J K SHAH CLASSES
CA FOUNDATION • PAPER 2: BUSINESS LAWS
REVISION BOOK OF LAW
Concept-wise Theory • Exam-tagged Questions • Practical Q & A
All concepts with their related exam questions placed together
Repeated questions merged – every exam reference shown once
One question & answer per concept – other questions with exam years
Compiled by
CA SURESH TEJWANI
How to Use this Book
➤ Every sentence starts on a new line with an arrow.
- Each part of a sentence after a comma is shown as a bullet point below it.
➤ Each concept is followed by one Question & Answer. The answer first refers back to the concept for the law, then applies it to the facts.
➤ Other questions on the same concept are listed below it, numbered chapter-wise, with a “Case in brief”, a one-line conclusion and the exams in which they were asked.
Colour key
| Shown as | Meaning |
|---|---|
| Section 2(h) | Section / Article reference |
| Balfour v. Balfour | Case law |
Contents
Chapter 1: Indian Regulatory Framework
Introduction
➤ Have you ever wondered why you are studying this subject called law?
➤ Is it only because it has been prescribed in the syllabus or is it because you will need this knowledge as a member of the profession?
➤ Awareness of law is essential to become a full-fledged Chartered Accountant.
➤ This is because a Chartered Accountant is the first level of contact on many legal matters.
➤ So, we should possess knowledge of law so that we can advise our management and clients on legal matters at a basic or threshold level.
➤ Some of you may later wish to specialise in a subject called taxation.
➤ Remember tax laws are also laws.
➤ In order to become an expert in taxation you should possess a basic awareness of the legal and regulatory framework of our country.
➤ The purpose of a regulatory framework is to provide a set of uniform rules and regulations that will govern the conduct of people interacting with each other in personal as well as business relationships.
➤ Down the ages,
- mankind has evolved from a hunter- gatherer society through agriculture and industrial revolution to a complex social framework.
➤ Throughout this journey,
- we have always needed laws and regulations to guide us on the right course of conduct as well as to identify violations and punish them.
➤ If we talk about ancient law,
- on the basis of information available from different sources “Code of Hammurabi” is known for oldest law in written form.
➤ King Hammurabi ruled Babylon for the period from 1792 BC to 1758 BC.
➤ He carved the code on bulky stone slabs and ordered to place those stones on different places all over the city so that the public may have the knowledge of codes.
➤ He also appointed judges to check whether public is following the laws or not.
➤ In 450 BC,
- a set of laws was engraved on 12 bronze tablets in Rome which is considered as first most detailed code of any of the civilisations and called Twelve Tables.
➤ The purpose of these tables was to protect the rights of public and to provide remedy for wrongs.
➤ All the citizens of Rome were supposed to have the knowledge of these tables.
➤ Over the time,
- many amendments were done in these laws as per the requirements.
➤ In this subject,
- you will be introduced to many laws.
➤ Therefore, in this chapter we will first understand how these laws are made and how they are implemented.
❖ What Is Law?
➤ Law is a set of obligations and duties imposed by the government for securing welfare and providing justice to society.
➤ India’s legal framework reflects the social,
- political, economic, and cultural aspects of our vast and diversified country.
Sources of Law
➤ The main sources of law in India are the Constitution,
- the statutes or laws made by Parliament and State Assemblies,
- Precedents or the Judicial Decisions of various Courts and in some cases,
- established Customs and Usages.
➤ You must be aware that India is a parliamentary democracy.
➤ We have a constitution which is the basis and source for all laws.
➤ We elect our representatives to the parliament as well as to the legislative assemblies of various States.
➤ These representatives of the people make laws in parliament or in their state assemblies as the case may be.
➤ So, Parliament is the ultimate law-making body.
➤ The laws passed by parliament may apply throughout all or a portion of India,
- whereas the laws passed by state legislatures apply only within the borders of the states concerned.
➤ The Government of India Act, 1935,
- passed by the Parliament of the United Kingdom is the precursor for the Constitution of India.
➤ It defined the characteristics of the Government from “unitary” to “federal”.
➤ Powers were distributed between Centre and State to avoid any disputes.
➤ In 1937, Federal Court was established and had the jurisdiction of appellate,
- original and advisory.
➤ The powers of Appellate Jurisdiction extended to civil and criminal cases whereas the Advisory Jurisdiction was extended with the powers to Federal Court to advise Governor-General in matters of public opinion.
➤ The Federal Court operated for 12 years and heard roughly 151 cases.
➤ The Federal Court was supplanted by India’s current Apex Court,
- the Supreme Court of India.
➤ The Constitution of India, 1950 is the foremost law that deals with the framework within which our democratic system works,
- and our laws are made for the people,
- by the people.
➤ The Constitution also provides for and protects certain Fundamental rights of citizens.
➤ It also lays down Fundamental duties as well as the powers and duties of Governments,
- both Central and State.
➤ The laws in India are interconnected with each other forming a hybrid legal system.
➤ The people who wrote the Constitution decided to divide the law-making power between the Central Government and the various State Governments.
➤ So, the Indian Constitution has three lists Viz.,
- Central List, State List and on current List.
➤ Depending on the list in which it figures a matter would become the subject for Central law or a State law.
❖ For example,
➤ Income Tax is a Central subject.
➤ So, throughout India we have only one law for Income Tax which is implemented by the Central Government through the Ministry of Finance.
➤ We also have matters for which both Central as well as State Governments can pass laws.
➤ Levy of stamp duty is such an example.
➤ Both Central Government and State Government have laws governing Levy of stamp duty.
✦ Question & Answer on this Concept
Q 1.1 Question
➤ Define Law and explain various sources of Law.
Asked in: Exam Sep 2025
✎ Answer
☞ Answer: Refer the concept “Sources of Law” explained above.
The Process of Making a Law
➤ When a law is proposed in parliament it is called a Bill.
➤ After discussion and debate,
- the law is passed in Lok Sabha.
➤ Thereafter, it has to be passed in Rajya Sabha.
➤ It then has to obtain the assent of the President of India.
➤ Finally, the law will be notified by the Government in the publication called the Official Gazette of India.
➤ The law will become applicable from the date mentioned in the notification as the effective date.
➤ Once it is notified and effective,
- it is called an Act of Parliament.
| Discussed | ||||||
|---|---|---|---|---|---|---|
| Problems | Bill (Solution Book) | Loksabha & Rajya Sabha | President Asset |
✦ Question & Answer on this Concept
Q 1.2 Question
➤ What do you understand by Law?
➤ Also, elaborate the procedure for making a law.
Asked in: MTP May 2025 | Exam Sep 2024 | RTP
✎ Answer
☞ Answer: Refer the concept “The Process of Making a Law” explained above.
★ Also asked in exams on this concept – revise the concept & the answer above
Q 1.3 “Explain the process by which a Bill becomes an Act of Parliament in India. After a law is enacted, how is it enforced, and which authorities are responsible for its implementation?
Asked in: Exam Sep 2025 | MTP-1
Types of Laws in the Indian Legal System
➤ The laws in the Indian legal system could be broadly classified as follows
❖ Types of Laws
1. Criminal Law
➤ Criminal law is concerned with laws pertaining to violations of the rule of law or public wrongs and punishment of the same.
➤ Criminal Law is governed under the Indian Penal Code, 1860,
- and the Code of Criminal Procedure, 1973 (Crpc).
➤ The Indian Penal Code, 1860,
- defines the crime,
- its nature, and punishments whereas the Criminal Procedure Code, 1973,
- defines exhaustive procedure for executing the punishments of the crimes.
➤ For Example: Murder, rape, theft,
- fraud, cheating and assault are some examples of criminal offences under the law.
✦ Question & Answer on this Concept
Q 1.4 Question
➤ Explain the types of laws in the Indian Legal System considering the Indian Regulatory Framework.
Asked in: Exam May 2025 | MTP May 2025 | Exam Sep 2024 | Exam Jun 2024 | RTP | MTP-1
✎ Answer
☞ Answer: Refer the concept “Types of Laws in the Indian Legal System” explained above.
★ Also asked in exams on this concept – revise the concept & the answer above
Q 1.5 What is criminal law?
Asked in: Practice Question
Civil Law
➤ Matters of disputes between individuals or organisations are dealt with under Civil Law.
➤ Civil courts enforce the violation of certain rights and obligations through the institution of a civil suit.
➤ Civil law primarily focuses on dispute resolution rather than punishment.
➤ The act of process and the administration of civil law are governed by the Code of Civil Procedure, 1908 (CPC).
➤ Civil law can be further classified into Law of Contract,
- Family Law, Property Law,
- and Law of Tort.
➤ For examples: are breach of contract,
- non-delivery of goods,
- non-payment of dues to lender or seller defamation,
- breach of contract,
- and disputes between landlord and tenant.
Common Law
➤ A judicial precedent or a case law is common law.
➤ A judgment delivered by the Supreme Court will be binding upon the courts within the territory of India under Article 141 of the Indian Constitution.
➤ The doctrine of Stare Decisis is the principle supporting common law.
➤ It is a Latin phrase that means “to stand by that which is decided.”
➤ The doctrine of Stare Decisis reinforces the obligation of courts to follow the same principle or judgement established by previous decisions while ruling a case where the facts are similar or “on all four legs” with the earlier decision.
Principles of Natural Justice
➤ Natural justice, often known as Jus Natural deals with certain fundamental principles of justice going beyond written law.
➤ Nemo judex in causa sua (Literally meaning “No one should be made a judge in his own cause, and it’s a Rule against Prejudice), audi alteram partem (Literally meaning “hear the other party or give the other party a fair hearing), and reasoned decision are the rules of Natural Justice.
➤ A judgement can override or alter a common law,
- but it cannot override or change the statute.
Enforcing the Law
➤ After a law is passed in parliament it has to be enforced.
➤ Somebody should monitor whether the law is being followed.
➤ This is the job of the executive.
➤ Depending on whether a law is a Central law or a State law the Central or State Government will be the enforcing authority.
➤ For this purpose government functions are distributed to various ministries.
➤ Some of the popular Ministries are the Ministry of Finance,
- the Ministry of Corporate Affairs,
- the Ministry of Home Affairs,
- the Ministry of Law and Justice and so on.
➤ These Ministries are headed by a minister and run by officers of the Indian administrative and other services.
➤ The Government of India exercises its executive authority through a number of Government Ministries or Departments of State.
➤ A Ministry is composed of employed officials,
- known as civil servants,
- and is politically accountable through a minister.
➤ Most major Ministries are headed by a Cabinet Minister,
- who sits in the Union Council of Ministers,
- and is typically supported by a team of junior ministers called the Ministers of State.
➤ For example, the Income Tax Act is implemented and enforced by the Ministry of Finance through the Central Board for Direct Taxes coming under the Department of Revenue and is administered by the officers of the Indian Revenue Service.
➤ We will see some of the major Ministries and the laws which are enforced by them:
➤ The Ministry of Finance (Vitta Mantralaya) is a Ministry within the Government of India concerned with the economy of India,
- serving as the Treasury of India.
➤ In particular, it concerns itself with taxation,
- financial legislation, financial institutions,
- capital markets, centre and state finances,