NIRMA UNIVERSITY INSTITUTE OF LAW

RESEARCH PROJECT

PERJURY: A MENACE TO CLEAN

Course Name- Criminal Law I Course Code- 2BL302

Submitted By: Preet Shah 12bll048

Submitted to: Asst. Proff. Owais Khan

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ACKNOWLEDGEMENT

I would like to express my profound gratitude for the project guidance to Mr. Owais Khan who has so ably guided the research project with her vast fund of knowledge, advice and constant encouragement, which made me, think past the difficulties and lead to the successful completion of the project. I am highly indebted for their guidance and constant supervision as well as for providing necessary information regarding the project & also for their support in completing the project. I have tried to cover all the aspects of the project and every care has been taken to make the project faultless. I have tried to write the project in my words as far as possible and simplified all the concepts by presenting it in different form. Thanking you

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Institute of law Nirma University CERTIFICATE Ther is to certify that Mr. Preet Shah, roll no. 12bll048 has done her project on the topic Novation in Indian Contracts for the subject Contract Law - II as a part of her course. The work done is of her own.

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CONTENTS 1. Chapter I 1.1 Introduction 1.2 Objective 1.3 Statement of problem 1.4 Hypothesis 1.5 Research Methodology 1.6 Review of literature 2. Chapter II 3. Chapter III 4. Chapter IV 5. Bibliography

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CHAPTER I 1.1 INTRODUCTION:Novation is a significant feature of building and construction projects, particularly in relation to design and construct (D&C) procurement.

It is important for construction industry participants (particularly principals, head contractors and consultants) to have a sound understanding of the concept, a failure of which can have unintended consequences. What is novation? Novation is a legal concept that, at its core, aims to achieve a process of substitution. It is a transaction by which, with the consent of all the parties concerned, a new contract is substituted for one that already exists. The effect of a novation is to discharge the original contract between two parties (the continuing party and the outgoing party) and substitute it with a new contract between the continuing party and a new party (the incoming party). The incoming party must perform the contractual obligations (under the new contract) that were formerly owed by the outgoing party under the original contract. For example, it is common under a D&C arrangement for the principal to engage a consultant to carry out design works prior to the principal engaging a head contractor to carry out the construction works. At some point during the project (for example when the design has reached a particular stage) the principal may novate the appointments of its design consultants to the head contractor. Novation fundamentally changes the risk allocation in the project, as the head contractor generally then assumes responsibility for the entire design (including the prior design work).

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1.2 OBJECTIVE:The following are the objectives of this research paper: To know what novation is exactly and in a way which can be understood by a layman too.

To know the difference between novation and change-of-name agreement.

To know which of the two is better.

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1.3 STATEMENT OF THE PROBLEM:-

This paper is based on an approach to explain what novation exactly is and how it takes place in India. It focuses on what are the factors due to which the novation of the contract takes place, how the novation is done and how to go about it within the ambit of The Indian Contract Act, 1872. It also includes the meaning of Change-of-Name Agreement, difference between Novation and Change-of-Name Agreement and which of the two is better.

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1.4 HYPOTHESIS:-

The basic reason of this paper is to find out what novation is and how it happens and also what is Change-of-Name Agreement. The main question to which the answer is to be found is which of the two is better?

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1.5 RESEARCH METHODOLOGY:-

The study of my topic is based on doctrinal research. It will involve secondary data such as Rules and regulations, cases, Judgements, Acts, Articles, Published Reports, and books.

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1.6 REVIEW OF LITERATURE Novation of a contract is given in Section 62 of The Indian Contract Act, 1872. It is as follows: Section 62: Effect of novation, rescission, and alteration of contract.- If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed.

Illustrations:

(A) A owes money to B under a contract. It is agreed between A, B and C that B shall thenceforth accept C as his debtor, instead of A. The old debt of A to B is at an end, and a new debt from C to B has been contracted.

(B) A owes B 10, 000 rupees. A enters into an arrangement with B, and gives B a mortgage of his (A's) estate for 5, 000 rupees in place of the debt of 10, 000 rupees. This is a new contract and extinguishes the old.

(C) A owes B 1, 000 rupees under a contract. B owes C 1, 000 rupees. B orders A to credit C with 1, 000 rupees in his books, but C does not assent to the arrangement. B still owes C 1, 000 rupees, and no new contract has been entered into.

The paper also includes the following topics discussed in detail: 1. Meaning of Novation and Change-of-Name Agreement.

2. Determining the agency responsible for executing your novation.

3. Difference between Novation and Change-of-Name Agreement.

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4. Which is appropriate: A Novation Agreement or a Change-of-Name Agreement?

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CHAPTER 2

Meaning of Novation and Change-of-Name Agreement

In contract law and business law, novation is the act of either: replacing an obligation to perform with a new obligation; or adding an obligation to perform; or replacing a party to an agreement with a new party.

In contrast to an assignment, which is valid so long as the obligee (person receiving the benefit of the bargain) is given notice, a novation is valid only with the consent of all parties to the original agreement: the obligee must consent to the replacement of the original obligor with the new obligor.[1] A contract transferred by the novation process transfers all duties and obligations from the original obligor to the new obligor. For example, if there exists a contract where Dan will give a TV to Alex, and another contract where Alex will give a TV to Becky, then, it is possible to novate both contracts and replace them with a single contract wherein Dan agrees to give a TV to Becky. Contrary to assignment, novation requires the consent of all parties. Consideration is still required for the new contract, but it is usually assumed to be the discharge of the former contract. Another classic example is where Company A enters a contract with Company B and a novation is included to ensure that if Company B sells, merges or transfers the core of their business to another company, the new company assumes the obligations and liabilities that Company B has with Company A under the contract. So in terms of the contract, a purchaser, merging party or transferee of Company B steps into the shoes of Company B with respect to its obligations to Company A. Alternatively, a "novation agreement" may be signed after the original contract[2] in the event of such a change. Ther is common in contracts with governmental entities; an example being under the United States Anti-Assignment Act, the governmental entity that originally issued the contract must agree to such a transfer or it is automatically invalid by law.

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The criteria for novation comprise the obligee's acceptance of the new obligor, the new obligor's acceptance of the liability, and the old obligor's acceptance of the new contract as full performance of the old contract. Novation is not a unilateral contract mechanism, hence allows room for negotiation on the new T&Cs under the new circumstances. Thus, 'acceptance of the new contract as full performance of the old contract' may be read in conjunction to the phenomenon of 'mutual agreement of the T&Cs. A change of ownership occurs when a title is transferred from one person or entity to another. Ownership of land is transferred by having the owner sign a deed in exchange for money and / or other considerations. It results in a change in the legal right to the ownership and possession of land. Change of ownership of land requires many formalities. Some states require the deed to be notarized. The land ownership deed should be also be officially "recorded" in the county where the land is situated.

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CHAPTER 3

DIFFERENCE BETWEEN NOVATION AND CHANGE-OF-NAME AGREEMENT. NOVATION Novation is defined by the Blacks Law Dictionary, 8th Edn., 2004 as The act of substituting for an old obligation a new one that either replaces an existing obligation with a new obligation or replaces an original party with a new party. In Whartons Law Lexicon, 15th Edition, 2009 at p.1174, the meaning of the term Novation is stated as the substitution, with the creditors consent, of a new debtor for an old one.

Section 62 of The Indian Contract Act, 1872 sets out the general parameters for novation. The Section reads in pertinent part as follows: Effect of novation, rescission and alteration of contract If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed.

Illustration:- (a) A owes money to B under a contract. It is agreed between A, B and C that B shall thenceforth accept C as her debtor, instead of A. The old debt of A to B is at an end, and a new debt from C to B has been contracted.

It is to be noted that Section 62 speaks of substitution of a new debtor, creditor, contract, etc. in place of an old one. The essential feature of novation of contract is that when a contract is substituted the rights under the original contract are relinquished or replaced by the new contract. Illustration (a) to Section 62 indicates that one of the requisites of such novation is the agreement of all the parties to the new contract.

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In every novation there are four essential requisites: (1) A previous valid obligation; (2) the agreement of all the parties to the new contract; (3) the extinguishment of old contract; and (4) the validity of the new one.

A novation is new contractual relation. It is based upon a new contract by all the parties interested. There, on dissolution of a firm its assets and liabilities were taken over by a third person. He paid part of the debt owed by the firm to a Bank and hypothecated assets with the bank. On filing of the suit by the bank against the firm and the third person for recovery of loan, it was held that in the absence of tripartite agreement between the parties, there was no novation of contract. The liability of the firm continued to exist. In P.S. Atiyahs An Introduction to the Law of Contract, 3rd Edition, 1981, at p. 283, it is stated as follows: The only way in which it is possible to transfer contractual duties to a third party is by the process of novation, which requires the consent of the other party to the contract. In fact novation really amounts to the extinction of the old obligation, and the creation of a new one, rather than to the transfer of the obligation from one person to another. Thus if B owes A $100, and C owes B the same amount, B cannot transfer to C the legal duty of paying her debt to A without As consent. But if A agrees to accept C as a debtor in place of B, and if C agrees to accept A as her creditor in place of B, the three parties may make a tripartite agreement to ther effect, known as novation. The effect of ther is to extinguish Bs liability to A and create a new liability on the part of C. The legal maxim that novatio non praesumitur enunciates whether a novation needs to be in writing. The maxim means that A Novation is not presumed.

In Appukuta Panicker v. Anantha Chettiar, AIR 1996 Ker 303, the Kerala High Court held that it is essential for the principle of novation to apply that there must be mutual consent of all parties concerned.

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In T.M. & Co. v. H.I. Trust, AIR 1969 Cal 238, the High Court of Calcutta observed that the liability can be transferred only by a tripartite agreement which will amount to novation.

In view of the above legal position, the consent of the Bank as also the execution of a tripartite agreement, between P Co. Ltd., the partnership firm(its partners) and the Bank, is sine qua non in order for it to be a novation of contract.

As regards the levy of stamp duty in respect of the aforesaid transfer of liability from partnership firm to P Company Ltd., the law on the subject is as follows: Sub-section (14) of Section 2 of the Indian Stamp Act, 1899, defines the term Instrument as under: Instrument includes every document by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded.

A novation arises when a new individual assumes an obligation to pay that was incurred by the original party to the contract. As the same is given effect to by the substitution of a new contract for an old one and the new agreement extinguishes the rights and obligations that were in effect under the old agreement, it falls under the definition of the term instrument as defined under the Indian Stamp Act, 1899. A novation agreement is an instrument under the Indian Stamp Act, 1899. Whether such instrument is chargeable to stamp duty needs further analysis.

Section 3 of the Indian Stamp Act, 1899 sets out the instruments chargeable with duty. It provides in relevant part as follows: Subject to the provisions of ther Act and the exemptions contained in Schedule I, the following instruments shall be chargeable with duty of the amount indicated in that Schedule as the proper duty therefor, respectively, that is to say (a) every instrument mentioned in that Schedule which, not having been previously executed by any person, is executed in India on or after the first day of July, 1899."

Since in the above case, the novation agreement is being executed for the first time not
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having been executed previously, it squarely attracts the provisions as contained in Section 3 of the Indian Stamp Act, 1899. Substitution of a new contract is the core of novation. If the new contract suffers from legal flaw such as want of registration, stamps etc., on account of which it becomes unenforceable, the original contract will not be extinguished and there would be no novation. In view of the above stated legal position, it must be said that a novation agreement is an instrument liable to stamp duty under the Indian Stamp Act, 189 CHANGE OF NAME/OWNERSHIP AGREEMENT Ownership means a person has a right over a property, and owns it. An owner will have the right of possession, right to its use, right of way, right to transfer it and the right to earn rent from the property. An owner can transfer her property by gifting or selling it. A sale deed, or any document through which the ownership rights are transferred, is a document that gives evidence of an individual's ownership of a property. Rights in property can be transferred only on execution and registration of a sale deed in favour of the buyer. A conveyance deed is executed to transfer title from one person to another. Generally, an owner can transfer her property unless there is a legal restriction barring such transfer. Under the law, any person who owns a property and is competent to contract can transfer it in favour of another. If the owner gives another individual a power of attorney (POA), that person can sell it under ther authority. A POA gives another person the power to act on behalf of the owner. However, if the POA only grants a person the authority to manage the property, he cannot sell it. Agreement to sell precedes execution of a sale deed. The subsequent sale deed is based on the agreement to sell. The agreement is signed and executed by the seller and buyer on a nonjudicial stamp paper. As such, it has legal value and can be produced as evidence. Agreement to sell is the base document on which the conveyance deed is drafted. Every document of transfer of property by way of sale would be preceded by an agreement to sell. The agreement to sell is also in writing. Any instrument indicating transfer of property must be registered. The sale deed and other relevant documents have to be stamped and registered at the subregistrar's office having
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jurisdiction over the property. The purpose of registration is to prevent fraud and provide security. It also ensures that every person dealing with property, where such dealings require registration, may rely with confidence on the statements contained in the registered document as a complete account of all transactions by which her title may be affected. A transfer of title in real estate is not valid if the sale deed is not registered. Registration in the name of the seller by the person transferring property is crucial for the transfer of clear title in favour of the new owner. Registration is to be done after payment of appropriate stamp duty, as prevalent in the State. Once purchased, the property should be mutated in the name of the purchaser. Mutation is not a legal title given to the new owner. It basically means rectification in the records of the municipal authorities (in case of urban properties) and local revenue officers (in case of other properties), replacing the name of the owner with that of the new owner. The new owner, in whose favour the title and other rights pass on, must apply to the local municipal authorities for mutation. Mutation of property is recorded on the presentation of registered documents showing evidence of transfer of property. Mutation of property in the municipal or revenue records is mainly for the purpose of payment of property taxes.

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CHAPTER 4

PROCESS OF NOVATION AND CHANGE-OF-NAME AGREEMENT IN INDIA.

To understand how change of name agreement works lets take a look at a very interesting example.

Transfer of ownership of motor vehicle 1) When the ownership of any motor vehicle is transferred within the same state the transferer shall report the fact of transfer within 14 days of transfer to the concerned registering authority. 2) In case of vehicle registered outside the state the transferer(seller) should report the fact of transfer within 45 days of the transfer to the concerned registering authority. 3) The transfree(purchaser) shall apply for the transfer to the concerned registering authority within 30 days of purchase. 4) In case of death of a registered owner of a motor vehicle or in case of purchase of motor vehicle at a public auction, the successor who has purchased or acquired the motor vehicle should inform within 30 days & for transfer of vehicle in her name to the concerned registering authority within 3 months.

Causes for transfer of ownership 1) Transfer of ownership on sale / purchase of motor vehicle. 2) Transfer of ownership on death of owner of motor vehicle. 3) Transfer of ownership of vehicle purchased in public auction.
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4) Transfer of ownership in the name of financer. Transfer of ownership on sale / purchase of motor vehicle

How to apply? 1) Form 29 (2 copies with sellers sign). 2) Form 30 (with signature of seller & purchaser & chassis print affixed on it). 3) Form T.C.A, TCR (for transport vehicle only). 4) Address proof. 5) Income tax declaration in form 60/PAN number (except 2 wheeler). 6) NOC (in case vehicle is purchased from other region / other RTO). 7) NOC from entry tax (in case vehicle arriving from out of state whose age is less than 30 months from the date of 1st registration. 8) NOC from financier if any. 9) All valid documents of vehicle. 10) Fee.

Transfer of ownership of vehicle purchased in public auction 1) The purchaser should apply for the transfer of ownership within 30 days of taking possession of vehicle at public auction to the concerned registering authority (RTO). 2) When vehicle auctioned is without any registration mark or with a registration mark which on verification is found to be false, the registering authority (RTO) assigns new registration mark to the vehicle in name of dept of govt. auctioning the vehicle & thereafter transfer of ownership in the name of person to whom the vehicle is sold is effected. How to apply?

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1) 2) 3) 4) 5)

From 30 (affixed with chassis print). Form 32. Form TCA, TCR (for transport vehicles only). Certified copy of order of central/state govt. authorising the auction of vehicle Order confirming sale of vehicle in purchasers favour , duly signed by the person

authorised to conduct the auction. 6) 7) 8) NOC from the financier if any. All valid documents of vehicle. Fee.

Transfer of ownership of vehicle purchased in public auction

1) In case of hire purchase, lease or hypothecation agreement if the registered owner of the vehicle becomes the defaulter, the financier of the said agreement can apply for the transfer of ownership of vehicle in her own name on following 2 conditions. a) The financier should satisfy the registering authority (RTO) that he has taken the possession of the vehicle from the owner (defaulter). b) The registered owner has refused to deliver the certificate of registration (RC) or has absconded. 2) Under such circumstances financier should apply to the registration authority concerned (RTO) for the issue of fresh certificate of registration in form 30 & 36 alongwith Fees 3) The registering authority after receipt of such an application would give the defaulter an opportunity to make any representation by serving him a notice by RPAD at her address entered in the certificate of registration (RC). 4) After that the registration authority will cancel the previous certificate & issue a fresh certificate of registration (RC) in the name of financier.
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CHAPTER 5

WHICH OF THE TWO IS BETTER?

Novation is a legal process where one party transfers the responsibility of the loan agreement to someone else. The original obligations set forth in the loan agreement will remain the same, but the parties involved will change during the process and be revealed on a new contract. During the novation process, the original owner of the contact has the contract revised to reflect a change in the liability of the contract or to outline a new plan that still obliges the same terms, with a few possible minor changes. There are three types of Novation processes that can take place. The first type of Novation that can take place is where the responsibility is not assumed by someone new, but the original agreement is reconstructed into a new agreement. The new agreement will retain the same obligations, with some minor changes. Ther type of Novation process is common in cases where a customer wants to take advantage of a new finance rate, interest rate, or plan that is being offered by the company. The second type of Novation happens when the original debtor of the contract wishes to transfer the liability of the contract to a new party, who will then become the new debtor on the contract. The original obligations will still be present, but the original debtor will no longer be liable for the loan under the new contract. Ther type of Novation is very common in divorces where a mortgage is present. The third kind of Novation takes place when the original creditor wants to transfer the responsibility, of holding the contract, to a completely new creditor. The original contract is only amended to remove the original creditor and to name the new creditor. All original obligations and debtors remain the same. A case where ther type of Novation would be present is when a company is sold to another company. Novation's are a very common practice and can be found in several of circumstances. For example, a divorce where a mortgage is present would be a very common place where a Novation would be needed. In a divorce the assumed responsibility of the mortgage is decided by the courts and if both parties are named on the mortgage, the party who did not assume the mortgage in the divorce will have to be removed. The
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Novation process will remove the un-assumed parties name and draft a new contract to only reflect the responsibility of the assumed party. A Novation is only legal when all parties fully agree to the process. But the problem with most Novation processes is that one party will not agree to assume full responsibility. Ther type of problem arises mainly in situations where property is involved. In the event of ther happening, a quitclaim deed will need to be introduced in conjunction with the Novation. A quit claim deed will allow the un-assumed party to completely eliminate their interest in the property, thereby, forcing the assumed party to take responsibility of the said property. The main benefit of a Novation is that it allows a party to erase their responsibility from a binding contract, given that all parties agree to the process. Ther is very advantageous when it comes to a divorce or separation where the assets are divided among each party. The liability attached to said assets can be transferred to the main party who will be assuming the sole responsibility for said assets.

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REFRENCES : 1. Scribd.Com 2. Legalservicesindia.Com 3. Advocate Khoj 4. Jstor 5. P.S. Atiyahs Book On Contract Law 6. Rk Bangia On Contract Law 7. Contract Law By Avatar Singh

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