handbook :cs ca-cwa-intermediate law

LEARNING PROFESSIONALS

HANDBOOK PART-I: - Beginner’s Capsule

BASICS OF LAW

Written by: - Hari krishan 6/25/2011

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Contents... Basics of law.....................................................................................4

Hierarchy of indian law.................................................................5

How to interprete law......................................................................6

How to interpret definitions...........................................................8

Interpretation of judgements..........................................................9

Rules of interpretation.....................................................................10

Bird’s eye view.................................................................................11

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Basics of law The word law comprises of : -

1} ACT : - The Constitution of India is the mother of all laws in India. The constitution of India was adopted on 26 November 1949 and came into effect on 26 January 1950, proclaiming India to be a sovereign, democratic republic.

Article 246 of constitution of india gives power to union govt. And the state govt. To make law regarding certain matters. These matters are enumerated in schedule-VII of the constitution. Each matter is called as ENTRY.

schedule-VII is divided into 3 parts. i.e.

list-1 i.e. union list : - the matters on which parliament has exclusive jurisdiction are listed in unoin list. For example: entry no. 43 of list-1 of schedule-VII gives power to union govt. To make law regarding incorporated association. i.e.- companies act, 1956 and LLP act, 2008

list-2 i.e. state list : - the matters on which state legislative assembly has exclusive jurisdiction are listed in state list. For e.g.: entry no.-34 gives power to state to make law regarding betting and gambling.

list-3 i.e.concurrent list : - matters on which both union and state govt. Can make law are enumerated in list-3 i.e concurrent list. E.g.: entry no.-44 of list-3 prescribes stamp duty. In this regard both central and state govt. Has made law regarding this.

2} RULES: - rules are always subordinate to the act. Rules must be framed consistant with the act. Usually parliament delegates this power to the central/ state govt. Rules must be made by either central or state govt. The power to make law must be there in the act. For e.g. under sec. 642 of companies act central govt. Has power to make rules.

3} REGULATIONS: - authority to make regulations is usually delegated to subordinate authorities. The regulations are subject to an additional condition i.e.THEY MUST BE CONSISTANT TO THE RULES. Under sec. 55A of the cos act,1956 SEBI has power to make regulations for certain matters. Under sec.157 of the customs act,1962 cbec has power to make rules.

4} CIRCULARS/ NOTIFICATIONS/ DIRECTIONS/ ORDERS : - these are issued time to time basis by the authorities of an act to widen the scope of a section or to clarify position of the law.

5} JUDICIAL ORDERS: - these are one of most important part of indian law system. Under article 141 of the constitution, LAW DECLARED BY SUREME COURT IS BINDING ON ALL COURTS. Supreme court can declare any provision of law null and void if it is inconsistant with any provision of constitution or any other law. However paliament can override the decision of supreme court by making any amendement in the law. Thus the decision of supreme court becomes law of land.

The Constitution in its current form (2011 March), consists of a preamble, 450 articles, 12 schedules, 2 appendices and 114 amendments to date. Although it is federal in nature it also has a strong unitary bias.

List-1{union list} of schedule-VII contains 97 ENTRIES

List-2{state list} contains 66 ENTRIES

List-3 {concurrent list} contains 47 matters



Hierarchy of indian law Constitution of India

There are some other points such as: -

What is a proviso?

“provided that” also known as Proviso. A proviso is meant to be an exception to something within the main enactment. A proviso cannot override the main enactment.

For e.g.

sec.3 (1) (iii) "private company" means a company which, by its articles,— (a) restricts the right to transfer its shares, if any; (b) limits the number of its members to fifty not including — (i) persons who are in the employment of the company, and (ii) persons who having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased; and (c) prohibits any invitation to the public to subscribe for any shares in, or debentures of, the company; Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this definition, be treated as a single member;

In this case the proviso to sec.3 (1) (iii) of cos act provides that joint holders of shares shall be counted as 1(one).

“notwithstanding anything”

The clause ”notwithstanding anything” is referred as “non-obstande clause” . A clause beginning with “notwithstanding anything contained in (the section/ the act/ or any other law)” is appended in view to give it overriding effect over other provisions. In case of conflict of it with others the “non-obstande clause” overrides the other conflicting clause(s).

legislature executive judiciary

Parliament or state legislature assembly

Union or state govt.

Supreme court & other high courts



What does SAVE AS OTHER WISE PROVIDED means?

It is just opposite to “notwithstanding anything” means the words save as otherwise provided gives the other section or act overriding effect over the section containing this word.

For e.g.

Section 9. Save as otherwise expressly provided in the Act— (a) the provisions of these Act shall have effect notwithstanding anything to the contrary contained in the memorandum or articles of a company, or in any agreement executed by it, or in any resolution passed by the company in general meeting or by its Board of directors, whether the same be registered, executed or passed, as the case may be, before or after the commencement of this Act; and (b) any provision contained in the memorandum, articles, agreement or resolution aforesaid shall, to the extent to which it is repugnant to the provisions of this Act, become or be void, as the case may be. Section-9 gives companies act overriding effect over memorandum/ articles but if any section gives memorandum/ article specific power to override the cos act then that sec. Will override section-9 of cos act.

What is meant by subject to?

Subject to is reverse of the phrase ”notwithstanding anything” Whenever this word “subject to” is used in the section it means the section is subject to other conditions also. Thus if a sec. Contains this word in the beginning then it means other sec. Overrides this section.

For e.g.

Under section 25(5) A licence may be granted by the Central Government under this section on such conditions and subject to such regulations as it thinks fit.

Here the licence granted to a sec. 25 co. Is subject to other regulations apart from those conditions which are specified while granting the licence u/s 25.

“Such as”

The words “such as” indicate that the things mentioned after these words are

only illustrative and not exhaustive {i.e. other things can also covered here}

“Namely”

Indian laws are drafted in:-

Section

Sub-section

Clause

Sub-clause

Para

Sub-Para

Item

Sub-item

-proviso

-explanation

-subject to

-such as

-namely

-this is an inclusive list students may find other words in the bare act.

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the word namely indicates that what are mentioned thereinafter is exhaustive and not

inclusive. Thus other things cannot be covered.

“And”

as per rules of grammar, “and” is conjunction. In other words, it has generally a cumulative

sense. Thus, “A and B” means both and A and B must exists.

HOWEVER, “AND ” MAY BE INTERPRETED AS “OR” , IF THE CONTEXT SO REQUIRES

PARTICULARILY IF THE ORDINARILY RULE MENTIONED ABOVE WOULD LEAD TO

ABSURDITY.

e.g.: - EXCISE; DEFINITION OF “EXCISABLE GOODS”

“Or”

in general or gives an alternate sense. Thus, “A OR B” means it is enough if one of them

exists.

What does explanation to a sec. Means?

Sometimes to increase the scope of a section or to provide the clarity about the object/ purpose of a section explanations are inserted. The only object of such is to facilitate the interpretation.

For e.g.: -

in India sec. 1 of each act contains : - {the full text from bare act is as follows}

1. Short title, commencement and extent. (1)This Act may be called the Companies Act, 1956.

(2) It shall come into force on such date1 as the Central Government may, by

notification in the Official Gazette, appoint.

2[(3) It extends to the whole of India:]

3[***]

4[Provided 5[***] that it shall apply to the State of Nagaland subject to such

modifications, if any, as the Central Government may, by notification in the

Official Gazette, specify.] 1.Came into force on 1-4-1956 vide S.R.O. 612, dated 8th March, 1956, published in the

Gazette of India, Extra. 1956, Pt.II, sec. 3, p. 473.

2. Subs. by Act 62 of 1956, sec. 2 and Sch., for sub-section (3) (w.e.f. 1-11-1956).



3. First proviso omitted by Act 25 of 1968, sec. 2 and Sch. (w.e.f. 15-8-1968).

4. Ins. by Act 31 of 1965, sec. 2 (w.e.f. 15-10-1965).

5. The word "further" omitted by Act 25 of 1968, sec. 2 and Sch. (w.e.f. 15-8-1968)

Section 1 is also known as short title.

Short titles are relevant to know about, to which extent the law is enforceable. For e.g.

some laws such as service tax is not applicable on JAMMU AND KASHMIR. While

interpreting law one must keep the sec. 1 in mind.

Generally Sec. 2 of most laws in India contains definition.

How to interpret definitions: -

Definitions

Inclusive definitions: - these definitions starts with the word ”includes” e.g. sec. 2(13)

"director" includes any person occupying the position of director, by whatever name called; generally the word includes is used where the lawmaker wants to widen the scope of

law. If any sec. Contains this word thus that means the definition or sec. Must be read in

liberal sense, and the definition is a illustrative one.

Exhaustive definitions: - this kind of definition are started with the word “means” e.g.

2(10) "company" means a company as defined in section 3; this kind of definitions

must be interpreted strictly. By using this kind of definitions lawmaker makes sure law is

interpreted strictly.

Exhaustive and inclusive definition: - in these kind of definitions, the word “MEANS”

AND”INCLUDES” both are used.

Such definition are also known as B hybrid definitions.

For e.g. “X means Y and includes Z” These definition in the 1st part i.e. means define the

term exhaustively, on other part it defines it inclusively. Thus, exhaustive part must be

interpreted strictly but the inclusive part must be interpreted liberally.

Inclusive Exhaustive



Interpretation of judgements Decision of supreme court is LAW OF LAND {article 141 of constitution of India} means the judgement itself becomes the law.

Decisions of high courts are subject to territorial limit. They are binding up to the limit of their jurisdiction. The decision of Delhi high court is not applicable on Maharashtra high court.

Rules of interpretation

Statutory interpretation is the process of interpreting and applying legislation. Interpretation - an explanation that results from interpreting something Sometimes the words of a statute have a plain and straightforward meaning. But in many cases, there is some ambiguity or vagueness in the words of the statute

that must be resolved by the judge. To find the meanings of statutes, judges use various tools and methods of statutory

interpretation, including traditional methods of statutory interpretation, legislative history, and purpose.

1.literal interpretation – Meaning and use

an interpretation based on the exact wording. In literal interpretation the letter of law is followed strictly without going on the object of such statue. The literal rule is also known as the Plain meaning rule.

The plain meaning rule dictates that statute is to be interpreted using the ordinary meaning of the language of the statute, unless a statute explicitly defines some of its terms otherwise.

In other words, the law is to be read word for word and should not divert from its ordinary meaning.

2.The mischief rule – Meaning and use

The Mischief Rule is a rule of construction that judges can apply in statutory interpretation in order to discover Parliament's intention. In applying the rule, the court is essentially asking the question: what was the "mischief" that the previous law did not cover, which Parliament was seeking to remedy when it passed the law now being reviewed by the court?

Legislative intent is determined by examining secondary sources, such as committee reports, treatises, law review articles and corresponding statutes.



The rule was first set out in Haydon’s Case [1584]76 ER 637 3 CO REP 7a.[3] where the court ruled that there were four points to be taken into consideration when interpreting a statute:

(1st). what was the common law before the making of the Act?

(2nd). what was the mischief and defect for which the common law did not provide?

(3rd). what remedy the Parliament hath resolved and appointed to cure the disease of the commonwealth. And,

(4th). The true reason of the remedy;

3.Golden rule - Meaning and use

It says that ordinarily the court must find out the intension of the legislature from the words used in a statue by giving them their natural meaning (literal meaning) but if this leads to absurdity, inconvenience, injustice or evasion, then court must modify the meaning to such an extent as would prevent such a consequence.

HARMONIOUS CONSTRUCTION

The rule of harmonious construction is the thumb rule to interpretation of any statute. An interpretation which makes the enactment a consistent whole should be the aim of the Courts and a construction which avoids inconsistency or repugnancy between the various sections or parts of the statute should be adopted. The Courts should avoid “a head on clash”, in the words of the Apex Court, between the different parts of an enactment and conflict between the various provisions should be sought to be harmonised.

The rule of harmonious construction has been tersely explained by the Supreme Court thus, “when there are, in an enactment two provisions which cannot be reconciled with each other, they should be so interpreted, that if possible, effect should be given to both”. A construction which makes one portion of the enactment a dead letter should be avoided since harmonisation is not equivalent to destruction.

It is a settled rule that an interpretation which results in hardship, injustice, inconvenience or anomaly should be avoided and that which supports the sense of justice should be adopted.

For e.g. section 11 of companies act 1956 provides that

Section 11. PROHIBITION OF PARTNERSHIPS EXCEEDING CERTAIN NUMBER.—

(1)-10 in case of banking business

(2)-20 in non-banking case

Point to be noted that partnership act,1932 is the specific law for partnership, and partnership act does not provides any restriction on no. Of partners thus we should apply the rule of harmonious construction between the two laws.



Other rules Ejusdem generis ("of the same kinds, class, or nature") When a list of two or more specific descriptors is followed by more general descriptors, the otherwise wide meaning of the general descriptors must be restricted to the same class, if any, of the specific words that precede them.

For example, where "cars, motor bikes, motor powered vehicles" are mentioned, the word "vehicles" would be interpreted in a limited sense (therefore vehicles cannot be interpreted as including airplanes).

In pari materia ("upon the same matter or subject") When a statute is ambiguous, its meaning may be determined in light of other statutes on the same subject matter.

Bird’s eye view law Law

ACT RULES REGULATIONS NOTIFICATIONS JUDICIAL ORDERS

Article 246 read with schedule-Vii

List-1 Union list

List-2 state list

List-3 Concurrent list

-97 entries e.g. Entry no.43-co.act, 1956 Entry no.82-income tax

-66 entries e.g. Entry no.45-land revenue Entry no.59- toll tax

-47 entries e.g. Entry no.44-stamp duty

These are made in compliance of Act

These must comply Act as well as Rules

These are issued by subordinate authorities i.e. SEBI/ CBDT/ CBEC TO ENHANCE THE SCOPE OF LAW

Issued by: - -Supreme Court -high court -quasi judicial body

-Decision of Supreme Court becomes law of land {article-141 of constitution}

-Decision of High court is applicable only on the jurisdiction of that court

-Quasi judicial body acts as judicial body. E.g. INCOME TAX APPELANT TRIBUNAL, COMPANY LAW BOARD

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