Laws relating to Construction in India
Every country has its own laws which every citizen in private life or business hoause has to observe
and work within. By failing to do so, the private citizen, or the businessman, may get hauled up
before a court of law by the enforcing Authority. Hence it is better to be aware of what laws are
applicable to construction and work within these bounds.
Laws applicable to business in general
There are several laws which are applicable to business in general and these are listed below:
1. Companies Act : This is the Act which governs the performance (not related to the making of
profits) of companies with regard to the issue of stocks of shares, declaration of dividends, proper
utilization of funds etc. Except for proprietary concerns all companies, public or private ltd are
governed by the provisions of this Act, in which changes take place at frequent intervals. It is
essential to know the provisions and work within them. For details refer to Nabhi’s Business Laws
: One Should Know.
2. Partnership Act : Partnerships are governed by the Indian Partnership Act, 1932. For details
refer to Nabhi’s Business Laws : One Should Know.
3. Income Tax Act : Some provisions change from year to year depending upon the budget passed
in the budget passed in the Parliament. The annual returns have to be submitted and the advance
tax installments have to be paid. If the provisions of this act are violated, the businessman can
face serious trouble and get involved in litigation lasting several years. For details refer to Nabhi’s
Income tax Guidelines and Mini Ready Reckoner with Tax Planning.
4. Sales Tax Act : The businessman has to pay Sales Tax on all the transactions in which he is the
buyer and collect it from the buyer if his product/services are bought by others, and deposit it
with the concerned Agencies as provided in the Sales Tax Act of the State in which he is doing
business. For details refer to Nabhi’s Delhi Sales Tax Guide.
5. Works Tax Act : Some years back Works Tax, which is a kind of Sales Tax on contractor was
not in existence. Now most of the states levy this Act and let the Owner deduct it at source as in
the case of Income Tax. He may have a provision for reimbursement of this by the Owner,
particularly any increase in the tax during the course of operation of the Contract. For details
refer to Nabhi’s Delhi Sales Tax on Works Contracts Act.
6. Indian Contract Act, 1872: All contracts signed between two parties either for the supply of
materials or services are governed by the provisions of this Act. The following points have to be
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noted by the parties before a contract is drawn up.
a.
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The parties have to be competent and authorized to sign a contract. For example, a contract ´
cannot be signed by a minor. In the case of a Company, the person concerned has to be ñ
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authorized by a resolution of the Board.
b. The contract has to have terms and conditions which are clear, forthright and straightforward
which are enforceable. They cannot have hidden or double meanings.
c.
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The contract cannot have clauses which are overly weighted in favour of one party. They must ªð
be fair on both sides. Contracts for construction works are generally weighted in favour of the £
Owner/Architect which shows a lack of trust in the Contractor. Such contracts are frowned P
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upon by Courts Law.
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d. Usually construction contracts have general conditions and special conditions which are part ÷
of a standard format. This format, finalized by the Institute of Architects, Government etc. ˜
should be followed to the maximum as these have stood the test of time, have been
challenged in courts of law and their provisions modified or corrected to suit the legal
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