Summary: Indian Regulatory Framework | Business Laws for CA Foundation PDF Download

Introduction

The study of law is crucial for Chartered Accountants, as they are often the first point of contact for legal issues, providing advice to management and clients. The regulatory framework offers guidelines that govern personal and business interactions. Laws have guided societies since the days of hunter-gatherers through significant historical periods, including the agricultural and industrial revolutions, leading to today’s complex social structure. The Code of Hammurabi (circa 1754 BC), carved on stone slabs, and Rome’s Twelve Tables (450 BC), engraved on bronze, are early examples of written laws intended to inform the public and ensure justice. Over time, laws have evolved to address contemporary issues, reflecting changes in societal values and norms.

What is Law?

• Law comprises a set of obligations and duties set by the government to ensure welfare and justice for society.
• India’s legal system reflects the country’s diverse social, political, economic, and cultural elements.
• This system is a mix of common law, statutory law, and customary law, which work together to regulate behaviour and provide justice.
• The Constitution of India is the supreme law, setting out the basic principles of governance and the rights of citizens.

Sources of Law

• The main sources of law in India include:
  (a)The Constitution
  (b)Statutes made by Parliament and State Assemblies
  (c)Precedents from judicial decisions
  (d)Established customs
• The Constitution of India (1950) is the highest law, organising law-making powers into Central, State, and Joint Lists.
• Parliament acts as the supreme law-making authority, while state legislatures can create laws for their states.
• The Constitution ensures fundamental rights for citizens, which are crucial for understanding India’s legal sources.
• Judicial review is a process that checks if laws align with the Constitution.
• The Government of India Act, 1935, established the foundation for a federal structure, which the Constitution further developed.

​The Process of Lawmaking

• When a law is proposed in Parliament, it is known as a Bill.
• After discussion and debate, it is passed in the Lok Sabha and then the Rajya Sabha.
• If the Rajya Sabha makes amendments, the Bill is sent back to the Lok Sabha for reconsideration.
• The Bill needs the assent of the President of India, who can return the Bill for further consideration.
• Once approved, the law is published in the Official Gazette of India and becomes an Act, effective from the date specified in the notification.

Types of Law

The Indian legal system classifies laws into several categories:

• Criminal Law: Governs violations of legal rules and their punishment, ensuring public order and safety.
• Civil Law: Addresses disputes such as breach of contract or non-payment of dues, focusing on remedies for civil wrongs.
• Common Law: Based on judicial precedents, where Supreme Court judgments are binding on all courts under Article 141 of the Constitution, guided by the doctrine of Stare Decisis, meaning "to stand by that which is decided."
• Principles of Natural Justice: Encompasses fundamental principles like nemo judex in causa sua (no one should judge their own case), audi alteram partem (hear the other party), and reasoned decisions, ensuring fairness beyond written law. These principles can override common law but not statutes.

Enforcing the Law

After a law is passed in Parliament, it must be enforced by the executive, with Central or State Governments monitoring compliance depending on the law’s jurisdiction. Government functions are distributed to ministries, headed by ministers and run by civil servants.

Ministry of Finance

The Ministry of Finance (Vitta Mantralaya) is a Ministry within the Government of India concerned with the economy, serving as the Treasury of India. It deals with taxation, financial legislation, financial institutions, capital markets, Centre and State finances, and the Union Budget. As a Chartered Accountant, many day-to-day activities are impacted by this ministry’s proclamations. The Union Budget, an annual event, sets tax rates and budget allocations.

Constitution of the Ministry of Finance: The Ministry is the apex controlling authority of four Central Civil Services: Indian Revenue Service, Indian Audit and Accounts Service, Indian Economic Service, and Indian Civil Accounts Service. It is also the apex controlling authority of the Indian Cost and Management Accounts Service.

Departments under the Ministry of Finance:

• Department of Economic Affairs
• Department of Expenditure
• Department of Revenue
• Department of Financial Services
• Department of Investment and Public Asset Management

1. Ministry of Corporate Affairs

• The Ministry of Corporate Affairs is a division of the Indian Government focused on managing the Companies Act 2013, the Companies Act 1956, the Limited Liability Partnership Act 2008, and the Insolvency and Bankruptcy Code 2016.
• Its main role is to regulate Indian enterprises in both the industrial and services sectors.
• The Ministry aims to promote the growth of the corporate sector and ensure adherence to corporate laws and regulations.
• It is primarily staffed by civil servants from the Indian Corporate Law Service (ICLS), who are appointed through the Civil Services Examination.
• The highest position within the Ministry is the Director General of Corporate Affairs.

Ministry of Home Affairs

The Ministry of Home Affairs (Grha Mantralaya) is a part of the Government of India, primarily responsible for maintaining internal security and overseeing domestic policy. It is led by the Union Minister of Home Affairs and plays an essential role in creating policies regarding internal security and domestic matters.
Departments under the Ministry of Home Affairs:

• Department of Border Management
• Department of Internal Security
• Department of Home
• Department of Jammu, Kashmir, and Ladakh Affairs
• Department of Official Language
• Department of State

Departments of Official Language

• Central Translation Bureau  
• Central Hindi Training  Institute
• Directorate of Census Operations

Ministry of Law and Justice

The Ministry of Law and Justice in the Government of India is a Cabinet Ministry dealing with the management of legal affairs through the Department of Legal Affairs, legislative activities through the Legislative Department, and administration of justice in India through the Department of Justice. The Department of Legal Affairs advises various Ministries of the Central Government, while the Legislative Department drafts principal legislation for the Central Government.
Departments under the Ministry of Law and Justice:

• Department of Legal Affairs
• Legislative Department
• Department of Justice

2. Securities and Exchange Board of India (SEBI)

• SEBI protects the interests of investors in securities.
• It also promotes the development and regulation of the securities market.
• Established on April 12, 1988, it became a statutory body on January 30, 1992, through the SEBI Act, 1992.

3. Reserve Bank of India (RBI)

• The Reserve Bank of India formulates and implements the country's monetary policy.
• It controls, issues, and maintains the supply of the Indian rupee.
• The bank manages the main payment systems in the country.
• It also promotes economic development.
• The Deposit Insurance and Credit Guarantee Corporation offers deposit insurance and credit guarantees.

4. Insolvency and Bankruptcy Board of India (IBBI)

• The Insolvency and Bankruptcy Board of India (IBBI) is the authority responsible for managing insolvency cases and regulating entities such as Insolvency Professional Agencies, Insolvency Professionals, and Information Utilities in India.
• It was established on 1st October 2016 under the Insolvency and Bankruptcy Code, which became law on 28th May 2016.
• The IBBI oversees individuals, companies, limited liability partnerships, and partnership firms.
• It also plays a vital role in developing a strong insolvency framework in India.
• The insolvency process is regulated through the National Company Law Tribunal (NCLT) and the Debt Recovery Tribunal.

Structure of the Indian Judicial System

The judiciary system in India has several important functions, including:

• Regulating the interpretation of Acts and Codes
• Resolving disputes
• Promoting fairness among citizens

The hierarchy of the judiciary places the Supreme Court at the top, followed by High Courts and District Courts.

Supreme Court

• The Supreme Court is the apex body of the Indian judiciary, established on January 26, 1950.
• The Chief Justice of India, appointed under Article 126, is the highest authority.
• Initially comprised seven members; currently has 34 judges, including the Chief Justice.
• Individuals can seek relief by filing a writ petition under Article 32 for enforcing fundamental rights.
• Supreme Court decisions are binding on all courts under Article 141 of the Constitution.

High Court

• The High Court is the highest court of appeal in each state and union territory, as stated in Article 214.
• According to Articles 226 and 227, High Courts have appellate, original, and supervisory jurisdiction.
• Currently, there are 25 High Courts in India, with some states and union territories sharing a High Court.
• People can seek remedies for violations of their fundamental rights by filing a writ under Article 226.
• High Courts can issue writs to enforce these fundamental rights.
• The Calcutta High Court, established on July 2, 1862, is the oldest in India.

District Court

• District Courts are below High Courts.
• Civil matters, such as contractual disputes and claims for damages, are handled by the Courts of District Judges.
• The Courts of Session deal with criminal matters.
• District Courts hear appeals from decisions made by subordinate courts.
• A civil judge can try suits valued at no more than ₹2 crore under pecuniary jurisdiction.
• The District Judge handles suits with higher values.

Metropolitan Courts

• Metropolitan courts are set up in cities with populations of ten lakh or more, based on criteria established by the High Court.
• The Chief Metropolitan Magistrate has powers similar to those of a Chief Judicial Magistrate.
• The Metropolitan Magistrate has the authority of a first-class magistrate.
• These courts mainly deal with criminal cases, including those punishable by imprisonment of three years or less.
• They play a vital role in the judicial system by ensuring the smooth administration of justice in urban areas.