Business and the constitution

Business and
the
Constitution
- UNIT 2
- Monica Ruby Ebenezer

MRTP (Monopolies and Restrictive
Trade Practices) Act
 The Act came into force from 1st June
1970. Amended in 1991.
 The Act aims to prevent concentration of
economic power, provide for control of
monopolies, and protect consumer
interest.
 Currently renamed as the Competition
Act, 2002, with a few changes to it.
Monica - Economic and Social
Environment3/14/2020

Objectives:
 To ensure that the operation of the
economic system does not result in the
concentration of economic power in the
hands of few.
 To provide for the control of monopolies.
 To prohibit monopolistic and restrictive
trade practices.
 After amendment of Act in 1984, a 4th
objective was introduced which was :
 Regulation of Unfair trade practices.

Before Amendment in 1991 After Amendment in 1991
Regulation of Monopolies and
prevention of Concentration of
economic power.
Controlling Monopolistic Trade
Practices (MTP)
Prohibit Monopolistic , restrictive
and unfair trade practices
MTPs, RTPs and UTPs
Regulating Monopolistic ,
restrictive and unfair trade
practices.
MTPs, RTPs and UTPs

Applicability :
 Extends to the whole of India except Jammu and
Kashmir.
Unless the central Govt otherwise directs,
This Act SHALL NOT apply to
 Any undertaking owned or controlled by a Govt
company.
 Any undertaking owned or controlled by the
Govt.
 Any undertaking owned or controlled by a
corporation (Not being a company established by
or under any Central, Provincial or State Act).
 Any Trade Union or other association of workmen
or employees formed for their own reasonable
protection as such workmen or employees

 Any undertaking engaged in an industry,
the management of which has been taken
over by any person or body of persons
under powers by the central govt.
 Any undertaking owned by a co-operative
society formed and registered under any
central, provincial or state act.
 Any financial institution.

MTP – Monopolistic Trade Practice
 A MTP represents
abuse of market power
in production and
marketing of goods
and services by
◦ Eliminating potential
competitors.
◦ Charging unreasonably
high prices.
◦ Preventing or reducing
competition.
◦ Limiting technical
development
◦ Deteriorating product
quality. Etc… Monica - Economic and Social

Regulation of MTPs
 Regulation of production and fixing the
term of sale.
 Prohibiting any action that restricts
competition.
 Fixing standards for goods produced.

Restrictive Trade Practices (RTPs)
 A trade practice that
restricts / reduces
competition may be
termed as Restrictive
Trade Practices. It
harms consumer
interest.
 Because of adverse
effects on consumer and
public interest, they are
sought to be regulated
in every country of the
world. Monica - Economic and Social

Regulation of RTPs
 The practice shall not be repeated.
 The agreement shall be void and shall
stand modified in such a manner as may
be specified in the order.

Unfair Trade Practices (UTP)
 A trade practice which for
the purpose of promoting
the sale, use or supply of
any goods or for the
provision of any service,
adopts any unfair or
deceptive practice
 Categorized as follows:
◦ False representation
◦ False price or bargain price
◦ Free gifts offer and prize
schemes.
◦ Non-compliance of
prescribed standards.
◦ Hoarding, destruction etc…
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Environment

 False representation - > falsely
suggests quality stds, grade and
composition of goods. Falsely suggest
rebuilt good as new one. Misleading rep of
usefulness of a G/S.
 False offer or Bargain Price -> ad in
newspaper offering goods for a bargain
price when there is no such intention.
 Free gifts offer and price schemes ->
bribes where the intention is deceptive.
Gifts offered with other goods, offering
prices to buyers through contests with
real intention to promise sales
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 Non-compliance of prescribed
standards -> sale or supply of goods
knowing or having reason to believe that
goods do not comply with the standards
prescribed.
 Hoarding, destruction -> any practice
that permits hoarding/destruction of
goods with intention to raise the cost of
those/other similar goods.
◦ Hoarding is the practice of obtaining and
holding scarce resources, with the intention to
sell to customers on a high profit in future
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Regulation of UTPs:
 The practice shall not be repeated.
 Any agreement relating to such an UTP
shall be void or shall stand modified in
such a manner as may be directed by the
commission.
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Conclusion
 Besides adversely affecting economic
growth, MRTP act blunted Indian
companies’ s ability to grow, consolidate
and improve competitiveness.
 Dampening effect on global
competitiveness.
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Environment

Competition (Amendment ) Bill
2007
 An Act to amend the competition Act, 2002.
 Competition -> firms/sellers independently
strive for buyer’s patronage in order to achieve
a particular business objective (profits, sales
or market share).
 Benefits of Competition -> companies –
improved efficiency, cost savings, better
resource allocation, consumer – wider choice
@competitive prices, government – increased
revenue
 BUT,..
 THESE BENEFITS ARE LOST IF COMPETITION
IS UNFAIR OR NON-EXISTENT
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 Not necessary to have large no of
producers and suppliers.
 Single producer while existing can produce
a competitive atmosphere
 Entry barriers due to
◦ Market position of incumbent firms – use
power as first movers to block entry
◦ Legal barriers – licensing and other govt
regulations.
◦ Strategic barriers - price reduction by
incumbent firms to thwart new entry
Extreme competition (Monopoly) – allocative
inefficiency , discourages innovation
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Objectives of competition Act
 Promote economic efficiency in static and
dynamic sense
 Protect consumers from undue exercise of
market power
 Facilitate economic liberalization, including
privatization. Deregulation and reduction of
external trade barriers.
 Preserve and promote sound development of
market economy
 Ensure fairness and equity in market place
 Protect opportunities for small and medium
business
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Competition Law
 Tool to implement and enforce
competition policy
 Prevent and punish anti-competitive
practices by firms
 Unnecessary govt intervention in the
market
 Covers three areas
◦ Anti-competitive agreements eg. Cartels
◦ Abuse of dominant positions by enterprises .
Eg. Predatory pricing, barriers to entry
◦ Regulations of Mergers and Acquisitions (M &
As)
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Competition Policy
 Includes reforms in certain policy areas to
make these more pro-competition
◦ Industrial policy
◦ Trade policy
◦ Privatization/disinvestment
◦ Economic regulation
◦ State aids
◦ Labor policy
◦ Other policies
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Industrial policy
 Address and reform:
◦ Licensing requirements
◦ Restrictions on capacities or foreign technology
tie –ups
◦ Guidelines on location of industries
◦ Reservation for SSIs
These adversely affect free competition in the
market
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• Trade policy
• Important implications for development of
competition in the markets.
• Measures for trade liberalization (reducing
tariffs, removal of quotas, invest control).
• Privatization or disinvestment
• Care taken that state monopoly is note replaced
by private monopoly
• State owned enterprises generally insulated
from market forces and receive
protection/benefits and so tend to be less
efficient than private owned firms.
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 Economic regulations (electricity,
telecomm and ports)
◦ Legislation and regulation to promote competition
and bring about restructuring of major industrial
sectors.
◦ Legislation to aim at separating
 natural monopoly elements from potentially
competitive activities
 Regulatory functions from commercial functions
 Create several competitive entities
 State aids
◦ Create unequal operating conditions for businesses.
Eg. Subsidies, tax rebates, preferential loan, capital
injunction
◦ Destroy incentives to become efficient
◦ Temporary is justified
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MRTP vis – a - vis competition Act:
 No provision for unfair trade practices
 Only consumer courts will have
jurisdictions
 Pending cases continued by MRTPC for 2
years
 After 2 years:
◦ All cases (except Disparagement cases)
transferred to national commission under CPA
◦ All Disparagement cases transferred to
competition commission
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Anti-competitive Agreements
 Companies can distort competition by cooperating
with competitors, fixing prices or dividing the market
up so that each one has a monopoly in part of the
market.
 Anti-competitive agreements can be open or
secret
 Horizontal agreements -> between/among
competitors at the same stage of pdn, supply and
distribution . Presumed to be illegal.
Eg. Cartel formation, collusive bidding
 Vertical Agreements -> between parties at
different stages of pdn, supply and distribution. Not
presumed illegal but subject to reason.
Eg. Exclusive supply/distribution agreements, refusal
to deal
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Adverse effects on competition
 Creation of barriers to entry
 Driving existing competitors out of market
 Benefits to consumers
 Benefit to scientific and technical
knowhow
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CCI (Competition Commission of
India) orders against anti-
competitive agreements
 Penalty = thrice the amt of Profit made out of
such agreement
OR
10% of avg turnover of the cartel for the
preceding three yrs whichever is higher.
CCI after inquiry can:
 Direct parties to discontinue the agreement
 Prohibit parties from re-entering the
agreement
 Direct modification to the agreement
 Impose penalty upto 10% of avg turnover
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Protection of Intellectual Property
Rights
 Prohibition on anti-competitive
agreements does not restrict a person’s
right to impose reasonable restrictions on
any of his rights under the Copyright Act,
the Patents Act, Trade and Merchandise
Marks Act, Designs Act.
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Abuse of Dominance
 Dominant position is the position of strength
which enables the enterprise
◦ To operate independently of competitive forces in
the market
◦ To affect its competitors or consumers in its favour.
This includes practices like
 Unfair or discriminatory conditions on prices
 Limiting/restricting pdn or technical/scientific
development
 Denial of market access
 Predatory pricing - pricing of goods or services at such
a low level that other firms cannot compete and are
forced to leave the market.
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The power of the CCI
 After inquiry, the CCI can order
◦ Discontinuance of abuse of dominant position
◦ Impose penalty upto 10% of the avg turnover
of the enterprise
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Combinations regulations
 Combinations include: mergers,
amalgamations and acquisitions.
 Commission is expected regulate
combinations which are likely to have
appreciable adverse effects on competition
 Threshold for single enterprise
◦ Assets greater than Rs 1000 cr
◦ Turnover greater than Rs 3000 cr
 Threshold for group of enterprises
◦ Assets greater than Rs 4000 cr
◦ Turnover greater than Rs 12000 cr
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 Notification of combination to CCI is
voluntary
 If notified, CCI to take a decision within
90 days on the combination
 Decision may allow, disallow, modify etc..
The combination
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Powers of the CCI:
 Cease and desist order
 Impose penalty up to 10%turnover
 In case of cartel, penalty can be 10% of
turnover or 3 times of profit illegally
gained from cartel activity, whichever is
higher.
 Recommend to Govt the division of
dominant enterprise.
 Various penalties varying from Rs 1 lac to
Rs 1 crore provided for failure to comply
with direction/order of commission
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Competition Advocacy:
 CCI is enabled to participate in the
formulation of the country’s economic
policies and participate in the reviewing of
laws related to competition at the instance
of the central Govt.
 Take measures for promotion of
competition advocacy, creating awareness
and imparting training about competition
issues
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 Advocacy -> competition promotion
through non-enforcement measures.
 For promotion of advocacy and creation of
awareness, the CCI may
◦ Undertake appropriate programmes /activities
◦ Encourage and interact with the org of
stakeholders, academic community etc. to
undertake activities, programmes, studies,
research work etc on competition issues
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Environment

Amendments made in the Act -
2007
 Vertical arrangements to include "provision of
services“
 Introduction of "collective dominance“ - >
◦ "No enterprise or group shall abuse its dominant
position." amended to "No enterprise or
group, jointly or singly shall abuse its dominant
position."
 Definition of "Turnover“ ->
"Turnover" includes value of sale of goods or
services was amended to state that "Turnover"
will include value of sale of goods or
services excluding the taxes, if any, levied on
sale of such goods or provisions of services.
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 Definition of "Group“-> states that a
"group" means two or more enterprises
which, directly or indirectly, are in a
position to exercise 26% or moreof the
voting rights in other enterprises. (sec 5
(b)(i)). . On March 02, 2011, the Indian
government released a notification which
increased the 26% threshold to 50%.
Amended the definition of "group" to
include "two or more enterprises which,
directly or indirectly, are in a position to
exercise 50% or more of the voting
rights in the other enterprise."
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Procedural Amendments
 Dawn raids to be simplified -> Instead of the
Magistrate, the DG can seek an order from the
Chairperson of the CCI, under section 41(3) to
conduct any search and seizure.
 Orders of the CCI during the stage of inquiry ->
if the amendment is effected, the CCI
will legitimately be able to pass any order,
irrespective of the finding of the DG during its
investigation.
 Opportunity to be heard before imposition of
penalty-> The Bill now proposes to include a proviso
requiring the CCI to grant a hearing to the party(s)
before it passes any order. This will be consistent with
judicial practice and offer a fair chance to parties to
defend any imposition of the penalty once the CCI
holds them in contravention of the Act.
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The IRDA Act, 1951
 Industrial Development Regulation Act.
 Passed in 1951 to implement the IPR
(Industrial Policy Resolution) , 1948.
 IPR – laid down national objectives to be
achieved.
 For this, Govt should have power to
direct, regulate and control Industrial
investment, location, management,
expansion, growth etc..
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 This Act empowered the Govt
◦ To make rules for registration of existing
Industries
◦ License all new undertakings.
◦ Rules for Regulating production and
Development of Industries in the ‘Schedule’.
◦ Consultation with state govts on these matters.
◦ Act provided for Constitution of a Central
Advisory Council and Development Councils
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Coverage of the ACT
 The whole of India and to all factories
manufacturing any item in the 1st
Schedule to the Act.
 Exemptions -> By the Govt of India. By
Official Gazette notification.
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Environment

Act can be divided into the
following Major Heads
A. Licensing and Registration(Sec/1 to 18).
B. Control and Management of Industries
(Sec/18A to 18FH, 18G)
C. Powers and Directions by Central Govt
(Sec 19 to 32)
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Environment

 This Act declares the usefulness by union
to control the industries specified in the
FIRST SCHEDULE
◦ Iron and Steel, Fuels, Prime Movers, Electrical
Equipment, Fermentation, Food Processing,
Sugar, Leather, Telecommunication,
Transportation, Machinery, Fertilizers,
Chemical, Medical and Surgical, Drugs,
Pharmacy, Textiles, Timber, Defense.
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Council Boards
 Establishment of Central Advisory
Council for the purpose of advising the
Central Govt on matters concerning
development of Industries and any other
aspect regarding the administration of the
Act which shall consist of representatives
of
◦ Owners
◦ Employees
◦ Consumers
◦ Suppliers (under Sec 5)
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 Establishment of Development Council
for the purpose of any scheduled
Industry/ Group of Industries which
constitutes the members representing the
interests of the owners, employees,
consumers and persons having special
knowledge with respect to technical
aspects of the industries under Sec 6
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Functions of DC: (Schedule 2)
 Recommending Production targets
 Suggesting Norms of Efficiency
 Recommends working of industries
efficiently specially less efficient units.
 Promotes arrangements through
distribution, marketing by which
consumer is satisfied
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Duties of the DC:
 DC shall prepare and submit to the central
govt and the advisory council annually
setting out functions it has been
setting during the last year along with
report of auditors on the accounts
under Sec 7
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 IDRA THE OWNER OF EVERY INDUSTRIAL
UNDERTAKING SHALL WITH IN THE
PERIOD SPECIFIED BY CENTRAL
GOVERNMENT, BY NOTIFICATION IN THE
OFFICIAL GAZZETTE,MUST REGISTER IN THE
PRESCRIBED MANNER ACCORDING TO SEC/
10 AND IT CAN BE REVOKED UNDER
SEC/10A IF THE CENTRAL GOVERNMENT IS
SATISFIED THAT IT HAS BEEN OBTAINED BY
MISREPRESENTING THE ESSENCIAL FACTS
AND ANY UNDERTAKING HAS CEASED TO BE
REGISTRABLE UNDER THE ACT.
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 IDRA INDUSTRIAL UNDERTAKING
(SEC/3(d)): ANY UNDERTAKING PERTAINING
TO A SCHEDULED INDUSTRY CARRIED BY
ANY PERSON OR AUTHORITY INCLUDING
THE GOVERNMENT.
 IDRA ACCORDING TO SEC/11 THIS ACT
EMPOWERS THE CENTRAL GOVERNMENT TO
REGULATE THE DEVELOPMENT OF
INDUSTIRES BY MEANS OF LICENSING WITH
SUITABLE EXEMPTIONS DECIDED BY
GOVERNMENT
 LICENSING: A WRITTEN STATEMENT FROM
THE GOVERNMENT TO AN INDUSTRIAL
UNDERTAKING TO MANUFACTURE SPECIFIED
ARTICLES INCLUDED IN THE SCHEDULE TO
THE ACT
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 AFTER THE COMMENCEMENT OF THIS
ACT NO AUTHORITY OR PERSON SHALL
ESTABLISH A NEW INDUSTRIAL
UNDERTAKING WITH OUT THE LICENSE
ISSUED BY CENTRAL GOVERNMENT
ACCORDING TO SEC/11
 Licensing is required For
◦ To set-up a new unit
◦ Manufacturing a new article
◦ Licence for Shifting Location
◦ Licence to carry on Business
◦ Licence of effecting Substantial Expansion
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 IDRA ABTAINED LICENSE CAN BE AMENDED AND
REVOCKED BY THE CENTRAL GOVERNMENT AFTER IT HAS
BEEN SATISFIED THAT REGISTERED UNDERTAKING HAS
FAILED TO ESTABLISH OR TAKE EFFECTIVE STEPS IN
RESPECT OF LICENSE ACQUIRED. CENTRAL GOVERNMENT
SHALL APPOINT AN OFFICER OR AUTHORITY TO MAKE
FULL AND COMPLETE INVESTIGATION IN RESPECT OF
APPLICATIONS RECEIVED
 BY THE RESULT OF SUCH INVESTIGATION GOVERNMENT
IS EMPOWERED TO ISSUE DIRECTIONS TO THE INDUSTRY
OR UNDERTAKING :
1) TO REGULATE THE PRODUCTION OF OUTPUT AND FIX
THE STANDARDS OF PRODUCTION.
2) REQUIRING THE INDUSTRY TO TAKE STEPS WHICH IT
FEELS NECESSARY FOR THE DEVELOPMENT
3)PROHIBITING THE INDUSTRY OR UNDERTAKING TO ACT
OR PRACTICE WHICH MIGHT REDUCE
PRODUCTION,CAPACITY OR ECONOMIC VALUE
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Power of Central Government
 Power of Inspection – person appointed by the CG
(Public servant) to enter and inspect premises to order pdn
of a book, doc, register or record.
 General Prohibition – taking over mgmt or control of any
IU by SG or local authority.
 Payment of Expenses – admin expenses towards wages
of DC are to be paid from money provided by parliament.
 To issue directions – DC guided by the CG directions reg
manner and purpose for which proceeds of the cess levied
 Exempt any IU or class of IU from all provisions of the
act. Having regard for smallness for no of workers or
amount invested
 Final Decision – final say in questions such as
◦ Whether there has been a substantial expansion of an IU
◦ Whether an IU is producing or manufacturing any new article
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Penalties
 Where any person failure on-
 Provision sec10(1)- Failure to get Registration
 Failure to obtain License for manufacture new article
 Failure to comply direction u/s 16 after investigation
 The Act contains penalties for contravention of the
provisions of the Act and for making false statement
by any person under the provisions of the Act
 These contravention attract imprisonment up to 6
months or five years or fine extending up to
Rs.5000/-
 Penalty for false statements – 3 months of
imprisonment or fine of Rs 2000/- or both.
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Sector open to foreign Investors
 Hotel & tourism
 Advertising Sector
 Insurance sector
 Telecommunication
 Power sector with approval
 Film Industry
 Drugs & Pharmaceuticals
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List of Industries reserved for Public
Sector
 Arms and ammunition and allied of
defense equipment
 Atomic Energy
 Mineral Oils
 Railway Transport
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Industrial License is compulsory
 Alcoholic drinks
 Cigar and Cigarettes of tobacco
 Defence equipment
 Hazardous chemicals
 Drugs and pharmaceutics
 Electrical Equipment
 Telecommunication
 Transportation
 Agricultural Machinery
 Earth Moving Machinery
 Medical & Surgical Appliances
 Chemical
 Textile
 Sugar
 Defence Industries
 Iron & Steel Industries
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Foreign Exchange Management
Act (FEMA)
 The Foreign Exchange Regulation Act, 1973
(FERA 1973), as amended by the Foreign
Exchange Management (Amendment) Act,
1999, forms the statutory basis for
Exchange Control in India.
 FEMA
◦ Consolidate and amend the law relating to foreign
exchange
◦ Facilitating external trade and payments
◦ Promoting the orderly development and
maintenance of foreign exchange market in India
◦ 49 sections in the Act
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Impotant Terminology
 Authorized Person: Authorized under the Act to deal in foreign
exchange
 Capital account transaction: Alters the assets or liability
 Currency: Currency notes, Money order, cheque, drafts etc…
 Currency Notes: Coin and bank notes
 Currency Account Transaction: Transactions other than capital
account transactions
 Indian Currency: Indian rupees
 Export: Goods and services from India to outside
 Foreign Currency: Other than Indian currency
 Foreign Exchange: Means foreign currency
 Foreign Security: Security expressed in foreign currency
 Import: Goods and services from outside to India
 Security:Shares, Stock etc as defined in the Public Debt Act of
1994
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 Repatriate to India: Realized foreign
exchange to India
 Service: Banking, Financing, insurance etc…
 Transfer: Sale, Purchase, Exchange etc…
 Non-Resident Indian (NRI): Citizen of India
residing outside
 Overseas Corporate Body (OCB): A company,
firm etc.. Owned at least 60% by NRIs
 Person of Indian Origin (PIO): Citizen of
country other then Bangladesh and Pakistan,
if
◦ Any time held Indian passport or
◦ Either of his parents or grandparents was citizen of
India
◦ The Person is spouse of an Indian citizen
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Applicability of the Act
 To the whole of India.
 Any Branch, office and agency, which is
situated outside India, but is owned or
controlled by a person resident in India.
 Broadly speaking FEMA, covers, three
different types of categories, and deals
differently with them. These categories are:
a) Person
b) Person Resident In India
c) Person Resident Outside India
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A Person
 A person shall include any of the following:
1. An individual
2. A Hindu Undivided family
3. A company
4. A Firm.
5. An association of persons or a body of
individuals, whether incorporated or not,
6. Every artificial judicial person, not falling
within any of the preceding sub clauses,
and
7. Any agency, office or branch owned or
controlled by such person.
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Person Resident in India
 A person who has been residing in India for more
than 182 days, in the last financial year. This
means if a person has to be assessed, as to
whether he is person resident in India, for any
offence committed in August 2001, then he
should be residing in India for more than 182
days during April 2000 to March 2001
 Any person or body corporate registered or
incorporated in India, or
 An office, branch or agency in India owned or
controlled by a person resident outside India, or
 An office, branch or agency outside India owned
or controlled by a person resident in India.
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Person resident outside India
 Simply putting it, "a person resident
outside India" means "a person who is not
resident in India"
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Provisions in Sec 3
 Prohibits dealings in foreign exchange except
through an authorized person
 Make any payment to or for the credit of any
person resident outside India in any manner
 Receive otherwise through an authorized
person, any payment by order or on behalf of
any person resident outside India in any
manner
 Enter into any financial transaction in India
for acquisition or creation or transfer of a
right to acquire, any asset outside India by
any person
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Provisions in Sec
 SECTION 4 – Restrains any person resident in India
from acquiring, holding, owning, possessing or
transferring any foreign exchange, foreign security or
any immovable property situated outside India except
as specifically provided in the Act.
 SECTION 5 – deals with current account transaction
Any person may sell or draw foreign exchange to or
from an authorized person if such sale or draw is a
current account transaction
 SECTION 6 - deals with capital account transactions.
This section allows a person to draw or sell foreign
exchange from or to an authorized person for a
capital account transaction.
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Transactions regulated by
Exchange control
Transactions having international financial implications matters are regulated by Exchange
Control:
•a) Purchase and sale of and other dealings in foreign exchange and maintenance of
balances at foreign centers
•b) Procedure for realization of proceeds of exports
•c) Payments to non-residents or to their accounts in India
•d) Transfer of securities between residents and non- residents and acquisition and
holding of foreign securities
•e) Foreign travel with exchange
•f) Export and import of currency, cheques, drafts, travelers cheques and other financial
instruments, securities, etc.
•g) Activities in India of branches of foreign firms and companies and foreign
nationals
•h) Foreign direct investment and portfolio investment in India including investment by
non-resident Indian nationals/persons of Indian origin and corporate bodies
predominantly owned by such persons
•i) Appointment of non-residents and foreign nationals and foreign companies as agents
in India
•j) Setting up of joint ventures/subsidiaries outside India by Indian companies
•k) Acquisition, holding and disposal of immovable property in India by foreign
nationals and foreign companies
•l) Acquisition, holding and disposal of immovable property outside India by Indian
nationals resident in India.
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Provisions in Sec
 SECTION 7 - deals with export of goods and
services. Every exporter is required to furnish to the
RBI or any other authority, a declaration etc. etc.
regarding full export value.
 SECTION 8 and 9- casts the responsibility on the
persons resident in India who have any amount of
foreign exchange due or accrued in their favour to get
same realized and repatriated to India within the
specific period and the manner specified by RBI.
 SECTIONS 10 and 12 - deals with duties and
liabilities of the Authorized persons authorized dealer,
money changer, off shore banking unit or any other
person for the time being authorized to deal in
foreign exchange or foreign securities.
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Duties of an Authorized Person
 To comply with RBI directions
 Not to engage in un authorized
transactions
 Ensure compliance of FEMA provisions
 To produce books, accounts etc…
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Powers of an Authorized Person
 To deal in or transfer any foreign
exchange
 Receive payments by order
 To open NRO, NRE, FCNR, NRNR, NRSR
accounts
 To sell or purchase foreign exchange for
current account transactions
 To sell or purchase foreign exchange for
permissible capital account transactions
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Powers of RBI
 Verifying the correctness of any
statements, information or particular
 Obtaining information which such
authorized person has failed to furnish
 Securing compliance with the provisions
of Act
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Provisions in Sec
 SECTION 13 –
 Any contravention, under FEMA, may invite
following kinds of penalties:
◦ If, the amount against which offence is quantified,
then penalty will be "THRICE" the sum involved in
contravention.
◦ Where the amount cannot be quantified the penalty
may be imposed up to two lakh rupees.
◦ If, the contravention is continuing everyday, then
Rs. Five Thousand for every day after the first day
during which the contravention continues.
 Further in addition to the penalty, any currency,
security or other money or property involved in the
contravention may also be confiscated.
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 SECTION 14 – If a person fails to make
full payment of the penalty imposed with
in a period of 90 days, he shall be liable
to civil imprisonment.
 SECTION 15 – Empowers the Directorate
of Enforcement and Officers of the
Reserve Bank of India as may be
authorized by the central Govt. in this
behalf to compound the offences.
 SECTION 16 – Empowers the central
Govt. to appoint as many adjudicating
authorities as it may think fit for holding
enquiries.
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Govt. to appoint one or more special
Directors to hear the appeals against the
orders of the Adjudicating Authorities.
Govt. to establish Appellate Tribunal to
hear appeals against the orders of
Adjudicating Authorities and special
Director.
 SECTION 19 – It makes provisions as
regards appeals to Appellate Tribunal.
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 SECTION 20 – Composition of Appellate Tribunal.
 SECTION 21 – Qualifications for appointment of
Chairperson member and Special Director.
 SECTION 22 – Term of Office.
 SECTION 23 – Terms and Conditions of service.
 SECTION 24 – Vacancies.
 SECTION 25 – Resignation and Removal.
 SECTION 26 – Member to act as Chairperson in
certain circumstances.
 SECTION 27 – Staff of Appellate Tribunal and Special
Directorate.
 SECTION 28 – Power of Appellate Tribunal and
Special Director.
 SECTION 29 – Distribution of business among
benches.
 SECTION 30 – Power of Chairperson to Transfer
cases.
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 SECTION 31 – Decision to be by
majority.
 SECTION 32 – Right of Appellant to take
assistance of legal practitioner or CA and
of Govt. to appoint presenting officer.
 SECTION 33 – Members, etc to public
servants.
 SECTION 34 – Civil court not to have
jurisdiction.
 SECTION 35 – Appeal to High Court.
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 SECTION 36 to 38 – Directorate of
Enforcement
◦ Enforcement of the provisions of the Foreign
Exchange Management Act
◦ Prevent leakage of foreign exchange
 Remittances of Indians abroad otherwise than through
normal banking channels, i.e. through compensatory
payments.
 Acquisition of foreign currency illegally by person in
India.
 Non-repatriation of the proceeds of the exported
goods.
 Unauthorized maintenance of accounts in foreign
countries.
 Siphoning off of foreign exchange against fictitious and
bogus imports land by.
 Illegal acquisition of foreign exchange through Hawala
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 The Securities and Exchange Board of
India was established on April 12, 1992 in
accordance with the provisions of the
Securities and Exchange Board of India
Act, 1992.
 Its main function is to stop fraudulent
activities of stock market.
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SECURITIES AND EXCHANGE BOARD
OF INDIA ACT, 1992
 An Act to provide for the establishment of a
Board to protect the interests of investors in
securities and to promote the development of,
and to regulate, the securities market and for
matters connected therewith or incidental
thereto.
 To ensure fair practices by the issuers of
securities so that they can raise resources at
minimum cost.
 To promote efficient services by brokers,
merchant bankers and other intermediaries so
Department of Commerce, Mar Ivanios College
that they become competitive and professional.
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SEBI INTRODUCTION
Formed: 12 April, 1992
Jurisdiction: Government of India
Headquarters: Mumbai, Maharashtra
Employees: 525 (in 2009)
Website: www.sebi.gov.in
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History of SEBI
 Initially SEBI was a non statutory body
without any statutory power.
 However in 1995, the SEBI was given
additional statutory power by the
Government of India through an amendment
to the securities and Exchange Board of India
Act 1992.
 In April, 1998 the SEBI was constituted as
the regulator of capital market in India under
a resolution of the Government of India.
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ROLE OF SEBI IN MUTUAL FUNDS
 SEBI notified regulations for the mutual
funds in 1993.
 SEBI has also issued guidelines to the
mutual funds from time to time to protect
the interests of investors.
 All mutual funds whether promoted by
public sector or private sector are
governed by SEBI.
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ROLE OF SEBI IN IPO
 The rules, regulations and procedures relating to
public issues in India are governed by SEBI.
 Any company going public in India should get
approval from SEBI before opening its IPO.
Issuer company’s lead managers submit the
public issue prospectus to SEBI, provide
clarification, make changes to the prospectus
suggested by SEBI and get it approve.
 SEBI validate the IPO and make sure that
document has enough information to help
investors to take decision before applying shares
in an IPO.
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FUNCTIONS OF SEBI
 SEBI performs following functions:
a) Regulating the business in stock exchanges
and any other securities markets.
b) Registering and regulating the working of
stock brokers, sub-brokers, share transfer
agents, bankers to an issue, trustees of trust
deeds, registrars to an issue, merchant
bankers, portfolio managers, investment
advisers.
c) Prohibiting fraudulent and unfair trade
practices relating to securities markets
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(2) The duty of the Board to protect the
interests of investors in securities and to
regulate the securities market.
(3) Board have some powers as issuing
commissions for the examination of
witnesses or documents.
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RESPONSIBILITIES OF SEBI
 SEBI has to be responsive to the needs of
three groups, which constitute the market:
a. the issuers of securities
b. the investors
c. the market intermediaries
 SEBI has three functions rolled into one
body:
◦ quasi-legislative,
◦ quasi-judicial and
◦ quasi-executive.
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POWERS OF SEBI
 Investigation:
I. inspect the books of accounts and call for
periodical returns from recognized stock
exchanges.
II. inspect the books of accounts of a financial
intermediaries.
III. compel certain companies to list their shares
in one or more stock exchanges.
 Cease and desist proceedings:
I. prosecute and judge directly the violation of
certain provisions of the companies Act.
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DEPARTMENTS OF SEBI
Market Intermediaries Regulation and supervision Department (MIRSD)
Market Regulation Department (MRD)
Derivatives and New Product Department (DNPD)
Corporation Finance Department (CFD)
Investment Management Department (IMD)
Integrated Surveillance Department (ISD)
Investigation Department (IVD)
Legal Affairs Department (LAD)
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STRUCTURE OF SEBI
 The board shall consist of the following
members :
◦ Chairman
◦ Two members, one from amongst the officials
of the Central government dealing with finance
and another from the administration of
Companies Act,1956.
◦ One member from amongst the officials of the
Reserve Bank of India.
◦ Five other members of whom at three shall
be whole time members to be appointed by
the Central Government.
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PROTECTION GUIDELNES GIVEN BY
SEBI
 Eligibility Norms For Companies Issuing
Security: No company shall make any issue of a
public issue of securities, unless a draft
prospectus has been filed with the Board,
through an eligible Merchant Banker, at least 21
days prior to the filing of Prospectus with the
Registrar of Companies (ROCs).
 Pricing By Companies Issuing Securities: A
listed company whose equity shares are listed on
a stock exchange, may freely price its equity
shares and any security convertible into equity at
a later date, offered through a public or rights
issue.
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 Pre issue Obligations: The standard of
due diligence shall be such that the
merchant banker shall satisfy himself
about all the aspects of offering, veracity
and adequacy of disclosure in the offer
documents.
 Contents of Offer Document:
Prospectus shall also contain all material
information which shall be true and
adequate so as to enable the investors to
make informed decision on the
investments in the issue.
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POWERS OF CENTRAL GOVERNMENT
 The Central Government has power to issue directions
to SEBI Board, supersede the Board, if necessary and
to call for returns and reports as and when necessary.
 The Central Government has also power to give any
guideline(s) or to make regulations and rules for SEBI
and its operations.
RELATION WITH THE CENTRAL GOVERNMENT
 The activities of SEBI are financed by grants from
Central Government, in addition to fees, charges etc.
collected by SEBI.
 The fund called SEBI General Fund is set up, to
which, all fees, charges and grants are credited.
 This fund is used to meet the expenses of the Board
and to pay salary of staff and members of the body.
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SEBI AMENDMENT BILL, 2013
 Passed by the Rajya Sabha on 5th
September 2013.
 Widen the area for eligible candidates for
the post of Presiding Officer at the
Securities Appellate Tribunal (SAT).
 The Bill extends eligibility criteria for SAT
Presiding Officer’s role & includes sitting
or retired Judges of a High Court with a
minimum service of 7 years.
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REGIONAL OFFICES
1. New Delhi
2. Kolkata
3. Chennai
4. Ahmedabad
LOCAL OFFICES
1. Jaipur
2. Bangalore
3. Guwahati
4. Bhubaneswar
5. Patna
6. Kochi
7. Chandigarh SEBI Bhavan
8. Mumbai Headquarters (in Bandra Kurla Complex)
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OBJECTIVE
 The main objective of the Consumer
Protection Act, 1986 is to protect the
interest and safeguard the rights of the
consumers which are as follows:
◦ Right to be protected against the marketing of
goods and services which are hazardous to life
and property.
◦ Right to be informed about the quality,
quantity, potency, purity, standard and price of
goods or services so as to protect the
consumer against unfair trade practices
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◦ Right to be assured , wherever possible ,
access to a variety of goods and services at
competitive prices
◦ Right to be heard and to be assured that
consumers' interests will receive due
consideration at appropriate forums
◦ Right to seek redressal against unfair trade
practices and unscrupulous exploitation of
consumers
◦ Right to consumer education.
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Terminologies
 “Consumer" means any person who
◦ “who buys any goods for a consideration which
has been paid or promised, or partly paid and
partly promised, or under a system of deferred
payment.
◦ Hires any services for a consideration which
has been paid or promised, or partly paid and
partly promised, or under a system of deferred
payment.
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 “Complaint" means any allegation in writing
made by a complainant that—
◦ An unfair trade practice or a restrictive trade
practice has been adopted by any trader or service
provider;
◦ The goods bought by him or agreed to be bought
by him; suffer from one or more defects;
◦ The services hired or availed of or agreed to be
hired or availed of by him suffer from deficiency in
any respect;
◦ A trader or service provider, as the case may be,
has charged for the goods or for the service
mentioned in the complaint a price in excess of the
price.
◦ Goods / Service which will be hazardous to life and
safety when used or being offered for sale to the
public.
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 “Complainant" means—
◦ A consumer; or
◦ Any voluntary consumer association registered
under the Companies Act,1956; or
◦ The Central Government or any State
Government,
◦ One or more consumers, where there are
numerous consumers having the same
interest;
◦ In case of death of a consumer, his legal heir or
representative; who or which makes a
complaint;
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 “Not a Consumer" means—
◦ A person who purchased goods for resale;
◦ Or A person who purchased goods for
commercial purpose;
◦ Or A person who obtains services without
consideration;
◦ Or A person who obtains services under a
contract of personal service;
◦ Or Tax-payers to municipality:
◦ Or Contractors;
◦ Or Applicants for jobs;
◦ Or Persons who filed suits in courts.
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Rights of Consumers
 Right to Safety – Hazardous goods & services
 Right to be Informed – About the quality,
quantity, potency, purity, standard and price of
goods
 Right to Choose – Access to variety of goods and
services at competitive price
 Right to be heard - due consideration at
appropriate forums.
 Right to seek Redressal – Right to seek redressal
against unfair trade practices or unscrupulous
exploitation of consumers
 Right to Consumer Education –Right to acquire
the knowledge and skill to be an informed
consumer throughout life.
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Consumer Protection Councils
 Central Consumer Protection Council.
◦ The Minister in charge of the consumer affairs in the Central
Government, who shall be its Chairman, and
◦ such number of other official or non-official members
representing such interests as may be prescribed.
 State Consumer Protection Council.
◦ The Minister in charge of consumer affairs in the State
Government who shall be its Chairman;
◦ such number of other official or non-official members
representing such interests as may be prescribed by the
State Government.
◦ such number of other official or non-official members, not
exceeding ten, as may be nominated by the Central
Government
 District Consumer Protection Council
◦ The Collector of the district (by whatever name called), who
shall be its Chairman;
◦ such number of other official and non-official members
representing such interests as may be prescribed by the
State Government.
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District Forum
 Each District Forum shall consist of a person who
is or has been or is qualified to be a District Judge
who shall be its President two other members,
one of whom shall be a woman possessing a
bachelor’s degree from a recognized university, be
a person of ability, integrity and standing and
have adequate knowledge and experience
 Every member of the District Forum shall hold
office for a term of 5 years or up to the age of 65
years which ever is earlier.
 Subject to the other provisions of the Act a
District forum shall have jurisdiction to entertain
complaints where the value of the goods or
services and the compensation, if any, claimed
does not exceed Rs.20 Lakhs.
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State Commission
 A Consumer Disputes Redressal Commission
to be known as the "State Commission"
established by the State Government in the
State.
 A person who is or has been a Judge of a
High Court, appointed by the State
Government, who shall be its President.
 Each State Commission shall have
jurisdiction to entertain complaints where the
value of the goods or services and
compensation, if any, claimed exceeds Rs. 20
Lakhs but does not exceed Rs.1 Crore and
appeals against the orders of any District
Forum within the State.
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National Commission
 The ‘ National Commission’ shall consist of a person
who is or has been a Judge of the Supreme Court,
shall be its President. Not less than 4 and not more
than such number of members as may be prescribed
and one of whom shall be a woman with similar
qualifications as required in the case of appointment
as a member to a District Forum or a State
Commission.
 Every member of the National commission shall hold
office for a term of 5 years or up to the age of 70
years which ever is earlier.
 The National Commission shall have jurisdiction to
entertain complaints where the value of the goods or
services and compensation, if any, the claim exceeds
Rs. 1 Crore and appeals against the orders of any
State Commission.
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Objective of Consumer Protection
Council
 To promote and protect the rights of the
consumers such as,—
◦ The right to be protected against the marketing
of goods and services which are hazardous to
life and property;
◦ The right to be assured, wherever possible,
access to a variety of goods and services at
competitive prices;
◦ The right to be heard and to be assured that
consumer's interests will receive due
consideration at appropriate forums;
◦ The right to be informed the right to consumer
education.
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