1.1 MEANING OF LAW
There is no universally acceptable definition of law. Various philosophers have given
multiple definition of law and they are contextual. As per Black‘s Law Dictionary, law is a
body of rules of action or conduct prescribed by a controlling authority, and having biding legal
force. That which must be obeyed and followed by citizens subject to sanctions or legal
consequence is a law.
Ignorance of law is no excuse. It is assumed that every citizen must know the law of the
land and ignorance of law is no excuse (ignorantiajuris non excusat). Moreover, the law assists
those that are vigilant with their rights, and not those that sleep thereupon. Therefore, study of
law is essential to abide by the law and also to protect one‘s rights.
Following are the essential characteristics of law:
a. Law is the set of rules and principles imposed to control and govern the activities
of the human beings.
b. Law is imposed and enforced by the state/ government.
c. All are equal before the law and are entitled without any discrimination equal
protection of law.
d. Law is a binding rule made by state for maintaining peace, order and security in
society which protects and confers rights and duties of individual.
e. Ignorance of law is no excuse.
f. Violation of law leads to punishment or appropriate penalty.
1.2 KINDS OF LAWS
There are several branches of laws like international law, constitutional law, civil law,
criminal law, mercantile law, etc. Here, only two types of law have been mentioned.
1.2.1 Substantive and Procedural Law
According to Black‘s Law Dictionary, Substantive law is that part of law which creates,
defines and regulates the rights, duties and powers of parties. Substantive laws govern people
and organizations in their daily interactions they are the laws that non-lawyers usually think
of when they think about what law is.
On the other hand the law which prescribed methods of enforcing rights, duties etc. as
provisioned by the substantive law is known as procedural law. Procedural law sets forth the
rules that prescribe the step for having a right or duty enforced by substantive law. It is the
rules that govern litigation the rules the parties must follow as they bring their case and the
rules for the courts‘ administration. These rules proscribe such things as who gets to bring
cases, which courts those cases are brought before, how the cases proceed through the judicial
process, the rules of proof, the available remedies, and the manner in which the judgment is
enforced.
1.2.2 Criminal and Civil Law
Criminal law is concerned to the protection of individual or society against an individual‘s
offense. In criminal cases, even though the immediate victim is an individual, it is the
government that files the case. Criminal law seeks to punish an offense by imposing penalty or
imprisonment. Civil law regulates disputes between private parties. It defines and protects private rights
of citizen. In civil cases, the aggrieved individual files the case. Civil law seeks to achieve
remedy for the injured party like compensation.
1.3 SOURCES OF LAW
There are various sources of law like:
a. Constitution
Constitution of Nepal, 2072 (2015) is the supreme and fundamental law of Nepal. Any
law inconsistent with the constitution shall, to the extent of such inconsistency, be void.
b. International treaty
Treaty Provisions are enforceable as good as laws and take precedence over national
legislation. Section 9 (1) of Treaty Act, 2047 (1990) states that in case of the provisions
of a treaty, to which Nepal or Government of Nepal is a party upon its ratification
accession, acceptance or approval by the Parliament, inconsistent with the provisions of
prevailing laws, the inconsistent provision of the law shall be void for the purpose of that
treaty, and the provisions of the treaty shall be enforceable as good as Nepalese laws.
c. Act or statue or national legislation
Statues or Acts are enacted by the legislature and come into effect after publication in
the Official Gazette. The enacted law remains effective unless it is repealed or amended
by the legislature itself or declared void by the court. In Nepal, parliament is the body
authorized to enact laws.
d. Precedents
Precedents are the decisions made by the court. They are also called case laws. The role
of courts is to interpret the legislation passed by the Parliament. Courts do not make law.
Lower courts must follow the precedents set by the Supreme Court. Precedents can be
overruled by a subsequent decision of higher court, larger bench or by legislation.
e. Rules
They are also called delegated legislation. Rules are made by the authorities, by
ministries or other bodies by the power conferred by the Act. Multiple rules may be
passed for ensuring operating and administrative ease of an Act.
f. Customs
Custom is a practice that by its common adoption and long, unvarying habit has come
to have the force of law. Most of the customs have already been codified into law.
Unwritten or uncodified customs have persuasive role.
g. Other sources
Apart from the aforementioned major sources of law, there are other sources as well.
The following shall be considered as the sources of law.
Writings or opinions of jurists, experts etc.
Law of foreign land
Principle of equity/natural justice
1.4 RULES FOR STATUTORY INTERPRETATIONS
i. Literal rule
It is also called ordinary meaning rule or plain meaning rule. Literal rule of interprets the
terms of statue by using the plain ordinary meaning of words. It restricts the interpretation as per
the black letter of law.
ii. Golden rule
Golden rule is used when literal rule creates absurdity. It is an exception to literal rule. In
this, the grammatical meaning of word is usually modified to avoid an absurd outcome.
iii. Mischief rule
This rule allows judges to look at the gap or the mischief the statue was intended to cover.
Further, there are rules of language, intrinsic aids and extrinsic aids for statutory interpretation.
There are four major rules of language:
a. Ejusdem generis (of the same kind): When general words follow specific words of distinct
category, the general expression takes its meaning from the preceding specific expression.
Example: If a document refers to automobiles, truck, wagon, motorcycle, or other vehicle,
the list will not include airplane.
b. Noscitur a socis(word is known by company it keeps): The meaning of unclear language
should be interpreted according to the language surrounding it.
Example:If a statue provides that floors, steps, stairs, passageways, and gangways, were to
be kept unobstructed. It was held that the words were used to indicate passage and did not
include storage.
c. Expressio unius est exclusion alterius: The express mention of one thing excludes others.
When certain persons or things are specified in law or contract, an intention to exclude all
others may be inferred.
d. Contemporanea expositio: The meaning of the words in a statue will be understood in the
sense which they bore at the time enactment was passed.
1.5 MERCANTILE LAW
The term Mercantile Law may be defined as the law concerning trade, industry and
commerce. Therefore it has a vital role in creating, developing, conducting, regulating
controlling, and governing the mercantile or business or commercial activities. It is an ever-
growing branch of law with the changing circumstances of trade and commerce. The scope of
mercantile law has enormously expanded with the increasing complexities of the modern
business world.
1.5.1 Meaning of Mercantile Law
According to Gloss and Banker ―business (mercantile) law is that portion of legal system,
which guarantees an orderly conduct of business affairs and their settlement of legitimate
disputes in a just manner.‖
M.C. Kuchhal in his book Mercantile Law defines the term mercantile law as, “mercantile law is
that branch of law which comprises laws concerning trade, industry and commerce.”
Therefore the term mercantile law is defined as the part of law which operates and regulates
commercial transactions with the business community and is considered as a part of civil law.
However, there is no clear demarcation between business law and other laws. Mercantile law
relates with establishment, operation, and dissolution of the business or entities. This law also
determines the rights, duties, responsibilities and liabilities of the persons engaged in commercial
activities.
The following may be considered the major objectives of the mercantile law.
To create good environment to develop the commercial activities.
To protect and preserve the rights and interest of the business persons.
To provide concessions and facilities to the business persons
To establish the proper responsibility and duties to the business persons.
To encourage and induce the persons carrying on business.
To maintain peace and order, discipline, proper regulation in the business community.
1.5.2 Development of Mercantile Law in Nepal
The modern commercial law is the development of ancient law of merchants. In the modern era,
British were pioneers in laying foundation of mercantile laws.
In the context of Nepal, laws relating to industry and commerce were enacted since the period
of 1900 circa. The following major laws were enacted during the Rana Rule in Nepal.
Factory Law, 1978
Company Law, 1983
Trading Company Law, 1989
Chamber of Commerce Law, 1990
Agency Law, 1992
Patent , Design and Trade Mark Law, 1993
Banking Law, 1994
Private Company Law, 2000
Even though, several commercial laws were enacted during the period of Rana Rule, the trade
and industry did not flourished as expected. After the fall of Rana regime in 2007, other
commercial laws were enacted. Some of the major commercial laws enacted and operated in
Nepal so far listed under:
Act Relating to Institutions Acting as Financial Intermediary, 2055 (1999)
Arbitration Act, 2055 (1999)
Bank and Financial Institution Loan Recovery Act, 2058 (2002)
Banking and Financial Institution Act, 2073
Banking-Offence-And-Punishment-Act-2064 (2008)
Bonus Act, 2030
Companies Act, 2063
Compensation Act, 2019 (1963)
Competition Promotion and Market Protection Act, 2063 (2007)
Cooperative Act, 2074
Customs Act, 2064 (2007)
Customs Act, 2064 (2007)
Domestic Postal Goods (Insurance) Act, 2019 (1962)
Electronic Transactions Act, 2063 (2008)
Employee Provident Fund Act, 2019 (1962)
Essential Commodities Control (Authorization) Act, 2017 (1961)
Excise Duty Act, 2058 (2002)
Export and Import (Control) Act , 2013
Foreign Investment and Technology Transfer Act, 2075 (2019)
House and Land Tax Act, 2019 (1962)
Immovable Property Requisition Act, 2013 (1956)
Income Tax Act , 2058
Individual Privacy Act, 2075 (2018)
Industrial Enterprises Act, 2073
Insolvency Act, 2063 (2006)
Insurance Act, 2049
Labour Act, 2074
Lands Act, 2021(1964)
Loan and Guarantee Act, 2025(1968)
Mediation Act, 2068 (2011)
Money Laundering Prevention Act, 2063 (2008)
National Cooperatives Development Board Act, 2049 (1992)
Negotiable Instruments Act, 2034 (1977)
Nepal Agency Act, 2014
Nepal Chartered Accountants Act, 2053 (1997)
Nepal Standards (Certification Mark) Act, 2037 (1980)
Notary Public Act, 2063
Partnership Act, 2020 (1964)
Patent, Design and Trade Mark Act, 2022 (1965)
Patent, Design and Trademark Act, 2022 (1965)
Prevention of Corruption Act, 2059 (2002 A.D)
Privatization Act, 2050 (1994)
Public Procurement Act, 2063 (2007)
Revenue Tribunal Act, 2031 (1974)
Right to Information Act, 2064 (2007 )
Some Public Documents Authentication (Procedures) Act, 2063 (2006)
Special Court Act, 2059 (2002)
Stamp Duty Act, 2019 (1963)
Standard Measurement and Weight Act, 2025 (1968)
Trade Union Act, 2049 (1992)
Value Added tax Act, 2052
Wealth Tax Act, 2047 (1990)
(Contribution based) Social security Act, 2074
Audit act, 2074 etc.
SELF EXAMINATION QUESTIONS
1.Mercantile Law shall be considered a separate branch of law. Comment.
2. What is Business Law ? What are the major demarcations between business law and any
other branches of law ? Explain in brief.
3. Define the term "Mercantile Law". What are the major sources of Mercantile Law in
Nepal ?
4. What are the distinctions between Substantive Law and Procedural Law ?
5. Write down the development of history of Mercantile Law in Nepal.
6. What is the importance of Mercantile Law ? Explain in brief.
7. British Mercantile Law has been considered the major source of Indian as well as
Nepalese Mercantile Law. Explain in brief.
8. What are the major objectives of formulation of Mercantile Law ?
Thank You So Much .
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