Winding up of Company - Why and How?

Winding up of Company

Winding up of a company is the stage , where by the company takes its last breath. It is a process by which business of the company is wound up, and the company ceases to exist anymore. All the assets of the company are sold, and the proceedings collected are used to discharge the liabilities on a priority basis.

Modes of winding up :

There are three ways, in which a company may be wound up. They are :

1. Winding up by the court.

2. Voluntary winding up,
• Members Voluntary winding up.
• Creditors Voluntary winding up.

     c.  Winding up subject to supervision of the court

Winding up by The Court:

A company may be wound up by the court in following situations. Here, the court means "High Court".

1. If the company itself, has passed a special resolution in the general meeting to wound up its affairs. Special resolution means, resolution passed by three-fourth (3/4") of the members present.
2. If there is a default, in holding the statutory meeting or in delivering the statutory report to the Registrar.

A company which is limited by shares, and a company limited by guarantee having share capital, is required to hold a " Statutory meeting" of its members, within six months, and after one month, from the date of commencement of it's business. A statutory report of the meeting so held shall also be forwarded to the registrar. [ sec 165 (1) & (5)]

3. If the company fails to commence it's business within one year from the date of it's incorporation, or suspends it's business for a whole year.

A company limited by shares, has to obtain a "certificate of commencement" of business from the registrar. Unless it obtains such certificate, it cannot carry on it's business operation.

4. If the number of members, in a public company is reduced to less than seven, and in case of private company less than two.

The statutory requirement of minimum number of members in a public company is seven, and in case of private company, it is two (sec 12)

5. If the company is unable to pay its debits; where the financial position of the company is, such, that it has more liabilities than assets, and after disposing off the assets, it is still unable to extinguish it's liabilities, it means that company is unable to pay it's debts.
6. If the court, itself is of the opinion that the company should be wound up.

The court may form such an opinion, if it comes to the knowledge of court that, the company is mismanaged, or financially unsound, or carrying an illegal operations etc.

Relevant Points :

Who Can Apply to Court, For Winding up Petition ? ( Sec 439)

Following persons can apply to the court, for petition for winding up:

• The company itself
• The creditor
• Any Contributory
• Registrar
• Any person authorized by central government, in case of oppression or mismanagement (397)

What Orders, The Court May Pass? (Sec 443)

The court may pass any one of the following orders on hearing the winding up petition.

1. Dismiss it, with or without costs
2. Make any interim order, as it thinks fit, or
3. Pass an order for winding up of the company with or without costs.

Consequences of court passing an order for winding up :

If the court is satisfied, that sufficient reasons exist in the petition for winding up, then it will pass a winding up order. Once the winding up order is passed, following consequences follow

• Court will send notice to an official liquidator, to take change of the company. He shall carry out the process of winding up, ( sec. 444)
• The winding up order, shall be applicable on all the creditors and contributories, whether they have filed the winding up petition or not.
• The official liquidator is appointed by central Government ( sec. 448)
• The company shall relevant particulars, relating to, assets, cash in hand, bank balance, liabilities, particulars of creditors etc, to the official liquidator. ( sec. 454)
• The official liquidator shall within six months, from the date of winding up order, submit a preliminary report to the court regarding:

1.    Particulars of Capital

2.    Cash and negotiable securities

3.    Liabilities

4.    Movable and immovable properties

5.    Unpaid calls, and

6.    An opinion, whether further inquiry is required or not ( 455)

The Central Govt. shall keep a cognizance over the functioning of official liquidator, and may require him to answer any inquiry. (463)

Stay Order :

Where, the court has passed a winding up order, it may stay the proceedings of winding up , on an application filed by official liquidator, or creditor or any contributory. (466)

Dissolution of company (481)

Finally the court will order for dissolution of the company, when :

• the affairs of the company are completely wound up, or
• the official liquidator is unable to carry on the winding up procedure for want of funds.

Appeal : 483

An appeal from the decision of court, will lie before that court, before whom, appeals lie from any order or decision of the former court in cases within it's ordinary jurisdiction.

Voluntary Winding up

A company may , voluntary wind up it's affairs, if it is unable to carry on it's business, or if it was formed only for a limited purpose, or if it is unable to meet it's financial obligation, and etc. A company may voluntary wind up itself, under any of the two modes:

1. Members voluntarily winding up
2. Creditors voluntarily winding up

A company may voluntarily wind up itself, either by passing :

An ordinary resolution, where the purpose for which the company was formed has completed, or the time limit for which the company was formed, has expired.

Or

By way of special resolution

Both types of resolution shall e passed in the general meeting of the company. (484)

Once the resolution of voluntarily winding up is passed, then the company may be wound up, eitherthrough :

• Members voluntarily winding up, or
• Creditors voluntarily winding up

The only difference between the abate two, is that in case of members voluntarily winding up, Board of Directors have to make a declaration to the effect, that company has no debts. (488)

Members Voluntarily Winding up

Directors of the company shall call for a Board of Directors Meeting, and make a declaration of winding up, accompanied by an Affidavit, stating that;

1. The company has no debts to pay, or
2. The company will repay it's debts; if any, within 3 years from the commencement of winding up, as specified in declaration (488)

Who shall carry out the winding up procedure? and What shall be the procedure?

• The company shall appoint one or more liquidators, in a general meeting, who shall look after the affair of winding up procedure, and distribution of assets. [ 490 (1)]
• The liquidator so appointed, shall be paid remuneration for his services, which shall also be fixed in general meeting [490 (2)]
• The company shall also give notice of appointment of liquidator to the registrar within ten days of appointment (493)
• Once the company has appointed liquidator, the powers of Board of Directors, Managing Director, and Manager, shall cease to exists. (491)
• The liquidator is generally given a free hand, to carry out the winding up procedure, in such a manner, as he thinks best in the interest of creditors, and company.
• In case, the winding up procedure, takes more than one year, then liquidator will have to call a general meeting, at the end of each year, and he shall present, a complete account of the procedure, and position of liquidator (496)

Members Voluntarily Winding up

Directors of the company shall call for a Board of Directors Meeting, and make a declaration of winding up, accompanied by an Affidavit, stating that;

1. The company has no debts to pay, or
2. The company will repay it's debts; if any, within 3 years from the commencement of winding up, as specified in declaration (488)

Who shall carry out the winding up procedure? and What shall be the procedure?

• The company shall appoint one or more liquidators, in a general meeting, who shall look after the affair of winding up procedure, and distribution of assets. [ 490 (1)]
• The liquidator so appointed, shall be paid remuneration for his services, which shall also be fixed in general meeting [490 (2)]
• The company shall also give notice of appointment of liquidator to the registrar within ten days of appointment (493)
• Once the company has appointed liquidator, the powers of Board of Directors, Managing Director, and Manager, shall cease to exists. (491)
• The liquidator is generally given a free hand, to carry out the winding up procedure, in such a manner, as he thinks best in the interest of creditors, and company.
• In case, the winding up procedure, takes more than one year, then liquidator will have to call a general meeting, at the end of each year, and he shall present, a complete account of the procedure, and position of liquidator (496)

Distribution of property of company on voluntarily winding up [ both members and creditors voluntarily winding up]

Once the company is fully wound up, and assets of the company sold or distributed, the proceedings collected are utilized to pay off the liabilities. The proceedings so collected shall be utilized to pay off the creditors in equal proportion . Thereafter any money or property left, may be distributed among members according to their rights and interests in the company.

Winding Up Subject to Supervision of Court

Winding up subject to supervision of court, is different from "Winding up by court."

Here the court only supervise the winding up procedure. Resolution for winding up, is passed by members in the general meeting. It is only for some specific reasons, that court may supervise the winding up proceedings. The court may put up some special terms and conditions also.

However, liberty is granted to creditors, contributories or other to apply to court for some relief. (522)

• The court may also appoint liquidators, in addition to already appointed, or remove any such liquidator. The court may also appoint the official liquidator, as a liquidator to fill up the vacancy.
• Liquidator is entitled to do all such things and acts, as he thinks best in the interest of company. He shall enjoy the same powers, as if the company is being wound-up voluntarily.
• The court also may exercise powers to enforce calls made by the liquidators, and such other powers, as if an order has been made for winding up the company altogether by court. ( 526)

Priority Indisposing Liabilities [529 A & 530]

• When the company is wound up, by any mode, the liabilities shall be discharged in following priority.

1.    Workman's dues.

2.    Debts due to secured creditors, in case of insolvency.

3.    All ---------, taxes, cesses and rates due from the company to the central government or a state govt.

4.    All wages and salary of any employee due within four months.

5.    All -------- holiday remuneration becoming payable to any employee.

• All such debts shall be paid in full. If assets are insufficient to meet them, they shall abate in equal proportions.

Money Received By Liquidator : (553)

Apart from an official liquidator, every liquidator appointed by company or court to carry on the winding up procedure, shall deposit the money is received by him in a scheduled bank, to the credit of a special banking account opened by him.

Winding up ( Contd.)

Apart from a normal company, registered under the companies Act, 1956 there are other companies as well winding up procedure for these companies are bit different from a company registered under companies Act.

Unregistered Companies : (583)

In simple words, an unregistered company, is a company which is not registered or covered under provisions of companies Act. 1956 ( 582)

• An unregistered company, cannot be wound up voluntarily, or, subject to super vision of court.
• However, the circumstances, in which unregistered company may be wound up, are as follows :
1. If the company, is dissolved, or has ceased to carry on business, or is carrying on business only for the purposes of winding up, it's affairs,
2. If the company is unable to pay it's debt
3. If the court is of opinion, that it is just and equitable, that the company, should be wound up.

A creditor, contributory, or company itself by filing a petition, or any person authorized by central government may institute winding up proceedings.

In respect to other aspects, the same provisions and procedure shall follow, as in winding up of registered company.

A foreign company, carrying on business in India, which has been dissolved , may be wound up, as unregistered company.

Foreign Company ( 584)

A foreign company, is a company which is incorporated outside India, and having a place of business in India.

Winding up of such companies is only limited to the extent of it's assets in India. In respect of assets and business carried outside India, Indian courts has no jurisdiction.

• Winding up of a foreign company can only be made through court.
• Even if the company had been dissolved or ceased to exist in the country of it's incorporation, winding up order in this country can be made.
• Even if a foreign company has been wound up according to foreign law, the courts in India still protect the Indian Creditors. The surplus assets, after paying the creditors, should be distributed among the share holders equally in the same proportion, as the assets ---- to the total issued and paid up capital.
• Tendency of a foreign liquidation does not affect the jurisdiction to make winding up order. The Assets can be of any nature and do not take to be in the ownership of the company and can come from any Source [(1944) 2 All.E.R. 556]
• As, for persons claiming to be creditors, their presence, itself is sufficient. It is not required to be shown, that company carried on business operations from any place of business in India.

Government Company

A Govt. company, means a company, in which 51% or more of, shares are held by a govt. company

Winding up procedure for a government company registered under the companies Act, 1956, is nearly similar to normal winding up procedure.

However, courts, take interest of public into consideration, and priority is given to them, as a govt. company is main function is to provide services to public.

Creditors Voluntarily Winding up

1.    Where the resolution for winding up has been passed, but the Board of Directors are not in a position to give a declaration on the liability of company, they may call a meeting of creditors, for the purpose of winding up. (500)

2.    It is the duty of Board of Directors, to present a full statement of company 's affairs, and list of creditors along with their dues, before the meeting of creditors. [500 (3)]

3.     Whatever resolution, the company passes in creditor's meeting, shall be given to the Registrar within ten days of it's passing. (501)

4.     Who shall carry out the winding up procedure and at shall be the procedure ?

5.    Company in the general meeting [ in which resolution for winding up is passed] , and the creditors in their meeting, appoint liquidator. They may either agree on one liquidator, or if two names are suggested, then liquidator appointed by creditor shall act. ( 502)

6.    Any director, member or creditor may approach the court, for direction that ;

·         Liquidator appointed in general meeting shall act, or

·         He shall act jointly with liquidator appointed by creditor, or

·         Appointing official liquidator, or

·         Some other person to be appointed as liquidator. [502 (2)]

7.    The remuneration of liquidator shall be fixed by the creditors, or by the court. (504)

8.    On appointment of liquidator, all the power of Board of Directors shall cease. (505)

9.    In case, the winding up procedure, takes more than one year, then he will have to call a general meeting, and meeting of creditors, at the end of each year, and he shall present, a complete account of the procedure, and the status / position of liquidation (505).

When affairs of the company are fully wound up

The liquidator shall take the following steps, when affairs of the company are fully wound up : (497)

1. Call a general meeting of the members of the company, a lay before it, complete picture of accounts, wining up procedure and how the properties of company are disposed of.
2. The meeting shall be called by advertisement, specifying the time, place and object of the meeting.
3. The liquidator shall send to, the Registrar and official Liquidator copy of account, within one week of the meeting.
4. If from the report, official liquidator comes to the conclusion, that affairs of the company are not being carried in manner prejudicial to the interest of it's members, or public, then the company shall be deemed to be dissolved from the date of report to the court.
5. However, if official liquidator comes to a finding, that affair have been carried in a manner prejudicial to interest of member or public, then court may direct the liquidator to investigate furthers.

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Maintenance denied to wife - Important Judgments

Judgements When Wife Denied Maintenance By Court in India

Alok Kumar Jain Vs. Purnima Jain an-nri-wins-an-interim-maintenance-case-2008 Anu_Kaul_vs_Rajeev_Kaul_on_23_March,_2009 Asha_Devi_vs_Pominder_Kumar_Chhabra_on_7_September_2006 CENTRAL INFORMATION COMMISSION – Bank Account Details and confidentiality Chaya_vs_K.G._Channappa_Gowda_on_22_September,_1992 Dhanwanti_Joshi_vs_Madhav_Unde_on_4_November,_1997 Dr._E._Shanthi_vs_Dr._H.K._Vasudev_on_22_August,_2005 Farjana_Banu_vs_Parvez_Alam_on_23_April,_2004 Gian Chand Versus Dilpreet Kaur Gomaji_vs_Smt._Yashoda_And_Anr._on_13_September,_1995 Harbans_Lal_Malik_vs_Payal_Malik_on_29_July,_2010 (1) Harbans_Lal_Malik_vs_Payal_Malik_on_29_July,_2010 Harminder_Kaur_vs_Gurtar_Singh_on_17_February,_2011 ines miranda vs santosh k swamy dated 14 december 2010 Iqbal_Bano_vs_State_Of_U.P._And_Anr_on_5_June,_2007 Jagdish_Prasad_vs_State_&_Ors_on_22_February,_2008 (1) Jagdish_Prasad_vs_State_&_Ors_on_22_February,_2008 (2) Jagdish_Prasad_vs_State_&_Ors_on_22_February,_2008 Joginder_vs_State_Nct_Of_Delhi_&_Anr._on_22_September,_2010 Kaveri_vs_Neel_Sagar_&_Anr._on_25_October,_2010 Kumaresan vs Aswathi M.S.Mani_vs_K.Shyamala_on_4_November,_2006 Maintenance claim based on Affidavit dismissed Manish_Kumar_vs_Mrs._Pratibha_on_18_September,_2008 Manmohan_Singh_vs_Smt._Mahindra_Kaur_on_25_March,_1976 Manoj_Yadav_vs_Pushpa_@_Kiran_Yadav_on_11_January,_2011 Manokaran_@_Ramamoorthy_vs_M._Devaki_on_21_February,_2003 Marimuthu vs. Janaki Monica_Bedi_vs_State_Of_A.P._on_9_November,_2010 Mr. Sanjay Bhosale Vs Khrishna Mrs. Meena Dinesh Parmar vs Shri Dinesh Hastimal Parmar Nachhattar_Singh_Alias_Khanda_And_…_vs_State_Of_Punjab_on_23_September,_2009 P.Kalyanasundaram_vs_K.Paquialatchamy_on_10_January,_2003 R.V.Srinath_Prasad_vs_Nandamuri_Jayakrishna_&_Ors_on_2_March,_2001 Radhika_Narang_And_Ors._vs_Karun_Raj_Narang_And_Ors._on_16_November,_2004 Ravindra_Haribhau_Karmarkar_vs_Mrs._Shaila_Ravindra_Karmarkar_…_on_17_July,_1991 Rekha Gupta Vs Dinesh Gupta dated 28-7-2008 Renubala_Moharana_&_Anr_vs_Mina_Mohanty_&_Ors_on_23_March,_2004 S.Chandra_vs_C.V.Sridharan_on_21_February,_2007 (1) S.Chandra_vs_C.V.Sridharan_on_21_February,_2007 S.R._Batra_And_Anr_vs_Smt._Taruna_Batra_on_15_December,_2006 saket_damanreet_kaur_vs_indermeet_singh_juneja Sanjay_Bhardwaj_&_Ors._vs_The_State_&_Anr._on_27_August,_2010 Savitri_W_O_Shri_Govind_Singh_…_vs_Shri_Govind_Singh_Rawat_on_9_October,_1985 Shanavas,_S_O.Abdulsalam_vs_Raseena,_D_O.Shihabudeen_on_10_December,_2010 Sharli_Sunitha_vs_D._Balson_on_20_November,_2006 Sheila_B._Das_vs_P.R._Sugasree_on_17_February,_2006 Shivani Kabra Vs. Sh Shaleen Kabra Shriram_Munjaji_Raut_vs_The_State_Of_Maharashtra_on_14_March,_2011 Smt. Mamta Jaiswal vs Rajesh Jaiswal Smt._Archana_Gupta_&_Another_vs_Sri_Rajeev_Gupta_&_Another_on_18_November,_2009 Smt._Pratiksha_Arya_vs_Sri_Deepak_Kumar_Arya_on_17_March,_2011 Smt._Rampyari_&_Ors._vs_Ms._Kamlesh_on_9_March,_2010 Sonia Vs. Vinod- Rohini Court Delhi Sudha_Suhas_Nandanvankar_vs_Suhas_Ramrao_Nandanvankar_on_15_September,_2004 Sunitha,_W_O.Jolly_vs_State_Of_Kerala,_Rep.By_on_10_December,_2010 Sunny_Bhumbla_vs_Shashi_on_25_January,_2010 unclean-hands-no-maintenance Usha_Baghel_vs_Dr._B.B._Singh_on_29_August,_1991 Vijay_Kumar_vs_Harsh_Lata_Aggarwal_on_10_September,_2008 Vikas_Jain_vs_Smt._Deepali_@_Ayushi_Jain_on_25_October,_2010

 

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Dishonor of Cheque

Dishonor of Cheque

Liability under the negotiable instruments act

• Where any cheque drawn by a person for the discharge of a liability is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honor the cheque or;
• That it exceeds the amount arranged to be paid from that account by an agreement made with that bank

Such person cheque shall be deemed to have committed an offence and shall be punishable with imprisonment for a term, which may extend to two year, or with fine, which may extend to twice the amount of the cheque or with both.

What constitutes an offence

Such cheque should have been presented to the bank within a period of six months of the date of on which it is drawn or within the period of its validity, which ever is earlier; and

The payee or holder in due course of such cheque should have made a demand for the payment of the said amount of money by giving a notice, in writing, to the drawer of the cheque within thirty days of the receipt of the information by him from the bank regarding the return of the cheque unpaid; and

The drawer of such cheque should have failed to make the payment of the said amount of money to the payee or the holder in due course of the cheque within fifteen days of receipt of the said notice.

The cheque in question should have been issued in discharge of whole or part of a debt or liability otherwise the maker of the cheque is not liable for prosecution. For example if the cheque is given as a gift or present and if the bank dishonors it the maker of the cheque is not liable for prosecution.

Offences by Companies

If the person committing the offence is a company, every person who, at the time offence was committed, was in charge of, and responsible to the company for the conduct of the business of the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished.

If a person proves that the offence was committed without his knowledge, or that he had exercised due diligence to prevent the commission of such offence, he shall not be punishable.

Where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial Corporation owned or controlled by the Central Government or State Government, he shall not be liable for prosecution.

Where any offence has been committed by a Company and f it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of any director, manager, secretary, or other officer of the Company, such person shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

Presentation of cheque any number of times

There is no embargo upon the payee to successively present a dishonored cheque during the period of its validity.

There is no restriction regarding the no of times a cheque can be presented and that every subsequent representation and dishonor gives rise to fresh cause of action for filing complaint.

In the course of business transactions it is not uncommon for a cheque being returned due to insufficient funds or similar such reason and being presented again by the payee after sometime, on his own volition or at the request of the drawer, in expectation that it would be encashed.

For dishonor of one cheque there can be only one offence and such offence is committed by the drawer immediately on his failure to make the payment within 15 days of the receipt of the notice served.

On each presentation of the cheque and its dishonor, a fresh right and not cause of action accrues. Therefore the payee without taking pre-emptory action in exercise of his right may, go on presenting the cheque so as to enable him to exercise such right at any point of time during the validity of the cheque.

Cause of action would arise only on failure to pay after notice.

Once a notice for payment is given a fresh cause of action will not arise if the cheque is presented again and it is dishonored.

Effect of stop payment

Stop payment instructions cannot obviate the offence.

Even if stop payment instructions are given and notice of the same is given to the payee or holder in due course liability cannot be avoided.

The position will not be different even if the drawer had instructed the bank to stop payment prior to the presentation of the cheque for encashment.

Once the cheque is issued there is a presumption, that the holder received the cheque for the discharge, of any debt or liability and merely because the drawer issues a notice to the drawee or to the bank for stoppage of the payment it will not preclude an action under the Act.

Notice in case of dishonor

The requirement of giving of notice is mandatory. If no notice making a demand for payment is served upon the drawer within 30 days from the date of dishonor of cheque, a complaint is not maintainable unless the complainant satisfies the Court that he had sufficient cause for not making a complaint within such period.

Notice means a notice in writing.

A postal acknowledgement due containing the signature of the accused is proper proof of service of the notice on the addressee shown in the postal acknowledgement.

When a notice is returned by the sender as unclaimed such date would be the commencing date in reckoning the period of 15 days. Such reckoning would be without prejudice to the right of the drawer of the cheque to show that he had no knowledge that the notice was brought to his address.

The notice need not necessarily be by registered post only. It can be sent by a telegram, fax or by a letter as well.

However it is preferable to send the notice by registered post, as that is clear evidence of service.

Period for payment

If payment is not made within 15 days of the receipt of the notice then the offence shall be deemed to have been committed.

The cause of action for filing complaint would arise after the completion of 15 days from the date the drawer receives the notice and fails to pay the amount within that period.

The court cannot take cognizance prior to the lapse of the period of 15 days even if there was a denial of the liability earlier, even after denial liability to pay the amount, the accused can at any time change his mind within 15 days of receipt of notice, make payment and avoid prosecution.

The offence shall be deemed to be committed only from the date when notice period expired.

The drawer cannot take the excuse that he had no reason to believe when he issued the cheque that the cheque may be dishonored on presentation for the reasons stated above.

Remedies

1.    To file a civil suit

2.    To file a complaint under section 138 of the Negotiable Instruments Act, 1881

3.    To file complaint under section 420 for cheating under the Indian Penal Code

In case a person has filed suits for recovery, he is not precluded from filing a complaint under section 138 of the Negotiable Instruments Act and section 420 of the Indian Penal Code. Both remedies may be simultaneously possible. A civil suit cannot debars the criminal prosecution.

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Food Adultration and Punishment

Food Adultration

The Prevention of Food Adulteration Act, 1954 aims at making provisions for the prevention of adulteration of food. The Act extends to the whole of India and came into force on 1st June 1955.

What is adulterated food?

An article of food shall be deemed to be adulterated –

1. if the article sold by a vendor is not of the nature, substance or quality demanded by the purchaser or which it purports to be;
2. if the article contains any substance affecting its quality or of it is so processed as to injuriously affect its nature, substance or quality;
3. if any inferior or cheaper substance has been substituted wholly or partly for the article, or any constituent of the article has been wholly or partly abstracted from it, so as to affecting its quality or of it is so processed as to injuriously affect its nature, substance or quality;
4. if the article had been prepared, packed or kept under insanitary conditions whereby it has become contaminated or injurious to health;
5. if the article consists wholly or in part of any filthy, putrid, disgusting, rotten, decomposed or diseased animal or vegetable substance or being insect-infested, or is otherwise unfit for human consumption;
6.  if the article is obtained from a diseased animal;
7.  if the article contains any poisonous or other ingredient which is injurious to health;
8. if the container of the article is composed of any poisonous or deleterious substance which renders its contents injurious to health;
9.  if the article contains any prohibited coloring matter or preservative, or any permitted coloringmatter or preservative in excess of the prescribed limits;
10. if the quality or purity of the article falls below the prescribed standard, or its constituents are present in proportions other standard, or its constituents are present in proportions other than those prescribed, whether or not rendering it injurious to health.

Thus, additions of water to milk amount to adulteration, within the meaning of sub-clauses (b) or (c).

When are foods misbranded

An article of food shall be deemed to be misbranded-

1. if it is an imitation of, or is a substitute for, or resembles in a manner likely to deceive, another article of food, and is not conspicuously labeled so as to indicate its true character,
2.  if it is falsely stated to be the product of any place or country,
3.  if it is sold by a name which belongs to another article of food,
4. if it is so colored, flavored, coated, powdered or polished as to conceal any damage to the article or to appear of greater value than it really is,
5. if false claims are made for it upon the label or otherwise,
6.  if, when sold in sealed or prepared packages by its manufacturer, the contents of each package are not conspicuously and correctly stated on the outside thereof;
7.  if the package containing it is deceptive with respect to its contents, in any manner, such as label, statement, design or device which is misleading,
8.  if the package containing it, or the label thereon, bears the name of a fictitious individual or company as the manufacturer or producer of the article,
9.  if it purports to be, or is represented as being for special dietary uses, unless its label bears the prescribed information concerning its dietary properties,
10. if it contains any artificial flavoring, coloring or chemical preservatives without declaring the same on the label, or in violation of the requirements of this Act and the Rules madethereunder, and
11. if it is not labeled in accordance with the requirements of this Act and the Rules madethereunder.

Preservative: means a substance which when added to food, is capable of inhibiting, retarding or arresting the process of fermentation, acidification or other decomposition of food.

Prohibitions and Restrictions

Prohibition on The Manufacture, Sale, Etc. Of Certain Food Articles

No person shall manufacture, store, sell or distribute

1. any adulterated food,
2. any misbranded food,
3. food articles to be sold under license without fulfilling the conditions of the license,
4. any food article the sale of which is prohibited by the Food (Health) Authority in the interest of public health,
5. any food article in contravention of any other provision of the Act or the Rules, (see ‘Conditions for Sale’) or
6. any adulterant.

The act of storing an adulterated article of food would be an offence only if storing is for sale. The sale of a part of the stored article constitutes an offence distinct and independent from the offence of storing for sale.

Prohibition on Use Of Certain Expressions While Labeling of Edible Oils And Fats

The package, label or the advertisement of edible oils and fats shall not use the expressions Super-Refined, Extra-Refined, Micro-Refined, Double-Refined, Ultra-Refined, Anti-Cholesterol, Cholesterol Fighter, Soothing to Heart, Cholesterol Friendly, Saturated Fat Free or such other expressions which are exaggerations of the quality of the product. (Rule 37 D).

Prohibition on Sale Of Certain Admixtures

For example, cream which has not been prepared exclusively from milk, milk which contains any added water, ghee which contains any added matter not exclusively derived from milk fat, a mixture of two or more edible oils as an edible oil and turmeric containing any foreign substances, etc. (Rule 44)

Prohibition on Use of Acetylene Gas (carbide gas) in artificially ripening of fruits (Rule 44 AA).

Prohibition on Sale of Food Articles Coated With Mineral Oil, except in accordance with the permitted standards. (Rule 44 AAA and Appendix B).

Restriction on Sale of Ghee having less than specified Reichert value except under the "AGMARK" seal. (Rule 46).

Prohibition on Sale of Admixtures of Ghee or Butter or on its use as an ingredient in the preparation of an article of food. (Rule 46).

Any food item resembling honey, but not pure honey, shall not be marked "honey". (Rule 45).

Restriction on Sale of Kangra Tea except only after it is graded and marked in accordance with the provisions of Agricultural Produce (Grading and Marketing) Act, 1937 and the Rules madethereunder. (Rule 44E).

Conditions for Sale of Flavored Tea only by those manufacturers. Who are registered with Tea Board and the package bearing the label, ‘FLAVOURED TEA’ (Common name of permitted flavor, percentage and Registration No.). (Rule 44G).

Restriction on Sale of Common Salt No person shall, sell or offer or expose for sale or have in his premises for the purpose of sale, common salt for direct human consumption unless the same isiodized. (Rule 44H).

Restriction on Use and Sale of Artificial Sweeteners except that saccharin sodium can be added to carbonated water, supari, pan masala and pan flavoring material within the specified maximum limit and aspertaine may be sold for diabetic use under medical advice. (Rule 47).

Prohibition on Sale of Permitted Food Colors, i.e. Synthetic colors, or their mixtures or any preparation of such colors, except under a license. (Rule 48A).

Prohibition on Sale of Permitted Food Additives, except only under the ISI certification marks.(Rule 48C).

Prohibition on Use of Coumarin and Dihydro Cocumarin, Tankabean (Dipteryl Adorat) and B-Asarane And Cinamyl Authracilate, as flavoring agents. Any extraneous addition of flavoringagent should be mentioned on the label attached to any package of food so flavored, in capital letters in the following manner:

"CONTAINS ADDED FLAVOR"

Restriction on Use of Preservatives

 Addition of Class I preservatives i.e. Common Salt, Sugar, Dextrose, Glucose (syrup), Spices, Vinegar or acetic acid, honey and edible vegetable oil, in any food is not restricted, provided that the food article to which the preservative has been added conforms to the specifications laid down in Appendix B.

Class II preservatives such as Benzoic acid and its salts, sodium diacetate and sodium, potassium and calcium salts of lactic acid, etc. can be used only restrictively. Use of more than one Class II preservative is prohibited.

Conditions for Sale of A Food Article,

Every utensil or container, used for manufacturing, preparing or containing any food or ingredientstherefore, and second hand tin containers for packaging of edible oils and fats, meant for sale, shall be maintained in a clean and sanitary condition, away from impure air or dust, properly covered at all times, and such utensils or containers shall not be used for any other purpose. Use of rusty containers, improperly tinned copper or brass containers, containers of aluminum or plastic not conforming to ISI specifications, etc., in preparation of food, is also prohibited. Besides, certain special conditions for sale of certain articles such as asafoetida, salseed fat, lactic acid, edible oils,katha, margarine, milk powder, etc. have also been laid down.

With effect from 22.2.95, on person shall sell powdered spices except in packed form. No person shall sell or serve food in any commercial establishment in plastic articles used in catering and cutlery, unless the plastic material used in catering and cutlery articles, conform to the food grade plastic

 Purchaser May Have Food Analyzed

A purchaser of any article of food, or a recognized consumer association, may also get an article of food analyzed by the public analyst on payment of the prescribed fees, provided that the vendor is informed of this intended action at the time of purchase. Thereafter, the purchaser or the consumer associations, have to follow the same procedure as discussed above in the case of Food Inspectors. If the article of food is found to be adulterated, the fees paid by the purchaser or the association shall be refunded.

Offences and Penalties

• Import, manufacture, storage, sale or distribution of any food article which is adulterated by allowing its quality or purity to fall below the prescribed standard, or is misbranded, or in contravention of any provision of the Act or Rules. Penalty is minimum imprisonment of six months that may extend upto 3 years and minimum fine of Rs 1000.
• Import, manufacture, storage, sale or distribution of any adulterant not injurious to health. Penalty is minimum imprisonment of six months that may extend upto 3 years and minimum fine of Rs 1000
• Preventing a Food Inspector from taking a sample or exercising his powers. Penalty is minimum imprisonment of six months that may extend upto 3 years and minimum fine of Rs 1000
• Giving a false warranty in writing in respect of any food article. Penalty is minimum imprisonment of six months that may extend upto 3 years and minimum fine of Rs 1000
• Import, manufacture, storage, sale or distribution of any food article which is adulterated within the meaning of any of the sub-clauses (e) to (l) of section 2(ia); or any adulterant which is injurious to health. Penalty is minimum imprisonment of one year that may extend upto 6 years and minimum fine of Rs 2000
• Sale or distribution of any food article containing any poisonous or other ingredient injurious to health, which is likely to cause death or grievous bodily harm. Penalty is minimum imprisonment of three years that may extend upto life and minimum fine of Rs 5000

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Medical Negligence

Medical Negligence

Professional negligence or medical negligence may be defined as want of reasonable degree of care or skill or willful negligence on the part of the medical practitioner in the treatment of a patient with whom a relationship of professional attendant is established, so as to lead to bodily injury or to loss of life.

Consumerism is now firmly established in the medical practice and the notion that blame may be attributed and compensated has a high priority

Who is a consumer?, What is a service?, What constitutes deficiency?

A consumer is any person who hires or avails of any services for a consideration, and includes any beneficiary of such service other than the person who hires or avails of the service, when such services are availed of with the approval of the first mentioned person.

Service means service of any description which is made available to the potential users, but does not include rendering of any service free of charge or under a contract of personal service.

Deficiency means any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance, which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service.

Duties owed by a medical practitioner

In general, a professional man owes to its client a duty in tort as well as in contract to exercise reasonable care in giving advice or performing services. Medical practitioners from all fields of medicine such as Allopathic, Homeopathy, Naturopathy can be liable under the Consumer Protection Act. Duties which a doctor owes to his patient are clear

• A duty of care in deciding whether to undertake the case,
• A duty of care in deciding what treatment to give.
• A duty of care in the administration of that treatment.
• A breach of any of these duties gives a right of action for negligence to the patient.

The practitioner must bring to his task a reasonable degree of skill and knowledge and must exercise a reasonable degree of care. Neither the very highest nor a very low degree of care and competence judge in the light of the particular circumstances of each case is what the law requires

When Does a Medical Service Fall Under The Consumer Protection Act

A medical service falls under the purview the Consumer Protection Act in the following cases:

• Service rendered to a patient by a medical practitioner (except where the doctor renders service free of charge to every patient or under a contract of personal service), by way of consultation, diagnosis and treatment, both medicinal and surgical.
• Service rendered at a non-Government hospital/Nursing home where charges are required to be paid by the persons availing such services.
• Service rendered at a non-Government hospital/Nursing home where charges are required to be paid by persons who are in a position to pay and persons who cannot afford to pay are rendered service free of charge, irrespective of the fact that the service is rendered free of charge to persons who are not in a position to pay for such services. Free service, would also be "service" and the recipient a "consumer" under the Act.
• Service rendered at a Government hospital/health center/dispensary where services are rendered on payment of charges and also rendered free of charge to other persons availing such services irrespective of the fact that the service is rendered free of charge to persons who do not pay for such service. Free service would also be "service" and the recipient a "consumer" under the Act.
• Service rendered by a medical practitioner or hospital/nursing home if the person availing the service has taken an insurance policy for medical care whereunder the charges for consultation, diagnosis and medical treatment are borne by the insurance company.
• Where, as a part of the conditions of service, the employer bears the expenses of medical treatment of an employee and his family members dependent on him, the service rendered to such an employee and his family members by a medical practitioner or a hospital/nursing home would not be free of charge and would constitute service.

When Does a Medical Service Not Fall Under The Under The Act

A medical service does not fall under the purview of the Consumer Protection Act in the following cases:

• Where service is rendered free of charge by a medical practitioner attached to a hospital/Nursing home or a medical officer employed in a hospital/Nursing home where such services are rendered free of charge to everybody. The payment of a token amount for registration purpose only at the hospital/nursing home would not alter the position.
• Where a service rendered at a non-Government hospital/Nursing home where no charge whatsoever is made from any person availing the service and all patients (rich and poor) are given free service. The payment of a token amount for registration purpose only at the hospital/Nursing home would not alter the position.

Remedies Available in Case of Medical Negligence

A consumer has the option to approach the Consumer Forums to seek speedy redressal of his grievances or file a criminal complaint.

Where to File a Complaint

How to File Complaint

Checklist to File a Case

1. Retain prescription, bills and references.
2. Maintain medical history records.
3. Consent given by the patient or close relative can be used as evidence in the court.

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