Industries Development and Regulation Act in India
Posted by admin on August 20th, 2009
Industries Development and Regulation Act
Growth of the industrial sector at a higher rate and on a sustained basis is a major determinant of a country’s overall economic development. In this regard, the Government of India has issued industrial policies, from time to time, to facilitate and foster the growth of Indian industry and maintain its productivity and competitiveness in the world market.
In order to provide the Central Government with the means to implement its industrial policies, several legislations have been enacted and amended in response to the changing environment. The most important being the Industries (Development and Regulation) Act, 1951 (IDRA) which was enacted in pursuance of the Industrial Policy Resolution, 1948. The Act was formulated for the purpose of development and regulation of industries in India by the Central Government.
The main objectives of the Act is to empower the Government:- (i) to take necessary steps for the development of industries; (ii) to regulate the pattern and direction of industrial development; (iii) to control the activities, performance and results of industrial undertakings in the public interest. The Act applies to the ‘Scheduled Industries’ listed in the First Schedule of the Act. However, small scale industrial undertakings and ancillary units are exempted from the provisions of this Act.
The Act is administered by the Ministry of Industries & Commerce through its Department of Industrial Policy & Promotion (DIPP). The DIPP is responsible for formulation and implementation of promotional and developmental measures for growth of the industrial sector. It monitors the industrial growth and production, in general, and selected industrial sectors, such as cement, paper and pulp, leather, tyre and rubber, light electrical industries, consumer goods, consumer durables, light machine tools, light industrial machinery, light engineering industries etc., in particular. It is also responsible for facilitating and increasing the foreign direct investment (FDI) inflow into the country as well as for encouraging acquisition of technological capability in various sectors of the industry.
The various provisions of the Act are:-
* Establishment of a ‘Central Advisory Council’ for the purpose of advising the Central Government on matters concerning the development of the industries, making of any rules and any other matter connected with the administration of the Act. Its members shall consist of representatives of the owners of industrial undertaking, employees, consumers, primary suppliers, etc.
* Establishment of a ‘Development Council’ for the purpose of development of any scheduled industry or group of scheduled industries. This council shall consist of the members representing the interests of the owners, employees, consumers, etc. and persons having special knowledge of matters relating to the technical or other aspects of the industries.
* The development council shall perform the following functions assigned to it by the Central Government:- (i) recommending targets for production, co-ordinating production programmes and reviewing progress from time to time. (ii) suggesting norms of efficiency with a view to eliminating waste, obtaining maximum production, improving quality and reducing costs. (iii) recommending measures for securing the fuller utilisation of the installed capacity and for improving the working of the industry, particularly of the less efficient units. (iv) promoting arrangements for better marketing and helping in the devising of a system of distribution and sale of the produce of the industry which would be satisfactory to the consumer. (v) promoting the training of persons engaged or proposing engagement in the industry and their education in technical or artistic subjects relevant thereto, etc.
* The development council shall prepare and transmit to the Central Government and the advisory council a report (annually) setting out what has been done in the discharge of its functions during the financial year last completed. The report shall include a statement of the accounts of the development council for that year, together with a copy of any report made by the auditors on the accounts.
* The IDRA empowers the Central Government to regulate the development of industries by means of licensing with suitable exemptions as decided by the Government. Accordingly, the entry into a business or the expansion of an existing business may be regulated by licensing. A licence is a written permission from the Government to an industrial undertaking to manufacture specified articles included in the Schedule to the Act. It contains particulars of the industrial undertaking, its location, the articles to be manufactured, its capacity on the basis of the maximum utilisation of plant and machinery, and other appropriate conditions which are enforceable under the Act.
* If an application for licence is approved and further clearance ( such as that of foreign collaboration and capital goods import) are not involved and no other prior conditions have to be fulfilled, an industrial licence is issued to the applicant. In other cases, a letter of intent is issued, which conveys the intention of the Government to grant a licence subject to the fulfilment of certain conditions such as approval of foreign investment proposal, import of capital goods,etc.
* The Government may order for investigation before the grant of licence to an industrial undertaking. It can make a full and complete investigation if it is of the opinion that in the respect of any schedule industry or undertaking, there has been or is likely to be:- (i) a substantial fall in the volume of output; or (ii) a marked deterioration in the quality of output or an unjustifiable rise in the price of the output. Also, if it is of the opinion that any industrial undertaking is being managed in a manner highly detrimental to the scheduled industry concerned or to the public interest, it orders investigation.
* As a result of such investigations, the Government is empowered to issue directions to the industrial undertaking for all or any of the following purposes:-
o Regulating the production of output by the industrial undertaking and fixing the standards of production;
o Requiring the industrial undertaking to take such steps as the Central Government may consider necessary to stimulate the development of the industry to which the undertaking relate.
o Prohibiting the industrial undertaking from resorting to any act or practice which might reduce its production, capacity or economic value;
o Controlling the prices, or regulating the distribution, of an output for securing its equitable distribution and availability at fair prices.
o The Act also provides that any such directions may be issued by the Central Government at any time when a case relating to any industrial undertaking is under investigation. These directions shall have effect until they are varied or revoked by the Central Government.
* The power of control entrusted to the Central Government under the Act extends to that of the take over of the management of the whole or any part of an industrial undertaking which fails to comply with any of the directions mentioned above. The Government can also take over the management of an undertaking which is being managed in a manner highly detrimental to the scheduled industry concerned or to the public interest. Further, the Central government can take over the management of industrial undertaking owned by a company under liquidation, with the permission of the High Court, if the Government is of the opinion that the running or restarting the operations of such an undertaking is necessary for the maintaining or increasing the production, supply or distribution in the public interest.
Until liberalisation, the industrial licence was required for the establishment of a new industrial undertaking, manufacturing of a new item by an existing undertaking, change of location of an industry, substantial expansion of existing capacity and for all other purposes. But the new industrial policy s liberalised this and exempted many industries from obtaining industrial licence. In today’s scenario, only 6 categories of industries require industrial licensing under the Industries (Development and Regulation) Act, 1951 (IDRA). Such industries file an Industrial Entrepreneur Memoranda (IEM) with the Secretariat of Industrial Assistance (SIA),Department of Industrial Policy and Promotion to obtain an acknowledgement.
Industrial Acts and Legislations in India
Companies Act in India
Posted by admin on August 19th, 2009
Companies Act
A Company is defined as a voluntary association of persons formed for the purpose of doing business, having a distinct name and limited liability. Companies, whether public or private, are an indispensable part of an economy. They are the modes through which a country grows and expands world wide. Their performance is an important parameter of a countries economic position.
In India, the Companies Act, 1956, is the most important piece of legislation that empowers the Central Government to regulate the formation, financing, functioning and winding up of companies. The Act contains the mechanism regarding organisational, financial, managerial and all the relevant aspects of a company. It provides for the powers and responsibilities of the directors and managers, raising of capital, holding of company meetings, maintenance and audit of company accounts, powers of inspection, etc. The Act applies to whole of India and to all types of companies, whether registered under this Act or an earlier Act. But it does not apply to universities, co-operative societies, unincorporated trading, scientific and other societies.
The Act empowers the Central Government to inspect the books of accounts of a company, to direct special audit, to order investigation into the affairs of a company and to launch prosecution for violation of the Act. These inspections are designed to find out whether the companies conduct their affairs in accordance with the provisions of the Act, whether any unfair practices prejudicial to the public interest are being resorted to by any company or a group of companies and to examine whether there is any mismanagement which may adversely affect any interest of the shareholders, creditors, employees and others. If an inspection discloses a prima facie case of fraud or cheating, action is initiated under provisions of the Companies Act or the same is referred to the Central Bureau of Investigation.
The Companies Act is administered by the Central Government through the Ministry of Corporate Affairs and the Offices of Registrar of Companies, Official Liquidators, Public Trustee, Company Law Board, Director of Inspection, etc. The Registrar of Companies (ROC) controls the task of incorporation of new companies and the administration of running companies.
The Ministry of Corporate Affairs, earlier known as Department of Corporate Affairs under Ministry of Finance, is primarily concerned with administration of the Companies Act, 1956, other allied Acts and rules & regulations framed there-under mainly for regulating the functioning of the corporate sector in accordance with law. The Ministry has a three-tier organisational set-up:-
- The Headquarters at New Delhi,
- The Regional Directorates at Mumbai, Kolkata, Chennai and Noida, and
- Tthe Registrars of Companies (ROCs) in States and Union Territories.
The Official Liquidators who are attached to the various High Courts functioning in the country are also under the overall administrative control of the Ministry. The set-up at the Headquarters includes the Company Law Board, a quasi-judicial body, having the principal Bench at New Delhi, an additional principal bench for Southern Region at Chennai and four Regional Benches located at New Delhi, Mumbai, Kolkata and Chennai. The organisation at the Headquarters also includes two Directors of Inspection and Investigation with a complement of staff, an Economic Adviser for Research and Statistics and other Officials providing expertise on legal, accounting, economic and statistical matters.
The four Regional Directors, who are in charge of the respective regions, comprising a number of States and Union Territories, interalia, supervise the working of the Offices of Registrars of Companies and the Official Liquidators working in their regions. They also maintain liaison with the respective State Governments and the Central Government in matters relating to the administration of the Companies Act, 1956.
Registrar of Companies (ROCs) appointed under Section 609 of the Companies Act, covering various States and Union Territories, are vested with the primary duty of registering companies floated in the respective States and the Union Territories and ensuring that such companies comply with the statutory requirements under the Act. Their offices function as registry of records relating to the companies registered with them. The powers vested with the ROCs are:-
- Registration of memorandum and articles.
- Registration of prospectus.
- Registration of reduction of capital.
- Call information or explanation.
- Seizure of documents.
- Investigation into affairs of a company.
- Inspection of books of accounts, etc of companies.
- To strike off defunct companies from register.
- Enforcement of duty of company to make returns, etc to Registrar.
- Non-disclosure of information in certain cases.
- Winding up petition by the Registrar.
Official Liquidators are the officers appointed by the Central Government under Section 448 of the Companies Act and are attached to the various High Courts. They are under the administrative charge of the respective Regional Directors who supervise their functioning on behalf of the Central Government.
According to the Act, a company means “a company formed and registered under the Act or an existing company i.e. a company formed or registered under any of the previous company laws”. The salient features of a company are:-
- Artificial legal person:- a company is an artificial person in the sense that it is created by law and lacks the attributes possessed by natural persons. It is invisible, intangible, immortal and exists only in the contemplation of law. Hence, it has to operate through a board of directors consisting of individuals.
- Separate legal entity:- a company is a distinct legal entity, different from its members or shareholders. This implies that:- the property of the company belongs to it and not to the members or shareholders; no member can either individually or jointly claim any ownership rights in the assets of the company; an individual member cannot be held liable for the wrongful acts of the company even if he/she holds virtually the entire share capital; the members of the company can enter into contracts with the company.
- Perpetual succession:- a company enjoys continuous existence and its continuance is not affected by the death, insolvency, mental or physical incapacity of its members. It is created by law and law alone can dissolve it.
- Limited liability of members:- the liability of its members is limited to the amount remaining unpaid on the shares subscribed by them. Thus, in case of fully paid-up shares, the members cannot be asked to contribute any further, if the company goes into liquidation.
- Common seal:- a company has a common seal, which is the signature of that company and signifies common consent of all the members. The company’s seal is affixed on all the documents executed for and on its behalf.
- Transferability of shares:- the shares of a public company are freely transferable without the permission of the company but in a manner provided in the Articles. The shareholders may transfer their shares to another person and this does not affect the funds of the company. But, a private company imposes restrictions on transfer of its shares.
- Separate property:- all the property of the company vests in it. The company can control, manage and hold the same in its own name. The members have no ownership rights in the company’s property, either individually or collectively. A shareholder does not even have an insurable right in the property of the company. The creditors of the company can have a claim only against the property of the company and not against the property of the individual members.
- Capacity to sue and being sued:- a company can enforce its rights through suits and can also be sued for breach of its statutory rights.
The basic objectives underlying the Act are:-
- A minimum standard of good behaviour and business honesty in company promotion and management;
- To help in the development of companies on healthy lines;
- To protect the interests of the shareholders;
- To safeguard the interests of the creditors;
- To equip the Government with adequate powers to intervene in the affairs of a company in public interest and as per the procedure prescribed by law;
- A fair and true disclosure of the affairs of companies in their annual published balance sheet and profit and loss accounts;
- Proper standard of accounting and auditing;
- A ceiling on the share of profits payable to managements as remuneration for services rendered;
- A check on their transactions where there was a possibility of conflict of duty and interest;
- A provision for investigation into the affairs of any company managed in a manner oppressive to minority of the shareholders or prejudicial to the interest of the company as a whole;
- Enforcement of the performance of their duties by those engaged in the management of public companies or of private companies which are subsidiaries of public companies by providing sanctions in the case of breach and subjecting the latter also to the more restrictive provisions of law applicable to public companies;
- To help in the attainment of the ultimate ends of the social and economic policy of the Government;
In response to the changing business environment, the Companies Act, 1956 has been amended from time to time so as to provide more transparency in corporate governance and protect the interests of small investors, depositors and debenture holders, etc. For example, the Companies (Amendment) Act, 2006 introduced an important provision of Director Identification Number (DIN), which is an unique Identification Number allotted to an individual who is an existing director of a company or intends to be appointed as director of a company pursuant to section 266A & 266B of the Companies Act, 1956 (as amended vide Act No 23 of 2006). The various amendments are:-
- The Companies (Amendment) Act, 2000
- The Companies (Amendment) Act, 2001
- The Companies (Amendment) Act, 2002
- The Companies (Second Amendment) Act, 2002
Industrial Acts and Legislations in India
Industrial Acts and Legislations in India
Posted by admin on August 19th, 2009
In India there are several Acts and legislations enacted by the Government of India for regulation of industries in the country. These enactments play a very important role in the country’s overall progress and economic development. These legislations are amended from time to time in accordance with the changing circumstances and environment. The most important Act is the Companies Act,1956 which relates to setting up and operation of companies in India. It empowers the Central Government to regulate the formation, financing, functioning and winding up of companies. It contains the mechanism regarding organisational, financial, managerial and all the relevant aspects of a company.
In order to provide the Central Government with the means to implement its industrial policies, several legislations have been enacted. The most important being the Industries (Development and Regulation) Act, 1951 (IDRA). The main objectives of the Act is to empower the Government to take necessary steps for the development of industries; to regulate the pattern and direction of industrial development; and to control the activities, performance and results of industrial undertakings in the public interest.
The bulk of the transactions in trade, commerce and industry are based on contracts. In India, the Indian Contract Act,1872 is the governing legislation for contracts, which lays down the general principles relating to formation, performance and enforceability of contracts and the rules relating to certain special types of contracts like Indemnity and Guarantee; Bailment and Pledge; as well as Agency.
Another important aspect of legislations is the industrial relations, which involves various aspects of interactions between the employer and the employees; among the employees as well as between the employers. In such relations whenever there is a clash of interest, it may result in dissatisfaction for either of the parties involved and hence lead to industrial disputes or conflicts. The Industrial Disputes Act, 1947 is the main legislation for investigation and settlement of all industrial disputes. The Act enumerates the contingencies when a strike or lock-out can be lawfully resorted to, when they can be declared illegal or unlawful, conditions for laying off, retrenching, discharging or dismissing a workman, circumstances under which an industrial unit can be closed down and several other matters related to industrial employees and employers.
Trade unions are also an important part of an industrial set up. The legislation regulating these trade unions is the Indian Trade Unions Act, 1926 . The Act deals with the registration of trade unions, their rights, their liabilities and responsibilities as well as ensures that their funds are utilised properly. It gives legal and corporate status to the registered trade unions. It also seeks to protect them from civil or criminal prosecution so that they could carry on their legitimate activities for the benefit of the working class.
Companies Act
Industrial Disputes Act
Industries Development and Regulation Act
Trade Unions Act
Contract Law
Regulatory Requirements to Start a Business in India
Posted by admin on August 18th, 2009
Once an entrepreneur has taken all the important decisions relating to starting a business, he/she has to take into account the basic regulatory requirements which are to be followed for setting up the organisation. The most important regulation is the Companies Act,1956, which regulates all the affairs of a company. It contains provisions relating to the formation of a company, powers and responsibilities of the directors and managers, raising of capital, holding company meetings, maintenance and audit of company accounts, powers of inspection and investigation of company affairs, reconstruction and amalgamation of a company and even winding up of a company. The Ministry of Corporate Affairs, earlier known as Department of Corporate Affairs under Ministry of Finance, is primarily concerned with administration of this Act as well as other allied Acts and rules & regulations framed there-under.
The next important regulation relates to environment. The environmental regulatory requirements envisage a wide legislative framework covering every aspect of environment protection like air, water, noise, forest conservation, wildlife protection, etc. Also, separate set of laws and rules for emission of hazardous wastes have been enacted. The Ministry of Environment and Forests (MoEF), is the nodal agency for regulating all such environmental aspects. It undertakes conservation & survey of flora, fauna, forests and wildlife; prevention & control of pollution; afforestation & regeneration of degraded areas. Every industry has to abide by all such guidelines and parameters for environmental protection because only this will ensure its sustainable progress and growth.
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A good environment is a constitutional right of the Indian Citizen. Environmental Protection has been given the constitutional status. Directive Principles of State Policy states that, it is the duty of the state to ‘protect and improve the environment and to safeguard the forests and wildlife of the country’. It imposes Fundamental duty on every citizen ‘to protect and improve the natural environment including forests, lakes, rivers and wildlife’.In India, the Ministry of Environment and Forests (MoEF) is the apex administrative body for :- (i) regulating and ensuring environmental protection; (ii) formulating the environmental policy framework in the country; (iii) undertaking conservation & survey of flora, fauna, forests and wildlife; and (iv) planning, promotion, co-ordination and overseeing the implementation of environmental and forestry programmes. The Ministry is also the Nodal agency in the country for the United Nations Environment Programme (UNEP). The organizational structure of the Ministry covers number of Divisions, Directorate, Board, Subordinate Offices, Autonomous Institutions, and Public Sector Undertakings to assist it in achieving all these objectives.
Besides, the responsibility for prevention and control of industrial pollution is primarily executed by the Central Pollution Control Board (CPCB) at the Central Level, which is a statutory authority, attached to the MoEF. The State Departments of Environment and State Pollution Control Boards are the designated agencies to perform this function at the State Level. Central Government has enacted several laws for Environmental Protection:-
The Central Pollution Control Board (CPCB) has developed National Standards for Effluents and Emission under the statutory powers of the Water (Prevention and Control of Pollution) Act, 1974 and the Air ( Prevention and Control of Pollution) Act, 1981. These standards have been approved and notified by the Government of India, Ministry of Environment & Forests, under Section 25 of the Environmental (Protection) Act, 1986. Besides, standards for ambient air quality, ambient noise, automobile and fuels quality specifications for petrol and diesel. Guidelines have also been developed separately for hospital waste management. Also, an Environmental Information System (ENVIS) has been established as a plan programme and as a comprehensive network in environmental information collection, collation, storage, retrieval and dissemination to varying users. The focus of ENVIS since inception has been on providing this environmental information to decision makers, policy planners, scientists and engineers, research workers, etc all over the country. ENVIS has developed itself with a network of participating institutions/organisations. A large number of nodes, known as ENVIS Centres, have been established in this network to cover the broad subject areas of environment with the focal point at the Ministry of Environment and Forest. These Centres have been set up in the areas of pollution control, toxic chemicals, central and offshore ecology, environmentally sound and appropriate technology, bio-degradation of wastes and environment management, etc.
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Joint Hindu Family Business in India
Posted by admin on August 2nd, 2009
Joint Hindu Family Business in India
Joint Hindu Family Business is a distinct type of organisation which is unique to India. Even within India its existence is restricted to only certain parts of the country. In this form of business ownership, all members of a Hindu undivided family do business jointly under the control of the head of the family who is known as the ‘Karta’. The members of the family are known as ‘Co-parceners’. Thus, the Joint Hindu Family firm is a business owned by co-parceners of a Hindu undivided estate. Its main features are :-
* It comes into existence by the operation of Hindu law and not out of contract. The rights and liabilities of co-parceners are determined by the general rules of the Hindu law.
* The membership of this form of business is the result of status arising from the birth in the family and its legality is not affected by the minority. Originally, only three successive generations in the male line ( grandfather, father and son) constituted the membership of this organisation. By the Hindu Succession Act, a female relative of a deceased member or a male relative of such a female member was made eligible for a share in the interest of the related member ( called co-parcener) at the time of his death. There is no legal limit to the maximum number of members.
* Registration is unnecessary, but the rights of its members to sue third parties for claims of debt remains unaffected.
* It is managed generally by the Karta. He has the authority to obtain loans against the family property or in other ways. Other members have no right of management nor to contract loans binding on the joint-family property.
* The manager or the Karta has the last word in the formulation of all policies and in their execution. He has unquestioned authority in the conduct of the family business.
* The Karta has unlimited liability while the liability of the other members is limited to the value of their individual interests in the joint family.
* The firm enjoys continuity of operations as its existence is not subject to the death or insolvency of a co-parceners or even of the Karta himself. Thus, it has a perpetual life like the public limited company.
Advantages
* Ease of formation
* Continuity of operations
Disadvantages
* Confined to Joint Hindu families
* Relatively limited capital
* Limited managerial talents
* Unlimited liability of the Karta
Type of Business Organizations in India