The Hindu Business Line : What happens if you bought a stolen car?

JOLLY bought a second-hand car from Yogesh for Rs 85,000. After Jolly had used the car for six months, he was deprived of it because Yogesh had no title to it. Can Jolly recover the price of the car from Yogesh? Advise Jolly.

Jolly can recover the price from Yogesh. In every contract of sale, there is an implied condition that the seller has the right to sell. The problem is based on the decision in Rowland vs Divall, where a stolen car was sold by the seller and the court held that the buyer may recover the full price from the seller.

MoA

SECTION 13 of Companies Act, 1956 provides for the contents of the memorandum of association (MoA) of a limited company. It may, however, be borne in mind that the MoA of a company cannot contain anything contrary to the provisions of the Companies Act. If it does, such provisions shall be devoid of any legal effect.

Surety and liability

A SURETY is said to be discharged from liability when his liability comes to an end. This may happen in various ways: i) by revocation of contract of guarantee — by notice (Section 130), death of surety (Section 131), novation (Section 62); ii) by the conduct of the creditor — by variations in the terms of the contract (Section 133), release or discharge of the principal debtor (Section 134), composition with the principal debtor (Section 135), impairing surety's remedy (Section 139); and iii) by invalidation of the contract — by obtaining guarantee by misrepresentation (Section 142), obtaining guarantee by concealment (Section 143), the failure of the co-surety to join (Section 144) and the failure of considerations.

True or false

PLANNING and controlling are complementary functions: True. Planning means deciding in advance and controlling ensures accomplishment in conformity with the set plans. Without planning, managerial control becomes difficult. Similarly, without controlling, planning is just a paper exercise.

Recruitment involves rejection of some candidates and is described as a negative process: False. Recruitment is a positive process of searching prospective employees and encouraging them to apply for jobs in an organization.

Management audit is compulsory for every company: False. Management audit in a critical and objective appraisal of the managerial performance of an organization. It is not compulsory for an organization through considered necessary for all organizations.

Strategic point control does not focus on key result areas of performance: False. Effective control system certainly makes a distinction between crucial and unimportant factors. It paves way for making it less costly. Thus, only key result areas are the focal points for strategic point control.

Staff officers enjoy executive powers: False. Staff officers play only an advisory role. They cannot implement or execute any decision or policy and have no executive role.

Short notes

BREAK-EVEN technique: This is commonly used to ascertain and control behaviour of cost, revenue and profit at various levels of activities. An organisation incurs fixed costs (such as rent, utilities, insurance premium, managerial and professional staff salary, property taxes, licence fees, and so on) and variable costs (labour costs, material overheads, sales commission, transport expenses) to effect production and sales. Break-even point = fixed cost / p - variable cost

(p is price per unit). It is the point when the organisation has no profit, no loss. The technique is very useful for planning price and profit of the organisation.

Decision-making process: This comprises identification of problem situation, defining and diagnosing the problem, specification of objectives, collection of data, developing alternative courses of action, evaluating alternative courses of action, selecting the most appropriate alternative and implementation of the decision. (Refer study material as well.)

Systems approach in management: The system approach defines an organisation as a complex whole comprising mutually interdependent and interacting parts which are viewed as sub-system. It aims at identifying and analysing the nature of relationship among various components or sub-system. The organisation is viewed as a relatively open system as it interacts with external environment and its survival depends on its ability to cope with changing environment. Organisations get power, strength and inputs from environment and, in turn, strengthen and contribute to the functioning of environment. Thus, the approach encourages meaningful analysis of an organisation, its various sub-systems or components and thus provides sound basis for understanding organisations and their problems. Some management scientists, however, criticise system approach as being purely theoretical, conceptual, vague and abstract.

Distinguish between

MISSION and objectives: The mission reflects the basic philosophy of the organisation. It is the fundamental, unique purpose that sets it apart from other organisations and indicates the scope of its operations. It is a course for its formation, existence and functioning and guides composition, structure and direction of activities. When the purpose is more clearly and specifically spelt, it becomes an objective. The objective is which the organisation wants to attain. The objective constitutes a basic plan of the organisation. All objectives are to be made in a compact set known as `matrix of mutually supportive goals' to reduce ambiguity and conflict among them.

Training and development: Although the terms `training' and `development' appear synonymous, there is a recognised difference between these concepts. Training is a means of preparing rank-and-file workers for promotion to supervisory positions and for improving their competence and capability. Human resources at all levels in an organisation need training to prevent relentless pressures of obsolescence of skills. Training is a means to development. It is the full development of the personality that enables human resources to exert their full potential. Development programmes aim at sharpening analytical faculties, judgement, reasoning and logic of middle level and senior level functionaries.

Hygiene factors and motivators: Herzberg, a behavioural scientist, discovered two sets of factors associated with satisfaction and dissatisfaction of the employee. The first set of factors known as `satisfiers or motivators' (including job, its importance, opportunities it provides for advancement, achievement, recognition and responsibility) are responsible for self-motivation of employees and are also knows as intrinsic factors.

The second set of factors, called `hygiene factors or maintenance factors', include working conditions, job security, salary, quality of supervision, organisational policies, intro-personal relationships and other factors in the immediate work environment.

Comment

LEADERSHIP is situational: The situational approach to leadership assumes that successful leadership occurs when the leader's style matches the situation. It emphasises the need for greater degree of flexibility in leadership and rejects the notion of universally applicable style of leadership. The situational factors influencing a manager's choice of leadership style could be the leader's personality, past experience and expectations; subordinates' characteristics, expectations and behaviour, task requirements; and organisational climate and policies. An effective leader, according to the situational theory, is one who understands the forces of the situation and emerges as a leader. The variables in each situation must be analysed before an optimum leadership style can be selected. One important limitation of situational theory of leadership is that the importance of traits has been completely discounted. A theory of leadership, according to Gouldner, should involve both traits and situations.

Coordination is the essence of management: Coordination is needed in every sphere of the organisation. It is only through coordination that activities performed by the members of the organisation can be mobilised and channelled for seeking organisational goals. The need and significance of coordination in management can hardly be over-emphasised:

i) coordination is imperative and indispensable in every group efforts; ii) diversity among various work units, departments and individual employees is reduced through coordination; iii) it ensures integration of individual goals with the goals of the organisation; iv) it is the key for other management functions such as planning, organising, staffing, directing and controlling; v) it is essential for reducing and resolving conflicts in organisations which may arise due to role, relationship, contribution, position, valves and norms; vi) it facilitates harmonisation of the flow of information, authority and resources. vii) it secures smooth functioning of the organisation with the help of its sub-systems and, thereby, achieve organisational goals.

Haimann rightly considers coordination as a part of managerial functions and Newman describes it as a part of all phases of administration.

(Concluded)

(Suggested answers to the December 2002 ICSI (Foundation, New Syllabus) paper on business laws and management.)

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