no one can pass a
better title than he himself has. As applied to the sale of goods, the rule means that a seller of
goods cannot give a better title to the buyer than he himself possess. Thus, even a bona fide
buyer who buys stolen goods from a thief or from a transferee from such a thief can get no
valid title to them, since the thief has no title, nor could he give one to any transferee.
EXCEPTION TO THE GENERAL RULE
1. Sale by a mercantile agent: A buyer will get a good title if he buys in good faith from a
mercantile agent who is in possession either of the goods or documents of title to the
goods with the consent of the owner, and who sells the goods in the ordinary course of
his business.
2. Sale by a co-owner: A buyer who buys in good faith from one of the several joint
owners who is in sole possession of the goods with the permission of his co-owners will
get good title to the goods.
3. Sale by a person in possession under a voidable contract: A buyer buys in good faith
from a person in possession of goods under a contract which is voidable, but has not
been rescinded at the time of the sale.
Example: X purchases jewellery from Y, by committing fraud. But before Y terminate the
contract,’ X sells the jewellery to Z who buys it in good faith and without notice of X’s
defective title. Z gets a good title.
4. Sale by seller in possession after sale: Where a seller, after having sold the goods,
continues or is in possession of the goods or of the documents of title to the goods and
again sells them by himself or through his mercantile agent to a person who buys in
good faith and without notice of the previous sale, such a buyer gets a good title to the
goods.
Example: B buys a mobile from S which he agrees to deliver to B the next day. S sells the
same mobile to T who pays a higher price than B. T buys in good faith and without notice

17.12
of the previous sale. T gets a good title.
5. Sale by buyer in possession: If a person has brought with the seller’s consent,
possession of the goods or of the documents of title, any sale by him or by his
mercantile agent to a buyer who takes in good faith without notice of any lien or other
claim of the original seller against the goods, will give a good title to the buyer. In any of
the above cases, if the transfer is by way of pledge or pawn only, it will be valid as a
pledge or pawn.
6. Estoppel: If the true owner stands by and allows an innocent buyer to pay over money
to a third-party, who professes to have the right to sell an article, the true owner will be
estopped from denying the third- party’s right to sell.
7. Sale by an unpaid seller: Where an unpaid seller has exercised his right of lien or
stoppage in transit and is in possession of the goods, he may resell them and the second
buyer will get absolute right to the goods.
8. Sale by person under other laws: A pawnee, on default of the pawnee to repay, has a
right to sell the goods, pawned and the buyer gets a good title to the goods. The finder
of lost goods can also sell under certain circumstances. The Official Assignee or Official
Receiver, Liquidator, Officers of Court selling under a decree, Executors, and
Administrators, all these persons are not owners, but they can convey better title than
they have.
DELIVERY
Delivery is the voluntary transfer of possession from one person to another. Delivery may be
actual, constructive or symbolic. Actual or physical delivery takes place where the goods are
handed over by the seller to the buyer or his agent authorised to take possession of the goods.
Constructive delivery takes place when the person in possession of the goods acknowledges
that he holds the goods on behalf of and at the disposal of the buyer. Symbolic delivery is made
by indicating or giving a symbol. Here the goods themselves are not delivered, but the “means
of obtaining possession” of goods is delivered.
RULES AS TO DELIVERY
The following rules apply regarding delivery of goods:
1. Delivery should have the effect of putting the buyer in possession.
2. The seller must deliver the goods according to the contract.
3. The seller is to deliver the goods when the buyer applies for delivery, it is the duty of the
buyer to claim delivery.
4. Where the goods at the time of the sale are in the possession of a third person, there
will be delivery only when that person acknowledges to the buyer that he holds the
goods on his behalf.
5. The seller should tender delivery so that the buyer can take the goods. It is no duty of
the seller to send or carry the goods to the buyer unless the contract so provides. But

17.13
 the goods must be in a deliverable state at the time of delivery or tender of delivery. If
by the contract the seller is bound to send the goods to the buyer, but no time is fixed,
the seller is bound to send them within a reasonable time.
6. The place of delivery is usually stated in the contract. Where it is so stated, the goods
must be delivered at the specified place during working hours on a working day. Where
no place is mentioned, the goods are to be delivered at a place at which they happen to
be at the time of the contract of sale and if not then in existence they are to be
delivered at the place at which they are manufactured or produced.
7. The seller has to bear the cost of delivery unless the contract otherwise provides.
8. If the goods are to be delivered at a place other than where they are, the risk of
deterioration in transit will, unless otherwise agreed, be borne by the buyer.
9. Unless otherwise agreed, the buyer is not bound to accept delivery in instalments.
UNPAID SELLER
Who is an unpaid seller?
The seller of goods is deemed to be unpaid seller:
1. When the whole of the price has not been paid or tendered, or
2. When a conditional payment was made by a bill of exchange or other negotiable
instrument, and the instrument has been dishonoured.
Think about this: a person sold stuff, didn't get paid, and now keeps it, looking for fairness or
another buyer. That's the story of an unpaid seller.
RIGHTS OF AN UNPAID SELLER AGAINST THE GOODS
An unpaid seller’s right against the goods are:

A Lien or right of retention

The right of stoppage in transit

Right of Resale

The right to withhold delivery

1. Right of Lien: An unpaid seller in possession of goods sold, may exercise his lien on the
goods, i.e., keep the goods in his possession and refuse to deliver them to the buyer
until the fulfilment or tender of the price in cases where:
i. the goods have been sold without stipulation as to credit, or
ii. the goods have been sold on credit, but the term of credit has expired, or
iii. the buyer becomes insolvent

17.14
The lien depends on physical possession. The seller’s lien is possessory lien, so that it can be
exercised only so long as the seller is in possession of the goods. It can only be exercised for
the non-payment of the price and not for any other charges.
A lien is lost:
i. When the seller delivers the goods to a carrier or other bailee for the purpose of
transmission to the buyer, without reserving the right of disposal of the goods,
ii. When the buyer or his agent lawfully obtains possession of the goods,
iii. By waiver of his lien by the unpaid seller.
2. Stoppage in transit: The right of stoppage in transit is a right of stopping the goods
while they are in transit, resuming possession of them and retaining possession until
payment of the price. The right to stop goods is available to an unpaid seller:
i. when the buyer becomes insolvent, and
ii. the goods are in transit.
The buyer is insolvent if he has ceased to pay his debts in the ordinary course of business, or
cannot pay his debts as they become due. It is not necessary that he has actually been
declared insolvent by the court.
The goods are in transit from the time they are delivered to a carrier for the purpose of
transmission to the buyer and until the buyer takes delivery of them. The transit comes to
an end in the following cases:
i. If the buyer obtains delivery before the arrival of the goods at their destination,
ii. If, after the arrival of the goods at their destination, the carrier acknowledges to the
buyer that he holds the goods on his behalf, even if further destination of the goods
is indicated by the buyer,
iii. If the carrier wrongfully refuses to deliver the goods to the buyer.
If the goods are rejected by the buyer and the carrier or other bailee holds them, the transit
will be deemed to continue even if the seller has refused to receive them back.
The right to stop in transit may be exercised by the unpaid seller either by taking actual
possession of the goods or by giving notice of the seller’s claim to the carrier or other
person having control of the goods. On notice being given to the carrier, he must redeliver
the goods to the seller who must pay the expenses of the redelivery.
The seller’s right of lien or stoppage in transit is not affected by any sale on the part of the
buyer unless the seller has assented to it. A transfer, however, of the bill of lading or other
document of seller to a bona fide purchaser for value is valid against the seller’s right.
3. Right of re-sale: The unpaid seller may re-sell:
i. where the goods are perishable,
ii. where the right is expressly reserved in the contract

17.15
 iii. where in exercise of right of lien or stoppage in transit, the seller gives notice to the
buyer of his intention to re-sell, and the buyer, does not pay or tender the price
within a reasonable time.
If on a re-sale, there is a deficiency between the price due and amount realised, he is
entitled to recover it from the buyer. If there is a surplus, he can keep it. He will not have
these rights if he has not given any notice and he will have to pay the buyer profit, if any, on
the resale.
4. Rights to withhold delivery: If the property in the goods has passed, the unpaid seller
has right as described above. If, however, the property has not passed, the unpaid seller
has a right of withholding delivery similar to and co-extensive with his rights of lien and
stoppage in transit.
RIGHTS OF AN UNPAID SELLER AGAINST THE BUYER
An unpaid seller may sue the buyer for the price of the goods in case of breach of contract
where the property in the goods has passed to the buyer or he has wrongfully refused to pay
the price according to the terms of the contract. The seller may sue the buyer even if the
property in the goods has not passed where the price is payable on a certain day.
The seller may sue the buyer for damages or breach of contract where the buyer wrongfully
neglects or refuses to accept and pay for the goods.
Thus an unpaid sellers rights against the buyer personally are:
i. a suit for the price.
ii. a suit for damages.
AUCTION SALES
1. A sale by auction is a public sale where goods are offered to be taken by bidders. It is a
proceeding at which people are invited to compete for the purchase of property by
successive offer of advancing sums.
2. Where goods are put up for sale in lots, each, lot is prima facie deemed to be the
subject of a separate contract of sale. The sale is complete when the auctioneer
announces its completion by the fall of the hammer or in other customary manner. Until
such announcement is made, any bidder may retract his bid.
3. A right to bid may be reserved expressly by or on behalf of the seller. Where such right
is expressly so reserved, the seller or any other person on his behalf may bid at the
auction.
4. Where the sale is not notified to be subject to a right to bid on behalf of the seller, it
shall not be lawful for the seller to bid himself or to employ any person to bid at such
sale, or for the auctioneer knowingly to take any bid from the seller or any such person.
5. Any sale in contravention of this rule may be treated as fraudulent by the buyer. The
sale may be notified to be subject to a reserved price. Where there is such notification,
every bid is a conditional offer subject to its being up to the reserve price.

17.16
6. Where an auctioneer inadvertently knocks down to a bidder who has bid less than the
reserved price, there is no contract of sale. If the seller makes use of pretended bidding
to raise the price, the sale is voidable at the option of the buyer.

17.17
 CHAPTER 18 - LAW RELATING TO NEGOTIABLE
INSTRUMENTS
DEFINITION OF A NEGOTIABLE INSTRUMENT
The term “negotiable instrument” means a document transferable from one person to another.
However the Act has not defined the term. It merely says that “A negotiable instrument” means
a promissory note, bill of exchange or cheque payable either to order or to bearer.
EFFECT OF NEGOTIABILITY
The general principle of law relating to transfer of property is that no one can pass a better title
than he himself has (nemodat quad non-habet). The exceptions to this general rule arise by
virtue of statute or by a custom. A negotiable instrument is one such exception which is
originally a creation of mercantile custom. Thus a bona fide transferee of negotiable instrument
for consideration without notice of any defect of title, acquires the instrument free of any
defect, i.e., he acquires a better title than that of the transferor.
IMPORTANT CHARACTERISTICS OF NEGOTIABLE INSTRUMENTS
Following are the important characteristics of negotiable instruments:

The holder of the instrument is presumed to be the owner of the

property contained in it.

They are freely transferable.

A holder in due course gets the instrument free from all defects of
title of any previous holder.

The holder in due course is entitled to sue on the instrument on his

own name

The instrument is transferable til maturity and in case of cheques till

it becomes stale (on the expiry of 6 months from the date of issue)

Certain equal presumptions are applicable to all negotiable

instruments unless the contrary is proved

CLASSIFICATION OF NEGOTIABLE INSTRUMENTS

The negotiable instruments may be classified as under:

18.1
 Incohate or
Bearer Order Inland Foreign Demand Time Ambiguous
incomplete
Instruments Instruments Instruments Instruments Instruments Instruments Instruments
Instruments

1. Bearer Instruments
A promissory note, bill of exchange or cheque is payable to bearer when
i. it is expressed to be so payable, or
ii. the only or last endorsement on the instrument is an endorsement in blank. A
person who is a holder of a bearer instrument can obtain the payment of the
instrument.
2. Order Instruments
A promissory note, bill of exchange or cheque is payable to order
i. which is expressed to be so payable, or
ii. which is expressed to be payable to a particular person, and does not contain any
words prohibiting transfer or indicating an intention that it shall not be transferable.
3. Inland Instruments
A promissory note, bill of exchange or cheque drawn or made in India, and made payable,
or drawn upon any person, resident in India shall be deemed to be an inland instrument.
Since a promissory note is not drawn an inland instrument is one which is either:
i. drawn and made payable in India, or
ii. drawn in India upon some persons resident therein, even though it is made payable
in a foreign country.
4. Foreign Instruments
An instrument which is not an inland instrument, is deemed to be a foreign instrument. The
essentials of a foreign instrument include that:
i. it must be drawn outside India and made payable outside or inside India, or
ii. it must be drawn in India and made payable outside India and drawn on a person
resident outside India.
5. Demand Instruments
A promissory note or a bill of exchange in which no time for payment is specified is an
instrument payable on demand.
6. Time Instruments
Time instruments are those which are payable at some time in the future. Therefore, a
promissory note or a bill of exchange payable after a fixed period, or after sight, or on
specified day, or on the happening of an event which is certain to happen, is known as a

18.2
 time instrument. The expression “after sight” in a promissory note means that the payment
cannot be demanded on it unless it has been shown to the maker. In the case of bill of
exchange, the expression “after sight” means after acceptance, or after noting for non-
acceptance or after protest for non- acceptance.
AMBIGUOUS INSTRUMENTS
1. An instrument, which in form is such that it may either be treated by the holder as a bill
or as a note, is an ambiguous instrument.
2. Where in a bill, the drawer and the drawee are the same person or where the drawee is
a fictitious person or a person incompetent to contract, the holder may treat the
instrument, at his option, either as a bill of exchange or as a promissory note.
3. Bill drawn to or to the order of the drawee or by an agent on his principal, or by one
branch of a bank on another or by the direction of a company or their cashier are also
ambiguous instruments.
4. A promissory note addressed to a third person may be treated as a bill by such person
by accepting it, while a bill not addressed to any one may be treated as a note.
5. But where the drawer and payee are the same, e.g., where A draws a bill payable to A’s
order, it is not an ambiguous instrument and cannot be treated as a promissory note.
6. Once an instrument has been treated either as a bill or as a note, it cannot be treated
differently afterwards.
INCHOATE OR INCOMPLETE INSTRUMENT
1. When one person signs and delivers to another a paper stamped in accordance with the
law relating to negotiable instruments, and either wholly blank or having written
thereon an incomplete negotiable instrument, he thereby gives prima facie authority to
the holder thereof to make or complete, as the case may be, upon it a negotiable
instrument, for any amount specified therein, and not exceeding the amount, covered
by the stamp. Such an instrument is called an inchoate instrument.
2. The person so signing shall be liable upon such instrument, in the capacity in which he
signs the same, to any holder in due course for such amount, provided that no person
other than a holder in due course shall recover from the person delivering the
instrument anything in excess of the amount intended by him to be paid thereon.
3. The authority to fill up a blank or incomplete instrument may be exercised by any
“holder” and not only the first holder to whom the instrument was delivered. The
person signing and delivering the paper is liable both to a “holder” and a “holder-in-due-
course”. But there is a difference in their respective rights.
4. A “holder” can recover only what the person signing and delivering the paper agreed to
pay under the instrument, while a “holder-in-due-course” can recover the whole
amount made payable by the instrument provided that it is covered by the stamp, even
though the amount authorised was smaller.

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KINDS OF NEGOTIABLE INSTRUMENTS
1. PROMISSORY NOTES
A “promissory note” is an instrument in writing (not being a bank note or a currency
note) containing an unconditional undertaking, signed by the maker to pay a certain
sum of money to, or to the order of, a certain person, or only to bearer of the
instrument.
Parties to a Promissory Note:
A promissory note has the following parties:
i. The maker: the person who makes or executes the note promising to pay the
amount stated therein.
ii. The payee: one to whom the note is payable.
iii. The holder: is either the payee or some other person to whom he may have
endorsed the note.
iv. The endorser.
v. The endorsee.
Essentials of a Promissory Note:
An instrument must possess the following essentials:
1. It must be in writing.
2. It must contain an express promise or clear undertaking to pay.
3. The promise or undertaking to pay must be unconditional.
4. The maker must sign the promissory note in token of an undertaking to pay to the payee
or his order.
5. The maker must be a certain person, i.e., the note must show clearly who the person is
engaging himself to pay.
6. The payee must be certain.
7. The sum payable must be certain.
8. Payment must be in legal money of the country.
9. It must be properly stamped in accordance with the provisions of the Indian Stamp Act,
1899.
10. It must contain the name of place, number and the date on which it is made.
2. BILLS OF EXCHANGE
A “bill of exchange” is an instrument in writing containing an unconditional order,
signed by the maker, directing a certain person to pay a certain sum of money only to or
to the order of, a certain person or to the bearer of the instument.
Parties to bills of exchange
The following are parties to a bill of exchange:
1. The Drawer: the person who draws the bill.
2. The Drawee: the person on whom the bill is drawn.

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 3. The Acceptor: one who accepts the bill. Generally, the drawee is the acceptor but a
stranger may accept it on behalf of the drawee.
4. The payee: one to whom the sum stated in the bill is payable, either the drawer or any
other person may be the payee.
5. The holder: is either the original payee or any other person to whom, the payee has
endorsed the bill. In case of a bearer bill, the bearer is the holder.
6. The endorser: when the holder endorses the bill to anyone else he becomes the
endorser.
7. The endorsee: is the person to whom the bill is endorsed.
8. Drawee in case of need: Besides the above parties, another person called the “drawee
in case of need”, may be introduced at the option of the drawer. The name of such a
person may be inserted either by the drawer or by any endorser in order that resort
may be had to him in case of need, i.e., when the bill is dishonoured by either non-
acceptance or non-payment.
9. Acceptor for honour: Further, any person may voluntarily become a party to a bill as
acceptor. A person, who on the refusal by the original drawee to accept the bill or to
furnish better security, when demanded by the notary, accept the bill supra protest in
order to safeguard the honour of the drawer or any endorser, is called the acceptor for
honour.
Essentials of a Bill of Exchange:
i. It must be in writing.
ii. It must contain an unconditional order to pay money only and not merely a request.
iii. It must be signed by the drawer.
iv. The parties must be certain.
v. The sum payable must also be certain.
vi. It must comply with other formalities e.g. stamps, date, etc.
Distinction between Bill of Exchange and Promissory Note
1. A promissory note is a two-party instrument, with a maker (debtor) and a payee
(creditor). In a bill there are three parties—drawer, drawee and payee.
2. A note cannot be made payable to the maker himself, while in a bill, the drawer and
payee may be the same person.
3. A note contains an unconditional promise by the maker to pay to the payee or his order,
however in a bill there is an unconditional order to the drawee to pay according to the
directions of the drawer.
4. A note is presented for payment without any prior acceptance by the maker. A bill
payable after sight must be accepted by the drawee or someone else on his behalf
before it can be presented for payment.
5. The liability of the maker of a pro-note is primary and absolute, but the liability of the
drawer of a bill is secondary and conditional.

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 6. Foreign bill must be protested for dishonour but no such protest is necessary in the case
of a note.
7. When a bill is dishonoured, due notice of dishonour is to be given by the holder to the
drawer and the intermediate endorsee, but no such notice need to be given in the case
of a note.
8. A bill can be drawn payable to bearer provided it is not payable on demand. A
promissory note cannot be made payable to bearer.
INLAND BILLS
A bill of exchange is an inland instrument if it is:
1. Drawn and payable in India, or
2. Drawn in India upon any person who is a resident in India, even though it is made
payable in a foreign country. But a promissory note to be an inland should be drawn and
payable in India, as it has no drawee.
Two essential conditions to make an inland instrument are:
i. the instrument must have been drawn or made in India, and
ii. the instrument must be payable in India or the drawee must be in India.
FOREIGN BILLS
All bills which are not inland are deemed to be foreign bills. Normally foreign bills are drawn in
sets of three copies.
TRADE BILL
A bill drawn and accepted for a genuine trade transaction is termed as a trade bill. When a
trader sells goods on credit, he may make use of a bill of exchange.
Example :
A sells goods worth Rs. 1,000 to B and allows him 90 days’ time to pay the price, A will draw a
bill of exchange on B, on the following terms: “Ninety days after date pay A or order, the sum of
one thousand rupees only for value received”. A will sign the bill and then present it to B for
acceptance. This is necessary because, until a bill is accepted by the drawee, nobody has either
rights or obligations. If B agrees to obey the order of A, he will accept the bill by writing across
its face the word “accepted” and signing his name underneath and then delivering the bill to
the holder. B, the drawee, now becomes the acceptor of the bill and liable to its holders. Such a
bill is a genuine trade bill.

ACCOMMODATION BILL
1. All bills are not genuine trade bills, as they are often drawn for accommodating a party.
2. An accommodation bill is a bill in which a person lends or gives his name to oblige a
friend or some person whom he knows or otherwise.
3. In other words, a bill which is drawn, accepted or endorsed without consideration is
called an accommodation bill.

18.6
 4. The party lending his name to oblige the other party is known as the accommodating or
accommodation party, and the party so obliged is called the party accommodated.
5. An accommodation party is not liable on the instrument to the party accommodated
because as between them there was no consideration and the instrument was merely to
help.
6. But the accommodation party is liable to a holder for value, who takes the
accommodation bill for value, though such holder may not be a holder in due course.
7. Thus, A may be in need of money and approach his friends B and C who, instead of
lending the money directly, propose to draw an “Accommodation Bill” in his favour.
BILLS IN SETS
Foreign bills are usually drawn in sets to avoid the danger of loss. They are drawn in sets of
three, each of which is called “Via” and as soon as any one of them is paid, the others become
inoperative. The stamp is affixed only on one part and one part is required to be accepted. But
if the drawer mistakenly accepts all the parts of the same bill, he will be liable on each part
accepted as if it were a separate bill.
BANK DRAFT
A bill of exchange is also sometimes spoken of as a draft. It is called as a bank draft when a bill
of exchange drawn by one bank on another bank, or by itself on its own branch, and is a
negotiable instrument. It is very much like the cheque with three points of distinction between
the two. A bank draft can be drawn only by a bank on another bank, usually its own branch. It
cannot so easily be counter-manded. It cannot be made payable to bearer.
CHEQUES
The definition of cheque to include the electronic image of a truncated cheque and a cheque in
the electronic form. A ‘cheque’ is a bill of exchange drawn on a specified banker and not
expressed to be payable otherwise than on demand and it includes the electronic image of a
truncated cheque and a cheque in the electronic form.
As per explanation appended to the section, the expression:
“A cheque in the electronic form” means a cheque drawn in electronic form by using any
computer resource and signed in a secure system with digital signature and asymmetric crypto
system or with electronic signature, as the case may be.
Simply stated, a cheque is a bill of exchange drawn on a bank payable always on demand. Thus,
a cheque is a bill of exchange with two additional qualifications, namely:
1. It is always drawn on a banker, and
2. It is always payable on demand.
3. A cheque being a species of a bill of exchange, must satisfy all the requirements of a bill,
it does not, however, require acceptance.
Parties to a cheque
The drawer: The person who draws the cheque.

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The drawee: The banker of the drawer on whom the cheque is drawn.
The payee, holder, endorser and endorsee: same as in the case of a bill.

ESSENTIALS OF A CHEQUE
1. It is always drawn on a banker.
2. It is always payable on demand.
3. A cheque can be drawn on bank where the drawer has an account.
4. Cheques may be payable to the drawer himself.
5. The banker is liable only to the drawer.
6. A cheque is usually valid for fix months.
7. No Stamp is required to be affixed on cheques.
Distinction between Cheques and Bills of Exchange
1. A cheque is a bill of exchange and always drawn on a banker, while a bill may be drawn
on any one, including banker.
2. A cheque can only be drawn payable on demand, a bill may be drawn payable on
demand, or on the expiry of a specified period after sight or date.
3. A bill payable after sight must be accepted before payment can be demanded, a cheque
does not require acceptance and is intended for immediate payment.
4. A grace of 3 days is allowed in the case of time bills, while no grace is given in the case
of a cheque, for payment.
5. The drawer of a bill is discharged, if it is not presented for payment, but the drawer of a
cheque is discharged only if he suffers any damage by delay in presentment for
payment.
6. Notice of the dishonour of a bill is necessary, but not in the case of a cheque.
7. A cheque may be crossed, but not a bill.
A cheque is a bill of exchange drawn on a specified banker and always payable on demand. A
cheque is always drawn on a particular banker and is always payable on demand. Consequently,
all cheques are bills of exchange but all bills are not cheques.

BANKER
A banker is one who does banking business. Banking business means, “accepting for the
purpose of lending or investment, of deposits of money from the public, repayable on demand
or otherwise and withdrawable by cheque, draft or otherwise.”
CUSTOMER
The special features of the legal relationship between the banker and the customer may be
termed as the obligations and rights of the banker. These are:
1. Obligation to honour cheques of the customers.
2. Obligation to collect cheques and drafts on behalf of the customers.
3. Obligation to keep proper record of transactions with the customer.

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 4. Obligation to comply with the express standing instructions of the customer.
5. Obligation not to disclose the state of customer’s account to anyone else.
6. Obligation to give reasonable notice to the customer, if the banker wishes to close the
account.
7. Right of lien over any goods and securities bailed to him for a general balance of
account.
8. Right of set off and right of appropriation.
9. Right to claim incidental charges and interest as per rules and regulations of the bank.

LIABILITY OF A BANKER
If a banker, without justification, fails to honour his customer’s cheques, he is liable to
compensate the drawer for any loss or damage suffered by him. But the payee or holder of the
cheque has no cause of action against the banker as the obligation to honour a cheque is only
towards the drawer.
The banker must also maintain proper and accurate accounts of credits and debits. He must
honour a cheque presented in due course.

When Banker must Refuse Payment

1. When a customer countermands payment i.e., where or when a customer, after issuing
a cheque issues instructions not to honour it, the banker must not pay it.
2. When the banker receives notice of customer’s death.
3. When customer has been adjudged an insolvent.
4. When the banker receives notice of customer’s insanity.
5. When the customer has given notice of assignment of the credit balance of his account.
6. When the holder’s title is defective and the banker comes to know of it.
7. When the customer has given notice for closing his account.
WHEN BANKER MAY REFUSE PAYMENT
1. When the cheque is post-dated.
2. When the banker has no sufficient funds of the drawer with him and there is no
communication between the bank and the customer to honour the cheque.
3. When the cheque is of doubtful legality.
4. When the cheque is not duly presented, e.g., it is presented after banking hours.
5. When the cheque on the face of it is irregular, ambiguous or otherwise materially
altered.
6. When the cheque is presented at a branch where the customer has no account.
7. When some persons have joint account and the cheque is not signed jointly by all or by
the survivors of them.

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 8. When the cheque has been allowed to become stale, i.e., it has not been presented
within six months of the date mentioned on it.
PROTECTION OF PAYING BANKER
1. Where a cheque payable to order purports to be endorsed by or on behalf of the payee
the banker is discharged by payment in due course.
2. He can debit the account of the customer with the amount even though the
endorsement turns out subsequently to have been forged, or the agent of the payee
without authority endorsed it on behalf of the payee.
3. It would be seen that the payee includes endorsee. This protection is granted because a
banker cannot be expected to know the signatures of all the persons in the world. He is
only bound to know the signatures of his own customers.
4. Therefore, the forgery of drawer’s signature will not ordinarily protect the banker but
even in this case, the banker may debit the account of the customer, if it can show that
the forgery was intimately connected with the negligence of the customer and was the
proximate cause of loss.
PAYMENT IN DUE COURSE
A payment will be a payment in due course if:
i. It is in accordance with the apparent tenor of the instrument, i.e., according to what
appears on the face of the instrument to be the intention of the parties;
ii. It is made in good faith and without negligence, and under circumstances which do
not afford a ground for believing that the person to whom it is made is not entitled
to receive the amount;
iii. It is made to the person in possession of the instrument who is entitled as holder to
receive payment;
iv. Payment is made under circumstances which do not afford a reasonable ground
believing that he is not entitled to receive payment of the amount mentioned in the
instrument; and
v. Payment is made in money and money only.

Collecting Banker
1. Collecting Banker is one who collects the proceeds of a cheque for a customer. Although
a banker collects the proceeds of a cheque for a customer purely as a matter of service,
yet the Negotiable Instruments Act, 1881 indirectly imposes statutory obligation,
statutory in nature.
2. This is evident from Section 126 of the Act which provides that a cheque bearing a
“general crossing” shall not be paid to anyone other than banker and a cheque which is
“specially crossed” shall not be paid to a person other than the banker to whom it is
crossed.

18.10
 3. Thus, a paying banker must pay a generally crossed cheque only to a banker thereby
meaning that it should be collected by another banker.
4. While so collecting the cheques for a customer, it is quite possible that the banker
collects for a customer, proceeds of a cheque to which the customer had no title in fact.
In such cases, the true owner may sue the collecting banker for “conversion”.
5. At the same time, it cannot be expected of a banker to know or to ensure that all the
signatures appearing in endorsements on the reverse of the cheque are genuine.
6. The banker is expected to be known only the signatures of his customer. A customer to
whom a cheque has been endorsed, would request his banker to collect a cheque.
7. In the event of the endorser’s signature being proved to be forged at later date, the
banker who collected the proceeds should not be held liable for the simple reason that
he has merely collected the proceeds of a cheque.
8. Section 131 of the Negotiable Instruments Act affords statutory protection in such a
case where the customer’s title to the cheque which the banker has collected has been
questioned.
It reads as follows:
“A banker who has in good faith and without negligence received payment for a customer of a
cheque crossed generally or specially to himself shall not, in case the title to the cheque proves
defective, incur any liability to the true owner of the cheque by reason of only having received
such payment.
The requisites of claiming protection under Section 131 are as follows:
1. The collecting banker should have acted in good faith.
2. The banker should have collected a crossed cheque.
3. The proceeds should have been collected for a customer.
4. That the collecting banker has only acted as an agent of the customer.
OVERDUE, STALE OR OUT-OF-DATE CHEQUES
A cheque is overdue or becomes statute-barred after three years from its due date of issue. A
holder cannot sue on the cheque after that time. Apart from this provision, the holder of a
cheque is required to present it for payment within a reasonable time, as a cheque is not meant
for indefinite circulation. In India, a cheque, which has been in circulation for more than six
months, is regarded by bankers as stale.
Crossing of Cheques
A cheque is either “open” or “crossed”. An open cheque can be presented by the payee to the
paying banker and is paid over the counter. A crossed cheque cannot be paid across the
counter but must be collected through a banker.
A crossing is a direction to the paying banker to pay the money generally to a banker or to a
particular banker, and not to pay otherwise.
MODES OF CROSSING
There are two types of crossing which may be used on cheque, namely:

18.11
 i. General, and
ii. Special
1. It is general crossing where a cheque bears across its face an addition of two parallel
transverse lines and/ or the addition of the words “and Co.” between them, or addition
of “not negotiable”.
2. As stated earlier, where a cheque is crossed generally, the paying banker will pay to any
banker.
3. In case of general crossing, the holder or payee cannot get the payment over the
counter of the bank but through a bank only.
4. In case of special crossing, the paying banker is to honour the cheque only when it is
prescribed through the bank mentioned in the crossing or it’s agent bank.
5. Account Payee’s Crossing: Such crossing does, in practice, restrict negotiability of a
cheque. It warns the collecting banker that the proceeds are to be credited only to the
account of the payee, or the party named, or his agent. If the collecting banker allows
the proceeds of a cheque bearing such crossing to be credited to any other account, he
will be guilty of negligence and will not be entitled to the protection given to collecting
banker.
NOT NEGOTIABLE CROSSING
1. Crossing with "Not Negotiable": A cheque can be made "not negotiable" by writing the
words within two transverse parallel lines across its face.
2. Title Limitation: If a person takes a crossed cheque with "not negotiable," they cannot
gain a better title to the cheque than the person who originally had it.
3. Transferability: A "not negotiable" crossing doesn't make the cheque non-transferable;
it only removes the negotiability aspect.
4. Essential Feature of Negotiable Instruments: Normally, a negotiable instrument allows
a person who acquires it in good faith, for value, before maturity, and without
knowledge of title defects to gain a good title.
5. Holder in Due Course: Such a person is known as a holder in due course and has an
indisputable title to the cheque.
6. Impact of "Not Negotiable": Crossing a cheque as "not negotiable" removes the crucial
feature of being able to become a holder in due course.
7. Title Taint: If there's a title defect in any of the endorsers' chain, subsequent
transferees' titles also become tainted, and they can't claim to be holders in due course.
8. Example: If a "not negotiable" crossed bearer cheque is taken by X, X cannot claim
holder in due course status, even if taken in good faith and for value.
9. Protection for Banks: Paying and collecting banks are protected under Sections 128 and
131 when dealing with "not negotiable" crossed cheques.

18.12
 10. True Owner's Rights: The rights of the true owner of the cheque take precedence over
the rights of a holder in due course in the case of "not negotiable" crossing.
11. Warning and Due Diligence: "Not negotiable" crossing serves as a warning to endorsees
to thoroughly investigate the title before taking the cheque, as they might be held
accountable to the true owner if the endorser's title is flawed.
12. Restricting Negotiability: Overall, "not negotiable" crossing restricts the negotiability of
the cheque, and in transfers, the transferee's title won't surpass that of the transferor.
MATURITY
1. Maturity is the date on which the payment of an instrument falls due. Every instrument
payable at a specified period after date or after sight is entitled to three days of grace.
2. Such a bill or note matures or falls due on the last day of the grace period, and must be
presented for payment on that day and if dishonoured, suit can be instituted on the
next day after maturity.
3. If an instrument is payable by instalments, each instalment is entitled to three days of
grace. No days of grace are allowed for cheques, as they are payable on demand.
4. If the day of maturity falls on a public holiday, the instrument is payable on the
preceeding business day. Thus, if a bill is at maturity on a Sunday. It will be deemed due
on Saturday and not on Monday.
5. The ascertainment of the date of maturity becomes important because all these
instruments must be presented for payment on the last day of grace and their payment
cannot be demanded before that date.
HOLDER
i. A person is a holder of a negotiable instrument who is entitled in his own name to
the possession of the instrument, and To recover or receive its amount from the
parties thereto. It is not every person in possession of the instrument who is called a
holder. To be a holder, the person must be named in the instrument as the payee, or
the endorsee, or he must be the bearer thereof. A person who has obtained
possession of an instrument by theft, or under a forged endorsement, is not a
holder, as he is not entitled to recover the instrument. The holder implies de jure
(holder in law) holder and not de facto (holder in fact) holder
HOLDER IN DUE COURSE
In order to be a holder in due course, a person must satisfy the following conditions:
i. He must be the holder of the instrument.
ii. He should have obtained the instrument for value or consideration.
iii. He must have obtained the negotiable instrument before maturity.
iv. The instrument should be complete and regular on the face of it.
v. The holder should take the instrument in good faith.

18.13
A holder in due course is in a privileged position. He is not only himself protected against all
defects of the persons from whom he received the instrument as current coin, but also serves
as a channel to protect all subsequent holders. A holder in due course can recover the amount
of the instrument from all previous parties, although, as a matter of fact, no consideration was
paid by some of the previous parties to the instrument or there was a defect of title in the party
from whom he took it. Once an instrument passes through the hands of a holder in due course,
it is purged of all defects. It is like current coin. Whoever takes it can recover the amount from
all parties previous to such holder.
NEGOTIATION
A negotiable instrument may be transferred by negotiation or assignment. Negotiation is the
transfer of an instrument for one person to another in such a manner as to convey title and to
constitute the transferee the holder thereof. When a negotiable instrument is transferred by
negotiation, the rights of the transferee may rise higher than those of the transferor, depending
upon the circumstances attending the negotiation. When the transfer is made by assignment,
the assignee has only those rights which the assignor possessed. In case of assignment, there is
a transfer of ownership by means of a written and registered document.
NEGOTIABILITY AND ASSIGNABILITY DISTINGUISHED
Aspect Transfer by Negotiation Transfer by Assignment
1. Method of Transfer Mere delivery (bearer Requires a written document
instrument) + Endorsement signed by the transferor.
and delivery (order
instrument)
2. Notice to Debtor No notice to the debtor is Notice of transfer to the
necessary. debtor is required to
complete the title.
3. Defects and Equities The transferee (holder-indue The transferee takes the
course) takes the instrument actionable claim subject to all
free from defects in the defects in the title and all
transferor's title. equities and defences against
the assignor, even if taken for
value and in good faith.
NEGOTIATION BY MERE DELIVERY
A bill or cheque payable to bearer is negotiated by mere delivery of the instrument. An
instrument is payable bearer:
i. Where it is made so payable, or
ii. Where it is originally made payable to order but the only or the last endorsement is
in blank.
iii. Where the payee is a fictitious or a non-existing person. These instruments do not
require signature of the transferor. The person who takes them is a holder, and can

18.14
 sue in his own name on them. Where a bearer negotiates an instrument by mere
delivery, and does not put his signature thereon, he is not liable to any party to the
instrument in case the instrument is dishonoured, as he has not lent his credit to it.
His obligations are only towards his immediate transferee and to no other holders.
A cheque, originally drawn payable to bearer remains bearer, even though it is
subsequently endorsed in full.
NEGOTIATION BY ENDORSEMENT AND DELIVERY
An instrument payable to a specified person or to the order of a specified person or to a
specified person or order is an instrument payable to order. Such an instrument can be
negotiated only by endorsement and delivery. Unless the holder signs his endorsement on the
instrument, the transferee does not become a holder. Where an instrument payable to order is
delivered without endorsement, it is merely assigned and not negotiated and the holder
thereof is not entitled to the rights of a holder in due course, and he cannot negotiate it to a
third person.
ENDORSEMENT
Where the maker or holder of a negotiable instrument signs the same otherwise than as such
maker for the purpose of negotiation, on the back or face thereof or on a slip of paper annexed
thereto (called Allonge), or so, signs for the same purpose, a stamped paper intended to be
completed as a negotiable instrument, he is said to endorse the same. In other words,
‘endorsement’ means and involves the writing of something on the back of an instrument for
the purpose of transferring the right, title and interest therein to some other person.
CLASSES OF ENDORSEMENT
An endorsement may be:
i. Blank or General,
ii. Special or Full,
iii. Restrictive, or
iv. Partial,
v. Conditional or Qualified.
Blank or General: where the endorser merely writes his signature on the back of the
instrument, and the instrument so endorsed becomes payable to bearer, even though originally
it was payable to order. Thus, where bill is payable to “Mohan or order”, and he writes on its
back “Mohan”, it is an endorsement in blank by Mohan and the property in the bill can pass by
mere delivery, as long as the endorsement continues to be a blank. But a holder of an
instrument endorsed in blank may convert the endorsement in blank into an endorsement in
full, by writing above the endorser’s signature, a direction to pay the instrument to another
person or his order.

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Special or Full: If the endorser signs his name and adds a direction to pay the amount
mentioned in the instrument to, or to the order of a specified person, the endorsement is said
to be special or in full.
Restrictive: An endorsement is restrictive which prohibits or restricts the further negotiation of
an instrument. Examples of restrictive endorsement: “Pay A only”
Partial: An endorsement partial is one which purports to transfer to the endorsee a part only of
the amount payable on the instrument. A partial endorsement does not operate as negotiation
of the instrument. A holds a bill for Rs. 1,000 and endorses it as “Pay B or order Rs. 500”. The
endorsement is partial and invalid.
Conditional or qualified: An endorsement is conditional or qualified which limits or negatives
the liability of the endorser. An endorser may limit his liability in any of the following ways:
a. By sans recourse endorsement, i.e. by making it clear that he does not incur the liability
of an endorser to the endorsee or subsequent holders and they should not look to him
in case of dishonour of instrument.
b. By making his liability depending upon happening of a specified event which may never
happen.
NEGOTIATION BACK
Where an endorser negotiates an instrument and again becomes its holder, the instrument is
said to be negotiated back to that endorser and none of the intermediary endorsees are then
liable to him.
FORGED ENDORSEMENT
1. The case of a forged endorsement is worth special notice. If an instrument is endorsed
in full, it cannot be negotiated except by an endorsement signed by the person to whom
or to whose order the instrument is payable, for the endorsee obtains title only through
his endorsement.
2. Thus, if an instrument be negotiated by means of a forged endorsement, the endorsee
acquires no title even though he be a purchaser for value and in good faith, for the
endorsement is a nullity.
3. Forgery conveys no title. But where the instrument is a bearer instrument or has been
endorsed in blank, it can be negotiated by mere delivery, and the holder derives his title
independent of the forged endorsement and can claim the amount from any of the
parties to the instrument.
Example
A bill is endorsed, “Pay A or order”. A endorses it in blank, and it comes into the hands of B, who simply
delivers it to C, C forges B’s endorsement and transfer it to D. Here, D, as the holder does not derive his
title through the forged endorsement of B, but through the genuine endorsement of A and can claim
payment from any of the parties to the instrument in spite of the intervening forged endorsement.
ACCEPTANCE OF A BILL OF EXCHANGE

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The acceptance of a bill is the indication by the drawee of his assent to the order of the drawer.
Thus, when the drawee writes across the face of the bill the word “accepted” and signs his
name underneath he becomes the acceptor of the bill.
ACCEPTANCE FOR HONOUR
1. When a bill has been noted or protested for non-acceptance or for better security, any
person not being a party already liable thereon may, with the consent of the holder, by
writing on the bill, accept the same for the honour of any party thereto.
2. The stranger so accepting, will declare under his hand that he accepts the protested bill
for the honour of the drawer or any particular endorser whom he names.
3. The acceptor for honour is liable to pay only when the bill has been duly presented at
maturity to the drawee for payment and the drawee has refused to pay and the bill has
been noted and protested for nonpayment.
4. Where a bill has been protested for non-payment after having been duly accepted, any
person may intervene and pay it supra protest for the honour of any party liable on the
bill.
5. When a bill is paid supra protest, it ceases to be negotiable. The stranger, on paying for
honour, acquires all the right of holder for whom he pays.
PRESENTMENT FOR ACCEPTANCE
It is only bills of exchange that require presentment for acceptance and even these of certain
kinds only. Bills payable on demand or on a fixed date need not be presented. Thus, a bill
payable 60 days after due date on the happening of a certain event may or may not be
presented for acceptance. But the following bills must be presented for acceptance otherwise,
the parties to the bill will not be liable on it:
1. A bill payable after sight. Presentment is necessary in order to fix maturity of the bills,
and
2. A bill in which there is an express stipulation that it shall be presented for acceptance
before it is presented for payment.

The following are the persons to whom a bill of exchange should be presented:
i. The drawee or his duly authorised agent.
ii. If there are many drawees, bill must be presented to all of them.
iii. The legal representatives of the drawee if drawee is dead.
iv. The official receiver or assignee of insolvent drawee.
v. To a drawee in case of need, if there is any. This is necessary when the original
drawee refuses to accept the bill.
vi. The acceptor for honour. In case the bill is not accepted and is noted or protested
for non-acceptance, the bill may
The presentment must be made before maturity, within a reasonable time after it is drawn, or
within the stipulated period, if any, on a business day within business hours and at the place of

18.17
business or residence of the drawee. The presentment must be made by exhibiting the bill to
the drawee, mere notice of its existence in the possession of holder will not be sufficient. When
presentment is compulsory and the holder fails to present for acceptance, the drawer and all
the endorsers are discharged from liability to him.
PRESENTMENT FOR ACCEPTANCE WHEN EXCUSED
Compulsory presentment for acceptance is excused and the bill may be treated as dishonoured
in the following cases:
1. Where the drawee cannot be found after reasonable search.
2. Where drawee is a fictitious person or one incapable of contracting.
3. Where although the presentment is irregular, acceptance has been refused on some
other ground.
PRESENTMENT FOR PAYMENT
Section 64 lays down the general rule as to presentment of negotiable instruments for
payment. It says all notes, bills and cheques must be presented for payment thereof
respectively by or on behalf of the holder during the usual hours of business and of the maker
or acceptor, and if at banker’s within banking hours.
PRESENTMENT FOR PAYMENT WHEN EXCUSED
No presentment is necessary and the instrument may be treated as dishonoured in the
following cases:
1. Where the maker, drawer or acceptor actively does something so as to intentionally
obstruct the presentment of the instrument, e.g., deprives the holder of the instrument
and keeps it after maturity.
2. Where his business place is closed on the due date.
3. Where no person is present to make payment at the place specified for payment.
4. Where he cannot, after due search be found.
5. Where there is a promise to pay notwithstanding non-presentment.
6. Where the presentment is express or impliedly waived by the party entitled to
presentment.
7. Where the drawer could not possibly have suffered any damage by non-presentment.
8. Where the drawer is a fictitious person, or one incompetent to contract.
9. Where the bill is dishonoured by non-acceptance.
10. Where presentment has become impossible, e.g., the declaration of war between the
countries of the holder and drawee.
11. Where though the presentment is irregular, acceptance has been refused on some
other grounds.
Dishonour by Non-Acceptance
Section 91 provides that a bill is said to be dishonoured by non-acceptance:
i. When the drawee does not accept it within 48 hours from the time of presentment

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 for acceptance.
ii. When presentment for acceptance is excused and the bill remains unaccepted.
iii. When the drawee is incompetent to contract.
iv. When the drawee is a fictitious person or after reasonable search can not be found.
v. Where the acceptance is a qualified one.
DISHONOUR AND ITS REMEDIES
DISHONOUR BY NON-PAYMENT
A promissory note, bill of exchange or cheque is said to be dishonoured by non-payment when
the maker of the note, acceptor of the bill or drawee of the cheque makes default in payment
upon being duly required to pay the same. If the bill is dishonoured either by non-acceptance or
by non-payment, the drawer and all the endorsers of the bill are liable to the holder, provided
he gives notice of such dishonour. The drawee is liable only when there is dishonour by non-
payment.
NOTICE OF DISHONOUR
1. When a negotiable instrument is dishonoured either by non-acceptance or by non-
payment, the holder or some party liable thereon must give notice of dishonour to all
other parties whom he seeks to make liable.
2. Each party receiving notice of dishonour must in order to render any prior party liable to
himself, give notice of dishonour to such party within a reasonable time after he has
received.
3. The object of giving notice is not to demand payment but to whom the party notified of
his liability and in case of drawer to enable him to protect himself as against the drawee
or acceptor who has dishonoured the instrument issued by him.
4. Notice of dishonour is so necessary that an omission to give it discharges all parties
other than the maker or acceptor. These parties are discharged not only on the bill or
note, but also in respect of the original consideration.

Notice of Dishonour Unnecessary

No notice of dishonour is necessary:
i. When it is dispensed with or waived by the party entitled thereto.
ii. When the drawer has countermanded payment.
iii. When the party charged would not suffer damage for want of notice.
iv. When the party entitled to notice cannot after due search be found.
v. When the omission to give notice is caused by unavoidable circumstances, e.g.,
death or serious illness of the holder.
vi. Where the acceptor is also a drawer, e.g., where a firm draws on its branch.
vii. Where the promissory note is not negotiable. Such a note cannot be endorsed.
viii. Where the party entitled to notice promises to pay unconditionally.
NOTING AND PROTEST

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NOTING
1. Where a note or bill is dishonoured, the holder is entitled after giving due notice of
dishonour, to sue the drawer and the endorsers.
2. Where a bill or note is dishonoured, the holder may, if he so desires, cause such
dishonour to be noted by a notary public on the instrument, or on a paper attached
thereto or partly on each
3. The noting of minute must be recorded by the notary public within a reasonable time
after dishonour and must contain the fact of dishonour, the date of dishonour, the
reason, if any, assigned for such dishonour if the instrument has not been expressly
dishonoured the reasons why the holder treats it dishonoured and notary’s charges.
PROTEST
1. The protest is the formal notarial certificate attesting the dishonour of the bill, and
based upon the noting which has been effected on the dishonour of the bill.
2. After the noting has been made, the formal protest is drawn up by the notary and when
it is drawn up it relates back to the date of noting.
3. Where the acceptor of a bill has become insolvent, or has suspended payment, or his
credit has been publicly impeached, before the maturity of the bill, the holder may have
the bill protested for better security.
4. The notary public demands better security and on its refusal makes a protest known as
“protest for better security”.
5. Foreign bills must be protested for dishonour when such protest is required by the law
of the place where they are drawn.
6. A protest to be valid must contain on the instrument itself or a literal transcript thereof,
the names of the parties for and against whom protest is made, the fact and reasons for
dishonour together with the place and time of dishonour and the signature of the
notary public. Protest affords an authentic evidence of dishonour to the drawer and the
endorsee.
DISCHARGE
The discharge in relation to negotiable instrument may be either:
1. Discharge of the instrument or
2. Discharge of one or more parties to the instrument from liability.
DISCHARGE OF THE INSTRUMENT
A negotiable instrument is discharged:
i. By payment in due course;
ii. When the principal debtor becomes the holder,
iii. By an act that would discharge simple contract,
iv. By renunciation, and

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 v. By cancellation.
DISCHARGE OF A PARTY OR PARTIES
A party may be discharged in the following ways:
i. By cancellation by the holder of the name of any party to it with the intention of
discharging him.
ii. By release, when the holder releases any party to the instrument.
iii. Discharge of secondary parties, i.e., endorsers.
iv. By the operation of the law, i.e., by insolvency of the debtor.
v. By allowing drawee more than 48 hours to accept the bill, all previous parties are
discharged.
vi. By non-presentment of cheque promptly the drawer is discharged.
vii. By taking qualified acceptance, all the previous parties are discharged.
viii. By material alteration.
MATERIAL ALTERATION
An alteration is material which in any way alters the operation of the instrument and the
liabilities of the parties thereto. Therefore, any change in an instrument which causes it to
speak a different language in legal effect from that which it originally spoke, or which changes
legal character of the instrument is a material alteration. A material alteration renders the
instrument void, but it affects only those persons who have already become parties at the date
of the alteration. Those who take the altered instrument cannot complain.
Examples of material alteration are :
Alteration
i. Of the date of the instrument
ii. Of the sum payable,
iii. On the time of payment
iv. Of the place of payment,
v. Of the rate of interest,
vi. By addition of a new party,
vii. Tearing the instrument in a material part.
There is no material alteration and the instrument is not vitiated in the following cases:
i. Correction of a mistake,
ii. To carry out the common intention of the parties,
iii. An alteration made before the instrument is issued and made with the consent of
the parties,
iv. Crossing a cheque,
v. Addition of the words “on demand” in an instrument where no time of payment is
stated.
HUNDIS

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Hundis are negotiable instruments written in an oriental language. They are sometimes bills of
exchange and sometimes promissory notes, and are not covered under the Negotiable
Instruments Act, 1881. Generally, they are governed by the customs and usages.
The following types of hundis are worth mentioning:
1. Shah Jog Hundi
“Shah” means a respectable and responsible person or a man of worth in the bazar.
Shah Jog Hundi means a hundi which is payable only to a respectable holder, as opposed
to a hundi payable to bearer. In other words the drawee before paying the same has to
satisfy himself that the payee is a ‘SHAH’.
2. Jokhmi Hundi
A “jokhmi” hundi is always drawn on or against goods shipped on the vessel mentioned
in the hundi. It implies a condition that money will be paid only in the event of arrival of
the goods against which the hundi is drawn. It is in the nature of policy of insurance. The
difference, however, is that the money is paid beforehand and is to be recovered if the
ship arrives safely.
3. Jawabee Hundi
“A person desirous of making a remittance writes to the payee and delivers the letter to
a banker, who either endorses it on to any of his correspondents near the payee’s place
of residence, or negotiates its transfer. On the arrival, the letter is forwarded to the
payee, who attends and gives his receipt in the form of an answer to the letter which is
forwarded by the same channel of the drawer or the order.” Therefore, this is a form of
hundi which is used for remitting money from one place to another.
4. Nam jog Hundi
It is a hundi payable to the party named in the bill or his order.
5. Darshani Hundi
This is a hundi payable at sight. It is freely negotiable and the price is regulated by
demand and supply.
6. Miadi Hundi
This is otherwise called muddati hundi, that is, a hundi payable after a specified period
of time. Usually money is advanced against these hundis by shroffs after deducting the
advance for the period in advance.
There are other forms of hundis also like.
Dhani Jog Hundi - A hundi which is payable to “dhani” i.e., the owner.
Firman Jog Hundi - which is payable to order if can be negotiated by endorsement and
delivery
PRESUMPTIONS OF LAW
It shall be presumed that:

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 1. Every negotiable instrument was made or drawn for consideration irrespective of the
consideration mentioned in the instrument or not.
2. Every negotiable instrument having a date was made on such date.
3. Every accepted bill of exchange was accepted within a reasonable time before its
maturity.
4. Every negotiable instrument was transferred before its maturity.
5. The instruments were endorsed in the order in which they appear on it.
6. A lost or destroyed instrument was duly signed and stamped.
7. The holder of the instrument is a holder in due course.
8. In a suit upon an instrument which has been dishonoured, the Court shall presume the
fact of dishonour, or proof of the protest.
However these legal presumptions are rebuttable by evidence to the contrary. The burden
to prove to the contrary lies upon the defendant to the suit and not upon the plaintiff.

PAYMENT OF INTEREST IN CASE OF DISHONOUR

The Negotiable Instruments Act, 1881 was amended in the year 1988, revising the rate of
interest as from 6 per cent to 18 per cent per annum payable on negotiable instruments from
the due date in case no rate of interest is specified.

POWER OF COURT TO TRY CASES SUMMARILY

1. All offences shall be tried by a Judicial Magistrate of the first class or by a Metropolitan
Magistrate.
2. Provided that in the case of any conviction in a summary trial under this section, it shall
be lawful for the Magistrate to pass a sentence of imprisonment for a term not
exceeding one year and an amount of fine exceeding five thousand rupees.
3. Provided further that when at the commencement of, or in the course of, a summary
trial under this section, it appears to the Magistrate that the nature of the case is such
that a sentence of imprisonment for a term exceeding one year may have to be passed
or that it is, for any other reason, undesirable to try the case summarily, the Magistrate
shall after hearing the parties, record an order to that effect and thereafter recall any
witness who may have been examined and proceed to hear or rehear the case in the
manner provided by the Code of Criminal Procedure, 1973 .
4. Every trial under this section shall be conducted as expeditiously as possible and an
endeavour shall be made to conclude the trial within six months from the date of filing
of the complaint.

POWER TO DIRECT INTERIM COMPENSATION

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 1. The Court trying an offence under section 138 of the Negotiable Instrument Act, 1881
may order the drawer of the cheque to pay interim compensation to the complainant:
i. in a summary trial or a summons case, where he pleads not guilty to the accusation
made in the complaint, and
ii. in any other case, upon framing of charge.
2. The interim compensation under sub-section (1) shall not exceed twenty per cent. of
the amount of the cheque.
3. The interim compensation shall be paid within sixty days from the date of the order, or
within such further period not exceeding thirty days as may be directed by the Court on
sufficient cause being shown by the drawer of the cheque.
4. If the drawer of the cheque is acquitted, the Court shall direct the complainant to repay
to the drawer the amount of interim compensation, with interest at the bank rate as
published by the Reserve Bank of India, prevalent at the beginning of the relevant
financial year, within sixty days from the date of the order, or within such further period
not exceeding thirty days.
OFFENCES TO BE COMPOUNDABLE
Section 147 of the Act provides that notwithstanding anything contained in the Code of
Criminal Procedure, 1973, every offence punishable under the Negotiable Instrument Act shall
be compoundable.
NATIONAL ELECTRONIC FUNDS TRANSFER (NEFT) AND REAL TIME GROSS
SETTLEMENT (RTGS)
1. National Electronic Funds Transfer (NEFT) is a nation-wide payment system facilitating
one-to-one funds transfer.
2. Under this Scheme, individuals, firms and corporates can electronically transfer funds
from any bank branch to any individual, firm or corporate having an account with any
other bank branch in the country participating in the Scheme.
3. NEFT is an electronic fund transfer system that operates on a Deferred Net Settlement
(DNS) basis which settles transactions in batches.
4. In DNS, the settlement takes place with all transactions received till the particular cutoff
time. These transactions are netted (payable and receivables) in NEFT whereas in RTGS
the transactions are settled individually. For example, currently, NEFT operates in hourly
batches.
5. Any transaction initiated after a designated settlement time would have to wait till the
next designated settlement time Contrary to this, in the RTGS transactions are
processed continuously throughout the RTGS business hours.
6. The acronym ‘RTGS’ stands for Real Time Gross Settlement, which can be defined as the
continuous (realtime) settlement of funds transfers individually on an order by order
basis (without netting). ‘Real Time’ means the processing of instructions at the time

18.24
 they are received rather than at some later time; ‘Gross Settlement’ means the
settlement of funds transfer instructions occurs individually . Considering that the funds
settlement takes place in the books of the Reserve Bank of India, the payments are final
and irrevocable.
ADVANTAGES OF NEFT
1. Round the clock availability on all days of the year.
2. Near-real-time funds transfer to the beneficiary account and settlement in a secure
manner.
3. Pan-India coverage through large network of branches of all types of banks.
4. The beneficiary need not visit a bank branch.
5. Positive confirmation to the remitter by SMS / e-mail on credit to beneficiary account.
6. Penal interest provision for delay in credit or return of transactions.
7. No levy of charges by RBI from banks.
8. No charges to savings bank account customers for online NEFT transactions.
9. The transaction charges have been capped by RBI.
10. The transaction has legal backing.
BENEFITS OF RTGS
1. It is a safe and secure system for funds transfer.
2. RTGS transactions / transfers have no amount cap set by RBI.
3. The system is available on all days on 24x7x365 basis.
4. The remitter need not use a physical cheque or a demand draft.
5. The beneficiary need not visit a bank branch for depositing the paper instruments.
6. Remitter can initiate the remittances from his / her home / place of work using internet
banking, if his / her bank offers such service.
7. The transaction charges have been capped by RBI.
8. The transaction has legal backing.

CASE LAW
Susela Padmavati Amma vs M/s Bharati Airtel Ltd
The issue raised was whether it was sufficient to make a person liable for being a director of a company
under Sec 141 i.e vicarious liability of Negotiable Instruments Act, 1881.
It was held that merely because a person is a director of the company, it is not necessary that he is aware
about the day to day functioning of the company. The court held that there is no universal rule that the
director of the company is in charge of its everyday affairs. Hence, he cannot be made liable just because
he is a director.
However, for Managing Director and Joint Managing director, court held that they will be held liable as the
designation of their office suggests that they are in charge of a company and are responsible for the conduct
of the business of the company. To escape the liability, they will have to prove that when the offence was
committed, they had no knowledge of the offence or that they exercised all due diligence to prevent the
18.25
commission of the offence.

Rakesh Ranjan Shrivastava v. the State of Jharkhand and others

Sec 143A – court have the power to order the drawer of a cheque to pay interim compensation to the
complainant in cases of cheque dishonor. Max upto 20 % of the cheque amount.

In this case SC laid the parameters for exercising discretion under Sec 143A. These are as follows:
1. The courts will have to prima facie evaluate the merits of the case made out by the complainant and
the merits of the defence pleaded by the accused in the reply of the application.
2. The financial distress of the accused can also be a consideration.
3. If the defence of the accused is found to be prima facie plausible, the court may exercise discretion in
refusing to grant interim compensation.
4. Quantum of interim compensation will have to consider based on the nature of transaction, the
relationship of the parties etc.
5. There could be several other paramaters. The list is not exhaustive.

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