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Introduction
In particular, any accounting student
should have understanding of the legal framework, which influences
business transactions. This paper on Business Laws, Ethics and
Communication have been introduced for the CA students at Intermediate
(IPC) Course level in a CA course to make the students aware of
legal background relating to business and company law. It comprises
laws of practical importance in the modern business world as law is a
convincing source of bringing reasons, fairness and stability in all the
mercantile dealings. Besides, in today’s scenario, ethics forms a
mainstay and principle part of any profession and it is certainly
necessary for the students of Chartered Accountancy to know the
value of ethics in business. Ethics is a series of values steering
the conduct of the peoples of the society. Further, a student also
needs to develop good business communication skills, as effectual
communication conduct helps disseminating laws and ethics to business
and society and emphasizing a sound understanding of related legal deeds
and documents.
IPCC LAW – PAPER 2 – SUBJECT SPECIFIC
GUIDANCE. Thus the introduction of this paper in the syllabus serves the
needs of the modern society.
Syllabus coverage
The syllabus is, therefore,
comprehensive, cohesive and synchronized explanation of the statutory
provisions of the business laws including some of the labour laws and
the company law, the fundamental doctrines to ethics required in the
conduct of the businesses, and the communication proficiency which is
preferred for the conduct of any business activity. The subject has been
segregated into three parts with Part I covering Business Laws and the
Company Law carrying 30 marks each. This part comprises of legal
provisions, numbers of case based illustrations and important cases with
view to help students to understand and apply provisions of law
properly. Part II covering Business Ethics discussing the ethical concepts
and the measures to overcome the ethical dilemmas faced by the
professionals carrying 20 marks and Part III covering Business
Communication carrying 20 marks dealing with communication principles,
its forms and applications. In other words, out of the total 100 marks
allotted to the subject, Law carries a weightage of 60 marks, Ethics of
20 marks and Communication of 20 marks. This paper prescribes a working
level knowledge of all the segments covered.
How to Plan for Examination?
Since the level of knowledge required at
this level for the subject is ‘working knowledge’ and the objective is
to gain knowledge of those branches of laws relating to business
transactions, students need to prepare and become conversant with
practical application of the law in commercial situations. Abstract
reading of the law in the form of theory will not help in complete
understanding of the subject. They have to focus their study based on
the legal provisions, case laws, if any, and understand their practical
implications. Besides, students should also give importance to the
terms/definitions for proper conceptualization of the answers.
Students should also go through the Bare
Acts to get a better understanding of the provisions contained in
various statutes. It is desirable to support answers with relevant
sections and leading case laws on the matter wherever necessary.
Handling of Paper
While attempting practical/application
oriented questions, students should be able to pinpoint the legal points
or issues involved in any statement, problem or situation given in the
question, explain the relevant legal provisions clearly, correlate the
legal provisions to the given statement or problem or situation and cite
the relevant case law in support of their reasoning.
A common comment of examiners in the Law
paper is that candidates are generally weak in their working knowledge
of basic concepts and provisions of the relevant laws as well as in
language and writing skills. It is therefore suggested that students
may go through the comments given by the examiners which are available
in the suggested answers of each examination and do the necessary
follow-up action to remove their shortcomings and improve their
knowledge and performance.
Practical /problem based question
Specimen of Question & Answer
Mr. Singh, an old man, by a registered
deed of gift, granted certain land property to A, his daughter. By the
terms of the deed, it was stipulated that an annuity of Rs.2, 000 should
be paid every year to B, who was the brother of Mr. Singh. On the same
day A made a promise to B and executed in his favour an agreement to
give effect to the stipulation. A failed to pay the stipulated sum. In
an action against her by B, she contended that since B had not furnished
any consideration, he has no right of action.
Examining the provisions of Indian Contract Act, 1872, decide, whether the contention of A is valid?
Answer
Name of the Act and the provision by which it is governed
Problem as asked in the question is
based on the provisions of the Indian Contract Act, 1872 as contained in
section 2(d) and on the principle ‘privity of consideration’.
Consideration is one of the essential elements to make a contract valid
and it can flow from the promisee or any other person. In view of the
clear language used in defining ‘consideration’ in Section 2(d) “…. the
promisee or any other person…..”, it is not necessary that consideration
should be furnished by the promisee only. A promise is enforceable if
there is some consideration for it and it is quite immaterial whether it
moves from the promisee or any other person.
Reference of any case law, if any for quality of the answer though not effecting on the scoring of the answer
The leading authority in the decision of
the Madras High Court in Chinnaya Vs. Ramayya (1882) 4 Mad 137., held
that the consideration can legitimately move from a third party and it
is an accepted principle of law in India.
Co-relation of the legal provisions to the given statement/problem in a question
In the given problem, Mr. Singh has
entered into a contract with A, but Mr. B has not given any
consideration to A but the consideration did flow from Mr. Singh to A
and such consideration from third party is sufficient to enforce the
promise of A, the daughter, to pay an annuity to B. Further the deed of
gift and the promise made by A to B to pay the annuity were executed
simultaneously and therefore they should be regarded as one transaction
and there was sufficient consideration for it.
Conclusion
Thus, a stranger to the contract cannot enforce the contract but a stranger to the consideration may enforce it.
Theoretical questions
For the theoritcal question, the answer
should be laid down in bullets with brief description given in small
paragraphs for making answer more appealing and legible.
Specimen of Question & Answer
What are the different manners of non-verbal communication?
Answer
One may continue to communicate non-verbally through:
Kinesics or Body language:
All our bodily movements, gestures, postures etc., are guided by our
feelings and thought processes. The nodding of our head, blinking of our
eyes, waving of our hands, shrugging of our shoulders etc., are
expressions of our thought and feelings. All these movements are the
signals that our body sends out to communicate.
Paralanguage: The
term paralanguage is used to describe a wide range of vocal
characteristics like tone, pitch, and speed etc. – vocal cues that
accompany spoken language which help to express and reflect the
speaker’s attitude. Speaker uses a vast range of vocal cues like:
(a) Pitch Variation
(b) Speaking
(c) Pause
(d) Volume variation
(e) Non – fluencies
(f) Word Stress.
Artificial Communication:
It is well known that we react to people on the basis of their
appearance. The use of personal adornment like clothing, accessories,
makeup, hairstyle etc. provides important non verbal cues about one’s
age, social and economic status, educational level, personality etc.
Proxemics: refers to
the space that exists between us when we talk or relate to each other as
well the way we organize space around us. We can also call it ‘space
language”.
Chronemics or Time language:
is the study of how we use time to communicate. Punctuality is an
important factor in time communication. Misunderstandings or
disagreements involving time can create communication and relationship
problems.
Haptics:
is communication through touch .How we use touch sends important
messages about us. It reveals our perceptions of status, our attitudes
and even our needs.
Silence: The absence of paralinguistic and verbal cues also serves important communicative functions.
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Last but not Least “Writing Put The Finishing Touché”
Students often feel that reading,
understanding and familiarizing with the subject is enough. The process
does not end there. After reading and before the examination, one may
test self by way of undertaking a mock test under examination
conditions. This may be done by attempting a model/previous year
examination question paper and comparing with the suggested answers. By
this, you can examine how far you are recapitulating the subject, of
course, the time in completion of the paper. The exercise may be painful
at the beginning but if one takes it seriously he/she will realize its
privileges.
A word on subject coverage from examination perspective
Business Laws
In Business Laws and Company Law
students have to focus on digesting all the major legal provisions and
their objectives and implications in practice. At every stage, they
should prepare themselves well enough to be able to conceptually explain
the relevant provisions, principles and conditions. Students should
also go through the Bare Acts to get a better understanding of all the
provisions contained in various sections and sub-sections. At the
Intermediate (IPC) Course level, it is better to start remembering some
of the impor tant sections and apply them logically in solving practical
problems. Reading leading case laws if any may also form part of your
reading for enhanced knowledge.
The content of this section has been discussed in six chapters, which are as under:The Indian Contract Act, 1872
Indian Contract Act, 1872 is one of the
oldest law in the Indian law regime, passed by the legislature of
pre-independence India. The statute contains essential principles
for formation of contract along with law relating to special
contracts such as indemnity, guarantee, bailment, pledge and
agency. This statute has been incorporated in the CA-course because
this is the law which forms the foundation upon which the superstructure
of modern business is built. This chapter is divided into 9 units.
The Negotiable Instruments Act, 1881
History of negotiable instruments began
in England as ‘bills of exchange’ whereby merchants were able to
exchange money while keeping their money safe in the banks. A
‘negotiable instrument’ is a signed writing containing an
unconditional promise to pay an exact sum of money. It
includes bill of exchange, cheque, promissory note, or other written
contract for payment that may serve as a substitute for money. It is
simple in form and easy to transfer. Like commercial paper, negotiable
instruments were developed to meet the needs of trade. They are used by
businessmen to facilitate long-distance transactions and to avoid the
cash transactions.
Major topics to focus
1. Meaning, definitions & characteristics of Negotiable Instruments
2. Classification of Instruments
3. Sight and Time bills
4. Negotiation, Negotiability, Assignability
5. Different Provisions relating to Negotiation
6. Rights and Obligations of Parties to an Instrument obtained Illegally
7. Acceptance and Payment for Honour and Reference in Case of Need
8. Presentment of Instruments.
The Payment of Bonus Act, 1965
The term Bonus means extra amount in
money, bonds or goods over what is normally due. The term is applied
especially to payments to employees either for production in excess of
the normal (wage incentive) or as a share of surplus profits. The
Payment of Bonus Act, 1965 intends to provide for the payment of bonus
to persons employed in certain establishments and for matters connected
therewith.
Major topics to focus
1. Act not to apply to certain classes of Employees (Section 32)
2. Definition
3. Who is Entitled to Bonus?
4. Establishments to Include Departments, Undertakings and Branches (section 3)
5. The First Schedule
6. The Third Schedule
7. Payment of Minimum Bonus (Section 10)
8. Payment of Maximum Bonus (Section 11)
9. Procedure for Calculation of Working Days and Proportionate Reduction in Bonus
10.Special Provision with respect to Certain Establishments (Section 16)
11.Special Provision with respect to Bonus Linked with Production or Productivity (Section 31A)
12.Power of Exemption (Section 36).
The Employees’ Provident Funds & Miscellaneous Provisions Act, 1952
This Act was moved by the
State to ensure welfare measures for labourers. The Act
carries great importance in providing welfare measures to
employees in an organization, students should know the
mechanism of this statute.
Major topics to focus
1. Definition (Section 2)
2. Employees’ Provident Fund Scheme (Section 5)
3. Employees’ Deposit-Linked Insurance Scheme
4. Other Provisions.
The Payment of Gratuity Act, 1972
Gratuity is an amount (as a lump sum
payment) which is paid by an employer to his employee for his past
services when the employment is terminated. In case of death of the
worker, it provides financial assistance to the members of his family
for their survival, if they have no other means for support. Thus, this
gratuity scheme serves as an instrument of social security as well as a
reward to a person who sacrifices his whole life for the betterment,
development and prosperity of an establishment and thereby for the
Nation.
Major topics to focus
1. Important Definitions
2. Payability of Gratuity
3. Calculation of Gratuity Amount Payable
4. Forfeiture of Gratuity
5. Nominations for Gratuity
6. Employer’s duty regarding the payment
7. Recovery.
Company Law
With the intention of giving first hand
working exposure in Company Law, a few chapters of the Companies Act,
1956 from Section 1 to 197 are covered. Students, at this level,
have to gain a working knowledge of the provisions of the Companies
Act, 1956.
Note
The Liberalization and Globalization of
our economy in tune with the global changes led to the emergence of the
Companies Act, 2013. The Act has come into existence on the 30th August,
2013 with enforcement of 98 sections by the Notification dated 12th of
September, 2013. The Companies Act, 2013 is not applicable for May, 2014
examination and an announcement in this regard dated 18th November,
2013 has already been hosted on the Institute’s website. For November,
2014 examination, above stated notified 98 sections of the Companies
Act, 2013 are applicable and an announcement in this regard dated 15th
March, 2014 has already been hosted on the Institute’s website.
Ethics
Ethics is a “critical, essential and
non-negotiable” characteristic of an effective leader. Strong business
ethics is a pillar of strategic business planning and success. Today, a
massive inequality exists among the nations throughout the world,
despite a five fold increase in economic growth and a twelve fold
increase in global trade since World War II. The globalised world
economy faces a catastrophic series of socio-economic, political,
cultural, spiritual and environmental crises, as well as a crisis of
security, and they are all threatening the fabric of society, and life
itself.
Recent corporate scandals such as,
Enron, WorldCom, Tyco, Satyam, to name but a few from a long list, have
sunk the world of big business to a new level of disgraceful
recklessness and irresponsibility. Examples of unethical behavior abound
in business stories around the world. And individuals witness some form
of unethical behavior in their workplace every day. Unethical
behaviour, where people deliberately intend to harm themselves or
others, develops from and is reinforced by, destructive states of mind,
including fear, greed, anger and envy. In contrast, ethical behaviour
enhances the well-being of everyone because it is developed from and
reinforced by strong motives and emotions such as love, joy, generosity
and compassion.
The greed-motivated neo-liberal world is
spinning out of control. Perhaps, it is high time to redefine our
values. Knowing what is right is very important to personal and business
ethics. Doing what is right is absolutely critical to personal and
business ethics. A strong unwavering commitment to core values and
guiding principles of business or organization will lead to the right
ethical decisions and actions. In the absence of these actions, all one
has is good intentions and that simply is not enough for the holistic
growth of the mankind.
Communication
Communication is an integral par t
of our professional life. We cannot do away with
communication. Communication is a sine qua non for any business
activity. With the emergence of new technological advances in
information and knowledge, an important skill that is required is
creating an environment that enables the business to connect and have
contacts with its stakeholders. To build long lasting business
relationships with the customers, communication should be clear, crisp
and with clarity. To achieve success, professionals need to assess and
respond to communication situations that occur constantly. Business
Communication usually starting with oral form need to be materialized in
a written form in the form of deeds and documents for which model
varies with the nature of agreement.
The courseware of this subject has been
designed in such a manner that it does not only suffice your examination
needs but also enable you to sharpen your professional skills as well.
This section introduces the students to the elements of communication,
communication in business environment and the preparation of legal deeds
and documents. Generally, students feel themselves in comfort zone
while dealing with this part. This part is a very important part to
increase your overall tally in the paper. But at the same time you
should be careful in your basic understanding.
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