INTRODUCTION

The place of law in society is often understood as a set of rules to be followed by

citizens. Drawing an analogy with a real life situation will be useful. Imagine a
traffic crossing where there are no lights. Obviously there would be a traffic jam
and people would not reach their respective destinations. But if a signal with red
and green lights and rules are stipulated for everybody that red means stop and
green means to go then traffic would move smoothly and everybodys purpose
would be served.
Similarly in life too we perform numerous journeys where we at different
intersections meet others. If the rules of interaction with others are laid down the
journey would be smooth. For example, a landlord and tenant or a seller and a
buyer; an employer and employee. Other than business situations too there are
journeys such as a marriage which may end say in a divorce in which case the two
individuals must separate or a citizen and the state for payment of taxes and
performing duties of state such as voting during elections. There are laws for each
of these journeys and as a student ones involvement with the subject at present is
for the limited purpose of writing exams and getting a degree. However with career
advancement more laws will need to be understood and followed. Be it employment
or setting a business or purchasing a car. Be it inheritance of property or buying
and selling of property for which there are laws. In short, getting interested in law
as a subject would help to pursue ones lifes journey(s) efficiently and smoothly.
The scope of this book is limited to basic laws pertaining to commerce. Yet, all laws
follow some basic principles and it is felt that understanding these basic principles
will help the student to a) understand new laws as and when they come into force
b) understand the provisions in law better.
These are briefly as follows:
1. Rule of Law:
Everyone is equal in the eyes of the law irrespective of caste, creed,
religion, gender or region. This principle is enshrined in the following
provision of the Constitution:
Article 14. (Constitution) Equality before law. -The State shall not deny to
any person equality before the law or the equal protection of the laws within the
territory of India.

This principle may not be applicable to every country. For example in

some countries women are not allowed to vote. Also while this principle is
an acknowledged principle in all civilized countries its implementation may
be found wanting for example when there is discrimination against

minorities/castes or riots or acts of racism and the law fails to take action
against the perpetrators.
2. Separation of Powers:
Art 32 (i) and (ii) (Constitution) in Part 3 gives the citizens direct access
to the Supreme Court to enforce fundamental rights provided for in this
part. The Supreme Court through the issue of writs can enforce the
fundamental rights.
Part V of Chapter one of the Constitution provides for issues w.r.t. the
Executive viz the Government.
Chapter two of the Constitution provides for issues w.r.t. the Legislature
viz the Parliament.
Chapter Four of the Constitution provides for issues w.r.t the Union
Judiciary.
Concentration of authority and power in one source is not advisable. Even
nature provides us with two parents to provide a balance as well as
safeguard if some accident befalls either parent the other is in a position
to take care. Similarly in society it is necessary to separate the powers to
avoid misuse. Accordingly to take a leaf from our civics lessons the law
maker is the legislature while the execution of law is done by the
government while the judiciary ensures that everyone including the
government and the legislators function according to the law.
But then there are instances of confrontation and instances of stepping
into each others jurisdiction. For example when the SC passed the
judgment on sealing of illegal construction in Delhi it led to a huge chaos
between government and legislators on the one hand and the citizens on
the other.
Another example was when the courts had to step in when pollution in
Delhi became intolerable and the government was reluctant to pass laws
on pollution as it would adversely affect interests of transporters plying
old vehicles and factories within a densely populated city. Subsequently
the government has since taken over this role actively.
The issue of legislators ( MPs and MLAs ) declaring their criminal
background before contesting elections led to a crisis as all political
parties had candidates with criminal cases pending against them and they
were reluctant to publicly admit them. There was a brief attempt to stall
the courts directive by bringing a law through Parliament to circumvent it
but that was given up once the controversy caught the public eye thanks
to a vigilante media.

The recent controversy between the courts and executive over the
constitution of the Competition Commission, and, also asking the judiciary
to declare their assets which the judiciary has objected to has damaged
the credibility of the institution but it is hoped that the process will lead to
a cleaner future.
3. Delegation of Powers
Ask your friends in the class to agree on a common menu of say eight
items in such a manner that each dish is acceptable to all. Chances are
that it will be almost impossible as different people will ask for different
things and it will be difficult to arrive at a consensus. A more practical
approach would be to form a committee representing all groups and
accept their recommendation. Imagine if this is the difficulty involved in a
simple exercise of preparing a menu how much time would Parliament
require making laws affecting the whole country. Therefore Parliament
delegates the details of law making to the government while deciding the
principles itself. The rule thus passed by the government refers to
delegated legislation. Now, each Minister of the government looks after a
particular department, which is housed in a particular building. Can a few
buildings take care of the entire countrys needs? So the government in
turn creates authorities/ institutions to administer the law and
simultaneously make regulations for everyone to follow. For example the
Parliament has legislated that all vehicles with a motor should be
registered under the Motor Vehicles Act but the actual methodology of
registration and details pertaining to fees chargeable or its periodicity may
be delegated to the government (state) and the government in turn may
ask the Authority or RTO to make regulations for the documents required
say Passport/PAN Card / proof of residence etc..or decisions such as
issuing of smart cards. Similarly the Employees Provident Fund Act
empowers the government to frame schemes for industrial workers to
provide for their future when they will not be able to earn an income. But
the detailed regulations and the day to day administration is done by the
Employees Provident Fund Organization. In case of Income Tax the act is
passed by Parliament while the clarifications and circulars are issued by
Ministry of Finance and the Central Board of Direct Taxes as well as the
Central Board of Excise and Customs.
As the aspiring student progresses in his career he would be required to
not only deal with the main acts but also the issues that delegated
legislation demand.
IMP : The scope of the delegated legislation cannot exceed the scope of
the Act through which the delegated authority derives its powers.

4. Principle of Hearing
While making laws it is useful to consult the people as they are the ones
affected by it. Failure to do so or to do it inappropriately would result in
either injustice or at times chaos. For example the reservation law was
passed by Parliament but it failed to take into account the loss of
opportunity to those not falling in any reserved category. The Supreme
Court had to step in to prevent the protests spinning out of control and
after hearing all parties concerned and their arguments gave a more
acceptable judjement through which the number of seats were restored
for those not in any reserved category. While courts pass their judjements
through judicial hearing which means it is formal and under oath or
through signed , noted submissions in the case of government its policy
and law are made by resorting to informal hearings such as in a
conference or over a luncheon meeting. For example the annual budget
exercise
of
the
government
could
involve
meeting
industry
representatives and associations, bankers and unions.
5. Principle of Natural Justice
Everyone saw on television channels the manner in which the 26/11
Mumbai terrorist attack was executed including the footage of the lone
terrorist caught. Now is there a need for an expensive trial? But in
civilized, modern societies the principle of Natural Justice requires
adherence to the following points:
a) no one is guilty unless proved
b) the person should be informed of the charges leveled against him
c) he must be given an opportunity to defend himself
d) the judge must be a neutral , unbiased , unconnected person with the
case
e) he must conduct the judicial proceedings in a fair manner allowing the
defendant an equal opportunity to present his case
f) the judge must arrive at his verdict after carefully evaluating the
evidence and the interpretation of law
g) the punishment must be commensurate with the degree of offence.
The above principle would equally be applicable to everyone in both
situations i.e as a defendant and as an authority.
6. Fast track courts / Tribunals (Quasi Judicial)
With the advent of technology and commerce and changes in policy due
to Globalization and Liberalization the scale of economic activities have
increased and also the cases in the courts leading to a huge backlog of
cases. Therefore various separate forums which are very much the
creation of law have been formed. For example students would be aware
of the District consumer Forums which provide consumer justice. Appeals

against the forums judgment lies with the Consumer Disputes Redressal
Commission at the state level and thereafter at the National level and
finally with the Supreme Court. In effect it lessens the burden of the
District Courts and High Courts. Similarly there are labour courts and
industrial tribunals and for recovery of debts beyond Rs 10 lakhs there is
the Debt Recovery Tribunal. Appeals against orders of TRAI lie with TDSAT
and w.r.t. SEBI orders it lies with Securities Appellate Tribunal. Of course
appeals against these Tribunal orders would lie with the courts so the
courts are never out of the picture but by providing a dedicated
court/forum/tribunal for specific issues there are three distinct advantages
1) Speed for eg. in the case of telecom disputes
2) Specialization and therefore more efficient and
3) Consistency of judjements between cases.
It is important to remember that in all these forums the litigant has
ultimate recourse with the courts of the land. The government is
contemplating setting up courts for cheques dishonured (bouncing of
cheques) because these type of cases are clogging the courts and
delaying other cases.
7. Regulators and their rules/guidelines.
As society expands its needs too expand. And these needs cannot always
be satisfied by the government which must concentrate more on policy
and strategy issues rather than the nitty gritty of execution. Therefore
many sectors have been opened for private participation such as
telecom / airlines / banking / power / ports. Now these sectors have to be
carefully nurtured so that the needs of multiple stakeholders are
protected. The stakeholders could be :

consumers (eg there should not be a monopoly)

service providers ( ensuring short and long term profitability)
society (quick access to technology such as 3G/CDMA)
Government ( revenue/security issues).

Very often there would be a conflict of interests between the stakeholders.

For eg number portability in the telecom sector is desirable for consumers
in order to make service providers provide better service but in a new
industry with huge investment and license costs the service provider
would lose out to cut throat competition as it happened with the Airlines
sector and eventually the customer too would lose. (All airlines are doing
financially badly). As we go into print the service providers in the telecom
sector too are facing difficulty as competition increases even though the
market is growing. The job of the regulator is to ensure a balance
between these interests and his role/duties as well as power is provided

by statute. Examples of Regulators are TRAI (telecom) / SEBI( capital

markets)/IRDA( Insurance) / Banking ( RBI). Indeed the powers of the
regulator are prescribed through legislative enactments.
At times the jurisdiction of different regulators conflict such as the recent
conflict between SEBI and IRDA over ULIPS. Simply put Insurance
companies were investing in the stock market as IRDA rules permitted it.
But stock market comes within the jurisdiction of SEBI which found ULIPS
harming the scope of mutual funds and hence restrained Insurance
companies. The matter is in the Supreme Court and there is a proposal to
create a super regulator in the financial sector over and above the SEBI
and IRDA.
These regulators in turn make laws and rules and regulations for all of us
to follow. Often they are accused of favouring one or the other
stakeholder which may or may not be true.
8. Role of International Law
With the world becoming a global village activities in one part of the globe
affect the rest of the world. Therefore international organizations which
have representatives of governments as their members attempt to form a
consensus and through conventions and treaties try to converge laws
which are divergent between nations on a common platform. For example
the International Labour Orgnization(ILO) has passed numerous
conventions which signatory countries would adopt into their local laws.
The Information Technology Act 2000 was at the initiative of the United
Nations because it was realized that IT crimes such as hacking can be
done from remote locations and thus all countries must quickly develop
laws for this. Similarly there is pressure from the international community
to frame environment laws to protect climate change but since this is
viewed to be at the cost of development and progress there is resistance
from developing countries including India to comply. In the case of
banking Central Banks meet frequently at Basel, Switzerland to frame
guidelines for the banking sector to follow. Once India has become the
member of the WTO it is bound to frame its laws in accordance with its
commitments to the WTO such as shifting from product patent to process
patent. Similarly trade pacts signed by the government with ASEAN or EU
would affect the custom tariffs on goods imported or exported besides
affecting the industries and customers.
It is important to understand that no international organization or foreign
government has any jurisdiction in India or its citizens (while in India) but

since India like any civilized nation views itself as a part of the comity of
nations it must be a responsible global citizen and therefore it participates
in international forums and whenever it agrees to a treaty or convention it
then incorporates it within its domestic laws.
The Legal System
Imagine you are a parent and making rules for your teenager. His/her
dos and donts. Would it be possible to anticipate every possible
foreseeable situation and frame a rule for it. Or would you prefer a broad
set of principles to guide his/her behavior and intervening in specific
situations when things go astray. Likewise in legal systems too, countries
such as the USA and UK prefer the common law system in which there are
some broad principles and in actual situations judjes deliberate and give
their judjement which then becomes the guide for future cases.Both
systems have arisen due to its own historical reasons and there is no
merit in discussing which is better but it is important to mention that
while USA and UK are increasingly laying down codified laws such as UCC
similarly Indian courts often rely on common law principles to decide.
Thus there is no water tight compartmental difference between the two
systems.
There is a third system applicable in Islamic countries following the Sharia
law which is based on religion. For example in Islamic banking interest is
not payable.

THE LEGAL MACHINERY

CONSTITUTION

PRESIDENT

GOVERNMEN
T

PARLIAMEN
T

SUPREME
COURT

SUPREME COURT

HIGH COURTS

SESSIONS COURTS

DISTRICT COURTS

Chief Judicial /Metropolitan Magistrates

First Class Judicial
Magistrate
Second class judicial
magistrate
Executive Magistrates

Senior Judge
civil
Junior judge
civil
Small causes
courts
Family courts

Explanation:
Sessions Courts are for criminal cases and so are the courts of the
judicial magistrates.
Each court has its own jurisdiction and powers in terms of admitting
cases and giving punishments. Higher courts also have the powers to
listen to appeals.