Table Of ContentContents 1
Law, Ethics
and
Communication
(For CA–IPCC)
ii Contents
ABOUT THE AUTHOR
BS Jolly is a Chartered Accountant and a Company Secretary. He also has a MBA in Finance to his credit.
Having done his graduation from Punjab University, Chandigarh with first position in his department, he
completed his chartered accountancy and company secretaryship courses in the first attempt. He completed
his CA in 1988 just at the age of 20, securing 39th merit position in the intermediate examinations, getting
thereby the distinction of being one of the youngest aspirants to qualify the CA examination.
Mr. Jolly has more than 23 years of professional experience at senior positions in the industry in financial
planning, accounting, auditing, taxation, legal and corporate law matters, among others.
Now based in Chandigarh, he is at the forefront of developing e-learning solutions for students of
professional courses such as CA, CS, CWA and Law. His venture “coursemateonline” (http://www.
coursemateonline.com) offers digital content for self-paced learning over internet and also offline learning
solutions.
Contents iii
Law, Ethics
and
Communication
(For CA–IPCC)
B S Jolly
Chartered Accountant
and
Educational Consultant
Chandigarh
Tata McGraw Hill Education Private Limited
NEW DELHI
McGraw-Hill Offices
New Delhi New York St Louis San Francisco Auckland Bogotá Caracas
Kuala Lumpur Lisbon London Madrid Mexico City Milan Montreal
San Juan Santiago Singapore Sydney Tokyo Toronto
Tata McGraw-Hill
Published by the Tata McGraw Hill Education Private Limited,
7 West Patel Nagar, New Delhi 110 008.
Law, Ethics and Communication
Copyright © 2012 by Tata McGraw Hill Education Private Limited.
No part of this publication may be reproduced or distributed in any form or by any means, electronic, mechanical,
photocopying, recording, or otherwise or stored in a database or retrieval system without the prior written permission of
the publishers. The program listings (if any) may be entered, stored and executed in a computer system, but they
may not be reproduced for publication.
This edition can be exported from India only by the publishers,
Tata McGraw Hill Education Private Limited.
ISBN (13 digit): 978-1-25-900179-6
ISBN (10 digit): 1-25-900179-2
Vice President and Managing Director: Ajay Shukla
Head—Higher Education Publishing and Marketing: Vibha Mahajan
Publishing Manager—B&E/HSSL: Tapas K Maji
Associate Sponsoring Editor: Hemant K Jha
Editorial Researcher: Silvi Dua
Executive (Editorial Services): Yogesh Kumar
Senior Production Manager: Manohar Lal
Senior Production Executive: Atul Gupta
Marketing Manager—Higher Education: Vijay Sarathi
Assistant Product Manager: Daisy Sachdeva
Graphic Designer (Cover Design): Meenu Raghav
General Manager—Production: Rajender P Ghansela
Manager—Production: Reji Kumar
Information contained in this work has been obtained by Tata McGraw-Hill, from sources believed to be reliable.
However, neither Tata McGraw-Hill nor its authors guarantee the accuracy or completeness of any information
published herein, and neither Tata McGraw-Hill nor its authors shall be responsible for any errors, omissions,
or damages arising out of use of this information. This work is published with the understanding that Tata Mc-
Graw-Hill and its authors are supplying information but are not attempting to render engineering or other pro-
fessional services. If such services are required, the assistance of an appropriate professional should be sought.
Typeset at Tej Composers, WZ 391, Madipur, New Delhi 110 063 and printed at Gopal Jee Enterprises, 190/5 Main
Road, Maujpur, Delhi 110 053
Cover Printer: SDR
RCXCRRXHRYCDR
To My Parents
P
REFACE
All of us belong to the civil society, which is bound and regulated by certain rules, called as laws, which
suit various needs and value systems. There are several branches of law, such as civil law, criminal law,
international law, constitutional law, etc. Every law regulates and controls a particular field of activity.
Mercantile law is that part of civil law that regulates trading and commercial activities of the people in the
society. It groups together laws that are considered important for men in business, and includes laws relating to
various contracts, partnerships, companies, negotiable instruments, insurance, carriage of goods, arbitration,
etc. Similarly, certain laws have been created for the welfare of employees and workers in factories, shops
and other commercial establishments. Then there are laws regulating creation, operation and management of
companies. All these laws, grouped together, are referred to in common parlance as ‘business laws’.
In addition to the laws, ethics and morals govern our working culture and lie at the foundation of any
profession. For the students of chartered accountancy, understanding ethics is perhaps the first and most
important part of curriculum, since the responsibility of finance and accounts professionals extend beyond
any particular organization, and the nature of their profession demands acting in public interest. Besides this,
corporate governance, corporate social responsibility, sensitivity to environment and consumer interest are
some issues which a Chartered Accountant is expected to encounter and resolve, irrespective of whether he
is employed in any organization or practices the profession independently.
Finally, good communication skills and sound knowledge of legal deeds and documents used in routine
business matters are imperative for a professional and is not a matter of choice.
As such, each student of chartered accountancy course is expected to have working knowledge of the
prevalent ‘Law, Ethics and Communication’ and their practical application in commercial situations.
The present work covering the syllabus prescribed by Institute of Chartered Accountants of India for the
students of Integrated Professional Competency Course (IPCC), has been divided into 3 parts as follows:
Part I
Section A: The Indian Contract Act, 1872
Section B: Other Business Laws
1. The Negotiable Instruments Act, 1881
2. The Payment of Bonus Act, 1965
3. The Employees Provident Fund & Miscellaneous Provisions Act, 1952
4. The Payment of Gratuity Act, 1972
Section C: Companies Act, 1956
viii Preface
Part II
Business Ethics
Part III
Business Communication
In order to facilitate easy understanding for the benefit of the students, the book incorporates the following
features:
Chapters arranged in a logical sequence
Easy and simple language, avoiding technical or legal jargons
Concise yet comprehensive coverage of the syllabus
Numerous examples for understanding application of concepts in practical situations
Self-review questions (including up-to-date previous years’ examination questions) with hints and
answers
Model Test Paper at the end of the book (with answers)
Although every effort has been made to make this work free from any mistakes and deficiencies, still
the author shall be grateful to the readers for pointing out anything that might have crept in inadvertently.
Feedback, comments and suggestions for further improvement in the book are always welcome.
I would like to acknowledge the support of team at Tata McGraw-Hill for the painstaking work and
continuous engagement in bringing out the present work.
Also, I humbly acknowledge the support and patience of my wife and children, the tips to improve the
work given by my brother and professional partner, and all other well-wishers who understood me and
provided the encouragement to complete the present project.
BS Jolly
Preface ix
S
YLLABUS
CA-IPCC Examination
PAPER 2: LAW, ETHICS AND COMMUNICATION
(One paper: Three hours — 100 Marks)
Level of knowledge: Working knowledge
PART I: LAW (60 MARKS)
Objective: To test working knowledge of business laws and company law and their practical application in
commercial situations.
Business Laws (30 Marks)
1. The Indian Contract Act, 1872
2. The Negotiable Instruments Act, 1881
3. The Payment of Bonus Act, 1965
4. The Employees Provident Fund and Miscellaneous Provisions Act, 1952
5. The Payment of Gratuity Act, 1972
Company Law (30 Marks)
Companies Act, 1956 – Sections 1 to 197
(a) Preliminary
(b) Board of company law administration National Company Law Tribunal; Appellate Tribunal
(c) Incorporation of company and matters incidental thereto
(d) Prospectus and allotment, and other matters relating to use of shares or debentures
(e) Share capital and debentures
(f) Registration of charges
(g) Management and administration – general provisions – registered office and name, restrictions on
commencement of business, registers of members and debentures holders, foreign registers of members
x Syllabus
or debenture holders, annual returns, general provisions regarding registers and returns, meetings and
proceedings.
(h) Company law in a computerized environment – e-filing.
Part II: ETHICS (20 Marks)
Objective: To have an understanding of ethical issues in business.
1. Introduction to Business Ethics
The nature, purpose of ethics and morals for organizational interests; ethics and conflict of interests;
ethical and social implications of business policies and decisions; corporate social responsibility;
ethical issues in corporate governance.
2. Environment Issues
Protecting the natural environment – prevention of pollution and depletion of natural resources;
conservation of natural resources.
3. Ethics in Workplace
Individual in the organization, discrimination, harassment, gender equality.
4. Ethics in Marketing and Consumer Protection
Healthy competition and protecting consumer’s interest.
5. Ethics in Accounting and Finance
Importance, issues and common problems.
Part III: COMMUNICATION (20 Marks)
Objective: To nurture and develop the communication and behavioural skills relating to business.
1. Elements of Communication
(a) Forms of communication: formal and informal, interdepartmental, verbal and nonverbal; active
listening and critical thinking
(b) Presentation skills, including conducting meeting, press conference
(c) Planning and composing business messages
(d) Communication channels
(e) Communicating corporate culture, change, innovative spirits
(f) Communication breakdowns
(g) Communication ethics
(h) Groups dynamics; handling group conflicts, consensus building; influencing and persuasion
skills; negotiating and bargaining
(i) Emotional intelligence - emotional quotient
(j) Soft skills - personality traits; interpersonal skills; leadership
2. Communication in Business Environment
(a) Business meetings – notice, agenda, minutes, chairperson’s speech
(b) Press releases
(c) Corporate announcements by stock exchanges
(d) Reporting of proceedings of a meeting
3. Basic Understanding of Legal Deeds and Documents
Syllabus xi
(a) Partnership deed
(b) Power-of-Attorney
(c) Lease deed
(d) Affidavit
(e) Indemnity bond
(f) Gift deed
(g) Memorandum and articles of association of a company
(h) Annual Report of a company
