Archive for July 2009


In recent years many financial establishments not covered by the RBI Act 1934, have cropped up in various parts of India and especially Karnataka. Many of them received deposits from the public on the promise of high rates of interest and easy gains. Most of them have defaulted to return the deposits on maturity and thus cheated the public. Against this background the state of Karnataka enacted this piece of legislation.As per this act the government or the district Magistrate are empowered to attach properties of financial establishments on default of return of deposits. The district magistrate suo moto or on receipt of any complaint may cause investigation on fraudulent transaction done by a financial establishment.

The government may attach money or property acquired by a financial establishment or personnel assets of the promoters, partners, directors, managers etc of the said financial establishment if the government is satisfied that
a. the financial establishment has failed to return the deposit after maturity or on demand by depositors or pay interest or other assured benefits or
c. if the government is satisfied that such financial establishment is not likely to return deposits or to pay interest to the depositors.

After the attachment, such properties shall vest in the competent authority appointed by the government, who shall be an officer not below the rank of an assistant commissioner, pending further order from the special court. The competent authority shall within 30 days from the date of receipt of order apply to the special court for further order of attachment to make it absolute. The competent authority has vast powers in dealing with the assets under its custody.The Competent authority can even sell the movable and immovable properties of the Financial Establishment by Public auction or with the prior approval of the Special Court by private arrangements. Within 30 days from the date of its appointment, the Competent Authority shall assess the deposit liabilities and assets of the Financial Establishment and submit a report thereof to the special Court. It shall also issue notice to secured creditors and depositors to submit their claims with proper proof. The secured creditors and depositors shall submit their claim before the Competent Authority within 30 days from the date of notice. The Competent Authority shall thereafter make an application to the Special Court seeking permission to make payments to the depositors from out of the money realized.

If any Financial establishment fraudulently defaults any repayment of deposit on maturity along with any benefit, or fails to render service assured, every person responsible for the management of the business of such Financial establishment, shall on conviction be punished with imprisonment for a term which may extend to 6 years and with fine which may extend to one lakh of rupees and such Financial Establishment is also liable for a fine.For the purposes of this Act, the government may constitute one or more special courts. The Special court has vast powers regarding realization of assets and payment to the depositors. The acts of the competent authority are supervised and guided by the Special court. The special court has the powers to attach property malafidely transferred by the Financial Establishment.Any person, including the competent authority, if aggrieved by an order of the Special court may appeal to the high court within 30 days form the date of the order.


1.Company is an artificial legal person. Partnership is not a legal person.

2.Company has perpetual succession. Partnership firm does not have perpetual succession.

3.Company is created by registration under Companies Act. For a partnership firm registration is not compulsory. It is guided by Indian Contract Act and Partnership Act.

4.Private Limited Company shall have at least 2 members and maximum 50 members. Partnership firm shall have at least 2 members and maximum 20 members and for banking business, maximum 10 members.

5.In a private limited company, liability of the members can be limited by shares or by guarantee. Liability of members is unlimited in a partnership firm.
6.A member is not an agent of company or of other members. Partner is an agent of firm and other partners.

7.Member cannot bind company by his act.  Partner can bind firm by his act. 
8.Ordinary members cannot take part in management of a company. Only director members can take part in management.  Partners can take part in   management of a firm.

9.Private limited company shall have a minimum paid up capital of   Rupees 1,00,000/-(Rupees One Lakh Only) and public limited  company of Rs. 5,00,000/- (Rupees Five Lakh Only). There is no minimum paid up capital for a partnership firm.

10.Shares of a private limited company can be transferred with ease. Partner can transfer his share but the assignee does not become a partner. He is only entitled to share of Profits.

11.A company is an entity distinct from its members. It may own property, make contracts, sue and be sued in its own name.  The property of a firm is   owned by the partners. It can also sue and be sued in the firm’s name and   partners can also be sued individually.

12.A single member cannot wind up a company.  A partnership may be dissolved by any partner at any time.


Organizations which have charity as their main motto and which work for the welfare of the society at large, without the motive of profit are known as Non Profit  organizations (NPO). In India people have a tendency to call them as NGO (Non Government Organizations), which terminology is not correct in the strict sense, because every non government organization may not be a non profit organization.
Trusts, societies and section 25 companies are the most common forms of NPOs in India. NPOs are entitled for various benefits under the Income Tax Act. Even without registering as an NPO, people can engage in charitable activities, but they register as NPOs to gain the IT benefits. Tax benefits are available to the organization as well as to those who donate to the organization. For this special permission need to be obtain from the Income Tax authorities after the registration of NPO. To obtain tax benefits, it is a condition precedent that the benefits of the NPO shall not be restricted to any particular cast, class or creed but open to all.
Trusts are registered under the Registration Act, Societies under the respective Societies Registration Acts of various states and Section 25 companies under the Companies Act, 1956.For each of these registrations, a deed need to be drafted explaining the main objectives and mode of working of the organization.
There is an increasing trend among the general public to establish NPOs and indulge in profit generating activities, at the same time deriving IT benefits. However, sooner or later the long arms of law will reach them.


Against the backdrop of the United Nations Conference on the Human Environment held at Stockholm in June 1972, in which India was a participant, the Central Government enacted a legislation, ‘The Environment (Protection) Act, 1986’, with an objective for protection and improvement of the environment and for matters connected therewith.

As per this Act, the Central Government shall have the power to take all such measures for the purpose of protecting and improving the quality of the environment and to prevent environmental pollution. Further, the Central Government shall have the power to give directions in writing to any person or officer or any authority for any of the purposes of the Act, including the power to direct the closure, prohibition or regulation of any industry, operation or process.

No person carrying on an industry, operation or process shall discharge or emit any environmental pollutant in excess of standards prescribed by the Government. Further persons handling with hazardous substances shall comply with the procedural safeguards as may be prescribed by the authorities.

As per the Act where the discharge of any environmental pollutant in excess of prescribed standard occurs, or is apprehended to occur due to any accidental or other unforeseen act or event, the person responsible for such discharge shall be bound to prevent or mitigate the pollutant so caused as well as intimate the fact of such occurrence to the concerned authorities.

The Central Government or any other officer empowered by the Central Government shall have the powers to take the samples of air, water, soil or any other substances from any factory, premises etc for the purpose of analysis. The said officer shall without delay send the container with the sample to the laboratory established or recognized by Central Government. The Central Government has established several environmental laboratories for the purposes of the Environment (Protection) Act.

For the purposes of protecting and improving the quality of the environment and preventing and abetting environmental pollution, the standards of emission or discharge of environmental pollutants from the industries, operations or processes are specified in Schedules 1 to 1V of the Environment (Protection) Rules.

The Central Government takes into consideration various factors while prohibiting or restricting the location of industries and carrying on of processes and operations in different areas. Every person carrying on an industry, operation or process requiring consent under the water (prevention and control of pollution) Act, 1974 or under The Air (Prevention and Control of Pollution) Act, 1981 or both or authorization under the Hazardous Waters (Management and Handling) Rules, 1989 shall submit an environmental statement for the financial year ending on the 31st March in Form V to the concerned State Pollution Control Board on or before the  Thirteenth day of September every year, beginning 1993.